U.S. Sen. Chuck Grassley (R-IA), chairman of the U.S. Senate Finance Committee, says the recently released final rule making several significant changes to the EB-5 Immigrant Investor Program stand to bring fresh economic opportunity to America’s rural and disadvantaged communities.
But “there’s still more work to be done,” Sen. Grassley told Transportation Today.
“Fully tackling fraud and national security vulnerabilities requires congressional action,” the senator explained. “As Congress considers whether to extend the program, these rules can serve as a launch pad for a more productive discussion with industry advocates.”
U.S. Citizenship and Immigration Services (USCIS), as part of the U.S. Department of Homeland Security (DHS), in late July issued the final rule published in the Federal Register marking the first major overhaul of the fifth employment-based preference (EB-5) immigrant visa category.
The EB-5 program makes qualified foreign nationals eligible to apply for lawful permanent residency in the United States if they invest in a new commercial enterprise that benefits the U.S. economy and creates at least 10 full-time U.S. jobs per investor.
Sen. Grassley has been a steadfast advocate for reforming the EB-5 program to address its flaws, the largest being its continued movement away from its congressional intent to generate increased U.S. capital investment that’s likewise supposed to spur investment and development in economically distressed communities and rural areas around the nation having high-unemployment rates — known as Targeted Employment Areas (TEAs).
“For the better part of a decade, I’ve raised concerns about how the EB-5 program has been abused to steer investment away from rural America,” said Sen. Grassley. “Despite an abundance of examples of fraud and national security vulnerabilities in the current system, bipartisan efforts to reform the program through legislation have been repeatedly stymied by big-money interests.”
Such big-money interests, he said, have drawn maps to define the TEAs to conveniently cover wherever they wanted to build another skyscraper.
“All of a sudden, investment dollars intended for communities in need were being sucked up for glitzy projects in America’s most well-to-do neighborhoods,” Sen. Grassley wrote in a July 29 opinion piece for the Daily Caller. “Real-estate developers sold expensive condos and created no new jobs for Americans, while the immigrants put no skin in the game. Their investments weren’t at risk and they didn’t so much as help build America as they helped rich developers get richer.”
In a nutshell, wrote Grassley, the real estate interest groups found a way to sell American citizenship to their own benefit while turning the EB-5 program into a massive security risk for the United States.
In China, for instance, the program is called the “golden visa” because government-connected billionaires or others tied to terrorism have essentially purchased access to America, the senator said.
Currently, the EB-5 program requires a $1 million investment per EB-5 investor but reduces that threshold to $500,000 if the investment occurs in a TEA.
That will change on Nov. 21 when the new USCIS final rule goes into effect and raises the minimum investment amounts from $1 million to $1.8 million. The final rule retains 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.
At the same time, the final rule also substantially restricts the possibility of gerrymandering by stipulating that states no longer can designate regional centers. That duty will fall upon the DHS.
With the new rules in place, Sen. Grassley said the interest groups won’t be able to draw the maps to benefit themselves anymore and rural America will finally begin to see the benefits of a nearly 30-year-old program.
“By ending gerrymandering of Targeted Employment Areas, which require a lower investment level, President Trump’s EB-5 rules not only bring more integrity to our immigration system, they incentivize development and job creation in rural America and economically distressed areas,” Sen. Grassley told Transportation Today.
Nevertheless, the lawmaker also pointed out that Congress still must get involved because the EB-5 Regional Center Program requires reauthorization before its Sept. 30 expiration date.
The EB-5 Regional Center Program was initially designed in 1992 as a pilot program set to expire after five years, but Congress has continued to extend the program to the present day, most recently by President Donald Trump who signed legislation in January to reauthorize the program through Sept. 30.
Under the Regional Center Program, foreign nationals base their EB-5 petitions on investments in new commercial enterprises located within ‘regional centers,’ which DHS regulations define as a public or private economic unit that promotes economic growth, regional productivity, job creation, and increased domestic capital investment.
Congress also authorized that priority be given to EB-5 petitions filed through the Regional Center Program.
While all EB-5 petitioners go through the same petition process, those petitioners participating in the Regional Center Program may meet statutory job creation requirements based on economic projections of either direct or indirect job creation, rather than only on jobs directly created by the new commercial enterprise, according to the USCIS final rule.
For regional centers, the higher investment amounts per investor in the final rule “will mean that fewer investors will have to be recruited to pool the requisite amount of capital for the project so that searching and matching of investors to projects could be less costly.”
However, the higher amounts also could reduce the number of investors in the global pool and result in fewer investors, thus potentially making the search and matching of investors to projects more costly for regional centers, according to the rule.
“Potential reduced numbers of EB-5 investors could prevent certain projects from moving forward due to lack of requisite capital,” the final rule says. “An increase in the investment amount could make foreign investor visa programs offered by other countries more attractive.”
Therefore, experts wonder if pending reauthorization legislation in Congress for the EB-5 Regional Center Program might align with or rebuff the USCIS final rule. They said there’s no telling right now.
“The end goal is to ensure that the program is serving its purpose of bringing investment and opportunities to the places that need it most,” Sen. Grassley said.