The EB-5 Legislative Outlook

By Enrique Gonzalez

In the wake of the 2008 economic crisis, the EB-5 program – originally established in 1990 as a stimulant to the stagnant economy, and further developed in 1992 with the creation of the “pilot” EB-5 Regional Center program – saw a renaissance unlike anything seen since the program was first created. The efficacy of the “pilot” EB-5 Regional Center program, set to “sunset” in September of 2015, is rarely called into question.[1] The purpose of this article is to first provide an overview of the EB-5 program, noting the effects the program has had, followed by a discussion as to the legislative outlook to extend, or stay, the expiration of the “pilot” EB-5 Regional Center program, and finally an analysis on the prospects new legislation has for success.

EB-5 At-A-Glance:

The EB-5 program authorizes the United States Citizenship and Immigration Services (“USCIS”) to grant immigrant visas to foreign investors. The present baseline criteria for determining eligibility are as follows:

1)    Investment must be made in a commercial enterprise[2];

  1. Established after Nov. 29, 1990, or
  2. Established on or before Nov. 29, 1990, that is:

           i. Purchased and the existing business is restructured or reorganized in such a way that a new commercial enterprise results, or

           ii. Expanded through the investment so that a 40-percent increase in the net worth or number of employees occurs

2)    Job creation; and

3)    Investment of at least $500,000 or $1 million, depending on project location.[3]

An investment in a new commercial enterprise must create or preserve 10 full-time jobs for qualifying U.S. workers within two-years of the immigrant investor’s admission to the United States. Additionally, the immigrant investor must make a minimum qualifying investment of $1 million or $500,000 if the commercial enterprise is located in a high-unemployment area or rural area, also know as a targeted employment area (TEA).[4]

An oft pursued avenue, besides creating one’s own business (singular company investment), is investing in a regional center. A regional center is an authorized investment vehicle. The majority are private companies, as opposed to government entities, and the job creation rules are somewhat more relaxed versus singular company investment. Whereas a singular company must prove the jobs directly created or preserved, a regional center is afforded the luxury of proving direct or indirect creation of jobs. It is important to note that investments in regional centers are not backed by the U.S. government – as mentioned previously, they are primarily privately owned corporations. 

Determining the exact effects of the EB-5 program, vis-à-vis business venture success, is not possible, as USCIS does not track the success of the business ventures created as part of the EB-5 program. What can be determined though is the amount of money that has entered the United States, the number of visas issued, and regional center projects that were successfully funded. Looking at the FY2014 results, a total of 5,115 petitions were approved, amounting to an investment of $2.557 billion to $5.115 billion in the United States.[5] Nearly 86 percent of petitions filed in FY14 were from mainland China, with South Korea totaling just over 2 percent. From 2008-2014, over 17,000 applications were approved.[6]

In terms of regional centers, the following is an abbreviated sampling, provided by the Association to Invest in the USA (IIUSA), detailing a diverse, but small, assortment of projects successfully funded thanks to EB-5 Regional Centers:

  • Redevelopment of a closed Air Force base in Southern California into a vital commercial area including a distribution center and regional airport;
  • Development of assisted and retirement living communities in Washington state, creating 800 jobs and serving approximately 130 seniors;
  • The transformation of a closed Navy yard in Philadelphia into a dynamic, multi-use development now home to 130 companies and 10,000 employees;
  • Restoration of the historic “Alaska Club” building in Seattle, creating a modern hotel that employs almost 100 people and serves over 100,000 hotel guests annually;
  • Expansion of a one season ski-resort in Vermont into a thriving four season vacation destination; and
  • Rehabilitation of a 100 year old building into a hotel that created over 161 jobs while kick-starting the revitalization of an historic Dallas neighborhood.[7]

Unfortunately, barring Congressional action – which the President must sign into law – the “pilot” EB-5 Regional Center program will cease to exist come September 30, 2015.[8]

The Future of the “Pilot” EB-5 Regional Center Program:

In 2012, President Barack Obama signed S. 3245 into law – a Senate bill which formally ended the “pilot” nature of the EB-5 Regional Center program, and extended the program’s ability to receive petitions and remit conditional (and full) green cards through September of 2015. Since this time, Congress has attempted to extend, or rectify the imminent “sun setting” to no avail. In 2013, the U.S. Senate approved S.744 which would have permanently authorized the EB-5 Regional Center program. Unfortunately, the House of Representatives did not take up S.744 before the end of 113th Congress on Dec. 31 2014. Accordingly, since both Houses of Congress did not approve the bill, it did not become law. Most recently, in 2014, Congressman Aaron Shock (R-IL) and Congresswoman Tulsi Gabbard (D-HI) introduced bipartisan legislation in the 113th Congress, H.R. 4659, to indefinitely extend the EB-5 deadline, and eliminate country-caps on employment-based visas. Unfortunately, H.R. 4659 failed to make it out of Committee.

It is often said that deadlines spur action. The 114th Congress has just over seven months to extend the deadline, or permanently lift the expiration of the EB-5 program. As recently as January 28, 2015, that opportunity seems to have presented itself. Congressman Polis (D-CO) and Congressman Amodei (R-NV) introduced H.R. 616, a bill designed to “provide reforms to the EB-5 immigrant investor program…”[9] This legislation contains a number of changes, technical in nature, implemented to both improve the efficacy of the program as well as benefit investors. The following sections describe many of these key additions in respect to each of the two categories: Improvements in the Program and Benefits to Investors. [10]

Improvements in the Program:

H.R. 616 contains numerous provisions to generally improve the efficacy of the EB-5 program. Following is a list of notable additions: deferment to the states for targeted employment area designation; extension of effectiveness of prior targeted determination area’s to two years; permanent authorization of regional center program; preapproval of new commercial enterprises; and deference to prior rulings.


Benefits to Investors:

The improvements in the program listed above ultimately result in added benefits for investors, but the legislation contains key provisions that were specifically aimed at aiding the investor. Following is a list of notable changes which most aid investors: permanency of the program; codification and limitation of processing times; elimination of “country cap;” removal of derivatives from the overall EB-5 visa limit; concurrent filing of adjustment of status; adult age change; and applicability of the foreign corrupt practices (“FCPA”).

Notably, the removal of the expiration date is imperative to prevent the program from “sun setting.” Removing the expiration date is a vital step to the continued depositing of funds aimed at economic growth and job creation. Failure to extend could lead to deleterious effects on the economy, namely a drop in the GDP, a lack of job creation, and nearly a billion dollars of tax revenue evaporating.[11] These effects also extend to investors, as they will no longer have regional centers to invest in, thus being tasked with starting and running their own businesses.

As of January 20, 2015, processing times for the I-526 were nearly 14 months.[12] H.R. 616 seeks to rectify this by codifying a maximum time for which petitions must be adjudicated. Under this proposal, the Secretary of Homeland Security must adjudicate a petition “not later than 180 days after the date on which the petition is filed.”[13] The presence, and implementation of an “adjudicate by” date should greatly aide the process. Through FY2014, there are over 12,000 petitions pending.[14] Numbers this high are a detriment to the program’s viability. Improving the processing times will avail the program, and its benefits, to more foreign investors, which in turn may allow a greater number of foreign investors to invest in the United States.

Present immigration policy limits the number of visas issued per country to 7 percent of the worldwide allotment.[15] This was initially implemented to protect any single country from monopolizing the annual quota.[16] When any one country begins to near this mark, USCIS implements a process whereby they place a “hold” on review of a petitions from that particular country. This process, known as retrogression, occurred for Chinese foreign investors in 2014, the first time in the 24-year history of the EB-5 program.[17] This is expected to occur again in 2015. The results of retrogression could prove a detriment, and may result in a slowdown in EB-5 Regional Center activity. H.R. 616 aims to solve this problem by placing a 15 percent per year cap on I-526s.[18] Observing the data USCIS posted at the close of FY2014, a total 5,115 I-526 petitions were approved. More than doubling the “cap” to 15 percent effectively eliminates the chance of future retrogression for any country participating in the EB-5 Regional Center program.

One area of significant change is language in the bill that provides that “derivatives” i.e., aliens who are the spouse or child of the alien investor, are not counted towards the annual EB-5 allotment. This is significant as it reduces superfluous visa allotment for direct family of alien investors, providing more than ample room for actual investors to obtain EB-5 visa’s rather than clutter the allotment with non-job creating dependents.

Another significant alteration to immigration policy, found in H.R. 616, is allowing concurrent filing of immigrant petitions (I-526) and adjustment of status (I-485) applications (“AOS”). Presently, a foreign investor must file his/her I-526, be approved, and then file either their I-485 if he/she is already in the United States or DS-230 or DS-260 in his/her home country. Under the proposed changes, a foreign investor may file their AOS concurrently if, at the time of filing, an immigrant visa would be immediately available. This presents a great opportunity for foreign investors to dramatically reduce the delay in receiving their conditional permanent residence. Pragmatically, its effect is a reduction of fifteen months -- what presently takes over eighteen months (fourteen for I-526 and four for I-485) will be reduced to merely 180 days.

Another beneficial change for foreign investors, as it relates to their family, is the expansion of age determination for children of alien investors. Under the current rule, if conditional permanent residence (“CPR”) is terminated, and the child of the foreign investor is no longer legally considered a child, he/she cannot be included under a subsequent refilling for permanent residence. H.R. 616 seeks to change this by allowing unmarried adults, who had previously been children under CPR, to have their application refilled with their parents so long as the application is filed within 1 year, and they remain unmarried. We anticipate that this change would benefit a very small group of applicants, and should not be confused with a child turning 21, in CPR, as those children continue to be a part of their parents’ application. 

The applicability of the FCPA is not new to the EB-5 arena, but codifying its application is. On occasion, the FCPA has been applied to cases involving fraud and deceit, especially as it pertains to foreign emigration agents. The FCPA, found within the Securities Exchange Act of 1934 (“Exchange Act”), has the particular purpose of dissuading any individual, with a certain degree of connection to the United States, from influencing government or other officials. It applies to private U.S. businesses, foreign corporations trading securities in the United States, American nationals, citizens, and residents acting in furtherance of influencing whether they are physically present in the United States or otherwise. Specifically as it relates to EB-5, the FCPA’s principle purpose is to eliminate bribery or corruption with regards to both source of funds and emigration history of individuals. As noted by other publications, some regional centers have come under fire for allegedly providing payment, either cash or in kind, to migration officials. Codifying the provisions of the FCPA within the Immigration and Nationality Act serves as a greater deterrent.

Prospects For Reauthorization of the EB-5 Regional Center Program:

It will be important to keep an eye on H.R. 616, which at the present time is the only legislation seeking to extend the EB-5 regional center program, as it has only recently been referred to the House Judiciary Committee, and subsequently referred to the Judiciary Committee’s subcommittee on Immigration and Border Security. The Polis bill is a strong step in ensuring the future of the EB-5 Regional Center program. It augments the current program with both safeguards and benefits to effectively provide for a more efficient program. At the present time there is great optimism that the EB-5 Regional Center program will either gain reauthorization or be granted permanent extension.

[1] See e.g., http://harboursideplace.com/foreign-investment-making-harbourside-a-reality-in-jupiter/; In 2013 USCIS noted over 7,871 investors had paid between $500,000 to $1 million for the opportunity to receive a green card – a net cash influx of $3,935,500,000 to $7,871,000,000

[2] 8 CFR 204.6 - Petitions for employment creation aliens.

[4] Supra note 2 at (f).

[6] Id.; It’s important to note that total applications approved were taken from I-526 petitions, which may yield higher than actual results as they may include the foreign investor and his/her family.

[9] See HR 616 (114th Congress, 2015)

[10] Note: this list is not meant to be an exhaustive catalogue of changes, but rather a sampling of a few of the prominent changes.

[12] See USCIS Processing Time Information for the Immigrant Investor Program Office, USCIS, available at https://egov.uscis.gov/cris/processTimesDisplayInit.do, posted January 20, 2015.

[13] Supra note 10 at page 12, line 14.

[14] Supra note 6.

[16] American Competitiveness in the Twenty-First Century Act (“AC21”) removed a “per quarter” limitation per country, where demand for visas is less than their allotment.

[18] Supra note 10 at page 17, Line 7.

Enrique Gonzalez

Enrique Gonzalez

Immigration attorney Enrique Gonzalez is the managing partner of the Florida office of Fragomen, Del Rey, Bernsen & Loewy, LLP. He counsels a broad spectrum of individuals, clients, and institutions, with an emphasis on advising high-net worth individuals on investment-oriented immigration routes such as the EB-5 visa. He also manages the compliance programs for companies involved in industries as wide-ranging as entertainment, healthcare, agriculture, energy, education/research, food service, technology, and hospitality.