EB-5 Investment Amount to Increase by $300,000 on October 1st if Proposed Senate Bill Passes

The widely popular EB-5 Regional Center Program is set to expire September 30, 2015.  The overwhelming consensus is that the Program is going to be renewed as it has been many times before, often with unanimous support.  However, it is possible that the current renewal will come with some significant changes. Reauthorizing and reforming the EB-5 program came before the Senate in June 2015. The bi-partisan bill proposes re-authorization and reforms on many key components of the EB-5 Immigrant Investor Program.  One such change includes a provision that the minimum investment amount will be adjusted upwards to $800,000 for TEA investments in high unemployment and rural areas and $1,200,000 for non-TEA investments.

When the EB-5 regional center pilot program was created in 1992, the minimum investment amount was $1,000,000 which was adjusted downward to $900,000 if the investment was made into a TEA.  This amount has remained untouched despite the Consumer Price Index showing that $900,000 today has a purchasing power equal to around $275,000 in 1990.  Given that the minimum investment amount has never been adjusted for inflation, this seems like a logical proposal.  However, to understand the effects that such an increase might have on the overall EB-5 landscape, one must also understand one reason why the EB-5 Program is so attractive to foreign investors, namely value.

Investment visas are not unique to the U.S.  In fact, many other countries offer their own form of investment visa.  To name just a few, such countries include: Canada, Australia, Germany, Portugal, and the United Kingdom.  Other countries minimum investment ranges from about $600,000 to $3,000,000.  One thing that sets the U.S. apart from the other countries is the comparatively low investment amount.  Indeed, this is represented by the fact that over 90% of investments are for the lower $900,000 amount.  It is expected that a 60% increase in investment price is enough to steer some Investor’s elsewhere.

Given that the number of investors is likely to decrease, the proposed legislation can also have other precipitous effects on the U.S. economy.  The popularity of the Program has been rapidly growing in the last five years.  In 2010, Immigration received a total of 1,955 I-526 petitions, while in 2014 Immigration received 10,928 I-526 petitions.  This 2014 figure represents more than $5.5 billion in foreign investment and over 100,000 new jobs that helped stimulate the economy.  Increasing the minimum investment amount will inevitably decrease the amount of investors utilizing the EB-5 Program.  If demand for the Program gets cut in half, which is not inconceivable given that one of the most attractive things about the Program is its comparatively low investment amount, then we are looking at a decrease to $4.4 billion in potential foreign investment and 55,000 jobs even when taking into consideration the 60% increase in price.   This is a net decrease of $1 billion and 45,000 jobs from the 2014.  Given that the core of the EB-5 Program was to promote foreign investment and create jobs, it seems puzzling that proponents of the Bill have not properly considered the chilling effect such an increase in investment might cause.