EB-5 Reform and Integrity Act Set to Reauthorize EB-5 Regional Center Program Through September 30, 2027
After more than eight months of a lapsed EB-5 Regional Center Program (the “Program”), Senators Charles Schumer (D-NY) and Charles Grassley (R-IA) have agreed on an EB-5 reform bill (the “EB-5 Reform and Integrity Act” or “Act”) that will re-start the Program, as part of the $1.5 trillion Consolidated Appropriations Act of 2022, the omnibus legislation to fund federal government operations, which is expected to be passed any day. The following provides an overview of certain of the material provisions of the 39-page Act.
Minimum Investment – The EB-5 Reform and Integrity Act sets the minimum investment amounts under the Program at:
- $800,000 in targeted employment areas (“TEA”).
- $1,050,000 in non-TEAs.
- subject to adjustment on January 1, 2027, and every five years thereafter, for inflation.
- Source of funds requirements apply to capital investments, administrative fees, and any fees “associated” with the investment.
- Gifts are still permitted under the Act and not limited to familial relations.
Visa Set-Asides – The Act creates new visa set-asides among the 10,000 EB-5 visas available annually, as follows:
- 20% for rural projects
- 10% for distressed urban area projects (high unemployment areas)
- 2% for investments in infrastructure projects
- Unused visas “carry over” in the same category in the immediately following year
- Unused visas in any category made generally available for any project, in the year immediately following the “carry-over” year
Job Creation – The Act changes the composition of the ten jobs that must be created per investor So while still ten jobs per investor under the Program, at least one job must be a “direct” job and the other nine can be “indirect” jobs and only 75 percent of jobs can be from impacts from construction lasting less than two years (and those count only to the extent of the fraction of a two year period). Tenant occupancy can count if the jobs are not relocated.
Tea Determination – Pursuant to the Act, USCIS will continue to issue TEA designations.
Fund Administration. In the absence of audited financial statements shared with investors, NCEs must maintain the EB-5 investors’ capital contributions in insured separate accounts and retain a third-party fund administrator to make sure that the capital properly flows to the job creating activity.
Redeployment/Reinvestment – Regarding the redeployment or reinvestment of capital following an early exit of a project upon its sale or refinancing or restructuring, the Act directs USCIS to enact regulations that permit the new commercial enterprise (the “NCE”) to redeploy capital anywhere in the United States to keep the investment “at risk” rather than only within the approved geographic area of the regional center of the original underlying area. This will be welcome news for EB-5 stakeholders throughout the country. However, failure to abide by these guidelines carry stiff penalties for the regional center.
Effect on Existing Investors – Pending investor petitions at the time of enactment of the Act are not subject to the new rules or higher investment amounts. Adjudication of these petitions and adjustment of status applications, and consular processing will resume upon enactment of the bill.
Grandfathering Provisions – Grandfathering provisions under the Act direct USCIS to continue to process EB-5 petitions if there is a future EB-5 program lapse, as long as the EB-5 petition is filed by September 30, 2026. This is great news for EB-5 investors as it provides the necessary protection to all EB-5 investors that have invested and will invest in the EB-5 Regional Center Program through September 30, 2026.
Regional Center Governance – The Act requires an exemplar application on Form I-924 to be filed with USCIS before individual investor I-526 petitions may be submitted under the Program (which has become the “norm” for most projects in the past five years) but now will be required. The Act extends the validity of new TEA letters for two years from one year which is a welcome change.
A few compliance changes affecting regional centers include that (i) USCIS must audit them at least every five years; (ii) disclosure is required of third-party agent fees and their involvement in a project; (iii) persons who have committed certain crimes or have been subject to orders or sanctions by certain state or federal enforcement agencies may not be involved with regional center; (iv) direct and third-party promoters must register with the USCIS; (v) only citizens and permanent residents may be involved with a regional center and foreign governments are barred from any aspect of regional center ownership.
The Act includes a procedure for switching projects if a regional center or new commercial enterprise (NCE) is terminated, which is long overdue and very welcome. To support a new “integrity fund,” in addition to all filing fees for application, regional centers must pay an annual fee of $20,000, or $10,000 by regional centers with 20 or fewer investors per year. Each regional center must also pay $1,000 with each Form I-526 petition filed as part of their project, which represents significant additional cost.
Change to Funding – The Act provides that the purchase of bonds no longer qualifies as part of the Program but otherwise the Act made no changes to capital structures.
Adjustment of Status – Investors and family already legally in the U.S. and eligible for a visa number may concurrently file applications for adjustment of status (avoiding consular visa processing) along with or while awaiting adjudication of the investor’s I-526 petition. EB-5 investors now join other employment-based immigrants in enjoying, under INA section 245(k), forgiveness of up to 180 days of status violations when they apply for adjustment. This represents an incredible change for EB-5 investors that have been demotivated to invest due to the long timeline to apply for residency after their capital investment.
Background on the Program Generally – For those new to the Regional Center Program, Congress created the EB-5 Program in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. In 1992, Congress created the Immigrant Investor Program, also known as the Regional Center Program, which sets aside EB-5 visas for participants who invest in commercial enterprises associated with regional centers approved by USCIS based on proposals for promoting economic growth.
Under the EB-5 program, investors (and their spouses and unmarried children under 21) are eligible to apply for a Green Card (permanent residence) if they invest the required minimum investment in a new commercial enterprise in the United States and create or preserve at least 10 permanent full-time jobs for qualified U.S. workers. The Act provides protection for dependent children aging-out in certain circumstances. That Program expired at the end of June 2021 and investors and stakeholders have been waiting for its renewal ever since.
Debbie Klis brings substantial investment fund, securities and capital markets experience with a particular emphasis on private equity and advising investment firms and equity sponsors on all aspects of their business including the formation, marketing and management of investment products, the launching of new business lines, and strategic investments and transactions, as well as the related operational, legal and regulatory issues. Read more here.
Sonia Oliveri’s practice focuses on business immigration, EB-5, and on commercial clients’ immigration and international business needs. A native of Italy, Ms. Oliveri is fluent in six languages: English, Farsi, Italian, French, Portugese and Spanish. Ms. Oliveri is a highly accomplished immigration attorney. She assists corporate clients, foreign corporations and investors with complex corporate transactions and immigration matters, with an emphasis on the EB-5 program, E-1/E-2 treaty trader and investor programs, H-1B visa matters, and L-1 intracompany transferee visa applications. Read more here.