By Marta Lillo
As the implementation of the EB-5 Reform and Integrity Act (RIA) enters its second year, industry specialists are stressing the need for clarity and immediate attention from the U.S. Citizenship and Immigration Services (USCIS) regarding some aspects of the investor visa program.
Stakeholders are concerned about unclear new project categories, updated regional center (RC) responsibilities, investment fund safety, and the agency’s responsiveness, among other issues.
“What we have is a good legislation and an overwhelmed agency that hasn’t been focused on providing this guidance,” says Rogelio Carrasquillo, EB-5 attorney and managing shareholder of Carrasquillo Law Group PC. “We would have expected better guidance being provided after the new law was drafted. We are still waiting for ideas of how these things should be interpreted. It’s consistent with how the USCIS has been behaving, and based on the track record of USCIS, we would not be getting that type of guideline any time soon.”
What more regulation and transparency mean for the EB-5 industry
One significant gray area pertains to the eligibility of projects under the new EB-5 program categories, particularly the new set-asides. Stakeholders need further understanding of specific qualifications for new infrastructure projects, rural Targeted Employment Areas (TEAs) and high-unemployment areas.
“From the investor side, we have the issue of infrastructure or rural areas projects. What do they entail? Are we talking infrastructure like traditional power plants, or roads? There are significant benefits to investing in infrastructure, but investors are hesitant. Also, the new RIA gave additional strong benefits to projects in rural areas, like lower amount of investment and faster processing times. The issue here is the logistics of how that benefit is being implemented. We still don’t know if it will be faster,” Carrasquillo says.
EB-5 investors need to understand the real processing times for rural area set-asides to calculate their immigration timelines accurately, adds Ying (Elissa) Lu, managing attorney at Law Office of Lu & Associates.
Role of the EB-5 fund administrator
The stricter responsibilities imposed on regional centers after RIA 2022 have helped reduce stakeholder concerns, but some uncertainty remains. The centers now face more rigorous control, reporting requirements, and limitations on individuals involved with its projects and operations. Additionally, the law mandates fund administrators for EB-5 funds and addresses issues such as indirect job limits, redeployment, and administration of funds.
According to Carrasquillo, the new oversight is welcomed by the industry, as RCs have been taking compliance very seriously for the past year. “We are seeing more disclosure right now with the forms and the policies they are implementing. From a reporting perspective, we are going to see increased reporting from RCs to USCIS. As the RIA matures, we’ll see USCIS expanding some of the forms and adding additional information.”
However, EB-5 investors have yet to see the impact of the role of the independent fund administrator in their process, although they understand the relevance of the new role, Lu says. “By implementing independent oversight, the RIA aims to minimize the risk of mismanagement or misuse of investor funds, providing additional protection for EB-5 investors,” she adds.
However, Reid Thomas, former managing director and chief revenue officer of funds administrator firm JTC Americas, says that even though the improved surveillance will make it more difficult for individuals with malicious intentions to engage in wrongdoing, “the act on its own doesn’t prevent (it),” he said in his podcast by EB5 Investors Magazine.
Carrasquillo adds the role would add value if it’s implemented correctly. “Everybody benefits. The RC will have a new tool, and that information will be important for several things, from compliance to provide information to investors, to help immigration efforts when filing forms before the USCIS, and to help protect the integrity of the program.”
For Lu, another key progress is the swift creation by the USCIS of a set of rules reflecting adjustments to key regional centers’ designation: I-956K, the replacement of Form I-924A with Form I-956G, and the introduction of Form I-956F.
In the case of I-956G, the deadline for RCs to submit was extended indefinitely. “So, it will still take a while to see how regional centers will follow the compliance requirements,” Lu adds.
EB-5 application backlog still an issue
Since RIA, some I-526E petitions, which involve rural projects in TEA areas, are being processed in a timeframe of less than a year. However, backlogs and delays exceeding years continue for others.
Processing times range between 55 months for I-526 applications from other countries outside China and 86 months for Chinese investors, and an average processing time of 66 months in the case of I-829 petitions, which is the last step in the EB-5 process.
Because of this delay, the available EB-5 visa quotas are not being used, said Ronald Klasko, EB-5 immigration attorney and one of the founders of Klasko Immigration Law Partners.
“The reason the quota is current is because nothing’s being approved. And if nothing’s being approved, none of the numbers are being used. So, no matter how many people are filing, it’s still current until they start approving some stuff. And if they have five-year processing times, it may be five years where it stays current,” Klasko said in the Voice of Eb5 podcast by EB5 Investors Magazine.
The EB-5 industry post-RIA
Stakeholders are urging the USCIS to tackle these gray areas promptly to enhance the EB-5 investor visa program.
According to Thomas, the EB-5 industry needs a few years to fully adapt and learn from the RIA to comprehend its impact and benefits fully. “If the industry doesn’t run clean for a few years and we have more instances of abuses, then I think the program is not likely to grow. So, we’re kind of at a pivotal point, I think, for the next few years,” he says.
However, the industry will continue moving forward despite the USCIS’ lack of guidance, Carrasquillo added. “We all wish the USCIS to be quicker, but in its absence, we are implementing collective knowledge to continue moving the program forward and protect investors. We are recommending clients, RCs, and developers to be conservative until we get that guidance to avoid potential delays.”
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