U.S. Citizenship and Immigration Services (USCIS) on Wednesday published its long-awaited final rule making several significant changes to the first major overhaul of its EB-5 Immigrant Investor Program. The final rule becomes effective on Nov. 21.
“The Trump administration’s reforms to the EB-5 investor visa program will ensure that wealthy foreigners who come to America actually invest in America’s success,” U.S. Sen. Tom Cotton (R-AR) said on July 24 following publication of the final rule in the Federal Register. “I applaud the administration for taking bold action so that our immigration laws better serve America’s interests.”
Congress in 1990 created the fifth employment-based preference (EB-5) immigrant visa category, which is targeted at qualified foreign nationals seeking to obtain lawful permanent residency — also known as a Green Card — in the United States by investing in a new commercial enterprise that will benefit the U.S. economy and create at least 10 full-time U.S. jobs per investor.
“Nearly 30 years ago, Congress created the EB-5 program to benefit U.S. workers, boost the economy, and aid distressed communities by providing an incentive for foreign capital investment in the United States,” USCIS Acting Director Ken Cuccinelli explained earlier this week. “Since its inception, the EB-5 program has drifted away from Congress’s intent.”
To redirect that drift, Cuccinelli said that the agency’s reforms now increase the investment level to account for inflation over the past three decades and substantially restrict the possibility of gerrymandering to ensure that the reduced investment amount is reserved for rural and high-unemployment areas most in need.
“This final rule strengthens the EB-5 program by returning it to its congressional intent,” said Cuccinelli.
Specifically, the USCIS-administered program today requires a $1 million investment per EB-5 investor, although that threshold is reduced to $500,000 if the investment occurs in a rural or high unemployment area, known as a Targeted Employment Area (TEA).
The final rule now raises the minimum investment amounts from $1 million to $1.8 million, and the rule also keeps the 50-percent minimum investment differential between a TEA and a non-TEA, thereby increasing the minimum investment amount in a TEA from $500,000 to $900,000.
“The key change is the increase in the minimum investment under the EB-5 regional center program from $500,000 to $900,000 USD,” said Andy Semotiuk, a U.S. and Canadian immigration lawyer and director of the Immigration Department at the Ontario, Canada-based Pace Law Firm.
“This will be a substantial burden for many investors to shoulder and could result in a slowdown or indeed even the end of the EB-5 program should foreign investors decide it is asking too much,” Semotiuk told Transportation Today. “This increase in investment required could backfire should foreign investors decide to go elsewhere.”
Immigration attorney Bernard Wolfsdorf, managing partner at Wolfsdorf Rosenthal LLP, agreed with Semotiuk’s explanation during his firm’s July 25 webinar on the final rule changes.
“Is this real? Most of us had to pinch ourselves,” Wolfsdorf said about the minimum investment increase. “The higher amounts could reduce the number of investors in the global pool and result in fewer investors.”
On top of that, said Wolfsdorf, the reduced number of EB-5 investors potentially could prevent certain projects from moving forward due to the lack of requisite capital.
“You have about 118 days” from yesterday, he said, to deal with a situation that’s headed toward becoming “ridiculous in the next five years.”
Another change to be instituted under the final rule — in order to eliminate gerrymandering of high-unemployment areas — stipulates that states no longer can designate regional centers. That duty will fall upon the U.S. Department of Homeland Security (DHS), which oversees the USCIS.
“Part of the new policy is a change in who gets to designate the TEAs. Previously, this was a matter left to individual states to decide. Now it will be decided by the federal government,” Semotiuk wrote in an email. “The concern was the abuse of the system caused by gerrymandering to include high unemployment areas within a district that otherwise is well off so as to qualify for the lower investment requirements.”
Gerrymandering of such areas typically occurred by combining a series of census tracts to link a prosperous project location to a distressed community in order to obtain the qualifying average unemployment rate, according to USCIS.
When the final rule goes into effect on Nov. 21, DHS will eliminate a state’s ability to designate certain geographic and political subdivisions as high-unemployment areas and will make such designations directly based on revised requirements in the regulation limiting the composition of census tract-based TEAs.
These revisions will help ensure TEA designations are done fairly and consistently so that investments are directed to the areas most in need, the agency said in the filing.
This rule change may bode well for transportation stakeholders, generally.
Semotiuk said that the new policy rulemaking “could benefit the transportation industry in that infrastructure improvements and upgrades to the transportation grid could be directed by the federal government through these new powers.”
Overall, however, what this means for EB-5 projects is that “half of projects and investments may no longer qualify as being in a TEA,” said Joseph “Joey” Barnett, partner at Wolfsdorf Rosenthal, during the firm’s webinar.
“Not getting a determination from the state could make it a little more difficult to locate in a TEA,” Barnett said. “Do an analysis now of whether your project meets TEA rules. That’s something that needs to happen now.”
“This is going to turn the program on its head,” Wolfsdorf added.
The final rule also clarifies USCIS procedures for the removal of conditions on permanent residence to improve the adjudication process by providing flexibility in interview locations and to adopt the current USCIS process for issuing Green Cards.
The final rule does this by revising regulations to make clear that certain “derivative family members” who are lawful permanent residents must independently file to remove conditions on their permanent residence. The requirement would not apply to those family members who were included in a principal investor’s petition to remove conditions.
This change offers greater flexibility to immigrant investors who have a previously approved EB-5 immigrant petition, USCIS says, and when they need to file a new EB-5 petition, they generally now will be able to retain the priority date of the previously approved petition, subject to certain exceptions.
Now that the final EB-5 rule has been published, some immigration stakeholders recommend that EB-5 investors get new applications filed ASAP before the final rule’s effective date.
Others are more conservative and suggest to keep on as usual since there could be looming litigation against USCIS to stop the new changes or Congress could approve a new EB-5 law that would overrule the new regulations.
“I believe despite fears that foreign investment in the EB-5 program will continue because the new threshold of $900,000 for investment is the same as, for example, the Canadian Quebec program’s requirement — so it is competitive,” Semotiuk said. “I believe we will just carry on as we have before once people get used to the ‘new normal.’”
But he added that, “Tinkering by regulation is a far cry from what is really needed in immigration, namely, comprehensive immigration reform. This is a job for Congress and let’s hope they can get their act together on this item.”