By Laura Reiff
For more than two years, the EB-5 program has not been reauthorized for the typical 3-year period as it had been every three years since 1992 when the program was created. Instead, the EB-5 program has been extended along with Continuing Appropriations and Omnibus funding bills, thereby having a new expiration date along with the federal budget at each turn. Since the 114th Congress, and now into the 115th Congress, there have been ten bills introduced in both the House of Representatives and the Senate, all focusing exclusively on the EB-5 program.
As of today, the EB-5 program has been extended until Sept. 30, 2017 as part of the Omnibus funding bill passed on May 4, 2017 and signed by the president the day after. The provision included in the Omnibus bill extends the EB-5 program as is, with no changes to the program. While this is generally good news, changes to the program may occur prior to Sept. 30, which will reform the program.
The Department of Homeland Security (DHS), published in the Federal Register, proposed regulations to reform the EB-5 program for the general public to provide comments and feedback. The comment period was closed on April 11, 2017, and is now under review by DHS. After the review, the regulations will be sent to the Office of Information and Regulatory Affairs (OIRA), which is part of the Office of Management and Budget (OMB) for final review and approval. If approved, the regulations will be published as final in the Federal Register, and an effective date will be noted. OIRA/OMB also has the option of not approving the regulations and/or returning the rule to the agency for further amendment or comment. The EB-5 industry has roundly not been receptive to the regulations, as the reforms would be harsh to the program. A few changes that would occur if the regulations were to be published as written, include: Minimum investment amount would be $1.35 million for Targeted Employment Areas (TEAs) and $1.8 million for High Employment Areas.
The TEA designation: Will not be designated by states; Defines a TEA as a census tract, or contiguous census tracts, where the New Commercial Enterprise (NCE) is located. Must meet the high unemployment rate of 150 percent. The census tracts may be spooled; Allows any city or town with an unemployment rate of 150 percent and a population of more than 20,000 to count as a TEA.
Priority Date: May be retained if the I-526 petition is denied through no fault of the investor.
While there have been 10 bills introduced in the last two years, there have been additional drafts of bills circulated amongst members of Congress, staff and major EB-5 stakeholders to come to a consensus on how to best address reform for the EB-5 program. The most recent draft was circulated by Senator John Cornyn’s office in the first week of May 2017. Some of the provisions to note, include: Minimum investment amount would be $800,000 in TEA and $850,000 in non-TEA locations. The TEA definition includes closed military bases, distressed rural census tracts or distressed urban census tracts.
A distressed rural census tract must include at least one of the following: 1) poverty rate is at least 20 percent; 2) median family income of no more than 80 percent of statewide median income; or 3) must not have more than 100 people per square mile for 100 square miles.
A distressed urban census tract must meet all of the following: 1) be inside a Metropolitan Statistical Area (MSA); 2) census tract’s poverty rate is greater than 30 percent; 3) the median family income for the census tract does not exceed 60 percent of the statewide median income; and 4) the unemployment rate for the census tract is at least 1.5 times the national average.
Regarding visa numbers, it eliminates dependent family members from the EB-5 cap.
If legislation is passed in Congress and signed by the president before the regulations are finalized, the legislation’s provisions will govern. If the regulations are finalized before legislation is passed, subsequent legislation (if passed) will supersede the regulations. The take-away is that while the EB-5 program has been extended to Sept. 30, 2017, regulations or legislation may reform the program as we know it before then.