For Regional Centers, Developers, Financiers And Others Involved With Eb-5

Good News
EB-5 Extension

EB-5 Regional Center statute extended to April 28, 2017 without change. Senator Grassley tried this week to pass his latest EB-5 bill (“Grassley 2.0.”) as part of the continuing resolution to fund the government but failed, at least for now.

Bad News
Investment Amount to $1 Million?

Grassley 2.0, if passed, will substantially diminish the EB-5 program. For example, his bill will raise the minimum investment amount for almost all EB-5 projects to $1.8 million, except for “infrastructure” or “manufacturing” projects or those on a military base that has been retired within 25 years. For these projects, the minimum investment amount would be $800,000.

Grassley 2.0 gives with one hand and takes away with the other. Here is how Grassley 2.0 works. One section sets forth the new minimum investment amounts as follows:

• On date of enactment:
  • $700,000
  • $650,000 in an infrastructure or a manufacturing project, or a project in a Targeted Employment Area (“TEA”)
• On October 1, 2017:
  • $850,000
  • $750,000 in an infrastructure or a manufacturing project, or a project in a TEA
• On October 1, 2018:
  • $1,000,000
  • $800,000 in an infrastructure or a manufacturing project, or a project in a TEA

BUT, another section of Grassley 2.0 redefines a TEA as a Priority Urban Investment Area (“PUIA”). The term PUIA means:

An area consisting of a census tract or tracts, each of which is in a metropolitan statistical area and, using the most recent census data available, each of which has at least two of the following criteria –

(I) an unemployment rate that is at least 150 percent of the national average unemployment rate;

(II) a poverty rate that is at least 30 percent; or

(Ill) a median family income that is not more than 60 percent of the greater of the statewide median family income or the metropolitan statistical area median family income.

Grassley 2.0 is more restrictive than previous versions, as it has eliminated the “Special Investment Zone”, which did allow for some (albeit limited) aggregating of census tracts to construct a TEA.

The economist Michael Kester, a foremost expert on TEA estimates that more than 90% of current TEAs would no longer qualify under Grassley 2.0. Thus, Grassley 2.0 by sleight of hand will increase the investment amount to $1.8 million for almost all projects (except for infrastructure and manufacturing projects and those on military bases retired with 25 years).