Analysis Of The New Proposed USCIS EB-5 Rules

On January 13, 2017, the USCIS issued proposed new EB-5 visa requirements through a notice of proposed rulemaking. If enacted the new rules would increase the EB-5 investment amounts; create extremely restrictive new Targeted Employment Area (TEA) requirements; allow retention of priority dates and make a few miscellaneous rule changes. The “proposed” rule changes and public comments may be submitted by April 11, 2017. After comments are reviewed, USCIS may implement the new rules, modify them, or not release them at all.

What Are The Proposed New Investment Amounts For An EB-5 Immigrant Visa?

The proposed rules would, if enacted raise the minimum EB-5 investment amount in a project located in a TEA from $500.000 to $1.35 million. For investments in a project in a non-TEA location, the proposed rule will increase the investment amount from $1.8 million to $1.8 million. This would apply to both Regional Center (RC) and direct EB-5 investment cases.

The justification for increasing the investment amount to $1.35 million in a T£A is that this amount is 75% of $1.8 million which is the amount adjusted for inflation since the EB-5 program was established in 1990. These amounts are a substantial departure from the previous suggested increase of the minimum EB-5 investment in a TEA to $800.000 by some, including the USCIS in a letter to the Senate in 2015. Also, Senator Grassley’s proposed EB-5 RC extension bill would increase the minimum investment amount in stages from $750,000 to $1.8 million by October 2018.

But the USCIS·s notice contains a surprising admission that it has no idea what impact the increased investment levels will have on raising capital and job creation. The notice says: “DHS has no way to assess the potential reduction in investments either in terms of past activity or forecasted activity, and cannot therefore estimate any impacts concerning job creation, losses or other downstream economic impacts driven by the proposed investment amount increases.”‘

This admission alone brings into question the rationality of the proposed rules. If USCIS cannot forecast 1he impact of the investment amount on job creation, it makes no sense to radically increase the minimum investment amount to $1.35 million instead of a lower amount, for example $800, 000 and then over lime assess the impact of that increase before making future increase.

Tile proposed EB-5 rulemaking notice also compared other EB-5 investment amounts to a few other countries’ immigration programs including the United Kingdom, Australia, Canada, and New Zealand. First comparing these countries’ programs by only the amount of investment is not a legitimate comparison. These programs differ substantially. Some allow the investor to invest in government securities- not at-risk real estate projects as with the EB-5 program.

Our program is a job-creating program that involves much more risk than most other countries’ programs. The Canada program was basically a loan of funds to the Canadian government- not high risk there. Fewer people will be willing to risk $1.8 million in a real estate project when they can invest a similar amount with another country s government which is essentially a guaranteed repayment. This radical increase in the investment amount, if enacted, would change EB-5 as we know the program today and would probably mean the loss of the program.

What Is The Effect Of Proposed TEA Rules?

USCIS’s proposal also would limit TEA to a Metropolitan Statistical Area, counties, cities or towns with a population of more than 20,000, a census tract, or a group of adjacent census tracts, if they have experienced an average unemployment rate at least 150% of the national average rate. It only allows census tracts to be averaged if they are adjacent (abutting) to the tract in which the project is located. This would end California’s use of up to 12 contiguous census tracts, Texas use of blocks, and other states use of state legislative districts. The USCIS’s justification is that this will make TEA more uniform and eliminate gerrymandering. The proposed rules would allow USCIS to determine TEAs instead of the state. USCIS deciding TEAs would be a disaster. I-526s are backlogged 17 months; I-829s 22 months. How long will it take USCIS to issue TEA letters? Will they pull people off I-526 and 1-829 cases to adjudicate TEAs, increasing backlogs even more? Another reason to probably end the program.

Often developers and direct investors seek multiple TEA letters from states as part of their due diligence for a project to determine if a business location will be a good one for an EB-5 project. They often never use the TEA letter. The 50 states can handle this volume and usually issue TEA letters in a few days or weeks. USCIS simply does not have the capacity to manage this TEA process in a timely manner for developers and RCs in the real world.

The proposed rules would kill most TEAs. This rule, if adopted means that the investment amount would be $1.8 million in most areas and end of program.

What Is Priority Date Retention?

The proposed rules would allow an EB-5 investor to keep their original filing date of an EB-5 petition if a second petition is needed such as when the project files for bankruptcy and the petitioner makes another investment. This is the only good rule but will only assist a few people.

Interesting Statistics

The proposed notice contains some interesting statistics:

• 91% of EB-5s invest in RCs
• 80% of EB-5 investors are born in China
• 99% of RC investments are in TEAs
• 64% of Direct investments are in TEAs
• 10% of investments are in rural TEAs

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