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EB-5 Insights Where Government Policies and Business Realities Converge

EB-5 Regulations Published for Public Inspection

Posted in Department of Homeland Security, EB-5, EB-5 Immigrant Investor Program, EB-5 Investment, EB-5 Legislation, EB-5 Modernization Rule, EB-5 Program, USCIS

After more than two and a half years, Obama-era EB-5 immigration regulations are set to be published on July 24, 2019, with an effective date 120 days after publication or Nov. 21, 2019. See EB-5 Immigrant Investor Program Modernization.

These regulations have been opposed by many industry participants, as evidenced in a letter to Congressional Leadership in May 2019.

For years all involved have called for significant reforms and modernization to the program including:

  • Integrity Measures to Bolster National Security and Fraud Deterrence
  • Long-term Reauthorization
  • Revised Targeted Employment Area (TEA) Definitions
  • Revised Investment Amounts
  • New Set-Asides for Rural and Urban Distressed Areas
  • Visa Backlog Relief

Legislators on both sides of the aisle have specifically called for integrity measures to ensure against fraud. The new regulations do not do what Congress continues to seek to do legislatively, because the agency does not have the requisite authority.

The  EB-5 rule proposed by USCIS in January 2017 proposed two critical things:

  1. Drastically increased investment amounts to $1.35 million and $1.8 million from the current amounts of $500,000 and $1 million.
  2. Changed the definition of “Urban TEAs”, the areas that – along with “Rural” – qualify for the lower investment amount.

The new proposed Urban TEAs would be in the shape of a “donut” – that is, a single census tract that is the “hole” of the donut, surrounded by a ring of other adjacent census tracts. This “donut” approach to TEAs has no precedent in any other statute or regulation that directs capital to economically-distressed areas

The final rule would do the following:

  • The new investment amounts would be $900,000 at the lower level and $1.8 million at the top level.
  • The reported rationale: These are the levels calculated if indexed to inflation from 1992, when the current levels of $500,000 and $1 million first took effect upon the program’s creation.

The new TEA definitions differ from the “donut” approach as initially proposed, by rule “tweaks” to clarify that any city or town with a population of 20,000 or more outside of a metropolitan statistical area may qualify as a TEA and substituting “contiguous” to “directly adjacent” when describing census tracts that can be added for purposes of defining a TEA (under distress criteria). This is different from the proposed rule that allowed any city or town with a population of 20,000 or more to qualify as a TEA, regardless of being in or out of a MSA. In addition, these regulations remove any mention of “geographic and political subdivisions” for special designations.

The reported rationale: DHS believes this will ensure consistency in TEA adjudications that adhere closely to Congressional intent. DHS will make these designations, which eliminates the current practice of a state being able to designate certain areas as high unemployment areas.

The EB-5 Regional Center program expires on Sept. 30, 2019. Congress and stakeholders are working on a reauthorization with much needed policy and legislative changes. If such an extension occurs, the rule published today may never take effect. Only Congress can enact all of the reforms necessary to modernize EB-5. The EB-5 regulations do not address:

  • the fraud and national security measures that we all agree are necessary.
  • the rural and urban distressed visa set aside
  • the Opportunity Zone designations in urban areas.

As stated above, implementation of the new rule is set to occur 120 days from publication, or Nov. 21, 2019.

The regulations do make changes along the lines we reported in past blogs. See A Detailed Look at the Proposed EB-5 Regulations, OMB Completes Review of Obama-Era EB-5 Regulations, and Summary: Notice of Proposed Rule for the EB-5 Immigrant Investor Program.

Please consult your GT attorney with specific questions. We will be posting additional materials as available and will be posting a comprehensive summary of all the changes shortly.