Obtaining designation as a targeted employment area (“TEA”) is beneficial to almost every EB-5 project, as it decreases the minimum qualifying investment amount from $1 million to $500,000. In order to qualify as a TEA, the area in question must be either a rural area (a metropolitan statistical area having a population of less than 20,000) or an area where the unemployment level is 150 percent higher than the national average.
A state government may designate a geographic or political subdivision within its boundaries as a targeted employment area based on high unemployment. Before the state may make such a designation, an official of the state must notify USCIS of the agency, board, or other appropriate governmental body of the state that will be delegated the authority to certify that the geographic or political subdivision is a high unemployment area. The state may then send a letter from the authorized body of the state certifying that the geographic or political subdivision of the metropolitan statistical area in which the enterprise is principally doing business has been designated a high unemployment area.
Gerrymandering a TEA:
A common misconception is that a project may link a high unemployment area with census tracts or political subdivisions with low unemployment to arrive at an aggregate finding of high unemployment. According to the October 14, 2010 stakeholder meeting, USCIS accentuated that the TEA must align with the state’s pre-determined political or geographic boundaries. USCIS defines a geographic boundary as an area based on the physical features of the Earth’s surface, while they define a political boundary as a division of a state that exists primarily to discharge some function of local government, such as a civil administrative unit of a county or city. With these definitions in place, USCIS has made it clear that a project may not match disconnected census tracts in order to acquire a TEA designation.
Once a TEA, always a TEA:
(as mentioned in “Dispelling Common Myths about EB-5” by Kate Kalmykov)
A common misconception is that once a particular area is designated as a TEA, it will retain this status indefinitely. If an area designated as a TEA ceases to be considered a rural area, or if the unemployment level in the area goes below 150 percent of the national average, then the TEA will likely lose its designation as such.
The Impact of the May 30th Policy Memorandum:
According to the May 30th Policy Memorandum, USCIS defers to state determinations of the appropriate boundaries of a geographic or political subdivision that constitutes the targeted employment area. However, for all TEA designations, USCIS must still ensure compliance with the statutory requirement that the proposed area designated by the state in fact has an unemployment rate of at least 150 percent of the national average rate. For this purpose, USCIS will review state determinations of the unemployment rate and, in doing so, USCIS can assess the method or methods by which the state authority obtained the unemployment statistics. Acceptable data sources for purposes of calculating unemployment include U.S. Census Bureau data (including data from the American Community Survey) and data from the Bureau of Labor Statistics (including data from the Local Area Unemployment Statistics).