The new act has many features that should protect investors by imposing onerous clauses for the Regional Centers (RC). Many of them were already complying with these requirements voluntarily. Now, it is the law. Therefore, not only RCs but investors and intermediaries such as migration agents, broker-dealers, and consultants must abide by them.
When established in 1990, the mission of the EB-5 program was to create much-needed American jobs. First, the program was strictly a direct investment program. A couple of years later, the RC-augmented program provided considerable flexibility for potential EB-5 investors. Many large-scale project owners were able to employ thousands of Americans as its global popularity and recognition increased.
In the last few years, given their urban locations, there has been considerable disagreement on the benefits of many RC projects, despite many advocates defending their contribution to the US economy.  Under the previous law, to qualify for targeted employment area (TEA) designation, project sponsors could use a much larger area surrounding the project. Under the new law, they can only use the census tracts adjacent to the census tract of its location. Unlike the previous law, the local governments are no longer authorized to designate a location TEA. That decision will be centralized and made by the United States Citizenship and Immigration Services (USCIS).
- benefits for both the investor and the issuer of the new act and,
- expectations from the EB-5 industry to comply with this new standard
- expectations of USCIS to clear the accumulated backlogs in processing existing and future petitions
BENEFITS OF THE EB-5 REFORM AND INTEGRITY ACT
Perhaps, the most significant benefit of the new program is the long-term reauthorization through Sept. 30, 2027. In the last few years, we had a few times a year the possibility that the program might not get extended or that the required minimum investment amount might increase. While that fueled an upward spike in the number of applications before each potential termination date of the program, it has not been healthy for the industry. All of the EB-5 stakeholders got frustrated. The trust in the program was rapidly declining. The program almost halted with the increase in the TEA-eligible investment amounts, from $500,000 to $900,000. While we had thousands of applicants annually before the raise, applications declined to hundreds after the raise.  The courts ruled the raise unlawful, and the required minimum investment amounts reverted to pre-November 2019 levels before the raise. However, the industry learned the hard way that the lawmakers, for the most part, were in favor of it. The program went on a lapsed mode for almost nine months. Now that we have new legislation, this is our chance to implement the lawmakers’ intent.
For example, by demanding that RCs be subject to USCIS audits at least every five years, Congress wants to ensure that they adhere to their responsibilities. In addition, the law mandates USCIS to investigate and monitor RCs and all the other parties to a transaction, including new commercial enterprises, job-creating entities, alien investors and their alien spouses, and alien children. The bill establishes the EB-5 Integrity Fund to ensure adequate funding for these enforcement activities.
USCIS will now learn about the foreign migration agents who might be direct or third-party promoters of the EB-5 projects. US broker-dealers are already under the supervision of US regulators such as the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC). As long as USCIS publishes guidelines on how they plan to regulate them, there is no question they will gladly comply. Lastly, in this integrity measures category, the role of the mandated Fund Administrator is very significant. No money transfers will be allowed without proper documentation. The Funds Administrator will verify that the transfer complies with all governing documents, including organizational, operational, and investment documents.
The integrity measures and the required periodic RC audits reveal the lawmaker’s intent in the new law. Most RC investors who want a green card are passive and rely on the expertise of the project sponsor to create the requisite jobs and preserve their capital.
The lawmakers want to ensure that the RC professionals assume this responsibility seriously. There is still the requirement of the investor capital to be at risk. If the investor is provided full disclosure on the risk and makes an educated decision that they want to proceed with the investment, the law permits it under the RC program. The contents of the Private Placement Memorandum (PPM) and professional studies like economic reports and business plans, necessary in its creation, provide full disclosure of such risks. Even though the law does not explicitly state this, direct investments, on the other hand, are more suitable for investors who want to run their projects and be actively involved. For ease of implementation, Congress disallowed all direct pooled investments. Their purpose was to protect these passive investors through the new controls in place of the RC program. We cannot deny that the law, being precise by definition, is vague and open to various interpretations until USCIS publishes clear guidance. Nevertheless, given the clear intent of no more pooling of direct investments, we hope that attorneys and dealmakers will not push the envelope in structuring transactions that could be in line with the letter of the law but not the spirit of the law.
INTERPRETATION OF THE NEW RIA
The 60-day period the new law granted was supposed to help them issue interim guidelines to ensure the successful resumption of the program without further delay. Instead, USCIS interpreted the new law to mean that they needed to recertify RCs whether they were in business for many years or were brand newcomers to the market. All RCs would have to be subject to the same recertification process by filling out the required I-956 form to be eligible to submit the I-924 project-related application. Until an RC was recertified, sent in this information about the EB-5 project, and obtained a receipt that USCIS had received their application, no investor would be allowed to file their I-526 petitions. Most established RCs would have welcomed this interpretation if they had known how long this new process would take. Unfortunately, USCIS, in a public listening forum they held on April 29, announced that the contents of the I-956 and the required supporting documents would only be available on May 14, essentially the end of the 60 days. Nobody had a clear idea of how long they intended to take to review these new recertification applications of the existing RCs. Naturally, this built a lot of tension between the industry and USCIS. RCs, existing investors, and potential investors patiently waiting to file new I-526 petitions were all frustrated with two lawsuits pending disputing USCIS’s strict interpretation of the new law.
Luckily, on June 24, 2022, Judge Vince Chhabria of the Federal District Court for the Northern District of California issued a preliminary injunction ruling. His ruling reversed the USCIS decision in April that removed the authorization of all formerly designated EB-5 Regional Centers based on its almost certainly erroneous interpretation of the new law U.S. Congress passed in March. Investors were again allowed to file new immigration petitions while the agency would create new regulations for implementation.
While the new law did not bring much-needed relief to the pending investors of retrogressed countries such as China, the visa set-asides for TEAs, especially for rural projects, did for new applicants from these countries. They could significantly benefit from priority processing should they invest in a rural project. 
The legislation allows the concurrent filing of the EB-5 application through the I-526 petition with the I-485 adjustment of the status petition if the investor is not from a retrogressed country in the visa category they are seeking and has a valid visa such as an F-1 student visa or H-1B work visa or E-2 investor visa.  Together with the I-485, the investor could file I-131, Application for Travel Document, and I-765, Employment Authorization Document (EAD). Assuming that their EAD gets approved, college students could get a summer job during college without using OPT. H-1B is subject to a lottery. A student with an approved EAD and an already filed green card application can bypass the H-1B process. As a result, their negotiation power and marketability increase immensely. A bonus for students is the chance of reduced educational costs if they could show residency in the state they want to study.  On the H-1B side, we have many India-born residents in the US with pending EB-2 and EB-3 petitions. Most have no hope of getting these petitions approved in a reasonable time. With a concurrent filing of I-526 and I-485, they could get employment approval quickly. Once their I-526 petition is approved, they could proceed with the green card. The same applies to a valid E-2 visa holder. With a pending I-526 petition, they could also file for adjustment of status, and once they get their EAD approved, they can work anywhere they wish.
SOURCE OF FUNDS AND FEES
The source of funds must now include the capital investment and any administrative or other fees, such as USCIS filing fees associated with the investment.  Most RC projects already required the administrative fee to be sourced voluntarily under the previous law. The added mandated other fees requirement is not onerous. The meaning of more likely than not is vague and open to interpretation. It would have been helpful if the new law had clarified it. In recent years, USCIS has taken a very conservative position on this, issuing Request for Evidence (RFEs) and Notice of Intent to Deny (NOIDs) on the source of funds that would have been acceptable just a few years ago.  We hope the new USCIS regulations will end this practice. Many eligible potential investors get frustrated by the source of funds scrutiny imposed on them and often decide not to invest. USCIS must develop sophisticated systems that adapt to accepted payment methods of various international jurisdictions. For example, USCIS needs to conclude more likely than not, a medical doctor or an attorney earned the funds they plan to use as capital through lawful means if they are from a country that has a predominantly cash-based economy.
As broker-dealers, we already must have our clients fill out an investor questionnaire that checks the suitability of the investment.  We decide on their sophistication based on their income, assets, and overall understanding of the investment risks. Under the new law, migration agents operating overseas in the country of foreign investors have to check investor suitability. Previously, RCs performed this function for investors who reside abroad and find the investment either by themselves or through migration agents. USCIS has not yet issued regulatory guidance on how they plan to supervise intermediaries. In line with the law, they will most likely obligate the migration agents to ensure that each investor’s EB-5 petition includes a disclosure, signed by them, reflecting all fees, ongoing interest, and other compensation paid to any person in connection with the investment. These disclosures have already been part of the offering that each investor sees and signs off. The new law’s intent must be that each investor should be made aware of the related fees.
Previously, it was common for an RC to solicit investors directly. Once they identify an investor, they would refer the investor to an immigration attorney for processing. It is not clear whether the active involvement of a regulated broker-dealer or migration agent was necessary. However, a fully informed investor should inquire about other immigration alternatives from a non-conflicted financial advisor or a broker-dealer.
It is possible that due to some of the well-known challenges, EB-5 might not be the right fit for every applicant. They might have an issue with the source of funds, global tax, or residency requirement. They might not be able to wait as long as it takes to process their application. The cost of the EB-5 could be prohibitive. Therefore, clients should be able to consider alternative nonimmigrant intent visas such as E-2, L-1, O-1, etc., instead. They could also try EB-1 if they have exceptional talents and recognitions that set them apart nationally or internationally. When a team of immigration attorneys and broker-dealers covers the clients, they are more likely to get a customized solution.
In conclusion, intermediaries should be unconflicted among projects they promote and potentially other suitable immigration options with or without investment. They need to work as a team with immigration attorneys and RCs. They should match the potential immigration applicant with the best immigration option offering a menu of already vetted investment options if that immigration option necessitates an investment. Immigrants, introduced to solutions suitable for their specific needs, rather than to products RCs or intermediaries have on the shelf they need to sell, will once again gain trust in the system.