The U.S.’s popular EB-5 investment-for-Green Card program is set to sunset on December 11, 2015; Congress, however, is currently considering proposed legislation that would extend the life of the program beyond December 11. I’ve prepared a short explanation of the EB-5 program, its legislative history and the most important pieces of legislation circulating in Congress right now.
What is the EB-5 Immigrant Investor Program?
The EB-5 Immigrant Investor Program was established via the U.S. Immigration Act of 1990. The program gives a foreign investor the opportunity to invest $1,000,000 in a U.S. business (formally known as a “new commercial enterprise” or “NCE”) that will create or preserve ten full-time jobs for U.S. workers directly employed by the NCE; in exchange for making the investment, the investor can petition United States Citizenship and Immigration Services (“USCIS”) for a Green Card.
Entities known as “regional centers” were created in 1992 as part of a pilot program aimed at increasing the EB-5 program’s popularity with foreign investors. Regional centers are designated by USCIS to facilitate the pilot program in various states across the U.S. The pilot program eased the job creation requirement by enabling foreigners to include the creation of indirect and induced jobs in their total job count when applying to USCIS for their Green Cards (indirect jobs, for example, are jobs created as a result of the establishment of an NCE, such as the lumber truck driver employed to drive lumber to a hotel construction site deemed to be an NCE under the EB-5 program). The program also gives foreigners the opportunity to invest only $500,000 in NCEs located within rural areas or areas with high unemployment rates (formally known as targeted employment areas, or “TEAs”), rather than $1,000,000.
Legislative History of the EB-5 Program
The pilot program has been reauthorized by Congress multiple times over the years. On September 30, 2015, Congress passed a bill reauthorizing the program until December 11, 2015. In the past, the program has garnered negative media attention for several controversies, such as regional center fraud, mismanagement of funds and gerrymandering of TEA boundaries. Two important pieces of legislation proposing major amendments to the EB-5 program are now pending in Congress in an effort to address these issues, as well as other issues that require attention. While other bills have been proposed in Congress since September 30, the acts outlined below are two of the most widely discussed in the EB-5 community.
H.R. 616 – American Entrepreneurship and Investment Act of 2015 was introduced to the House of Representatives by Congressmen Jared Polis (D-Colorado) and Mark Amodei (R-Nevada). Among other proposals, the act suggests making the pilot program permanent, mandating that the Secretary of Homeland Security defer to a state’s decisions about which areas are eligible to be deemed as TEAs and confirming that the Foreign Corrupt Practices Act applies to petitions made under the EB-5 program. The act also prevents individuals with certain criminal convictions or those who have been found guilty of committing certain civil actions from acting in managerial positions at regional centers in order to further combat the potential for fraud.
Section 1501, the American Job Creation and Investment Promotion Reform Act of 2015 was introduced to the Senate by Senators Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vermont). This act proposes the following changes to the EB-5 program, among others:
- Extending the regional center program for five years, until September 30, 2020;
- Increasing the minimum investment amount for NCEs located in TEAs from $500,000 to $800,000;
- Increasing the minimum investment amount for NCEs located outside of TEAs from $1,000,000 to $1,200,000 in order to adjust for cost of living increases (future cost of living increases would only occur every five years, rather than on an annual basis);
- In addition to the oversight already in place regarding the source of EB-5 investment funds, mandating that the source of funds for any administrative fees paid to a regional center also be scrutinized;
- Tightening the definition of what constitutes a lawful source of EB-5 investor funds; and
- Establishing an EB-5 Integrity Fund requiring a $20,000 fee payment from regional centers in order to cover the cost of increased oversight by USCIS.
Many investors and stakeholders in the the EB-5 community are hopeful that the regional center program will continue after December 11 with appropriate overhauls in place. Whether Congress decides to renew the program, however, remains to be seen.
Congress’s decision on December 11 will dictate the future of the EB-5 regional center program. I, along with my associate, Leanne Milech, who provided helpful input on this blog, will continue to closely follow the progression of the legislation through Congress. We will alert you to the outcome on December 11. In the meantime, if you have any questions about what the proposed changes mean for potential EB-5 investors, please contact David A. Altro at email@example.com.