EB5 Investors Magazine invited several EB-5 leaders to weigh in on the issues, policy considerations, and possible solutions.
Raising the EB-5 Visa Cap
by EB5 Investors Magazine Staff
We have an urgent cause: the EB-5 visa backlog—last reported to be 19,406, according to U.S. Citizenship and Immigration Services figures for the third quarter of this fiscal year.
Arguably the most pressing issue facing the industry, the hope is that a joint effort to address this serious matter will not only help the industry continue to grow, but create tens of thousands of more jobs and generate billions of additional dollars in investment capital in America.
In the cover story in this issue, EB5 Investors Magazine features several articles by experts discussing different reasons why they believe Congress should address the backlog.
The essential problem is that demand for EB-5 visas is now exceeding the annual supply of 10,000 that are available, resulting in an estimated six-year wait for investors to be issued a conditional visa to live and work in the United States.
At a time when similar global citizenship and residence programs are proliferating around the world, experts say Congress needs to act quickly to address this backlog, or the United States stands to lose billions of dollars, significant tax revenues, a job-creating engine and dash the dreams of thousands of Chinese and other immigrant investors.
“There are countries all over the world that are trying to encourage investors to come to their countries and make investments to facilitate economic growth and create jobs, not just the United States,” says Tom Rosenfeld, the president and chief executive officer of CanAm Enterprises, a New York City-based regional center operator that promotes and administers private and government immigration-linked investment funds. “In some of these countries, you can get processed in as little as three or six months.”
The United States is in danger of losing a great opportunity that can attract capital investment, create jobs and attract some of the “crème de la crème” from countries throughout the world, Rosenfeld says. Many of these investor immigrants have started companies that trade with the United States and will continue to facilitate a significant amount of economic development independent of investor programs.
“The EB-5 program is now being reviewed in terms of a number of issues, and yet the biggest issue is visa retrogression,” Rosenfeld says. “Investors at some point are not going to wait six, seven or eight years. Investors are saying, on balance, that they have other options that are better than the United States, even though the United States would be their first choice. So the fact that the visa issue is not being addressed is a detriment to the country, and will continue to result in a loss of capital through the EB-5 program.”
U.S. Rep. Jared Polis, D-Colo., is building support in Congress for a bill to address the EB-5 visa backlog. He’s also exploring whether language could be inserted into proposed comprehensive immigration reform legislation after the presidential election in November to address the backlog.
“Congress, unfortunately, imposed an arbitrary cap on the number of immigrant visas available and as a result the EB-5 program is only allowed 10, 000,” Polis says. “There is a backlog of EB-5 visa petitions, estimated at about (20,000 to) 25,000, that is a detriment to growing capital in our country and creating jobs that come along with those visas.”
One of the easiest ways to address the backlog is to change the way the cap is calculated. Congress set the cap of 10,000 visas in 1990 when it passed the Immigration Act of 1990. Currently, both investors and each of their family members are counted when calculating the cap. However, a convincing argument can be made that Congress originally intended to limit the program to 10,000 investors annually—not 3,000-3,200 families as the cap is currently interpreted. As a result, each investor petition averages three visas currently. A simple change returning the meaning of the cap to Congress’ original intent would quickly reduce the backlog.
“We could recapture the hundreds of thousands of unused immigrant visas, we could simply increase the number of immigrant visas for the employment-based categories, or we can remove family members from under the 10,000 visa cap for EB-5 so they are not counted toward that,” Polis says.
Experts say the U.S. should address this backlog as soon as possible to remain competitive globally. Throughout the world, from the Mediterranean island nations of Cyprus and Malta to Australia, Portugal, Spain and the United Kingdom, programs similar to EB-5 are increasing sharply in numbers.
“I think it’s important to address this backlog really for the viability of the program overall,” says Ginny Fang, chief executive officer at Golden Gate Global, a San Francisco-based immigrant investment regional center. “EB-5 is one of many different options for investors around the world.
“There obviously are similar programs in other countries, and I think with the backlog issue, if we push it to a point where the program is no longer attractive because the waits are so long, investors will simply look to other countries to invest in. EB-5 is an important way to attract foreign investment into the United States We should keep the program competitive and keep the waits reasonable for investors as they are considering a family decision to move to the United States and become permanent residents. Accordingly, we should make sure it’s a functioning program for them.”
As it stands, the U.S. is losing this competitive battle. In some countries, such as Cyprus, investors can obtain full Cypriot citizenship in as little as three months. Compare that to a six-year wait in the U.S., and it’s not hard to understand why the number of EB-5 applications is dropping so rapidly.
The number of applications fell from more than 6,000 per quarter in recent years to 1,513 in the third quarter of 2016’s fiscal year, according to USCIS EB-5 petition data. While there is no way to know conclusively at this point how big of a role the EB-5 visa backlog has played in this, common sense dictates it’s likely played a significant part.
Why would immigrant investors choose the U.S. EB-5 program when they could apply for similar programs in Europe, the Mediterranean or the Caribbean where waits for citizenship are much shorter? While the United States is still very attractive to immigrants and their families for its excellent educational system, economic opportunities and high quality of life, it’s getting to the point where it just doesn’t make a lot of sense for immigrants to choose America.
Advocates say people in the industry need to get active, contact their representatives in Congress and ask them to increase the cap or take other steps to address the EB-5 visa backlog. The battle over the Targeted Employment Area and other matters consuming the attention of Congress and people in the industry will mean little if the EB-5 backlog is not addressed and applications for the program dry up.
As an industry, Rosenfeld says the focus needs to be one thing—addressing the EB-5 visa backlog.
“While there may be a six year backlog now, any legislation next year could return that backlog to zero,” Rosenfeld says.
Our message: Keep the United States competitive with the rest of the world!
It’s in America’s National Interest to Address the Extreme EB-5 Visa Backlog
by Bob Kraft
Each year, about 1 million Lawful Permanent Residents (LPR) are admitted to the U.S.
Capped at approximately 10,000 immigrant investors and derivatives, EB-5 comprises just 1 percent of the total number of LPR admissions and .003 percent of the total population of the United States.
So while EB-5 immigration numbers are a drop in the bucket, the program has had a profound ripple effect on communities across our great nation. EB-5 has funded more than $14 billion in foreign direct investment, creating tens of thousands of American jobs, contributing to GDP, and adding to federal, state and local tax revenue—all at no cost to the taxpayer.
The effects of the backlog will be particularly pronounced in small market cities like Milwaukee, where EB-5 has been a catalyst for citywide development. Small cities and rural areas typically attract limited Foreign Direct Investment and I believe without EB-5 as a vehicle, these areas are less likely to do so in the future.
The mission of the U.S. Commerce Department is to create and promote conditions for economic growth, opportunity, job creation, sustainable development, and an improved standard of living for Americans. This strongly parallels the language Congress used to explain the intent of their EB-5 program.
The budget provides over half a billion dollars to the International Trade Administration (ITA), to promote economic growth and create high-paying jobs in the U.S. This includes funding for SelectUSA to facilitate job-creating business investment into the United States. It would appear that EB-5 is helping the administration do just that.
So, if the U.S. government has a department with parallel objectives which they fund to promote the growth of these very activities, why limit it? At present, we are principally capping EB-5 investments at approximately $1.5 - $2.5 billion dollars and job creation at 30, 000 to 50,000 per year. Has the world’s largest economy exceeded our appetite for job creation? Do our communities have too much investment?
“Encouraging global foreign direct investment will help the United States compete for the opportunities that develop as emerging markets mature,” according to the U.S. Commerce Department.
The benefit doesn’t stop at investment. EB-5 investors are willing to risk their capital investment—the spirit that built this country. A report by the Partnership for a New American Economy found that immigrant entrepreneurs established 18 percent of all Fortune 500 companies, for a combined impact of $1.7 trillion in annual revenue, employing 3.7 million workers worldwide.
In addition, the EB-5 investor family is well educated and successful; adding talent, financial capacity, and creativity to the U.S.
“They are going to contribute and succeed somewhere—why shouldn’t it be in the United States? America’s prosperity has always depended on the hard work, sacrifice, drive, and dreams of immigrants. Our future will depend on them even more,” U.S. Chamber of Commerce Chief Executive Officer Thomas J. Donohue says.
It is in our national interest to spur investment in our communities and create jobs. However, so long as the extreme backlog continues unaddressed, we are essentially turning away jobs, investment, and some of the world’s most talented people.
Everybody Wins: Addressing EB-5 Program Capacity Issues Before it’s Too Late
by Peter D. Joseph
Since the global financial crisis of 2008—a year when EB-5 accounted for about $320 million in foreign direct investment (FDI)—the program has grown exponentially.
In 2015, EB-5 accounted for $4.5 billion in FDI, an increase of over 1,200 percent during that seven-year period. This growth was fueled by the dire need for investment capital in the United States following the financial crisis and the supply of immigrant investor capital in global emerging markets, mostly from China. The year 2008 also saw China surpass South Korea—for the first time—to account for the highest number of utilized EB-5 visas in a given year, a position that China has easily occupied ever since.
China now annually accounts for 85-90 percent of EB-5 usage per year. The growth has been so rapid and so fast that the demand for EB-5 visas now outweighs the annual supply of 10,000 that are available.
Mainland-born Chinese investors face an estimated six-year wait to be issued a conditional visa (i.e., “green card”) to the United States. At the end of FY2016 Q2, there were over 13,200 I-526 petitions approved since February 2014 with 20,235 petitions pending with USCIS. Some quick math shows if about 85 percent of I-526 petitioners are from Chinese investors, the country will account for over 28,400 of those petitions. If we assume each has at least one family member that plans to immigrate with them, that means over 56,800 visas need to be issued. Even if 10-20 percent of those petitions are denied for some reason, there would still not be enough visas to meet growing demand—and it has to be fixed before it’s too late.
The implications of a long wait time can be detrimental to an investor’s dream to provide a better life for his or her family. Picking the right investment opportunity requires working with professional financial, immigration, and legal advisors to analyze how different investment offerings address EB-5 specific issues that are the result of a lack of visa availability.
Investors must perform due diligence to understand these issues before making any EB-5 investment decisions. It takes time to pick the right opportunity and make the necessary life plans to navigate the tricky timing involved in the EB-5 process.
Investors and advisors need to ask several questions, and project officials need to be prepared to provide answers. These questions include:
- What will the project do to keep investor funds “at risk” to meet EB-5 requirements after a project has been completed but an investor does yet have a visa?
- Will the investor’s children be young enough to be considered a derivative at the time of visa issuance?
- What if there is a material change to the project?
Short term, investors need to do their homework before just getting in line. Longer term, if the U.S. wants to continue to be the No. 1 destination of FDI and have immigrant investor demand that is the envy of the world, EB-5 industry stakeholders need to be relentless advocates for expanding visa capacity by any and all options available.
It is in everyone’s best interest, after all, in building these bonds of economic friendship.
Solutions to the Chinese EB-5 Visa Backlog Predicament
by Bernard P. Wolfsdorf and Joseph M. Barnett
In May 2015, the U.S. Department of State (DOS) announced the establishment of a cutoff date for Chinese EB-5 visas. A waiting line of 24 months for persons chargeable to the China-Mainland quota was set.
At that time, DOS stated it was “extremely likely that this category will remain subject to a cutoff date indefinitely.” As of September 2016, the waiting line has extended to over 30 months and is likely to get longer.
The U.S. Congress must act urgently to decrease this waiting line for Chinese EB-5 investors who in FY 2015 contributed over 85 percent of the capital investment in the EB-5 program.
EB-5 immigrant investors are limited to 7.1 percent of the employment-based annual limit. This quota of approximately 10,000 visas was set by the Immigration Act of 1990 over 25 years ago and has never been adjusted despite the massive increase in demand for EB-5 visas over the past 10 years.
Due to the fact that Congress is reluctant to raise the overall immigrant quota, one option would be to re-allocate visas from the 55,000 randomly allocated to the diversity program, or from the fourth preference sibling category that receives over 40,000 visas annually. A convincing argument can be made that Congress intended to admit 10,000 investors, not the 3,000 - 3,200 families currently admitted annually. Each investor petition consists on average of three visas.
Additionally, from FY 2001-2013, only 29,689 EB-5 visa numbers were issued, leaving 99,531 unused and wasted EB-5 visas. While the law currently re-allocates unused visa numbers, Congress needs to act now to recapture these unused EB-5 visas that were intended for the EB-5 program.
Finally, an interim administrative solution that will assist some investors languishing in the waiting line is for USCIS to open Chart B – Date for Filing. This will allow certain persons in lawful status in the U.S. to file Form I-485 Application for Adjustment of Status (“Form I-485”) if otherwise eligible to adjust.
This proposal emerged from President Obama’s Executive Action Initiative Modernizing & Streamlining Our Legal Immigration System for the 21st Century. Chart B adjustment filings will allow some Chinese EB-5 investors to apply for travel and employment authorization while waiting for their visa number to come up. This could be a huge benefit for Chinese nationals waiting in the ever-lengthening waiting line.
U.S. Immigration Visa Policy Issues and the Chinese Backlog
by Laura Foote Reiff
The availability of immigrant visas is subject to arbitrary numerical caps imposed by Congress—limiting how many foreign nationals can obtain these visas each year.
In the employment-based green card category, Congress allots 140,000 immigrant visas (green cards) to be issued annually. The employment-based categories are subdivided into five preference categories:
- EB-1: Priority Workers (Extraordinary Ability, Outstanding Professors and Researchers, and Multinational Managers or Executives)
- EB-2: Professionals Holding Advanced Degrees and Persons of Exceptional Ability
- EB-3: Skilled Workers, Professionals, and Unskilled Workers
- EB-4: Certain Special Immigrants including Religious Workers
- EB-5: Immigrant Investors
No one country in each of the five categories is allowed to exceed more than 7 percent of the category per the requirement. The employment-based fifth preference category “EB-5” is allotted 10,000 immigrant visas annually. The 10,000 EB-5 immigrant visa quota includes principal applicants, as well as spouses and dependent children under 21 years of age.
At present, the EB-5 visa category is current for all countries except China. The China category has retrogressed to those cases filed in February 2014 and earlier. While China is expected to continue to retrogress, other countries may also retrogress because of the overall demand for visas. Currently, there is a severe backlog of EB-5 petitions awaiting adjudication from U.S. Citizenship and Immigration Services – by some estimates more than 25,000 in the queue.
While retrogression is a new development for many Chinese EB-5 applicants, the EB-2 and EB-3 categories for Chinese nationals have been backlogged between 5-10 years for quite some time. How can Congress address this backlog? Several ways that have been proposed:
- Recapturing unused immigrant visas: Estimated to be in the hundreds of thousands, Congress could resolve the EB-5 backlog issue creatively and as a one-time event.
- Increasing the number of immigrant visa numbers for employment-based categories. A more realistic market-based system would make sense.
- Backlog reduction: A deficit reduction component that imposes a one-time mandatory fee on any petitioner, who obtains a new, borrowed or recaptured visa, and commit these revenues to reduction of the deficit.
- Do not count derivatives of principal EB-5 investors under the EB-5 category.
- Eliminate the per country quotas for immigrant visas.
- Exempting certain immigrant visa number from the EB-5 visa category, i.e. TEA investors.
All these proposals would result in some kind of relief in terms of the backlogs for Chinese investors and others. USCIS could address these matters through regulatory action.
The political reality of this policy conundrum is that the matter is tied up with overarching immigration policy issues that might only be addressed in a more comprehensive way when the new Congress is seated in 2017.
 Visa Bulletin for May 2015, available at https://travel.state.gov/content/visas/en/law-and-policy/bulletin/2015/visa-bulletin-for-may-2015.html (last accessed August 30, 2016).
 Visa Bulletin for September 2016, available at https://travel.state.gov/content/visas/en/law-and-policy/bulletin/2016/visa-bulletin-for-september-2016.html (last accessed August 30, 2016).
 8 U.S.C. § 1153(b)(5)(a).
 See USCIS Form I-526 Immigrant Petition by Alien Entrepreneur (Fiscal Year 2016, 2nd Qtr.), available at https://www.uscis.gov/sites/default/files/USCIS/Resources/Reports%20and%20Studies/Immigration%20Forms%20Data/Employment-based/I526_performancedata_fy2016_qtr2.pdf (last accessed August 30, 2016).
 White House, Modernizing & Streamlining Our Legal Immigration System for the 21st Century, available at https://www.whitehouse.gov/sites/default/files/docs/final_visa_modernization_report1.pdf (last accessed August 30, 2016).