New EB-5 Immigration Changes Are Near
The EB-5 Immigrant Investor Modernization Final Rule published on July 24, 2019, and effective on November 21, 2019, revises policy guidance, updates the minimum investment amounts, explains the new methodology for determining high unemployment areas, and adds and clarifies information about priority dates. This is the first significant change in the EB-5 Investor Visa Program since 1993.
The final rule will drastically affect the EB-5 marketplace and the ability of certain regional centers to continue to operate. Under the EB-5 program, qualified individuals are eligible to apply for lawful permanent residence in the United States if they make the necessary investment in a commercial enterprise in the United States and create or, in certain circumstances, preserve 10 full-time jobs for qualified U.S. workers. Although there are many technical changes in the new regulations, there are a couple major changes to make note of:
New Dollar Amount:
1. The minimum investment amount will increase significantly from $500,000 to $900,000 in a qualified Targeted Employment Area (“TEA”).
2. Investment amounts in a non-TEA will increase from $1 million to $1.8 million.
3. The regulations also include provisions that the investment amounts will be adjusted every five years based on inflation.
New TEA Designations:
1. U.S. Department of Homeland Security (“DHS”) will make TEA designations directly now (taking them away from the individual States).
2. DHS will approve census tract-based TEAs, based on new configuration rules, which will eliminate gerrymandering and will presumably provide consistency.
These changes beg the question: who will be impacted the most by the new regulations? States are now being formally removed from having any input in determining what qualifies as a TEA. Instead, DHS will make such designations directly, using a uniform but far more stringent standard. Stripping the designation authority away from each state and giving DHS sole authority to designate what areas qualify as targeted employment areas was a consequence of what some industry and elected officials felt was a disproportionate investment in low unemployment urban centers. Granted EB-5 visa category is fundamentally an economic development program, the removal of state input neutralizes any localized input on the what, who, and where of these investments. This provision in the new regulations is contrary to the original implemented regulations, wherein the predecessor agency had found that “… the Service believes that the enterprise of assembling and evaluating the data necessary to select targeted areas, and particularly the enterprise of defining the boundaries of such areas, should not be conducted exclusively at the Federal level without providing some opportunity for participation from state or local government.” 56 FR 60897-01. DHS no longer feels this way.
The new regulations increase the minimum investment for rural areas and TEA to $900,000. Investments not within those areas must be $1,800,000. Regardless of the reasoning behind the increase, the increase will shrink the pool of prospective investors who have sufficient means to make such an investment, and as the result, less wealthy investors will be disadvantaged.
Lastly, setting aside the policy objectives of redirecting investment to the areas of high unemployment, it seems apparent from DHS’ own analysis that there will be detrimental economic impact due to the TEA-related changes. When evaluating the economic impacts of the TEA-related changes, DHS found that 54% of all investments would be affected. Despite this, DHS concluded that the TEA-related changes will “…provide benefits in that additional areas may qualify as a TEA based on high unemployment, potentially offering investors more opportunities to invest in a TEA at the reduced investment amount…” However, it is not apparent how additional areas would qualify as a TEA under a more restrictive definition.
Rural projects will benefit significantly under the new final rule. Constraining the ability of urban areas to qualify for the lower investment threshold appears likely to drive a measurable number of investors to projects located in rural areas.
The final rule provides a number of other changes:
Priority date retention to certain EB-5 investors (this means that if an investor desires to redirect his investment to another project following approval of the initial I-526 petition, the initial priority date of such application will be preserved);
A clarification on USCIS procedures for the removal of conditions on an investor’s permanent residence.
The long awaited new EB-5 regulations come with the promised enforced integrity measures and due diligence steps for both regional centers and investors. Only time will tell how these new changes will be implemented and how they will impact local economic growth.
Irina Batrakova The Batrakova Law Office