by EB5Investors.com
The American Entrepreneurship and Investment Act of 2015 was introduced to the House of Representatives in January by Congressmen Jared Polis and Mark Amodei. It represents the EB-5 industry’s best chance for the permanent reauthorization of the Regional Center Program and makes the types of improvements that industry stakeholders have been calling for. This article explains the Congressional playing field surrounding the bill and provides insight from EB-5 professionals about how it will improve the program.
A year ago, EB5 Investors Magazine published a feature on major legislation regarding the EB-5 program. Each of the bills outlined in the article aimed to make significant improvements to the program as a whole and make the Regional Center Pilot Program permanent. Unfortunately, none of the bills were passed, and the program now needs Congressional action before the end of the government’s fiscal year — September 30, 2015.
Regional Center Pilot Program has been renewed by Congress every three years since its inception. However, its lack of permanency breeds instability and uncertainty among program participants.
The most recent reauthorization was part of S. 3245, which was passed with a unanimous vote in the Senate. Shortly thereafter, the House of Representatives passed the bill to reauthorize with a 412-3 vote.
This type of bipartisan support is unprecedented in American politics, and measures should be taken by industry stakeholders to ensure that support continues by advocating for and endorsing bills that not only make the program permanent, but also make it more efficient and effective. After 25 years of continued bipartisan backing, the EB-5 Regional Center program needs a strong, unified voice from industry stakeholders willing to fight for its permanent reauthorization. The catalyst for industry unification was introduced by Congressman Jared Polis (D-CO) and Mark Amodei (R-UT) in January of this year. The American Entrepreneurship and Investment Act of 2015, outlined in detail in the following pages, is the industry’s best shot at permanent reauthorization coupled with reform.
“The EB-5 program plays an integral part in helping the American economy grow,” Congressman Polis told EB5 Investors Magazine staff.
“The improvements that have been proposed through the American Entrepreneurship and Investment Act ultimately make the program stronger” Congressman Polis added.
EB-5 has garnered a diverse base of supporters, both old and new, from both parties. In addition, U.S. businesses and coalitions across the industry spectrum have publicly supported legislation to amend and make the Regional Center Program permanent.
“Permanent reauthorization should be the minimum threshold for what we strive as a community,” says Laura Reiff, Co-Chair of the EB5 Immigration Coalition. “We must aim for even a higher goal as a community, and this is embodied in Congressmen Amodei and Polis’ legislation, the American Entrepreneurship and Investment Act of 2015.”
EB-5 also has influential supporters in the Senate including Kentucky Senator Rand Paul, whose keynote address at the 2015 Las Vegas EB-5 Conference in January affirmed his drive to improve the program. Senator Paul has long supported programs that enhance economic growth and stimulus. In 2013, he introduced the Economic Freedom Zones Act, which was co-authored by fellow Kentucky Senator Mitch McConnell. The act establishes “free enterprise zones” in areas with high levels of unemployment.
During his speech at the January conference, Senator Rand Paul encouraged immigration reform through smaller bills. He mentioned that EB-5 reform has a much higher likelihood of success if not coupled with the larger immigration bills. In his ending remarks, he mentioned that he would like to see the EB5 visa cap “raised to 20,000.”
Despite support from Senator Paul and numerous other Senators, the stakeholder community cannot ignore the obstacles that still lay ahead of us. Program reform will likely face additional scrutiny from Senator Charles Grassley, whose position on the Senate Judiciary Committee gives him a key leadership role in immigration legislation. Senator Grassley has been skeptical and critical of the program and his indicated his wishes to see significant reforms.
Continued negative press and criticism of the program have ignited public debate about the merits and potential dangers of the program. Much of public debate has been a direct result of misinterpretations of the EB-5 visa’s most basic functions. A recent ABC News Nightline investigation mischaracterized the program as being riddled with fraud and a “magnet for those seeking to sidestep the scrutiny of the traditional immigration process.”[9]
“Even a basic understanding of U.S. immigration procedure dispels any truth to those claims” says immigration attorney Kate Kalmykov. “With significant bipartisan support led by Senators Schumer, Flake, Paul, and Leahy, it seems likely that the program will be reauthorized at the very least.”
For the EB-5 visa to stay competitive among the other immigrant investor programs offered by other countries, we need to make improvements in the program and institute reform like those offered by Congressmen Polis and Amodei’s recent bill.
The following is an in-depth analysis of Congressman Polis’ American Entrepreneurship and Investment Act of 2015 and its favorable impact on the EB-5 program.
H.R. 616, American Entrepreneurship and Investment Act of 2015
Representatives Jared Polis (D-CO) and Mark Amodei (R-NV)
Introduced to House of Representatives January 2015
The text: “Permanent Authorization of the Regional Center Program”
What it does: This text provides for the permanent authorization of the EB-5 program to guarantee immigrant investors the certainty and predictability needed to help the American economy grow
What it means: Over 90 percent of EB-5 investments are made through regional centers. The EB-5 program has become dependent on regional centers in recent years because they allow investors to finance projects with more expansive job creation projections, e.g. using indirect and induced jobs in the calculations.
“Removing the expiration date is a vital step to the continued depositing of funds aimed at economic growth and job creation,” said immigration attorney Enrique Gonzalez. “Failure to extend could lead to deleterious effects on the economy, namely a drop in the GDP, a lack of job creation, and nearly a billion dollars of tax revenue evaporating.”
The text: “Targeted Employment Areas” & “State Determinations”
What it does: Sets aside no fewer than 5,000 visas for investors who invest in TEAs; Defers TEA designation to states’ discretion; TEA designations last for two years
What it means: The bill mandates that the Department of Homeland Security shall “defer to a state’s designation as conclusive.” The precedent for this was established in the USCIS May 30, 2013 Policy Memorandum, but the bill puts the matter into law. Additionally, the bill stipulates that once a state designates an area as such, it remains a TEA for two years. Economist Elliot Winer says that the stipulation to keep a TEA’s designation for two years is “a major improvement from the current situation.”
Currently, “determinations have to be recertified on an annual basis or sometimes even sooner,” Winer said. “This can present problems for projects trying to bring in investors over an extended period of time, and can put potential projects in danger if the area can no longer be TEA certified the following year.”
“No one should be penalized,” Winer added, “because the unemployment rate in an area you are actually trying to improve happened to fall slightly since an original TEA determination was made.”
The text: “Preapproval of New Commercial Enterprises”
What it does: Requires the Secretary of Homeland Security to establish a preapproval procedure by which a regional center may ask USCIS to approve a business plan before marketing to potential investors
What it means: This step improves the overall quality of projects because regional centers will be able to clear their project with USCIS before collecting any money. Potential investors will also have the ability to distinguish between quality projects that have preapproval and projects that do not. Ideally, this will provide incentive for regional centers to get their projects pre-approved as a best practice, enhancing the overall quality of the EB-5 project market while protecting investors. The bill also allows applicants to correct deficiencies found by the Secretary before being terminated.
The text: “EB-5 Petition Processing Times”
What it does: Establishes concrete timeframes for petition and application rulings
What it means: Current USCIS processing times for I-924 or I-526 forms are 12-18 months. This threatens the EB-5 projects and jobs they will create. This portion of the bill requires that the Secretary of Homeland Security provides an expedited processing option for certain petitions. The bill dictates that USCIS will make rulings on I-829 and other petitions “not later than 180 days after the date on which the proposal or application is filed.” Faster processing times mean more investors get through the application process, bringing additional investments to the United States and creating more jobs.
“Obviously, as far as processing times go, the faster the better,” immigration attorney Edward Beshara said. “A quicker approval means that the investor gets their permanent residency and can come to the United States faster.”
According to Beshara, the bill’s provision is especially helpful for investors whose children are close to the USCIS age limit.
“For investors with children who are nearing 21 years old, their conditional residency is two or three years off. Their children could ‘age out’ before they get their green card,” Beshara said. The faster processing times stipulated in Congressman Polis’ bill also help to combat Chinese retrogression, and when combined with the bills’ removal of “derivatives” from the visa count and its elimination of a per-country visa cap, retrogression could be ended altogether.
“Retrogression creates unnecessary delays that affect exit strategies, job creation, and how you sustain an investment in a project,” Beshara said. “If you remove derivatives, hopefully you won’t see Chinese retrogression being an issue.”
The text: “Aliens Not Subject to Numerical Limitation”
What it does: This clause removes “derivatives” from the visa count, meaning that “aliens who are the spouse or a child of an investor under the EB-5 program” no longer count against the overall annual EB-5 visa limit
What it means: “Removing derivative family members from the EB-5 visa cap would be an immediate relief to the EB-5 program by reducing the potential for an EB-5 visa waiting list for years to come,” said immigration attorney Ignacio Donoso.
In addition to preventing an EB-5 waiting list, the removal of derivatives from the overall EB-5 visa limit will increase the market size of the EB-5 industry and create more U.S. jobs. Each of the 10,000 visas could be used to their full potential, rather than being counted toward family members.
“Since the average investor brings a family of 2.5 people (a spouse and one or two kids), not counting ‘derivatives’ triples the number of investors who can fill the quota in this category,” immigration attorney and IIUSA Vice President Robert C. Divine said. “That means three times more jobs created for American workers. This is a type of provision that has received bipartisan support for all of the employment based immigrant categories.”
The text: “Numerical Limitations on Individual Foreign States”
What it does: This portion of the bill eliminates per-country quotas for EB-5 visas, combating looming retrogression
What it means: Current per-country visa limits prevent any single country from monopolizing visas. When a country nears the quota, USCIS places a “hold” on review of petitions from that particular country. This “retrogression” occurred for the first time in the EB-5 program’s history with Chinese investors in 2014, as demand for the visa succeeded the quota. Retrogression is expected to occur once again in 2015, and slows regional center activity. Congressman Polis’ bill addresses this problem by eliminating per-country quotas for EB-5 Visas.
“By raising the per-country limits on immigrants in the EB-5 program, the Polis-Amodei Bill recognizes the tremendous popularity of the EB-5 program among Chinese investors,” Donoso said.
Immigrants from countries with much fewer EB-5 applicants will still be able to contribute to the program and the steady Chinese demand would facilitate a “stable program that can grow predictably without the cloud of uncertainty of a years-long visa waiting lists suddenly occurring,” Donoso added.
The Text: “Preventing Fraud in the Regional Center Program”
What it does: Enhances transparency and accountability within the EB-5 program by requiring investors to comply with certain additional enforceable regulations and laws, including federal securities laws
What it means: One of the most widespread criticisms of the EB-5 program is its potential for fraud. Senator Grassley and certain news outlets are quick to point out a few outlying cases as evidence that the program itself is corrupt. This section of the bill identifies and addresses the issue by creating and enforcing a higher standard for regional center operators and representatives. The lengthy list of disqualifying determinations will aid in controlling the quality of regional center administrators coming into the program, decrease the likelihood of fraud and criminal activity.
Past Legislation Still Awaiting Action
While Congressmen Polis and Amodei’s bill was reintroduced this year, there may be other EB-5-related legislation that could be reintroduced this year. The following bills were introduced to past sessions of Congress:
H.R.15 Border Security, Economic Opportunity, and Immigration Modernization Act
Sponsored by Congressman Joe Garcia (D-FL)
Introduced in October 2013 after a 68-32 passing vote in the Senate as S. 744
The Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744) was passed in the Senate with a 68-32 vote, with support from both parties, in 2013. The act’s EB-5 reforms were written by Senator Leahy and call for the permanent reauthorization of the EB-5 regional center program, regional center document pre-approval, enhanced Department of Homeland Security authority, and five-year TEA designations, among other reforms. H.R. 15 is the House of Representatives’ companion to S. 744. The bill was not called for a vote in the House of Representatives in 2014, and looks unlikely to be voted on in 2015.
H.R. 2131, The SKILLS Act
Introduced by House Oversight Committee Chairman Congressman Darrell Issa (R-CA) with 22 Republican Sponsors, including House Judiciary Chairman Bob Goodlatte
Introduced in May 2013
Like much recent EB-5 legislation, the SKILLS Act would make the EB-5 Regional Center Program permanent, in addition to expanding permanent residency limits, standardizing TEA designation regulations, and expanding DHS authority.
After being assigned to and discharged from several committees, the last action related to the SKILLS Act was in December of 2014, when it was discharged from the Committee on Education and the Workforce and placed on the Union Calendar. H.R. 2131 represented one of the better chances for EB-5 program reform, but the bill was not voted on in the 113th Congress.
[1] Al Kamen, “An Investment in American Citizenship; Immigration Program Invites Millionaires to Buy Their Way In,” Washington Post, (Sept. 29, 1991).
[2] U.S. Government Accountability Office Report to Congressional Committees, Immigrant Investors: Small Number of Participants Attributed to Pending Regulations and Other Factors, p. 2 (Apr. 2005) (GAO-05-256).
[3] Matter of Soffici, 22 I. & N. Dec. 158 (Comm.1998);Matter of Izummi, 22 I. & N. Dec. 169 (Comm. 1998); Matter of Hsiung, 22 I. & N. Dec. 201 (Comm. 1998); Matter of Ho, 22 I. & N. Dec. 206 (Comm. 1998).
[4] FY 1998: 1368 I-526 receipted, 290 denials, FY 1999: 650 I-526 receipted, 1558 denied. USCIS Performance Analysis System Data, Office of Performance and Quality (OPQ), Data Analysis and Reporting Branch (DARB) – AC/DL, Report Date: October 26th, 2012.
[5] U.S. V. O’Connor (158 F. Supp. 2d 697 – Dist. Court, ED Virginia, 2001)
[6] Id.
[7] U.S. Government Accountability Office Report to Congressional Committees, Immigrant Investors: Small Number of Participants Attributed to Pending Regulations and Other Factors, p. 2 (Apr. 2005) (GAO-05-256).
[8] 21st Century Department of Justice Appropriations Authorization Act, Pub. L. No. 107-273, 116 Stat. 1758 (2002).
[9] http://abcnews.go.com/US/whistleblowers-us-gave-visas-suspected-forgers-fraudsters-criminals/story?id=28671577&singlePage=true
EB5Investors.com Staff
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