By Anayat Durrani
The House Committee on Ways and Means passed the Build It in America Act in June to restore the United States’ business competitiveness and secure global supply chains amidst what the authors of the bill call China’s increasing growth as a global economic influence.
The new legislation also bans US foreign land sales to companies from “countries of concern,” specifically China, Russia, and Iran.
“We’ve heard about the growing threat of China. China has expanded into the West and is beginning to settle in our backyard,” Ways and Means Chairman Jason Smith (MO-08) said in opening remarks during the consideration of the bill. “It currently owns over a quarter of a million acres of US farmland and looks to expand even further. We cannot allow hostile foreign governments, especially China, to subvert our food supply and harm our farmers and workers.”
Smith said the legislation takes an existing real estate withholding tax, raises it by 400 percent, and applies it to those who buy farmland who are citizens of, or companies owned 10 percent by “countries of concern.” He added, per the Joint Committee on Taxation, the legislation will keep US farmland “from falling into the hands of countries that burn our flag.”
The legislation is composed on feedback from America’s farmers and workers, families, and small business owners the committee heard from during hearings held nationwide.
Impact on EB-5 investors limited, experts say
Charles H. Kuck, managing partner of Kuck Baxter, says the act might have a small impact on EB-5 investments in rural areas, particularly as they apply to ranch and farmland bought by citizens of China, Russia, and Iran.
“Remember, buying into a regional center is buying into something owned by someone else. You are an investor, and technically the direct owner of the property, for example, further, I know of no EB-5 investment in such properties,” says Kuck.
Ed Beshara, managing partner of Beshara P.A., says the Build It in America Act may have limited impact on the EB-5 program, for example, set-asides for rural areas. He says a law already exists that restricts foreign nationals from owning an EB-5 Regional Center.
“However, there is no restriction on foreign nationals investing in and owning an interest in an EB-5 New Commercial Enterprise,” says Beshara. “In the EB-5 Regional Center infrastructure the Job Creating Entity which may own the land, in rural or urban areas, upon which the development is located, and job creation occurs.”
Beshara says that under the EB-5 Regional Center Program, foreign nationals may invest in and own a New Commercial Enterprise, an affiliated company with the Regional Center.
“The NCE is a “Pass Through Entity.” The NCE, and not the individual investor owners, can enter into a Legally Binding Loan Agreement with the JCE Legal Entity,” says Beshara. “The NCE accumulates the individual EB-5 investors’ funds, and as a legal entity the NCE will enter into a loan agreement with the JCE and pass these investors’ funds to be used by the JCE, located in urban or rural areas, in which the development is located.”
Therefore, he says, a foreign national EB-5 investor is not the owner of the JCE, whether located in an urban or rural area, meaning the new Build It in America restrictions on foreign ownership are not applicable to EB-5 investors from “countries of concern.”
“The EB-5 investment in a JCE in rural areas, which may have faster processing adjudications than urban areas, may continue to occur, regardless of the new Build It in America Act,” says Beshara.
The house passed the bill along party lines 24-18 and is headed for the Senate.
“The reality is, such a provision would likely be opposed in the Senate and has little chance of seeing the light of day,” says Kuck.
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