S.2415 and the Next 10 Months for the EB-5 Program - EB5Investors.com

S.2415 and the Next 10 Months for the EB-5 Program

Kristen W Ng

Senator Flake (R-AZ), with Senator Cornyn (R-TX) and Senator Schumer (D-NY) introduced S.2415, the “EB-5 Integrity Act of 2015,” that aims to propose integrity measures for the EB-5 program. Now that the EB-5 program has been given a “clean” extension until Sept. 30, 2016, the EB-5 industry will likely see additional bills introduced next year during the second session of the 114th Congress. S.2415, focusing on integrity measures, is the sixth bill introduced in this Congress, and the first new piece of EB-5 legislation since the program’s original sunset date of Sept. 30, 2015. A quick and succinct analysis of the major provisions of S.2415 will prove useful, as it contains the majority of the integrity provisions found in the discussion drafts that were circulated for review prior to the extension, and may prove to be a foundation for future bills.

As previously mentioned, the bill reflects much of the oversight and integrity measures that were introduced in S.1501. Much of the proposed integrity and oversight measures have been mostly welcomed and embraced by the EB-5 industry, as key stakeholders recognize the need for reform to the program in order for it to work effectively and benefit the U.S. economy. The EB-5 Integrity Act of 2015, however, does not include reforms to current policy, specifically as it applies to definitions of Targeted Employment Areas and minimum investment amounts. The following are some of the major provisions that are included in S.2415:

  • Job creation definitions are modified, and new guidelines are established for amendments to regional centers.
  • An application for preapproval of a business plan must be filed prior to an investor’s filing of a petition. Preapproval will be binding on future cases.
  • Annual statements with reporting requirements are mandatory for regional centers.
  • Background checks are required for certain individuals of regional centers.
  • Ownership of a regional center by a foreign government or governmental entity is prohibited, including financial support.
  • DHS has broadened authority to terminate a regional center.
  • Annual certifications by the regional center are required to demonstrate compliance with securities laws.
  • The proposed EB-5 Integrity Fund will require a $20,000 or $10,000 fee per regional center (depending on size), and $1000 per investor. 
  • Direct and third party promoters must register with U.S. Citizenship and Immigration Services (USCIS) and meet certain requirements. Investors must sign a disclosure reflecting an understanding of the rules and procedures, and the fees involved.
  • New source of funds requirements on gifts and loans. The required documentation includes a provision for seven years of tax returns, if applicable in the taxing jurisdiction.
  • Effective dates: all amendments made under the Regional Center Program will be effective 90 days after date of enactment. The provisions governing source of funds and amendments to the regional center will be effective on the date of enactment.
  • New reports required from the GAO and Inspector General’s office.
  • Transparency of agency actions is required, including, but not limited to, all communications. 

With these provisions in mind as possibly the foundation for future negotiations/mark-ups, or even as a base for future bills, it is now a critical time to plan the strategy for the next 10 months to ensure that the EB-5 program is not only reauthorized, but also that the EB-5 program is reformed. The EB-5 industry, largely as a whole, agrees that the program is in need of reform, and had in fact supported most of the integrity measures that were included in the discussion draft prior to the program’s temporary extension. Both Senate and House leadership also echo the sentiment that the program is in need of reform to combat fraud and to effectively benefit the U.S. economy. It will be pertinent that the EB-5 industry work hand-in-hand with our Congressional leaders to see that all goals and objectives are achieved, and below are three key points to focus on in the next 10 months:

1)      Read the bills:  As stakeholders in the EB-5 industry, any changes contained in an introduced bill, whether favorable or not favorable, will impact your business in some way, regardless of whether you are an attorney, bank, developer, regional center, investor, or any other relevant service provider. Due to the fact there are so many various “players” in the EB-5 industry, each person’s opinion and perspective will be unique, and as such, will be invaluable. For example, an attorney will read one provision a different way from a regional center provider and may miss a critical interpretation of the proposed provision, and therefore not understand the impact. It is therefore critical to read each and every bill that is introduced, and not pass it on to the next person or expect that it will be vetted by another group. Pooling knowledge and time is important, and the exchange of ideas will be essential to ensuring that the proposed reforms will make the EB-5 program stronger. 

2)      Stay involved:  This relates to the first point. What happens when you spot a provision that is of concern, or a provision where you need additional clarification for your own understanding? To whom will you turn? There are some major trade associations and lobbying groups that have worked tirelessly to champion EB-5 reform, and will continue to do so in the next 10 months. As members of the EB-5 Investment Coalition, we urge you to join us, or a similar group. Participation in a Coalition or a group advocating for reform such as the EB-5IC is important as membership will provide a platform to discuss ideas, potential changes, impacts, and strategies to educate and support Congressional leaders and their staff. If you were involved in this year’s effort, thank you. If you were not, then prepare to spend your time and resources; get involved! It is your business at risk.

3)      Meet with your leaders:  It is especially critical that you meet with your local Congressman or Senator’s office to advocate the EB-5 program and its reforms. As constituents, your local Congressman or Senator wants to hear your voice and hear how the EB-5 program is working. The 2015 year involved many meetings educating various offices on the pros and benefits of the EB-5 program, and each visit followed with the office requesting that local projects and examples of “EB-5 at work” be shown. By showing that EB-5 is benefitting your Congressman/Senator’s district or state, you will be giving them a reason to champion the program. Joining a Coalition or a group will also provide resources for you to bring with you on visits, and some groups may be able to guide you on actions to take and how to effectively structure such meetings.

The next ten months will seem simultaneously long and short, and it will be important for the EB-5 industry to come together and work as a cohesive unit. Advocacy efforts, hearings, and additional legislation will surely follow after the New Year. It is up to us to ensure this program does not lapse upon the Sept. 30, 2016 date and that EB-5 is continued in a workable and useful forum to create American opportunities, jobs, and economic development into the future.

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