EB-5 TEA News

Department of Homeland Security Secretary Jeh Johnson said at a Senate hearing on June 30^th that new regulations soon to be released will limit targeted employment areas (“TEAs”), which permit a $900,000 EB-5 investment, to eliminate “gerrymandering” districts. Gerrymandering is a term often used to describe oddly shaped political districts.

Gerrymandering can be perfectly legal except if it is intended to discriminate against minorities. “Gerrymandering” of TEA districts is used by projects to combine both high unemployment and low unemployment contiguous census tracts to form a larger district with a high average unemployment (today 8%). This has been accepted by many states and USCIS, which follows the state’s designation. In California, only up to 12 census tracts can be combined to form a TEA. In other states, more census tracts or other political subdivisions are permitted.

New EB-5 Regulations Timelines

Secretary Johnson at the Senate hearing said he hopes to have new EB-5 regulations out by November. After a new proposed rule is published, the public has 60 days to comment. It was not clear from Secretary Johnson’s remarks if the proposed EB-5 regulations will be out this summer, followed by the comment period, and adopted by November, or if the new proposed regulation will be released for comment in November. The USCIS has previously said the new regulations would be out this summer. The new regulations will also increase the TEA minimum investment amount from $900,000 to $800,000.

Redeployment of EB-5 Funds

I am receiving many questions about the impact on an investor’s EB-5 case if the project is sold before the I-829 Removal of Conditions is granted. One person asked me whether the redeployed funds must also create jobs. The answer is no, not if the funds created the needed jobs in the first project.

USCIS has stated that the EB-5 funds, after the initial investment project created the needed jobs, may be redeployed to another “at risk” project and the I-829 granted. On a stakeholder call, USCIS said the funds could not be redeployed to a bank account.

I hope the USCIS position will change for it is not rational. USCIS allows a Regional Center I-526 to be filed at the beginning of the EB-5 process when funds are in escrow and are viewed as “at risk” before they are deployed to the project. Once the project is built, jobs created and sold or refinanced, why can’t the funds be redeployed back to an escrow or to a bank account or government bonds, and be viewed as “at risk” until the I-829 is granted?

One would think if escrowed/banked funds are “at risk” on the front end they should be viewed as “at risk” on the back end of the project. I hope someday this view will prevail. Until it does, we must assume the government policy will require, if the project is sold or refinanced, the investor not get his/her funds back until the I-829 is decided, and the EB-5 funds must be redeployed to another “at risk” project.