Finally, the Regional Center EB-5 Program is Back!
After 8.5 months of nervous anticipation, the regional center EB-5 program is coming back. The EB-5 Reform & Integrity Act of 2022 was attached to the Consolidated Appropriations Act, 2022, an appropriations bill for funding the U.S. government, and then passed by the Senate, in the late hours of March 10, 2022. Two different versions of the “Consolidated Appropriations Act, 2022” were passed by the House and Senate, and so the differences must be resolved in conference committee, and then the revised legislation must be passed again in the revised form, and then sent to the President Biden to be signed into law.
As a result of this legislation, the EB-5 program will be renewed for 5.5 years to September 30, 2027. There are many changes to the program, a number of which are very beneficial to investors, but most of the changes are directed at increasing the financial transparency and accountability of the regional centers by changing how they structure the projects, changing how they market their projects, and expanding how much financial, project status, and marketing information they must report to USCIS, and eliminating TEA gerrymandering, among many other things.
Grandfathering of existing EB-5 investors
All investors who already invested and filed I-526 petitions are allowed to continue their immigration process under the terms in effect at the time when they filed their I-526 petition. The processing of pending I-526 petitions, EB-5-based adjustment of status applications, and EB-5-based consular processing of immigrant visas should resume upon enactment, i.e., once the Senate and the House of Representatives resolve differences between their two respective versions of the appropriations bill in conference committee, and once President Biden signs the legislation into law, which should come sometime between now and March 15, 2022.
Protection of EB-5 investors from any future lapses in the program
Fortunately, EB-5 investors will be protected from any future lapses in the EB-5 program, as long as they file their I-526 petition before September 30, 2026.
Protection of EB-5 investors from termination of the EB-5 regional center or project
If USCIS terminates a regional center or project, as long as the EB-5 investor’s source of funds met USCIS’s requirements, they can switch to another project or regional center without restarting the entire process and losing their priority date. This does necessitate reinvesting in the new project, whether from new investment funds or obtaining a refund of the funds invested in the previous regional center project.
New required investment amounts
The new investment amount for investment in a rural area or in a Targeted Employment Area (“TEA”) is $800,000, while for a non-TEA area it is $1,050,000. Congress decided to reduce the difference between the two investment amounts to just $250,000. These amounts will be adjusted for inflation every 5 years.
Congress appointed USCIS to have sole authority for designating TEAs and rural areas. Only immediately adjacent census tracts can be considered when evaluating the unemployment in the area where the EB-5 project is located. TEA designations are valid for 2 years, but they can be renewed. Nevertheless, once an investor invests in a designated TEA it will remain valid throughout that investor’s immigration process.
It is also interesting to note that USCIS must now give priority to processing EB-5 projects located in rural areas.
Concurrent filing of adjustment of status with or after I-526 petition filing
This is a wonderful new improvement! EB-5 investors, who are in the U.S. in valid non-immigrant status (except for visitor status under the ESTA-Visa Waiver Program) can now apply for adjustment of status at the same time as they file their I-526 petition, or after they file their I-526 petition, as long as the EB-5 quota is not backlogged for their country of birth. This opens up wonderful new opportunities for EB-5 investors to live in the U.S. while they bridge the long processing time for I-526 petitions. While in the adjustment of status process, it is possible to obtain a work authorization, a travel document for international travel, and a Social Security Number. Quite simply, with the adjustment of status process it is possible to live full-time in the U.S., work, operate a business, or enjoy retirement. It does typically take at least 6+ months from filing to obtaining the work authorization and travel document.
INA 245(k) coverage for EB-5 investors
This is a great new development, as well. There is a provision of law governing adjustment of status, which offers some flexibility to EB-5 investors, whose status may have expired within 180 days of the date of filing for adjustment of status. Also, if the person has worked without authorization, since their last admission to the U.S., less than 180 days, then USCIS can still approve that person’s adjustment of status. Until this change in the law, EB-5 investors were not eligible to qualify for relief under this provision.
New Investments and filing of new I-526 petitions
Congress is, effectively, reconstituting the EB-5 program. They are requiring that all regional centers go back and reapply for designation as a regional center under the new rules. Congress discovered that some regional centers were being controlled and operated by foreign governments, even the Chinese government was operating a regional center through front companies. Also, some regional centers were violating securities regulations, allowing marketing companies to make fraudulent promises and representations to investors on their behalf. It is anticipated that USCIS will cut the number regional centers to less than half of its current number. Well-established regional centers will have no problem being redesignated, but regional centers that are barely functioning will likely be terminated.
In addition, new requirements are being imposed for how regional centers prove job creation in their projects, and so regional centers will need time in order to create new projects, or restructure existing projects, in order to satisfy the new requirements. This will also take some time. However, during the lapse in the program, regional centers were aware that these changes were coming, and so regional centers who were proactive in their planning will probably not need long to offer new projects in compliance with the new rules.
As a result of this redesignation process, USCIS will not accept new I-526 petitions for at least 60 days from the date of enactment.
New Job Creation Requirements
Indirect job creation, usually calculated based on expenditures on construction work, can account for no more than 90% of the jobs in a project. And from the 90% of job creation from indirect job creation, no more than 75% of the indirect job creation can come from construction work, if that construction work lasts less than 2 years.
As a result, only very large construction projects where the construction will take at least 2 years will be able to claim up to 90% of their job creation from indirect jobs from construction. The 10-25% of job creation from “direct jobs” does not mean that the EB-5 project in which investors invest will directly employ workers. Direct jobs, in this case, still means jobs created by third parties. To illustrate, if the EB-5 project is for funding the construction of a warehouse facility, then the direct jobs would be created by the business(-es) that move into and operate in the warehouse facility. The point of these restrictions is that Congress does not want EB-5 funding to go just for constructing residential buildings where there is no further employment of U.S. workers, but rather to fund the construction of commercial buildings where businesses will operate and employ U.S. workers.
As a result of the more restrictive TEA designation requirements and the new job creation requirements, EB-5 investor funding will no longer be funding the construction of large residential buildings in up-scale neighborhoods of cities.
New allocations of EB-5 Green Cards by project type or location and rollover of unused EB-5 Green Cards from one year to the next
The annual quota for EB-5 category is still 10,000. From those 10,000, 20% are reserved for investors who invest in projects in rural areas, 10% for projects in high-employment areas, and 2% for government infrastructure projects. The other 68% of EB-5 green cards are up for grabs to investors in all types of projects. If the above-mentioned reserved categories are not used up in the first year, they are carried over to the second year with the same reservations. If they are not used up by the third year, then they are up for grabs for EB-5 investors in all categories.
Currently, there are very few projects in rural areas. The legislation’s primary sponsor, Senator Chuck Grassley, is from Iowa, a primarily rural and agrarian state, and he is aiming to promote having more EB-5 projects to be created to fund economic development in rural areas. With this legislation, he is incentivizing the creation of projects in rural areas, since investors who want to immigrate quickly will want to invest in such projects in order to have their cases processed faster and they will have immediate access to green cards with this 20% set-aside for investors in projects in rural areas.
Congress is pushing USCIS to hire more staff and speed up processing
In the legislation, Congress mandates that USCIS increase the filing fees to whatever level necessary in order to hire sufficient personnel that they can process different EB-5-related case types within stipulated time frames: 120 days for I-526 petitions based on investment in a project in a rural or TEA area, 240 days for I-526 petitions based on investment in a project in a non-TEA or non-rural area, and 240 days for I-829 petitions for removal of conditions. The filing fees will probably increase the most for regional centers, since the regional centers’ owners stand to profit from operating under the program, and because USCIS will have to hire more staff to oversee the regional centers, given the greatly expanded oversight responsibilities that USCIS will have as a result of this change in the law.
In addition, Congress approved raising the pay ceiling for employees working in the EB-5 unit, the Immigrant Investor Program Office (“IIPO”), so that they can pay more highly qualified staff members like economists, securities law attorneys, and other professionals that the IIPO needs. The limitations on how much USCIS could pay such professionals inhibited their ability to attract and retain them as employees.
Redeployment of EB-5 Investors’ funds, continuing acceptance of bridge loans, & EB-5 investors continue to be credited with job creation brought about by non-EB-5 investment
USCIS’s policy is that once the EB-5 investor has completed the two-year conditional residence period and, if the EB-5 project has completed the job creation and otherwise accomplished the goals of the project, the EB-5 investor can receive repayment of the EB-5 investment without endangering the immigration process. As the processing of EB-5 cases has been taking longer, and as backlogs have developed for certain countries, this has delayed the start and end of many EB-5 investors’ conditional permanent residence. If the EB-5 investor has not reached the end of the conditional permanent residence at the time when the project is repaying the other investors in the same project, the investment funds of the EB-5 investor, who has not reached the end of the conditional permanent residence, must remain invested with the EB-5 project company. In order for the funds to qualify as being still invested, they cannot just be sitting in a bank account, but rather must be “at risk” by being “redeployed” by the EB-5 project company investing them into a commercial business activity. Very often the investment funds are redeployed in bridge loans to develop other EB-5 projects in the beginning stages before funding from other EB-5 investors is brought in to develop the project. Previously, USCIS required that the funds be deployed in the same state, but now they can be redeployed anywhere in the U.S.
Congress accepted the continued use of bridge loans to finance the initial start-up of EB-5 projects, where it is planned that the bridge loans will be paid off with funding from EB-5 investors.
Congress accepted that EB-5 investors continue to enjoy the benefit of job creation attributable to funding of projects from loans and investments that the same project obtains from non-EB-5 sources.
Existing rules on loans and gifts still in effect
EB-5 investors can still invest funds from gifts, so long as the funds are gifted truly in good faith, not a loan passed off as a gift. As always, it must be documented that the gift giver obtained the funds legally. EB-5 investors can invest only from secured loans, not from unsecured loans.
No pooled investments under the standard (self-directed) EB-5 program
The EB-5 Reform & Integrity Act of 2022 prohibits having more than one EB-5 investor in a project that is not under a regional center. As a result, the EB-5 projects set up for multiple investors under the standard (self-directed) EB-5 program, which were created during the lapse of the regional center EB-5 program, will no longer be permitted. The standard (self-directed) EB-5 program will henceforth be only one EB-5 investor per business.
The EB-5 Reform & Integrity Act of 2022 will impose many more new provisions and requirements, but these are the ones I think that are of greatest interest to EB-5 investors.