After years of delay the Obama-era EB-5 immigration regulations were published on July 24, 2019. You can find a copy of the regulations at this link. You can also find a summary of them here. The regulations only apply to those who file their I-526 Petitions on or after Nov. 21, 2019. Without further ado, below are some winners and losers of the new regulations.

Those who will lose out with the new regulations

States. States are one of the biggest losers, as DHS has decided to formally remove any state input from the determination as what qualifies as a targeted employment area (TEA). Given that the EB-5 visa category is fundamentally an economic development program, the removal of state input neuters any localized input on the what, who, and where of these investments. This position is contrary to the original implementing regulations, wherein the predecessor agency to DHS had found that “…the Service believes that the enterprise of assembling and evaluating the data necessary to select targeted areas, and particularly the enterprise of defining the boundaries of such areas, should not be conducted exclusively at the Federal level without providing some opportunity for participation from state or local government.”1 DHS no longer feels this way.

Less wealthy investors. The final regulation increases the minimum investment for rural areas and targeted employment areas to $900,000. Investments not within those areas must be $1,800,000. Regardless of the rationale for the increase, the increase will shrink the pool of prospective investors who have sufficient means to make such an investment.

Conditional permanent residents in failed projects. While there is a positive side to priority date retention, which will be discussed below, DHS’ decision to draw a line as to who is eligible for priority date retention clearly puts conditional permanent residents in failed projects into the loser category. Under the new regulation, an investor can retain the priority date from an approved I-526 Petition as long as (a) USCIS did not revoke the earlier approval based on the investor’s fraud or willful misrepresentation, (b) USCIS did not revoke the earlier approval based on a material error, and (c) the investor has not been admitted to the U.S. as a conditional permanent resident. Thus, if an investor has, pursuant to an approved I-526 Petition, entered the United States as a conditional permanent resident and previously used the I-526 to become a conditional permanent resident, and circumstances outside the investor’s control make it such that the investor will not be able to remove the conditions on residence (i.e., not enough jobs are created), the investor must file a new I-526 Petition with a new priority date in order to continue seeking permanent residency under the EB-5 visa category if he or she cannot otherwise meet the eligibility requirements under the policy outlined on material change in the USCIS Policy Manual.

DHS explained that it declined to include investors who have been admitted as conditional permanent residents because it believes a priority date cannot generally be re-used in other employment or family-based visa categories; the goal of this regulation is to protect against the effects of retrogression, and there are other protections for investors who are conditional permanent residents to remove the conditions on residence. These rationales fail to hold up under scrutiny.

While it is accurate that a priority date cannot generally be re-used in other employment or family-based visa categories, the other visa categories are simply not analogous or comparable. There is no other employment or family-based visa category subject to visa availability (retrogression) that requires conditional permanent residency before a final grant of permanent residency. The only analogous category is spouses of U.S. citizens, who receive conditional permanent residency for a two-year period, and who are not subject to visa availability because spouses of U.S. citizens are classified as immediate relatives (a visa number is always available). Thus, DHS was unable to find a parallel in other employment or family-based visa categories because no such parallel exists.

The effects of retrogression will also be felt acutely by investors who are conditional permanent residents. For instance, a conditional permanent resident born in India may have been able to enter the United States prior to the recent retrogression for Indian-born investors. If that investor is required to refile a new I-526 Petition and process with a new priority date, that investor will likely be forced to depart the United States and wait abroad for eight or more years until a visa is available based on the new priority date.

Lastly, while it is true that the statute, regulations, and policies provide other avenues for investors in conditional permanent residency status to remove conditions, none of those avenues protect investors from a total project failure where money is spent and not enough jobs are created, or where a project fails to move forward. In those circumstances, conditional permanent residents would likely have to self-deport, unless they were eligible for another immigrant or nonimmigrant visa category, and file a new I-526 Petition at the back of any existing retrogression queue if they want to continue to pursue permanent residency under the EB-5 visa category.

DHS. DHS has not done itself any favors with the publication of these regulations. As already discussed above, DHS’ rationale for not permitting a conditional permanent resident to retain their earliest priority date fails under scrutiny. DHS’ rationale in a few other areas also fails to hold up under scrutiny.

While there is a logical argument for an increase in the minimum investment, DHS’ response to comments regarding competitiveness of the EB-5 visa category only discussed one competitor investment visa program, which had a smaller minimum investment than EB-5: the Quebec Program. Instead, DHS focused on Australia, the U.K., and New Zealand. This analysis conveniently omits Portugal and Spain, which grant residency permits for EUR 500,000; Malta, which grants citizenship (Malta is an EU-member country) for approximately EUR 900,000; and Cyprus, which also provides citizenship for approximately EUR 2,500,000. Cyprus and Malta will also grant permanent residency for a lower amount. These are the programs currently competing directly with the United States, and they provide for residency in western European countries with comparable prices to the U.S., and in some instances, for a little bit more money the promise of immediate citizenship.

This analysis also does not include a review of the Caribbean countries that will grant citizenship within a matter of months for less than $500,000. These countries include Grenada, which has an E-2 treaty with the United States. With the increase in the minimum investment to $900,000 under these regulations, it will be far more attractive to obtain a Grenadian passport, establish a U.S. business that qualifies for an E-2, and enter and live in the United States on an E-2 visa.

DHS also takes great pains to establish that it cannot calculate whether or not there will be less applications due to these regulations, and in particular, because of the increase in the minimum investment. This belies common sense, and can only be supported by cherry picking other visa programs around the world which cost more and ignoring those that cost less. Indeed, DHS makes a similar mistake when it references a 10-year forecast of I-526 Petition receipts that – notwithstanding the fact I-526 Petition receipts have fallen by approximately half since 2015 – predicts a 3.3% increase over the next three fiscal years.2 It’s simply not credible that I-526 Petitions receipts, which have fallen in half for three straight fiscal years, would somehow increase, even by a small amount, after an increase in the minimum investment amount.

Lastly, setting aside the policy goals of redirecting investment to the actual area of high unemployment, it seems clear from DHS’ own analysis that there will be detrimental economic impact due to the TEA-related changes. When evaluating the economic impacts of the TEA-related changes, DHS found that 54% of all investments would be affected. Despite this, DHS concludes that the TEA-related changes will “…provide benefits in that additional areas may qualify as a TEA based on high unemployment, potentially offering investors more opportunities to invest in a TEA at the reduced investment amount…” It is unclear how additional areas would qualify as a TEA under a more restrictive definition.

Those who will win with the new regulations

Rural Projects. The clear winners are projects in rural areas. Constraining the ability of urban areas to qualify for the lower investment threshold seems likely to drive a measurable number of investors to projects located in rural areas.

Backlogged investors in stalled/failed projects. As noted above, the flipside of the priority date retention changes is that investors with approved I-526 Petitions, who have not yet become conditional permanent residents due to retrogression or any other reasoning, can file a new I-526 Petition and maintain their old priority date. This is a welcome respite for investors waiting outside the United States for a visa and dealing with a failed or staller project, or a situation where the regional center involved was terminated. As noted above, priority date retention is not available in cases involving fraud, willful misrepresentation of a material fact by the investor, or when DHS determines that it approved the I-526 Petition based on a material error.

Dependents in I-829 Petitions. Currently, dependents may be either included in a principal applicant’s I-829 Petition or added at a later date by paying the biometrics fee. However, if the principal applicant failed or refused to file an I-829 Petition, the dependent would not be eligible to remove the conditions on their residence. Under the new regulations, if a principal applicant refuses to file or fails to file an I-829 Petition, each derivative applicant may file their own I-829 Petition. This could be beneficial to divorced spouses who no longer have contact with their spouses who were the principal applicant. The practical effect of this change is a bit limited, as DHS found an average of approximately 24 cases per year involving these circumstances.

DHS has also clarified via regulation that a child who becomes married during conditional permanent residency and a child who reaches the age of 21 during conditional permanent residency is eligible to file an I-829 Petition, either with the principal applicant or on their own. DHS also clarified that where a principal applicant is deceased, the spouse and child may file separate I-829 Petitions or may file one I-829 Petition together.

Economists. Economists, who were already important, just got a lot more important. Under the prior regulations and the deference by DHS to state-based TEA determinations, it was possible for a layman to determine whether or not a project was located in a TEA. The new regulation states that USCIS may designate as an area of high unemployment a census tract or contiguous census tracts that are directly adjacent, and that have a weighted average based on a labor force employment measure of 150% of the national average unemployment rate. The use of a weighted average is a change from existing regulation and would require a mathematical calculation of unemployment of all applicable census tracts and the labor force of all applicable census tracts. While this information is publicly available through the Bureau of Labor Statistics and the Census Bureau, it seems extremely burdensome for an average lay person to make such a calculation on their own.

Further complicating this issue is that under the new regulations only USCIS can make a determination of whether a project is in a TEA. The new regulations do not establish a separate application or process for obtaining TEA designation from USCIS prior to filing an I-526 Petition, and USCIS will not issue separate TEA designation letters for areas of high unemployment. DHS will make the determination as part of the existing adjudication process. If a regional center prefers to seek a TEA determination in advance of an I-526 Petition adjudication, it can file an exemplar I-924 application and if approved, the approval, including the TEA determination, will receive deference in I-526 Petitions associated with that exemplar. However, this deference is likely short-lived, if applicable at all, because the average processing time for an exemplar I-924 application is longer than the validity of the unemployment data, which is generally valid for one year. Thus, economists will be extremely important to ensuring a project is accurately located in a TEA.

1 See 56 FR 60897-01

2 In fiscal year 2015, USCIS received 14,373 EB-5 petitions; in fiscal year 2016, 14,147; in fiscal year 2017, 12,165; and in fiscal year 2018, 6,424. See U.S. Citizenship and Immigration Services, Number of Form I-526, Immigrant Petition by Alien Entrepreneur, by Fiscal Year, Quarter, and Case Status 2008-2018, available here.