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On April 9, 2019, Rep. González-Colón (R-PR-At Large) introduced H.R.2173 – a bill to amend the Immigration and Nationality Act to reserve EB-5 visas each fiscal year for investors in new commercial enterprises in areas where a major disaster has been declared by the president.

The bill is not publicly available as of this writing, but staff informed EB-5 Insights that it proposes to set aside 100 immigrant investor visas per year for areas designated by presidential declaration to be major disasters.

Rep. González’s legislative approach recognizes the economic benefits of the EB-5 program and the ability to fund vital government programs while creating new jobs for Americans in new and creative ways.

However, the EB-5 program is in great need of long-term authorization and modernization, especially as relates to the current 10,000 annual visa cap. Due to family derivatives count and per-country caps, the actual number of annual EB-5 investors is approximately one-third of annual visas, thus restraining the economic potential of the program.

According to a recent economic study by the EB-5 Investment Coalition (linked above), EB-5 modernization, such as removing derivatives from the annual visa cap and/or expanding the annual visas available, could unleash EB-5 as an economic engine to fund vital government programs well above-and-beyond its constrained status today.

Please check back for additional information on this development and other matters as information becomes available.

For more on the economic impact of EB-5, click here.

On March 14, 2019, the EB-5 Investment Coalition, in cooperation with Invest in the USA (IIUSA), released the most comprehensive economic analysis of the EB-5 program to date. Laura Reiff, co-chair of Greenberg Traurig’s Immigration & Compliance Practice, commented on the report: “Without the typical data limitations and constraints on economic analysis, premier industry economists measured and determinized the billions of dollars in economic activity created by EB-5.  At a time of needed reauthorization and legislated reforms, we hope to present this data to the Administration and Congress to help make sound economic-based reforms to this vital economic engine and job-creating EB-5 program.”

For more on EB-5 and job creation, click here.

For more on EB-5 and the economy, click here.

˘ Not admitted to the practice of law

Two members of the Senate introduced The American Job Creation and Investment Promotion Reform Act, S. 1501, in June 2015.  The bill has many provisions seeking to provide reform to the program, including provisions for integrity measures, increased capital investment amounts, and provisions to redefine Targeted Employment Areas (TEAs).

Under current law, a TEA is defined as “an area which, at the time of investment, is a rural area or an area which has experienced unemployment of at least 150 per cent of the national average rate.”  The definition of a “high unemployment area” is defined as a “metropolitan statistical area, the specific county within a metropolitan statistical area, or the county in which a city or town with a population of 20,000 or more is located, in which the new commercial enterprise is principally doing business has experienced an average unemployment rate of 150 percent of the national average rate.”  The state is given the authority to designate TEAs.

The new bill proposes to redefine TEAs and high unemployment areas.  Under the proposed bill, a TEA means “a high unemployment area, a rural area, or any area within the geographic boundaries of any military installation closed, during the 20-year period immediately preceding the filing of an application . . .based upon a recommendation by the Defense Base Closure and Realignment Commission.”  8 C.F.R. §204.6.  The TEA designation determination, under S. 1501, shifts the responsibility to the Department of Homeland Security and takes away the designation authority from the state.  In addition, high unemployment area is redefined under S. 1501 as “an area, using the most recent census data available, consisting of a census tract that has an unemployment rate that is at least 150 percent of the national average unemployment rate.”

The new proposed definition of a TEA under S. 1501 limits the word “area” to only one census tract.  This action restricts the EB-5 program’s economic benefits into many mid-sized cities and suburbs across the country, as many areas that currently qualify as a TEA will no longer qualify as a TEA under S. 1501.  The EB-5 Investment Coalition (EB-5IC) has compiled data on select states demonstrating the percentage of census tracts that would be disqualified in certain Metropolitan Statistical Areas (MSAs).  Please refer to the  following documents: 1501’s TEA Proposal: The Economic Consequences Made Clear and Cities of All Sizes Will Lose Jobs Under S.1501.

The Government Accountability Office (GAO) recently reviewed the risks and economic benefits of the EB-5 program. The report addresses several challenges related to the EB-5 program that have been highlighted in recent years, and which are addressed in legislation currently pending in Congress.

The congressional requesters asked the GAO to examine the following:

  • The extent to which U.S. Citizenship and Immigration Services (USCIS) and its sister agencies have assessed risks of fraud in the program, and what risks have been found;
  • The extent to which USCIS has put into place procedures to address and identify risks within the program;
  • The extent to which USCIS has expanded its capacity to verify job creation, including the use of reliable methodologies to report economic benefits of the programs.

The report’s top line findings were as follows: while USCIS had worked with its partner agencies to identify fraud risks, such assessments are not ongoing. The GAO reported that USCIS acknowledged that it did not have current plans to systematize such assessments. The GAO noted that USCIS stated that fraud-related risks were evolving. Specifically, the GAO received information from agency officials relative to areas of concern for fraud risk that included determining an investor’s source of funds and the legitimacy of an investment entity. The GAO made clear that USCIS had taken steps to enhance its oversight and focus resources effectively, but also noted that weaknesses in its information systems present challenges to most effectively using data collected to identify such risks.

The report also focused on USCIS’ ability to report the program’s economic benefits, noting that USCIS’ increase of its EB-5 workforce, and its enhanced technical sophistication, has increased its capacity to verify job creation through the program.  The GAO reported that USCIS’ reporting methodology can both overstate and understate economic benefits resulting from the program. The GAO recommended that USCIS implement better information collection procedures; though it also acknowledged that USCIS does not believe it has the statutory authority or mandate to develop a more elaborate mechanism to collect such information.

As part of its study, the GAO interviewed numerous parties associated with the EB-5 program, from USCIS adjudicators and economists, to regional center principals and FDNS and IPO supervisory officials to gain insight to its queries.  The GAO also reviewed the economic models to estimate job creation and interviewed the appropriate subject-matter experts. The GAO also reviewed two reports issued by the DHS Office of Inspector General (OIG) on the EB-5 program: a report published in December 2013 focused on USCIS’ ability to terminate a regional center based upon national security concerns and determining whether the program was benefiting the U.S. economy and fulfilling job creation requirements. The second report, from March 2015, found that a former director created the perception of favorable action toward some program stakeholders.

The GAO’s Findings

As a result of its inquiry into the fraud risks and economic benefits of the EB-5 program, the GAO found the following, summarized below:

Source of Immigrant Investor Funds

The GAO reports that it can be difficult for USCIS adjudicators to verify the lawful source of investor funds, which is then identified as a fraud risk. The GAO assessed 150 petitions designated as “high risk” for fraud concerns, and the Fraud Detection and National Security Unit (FDNS) determined that the source of funds contained a risk of fraud, including counterfeit documents and the inability to verify information from foreign banks. The U.S. currently has some limits in verifying foreign banking information, though it does have agreements with certain countries to exchange financial information.

Legitimacy of Investment Entity

Regional centers and their operators have been under recent scrutiny by USCIS for potential fraudulent investment schemes. The GAO report cites two instances where the regional center was found to have defrauded investors. According to the report, there are concerns relating to the inability of the U.S. government to fully investigate foreign-based sales and marketing practices abroad.

Appearance of Favoritism in Program Administration

The GAO referenced a report issued by the DHS Office of Inspector General that examined actions by a former USCIS director, which concluded that the former director created an appearance of favoritism. The GAO noted that following the issuance of that report, the Secretary of Homeland Security instituted protocols to prevent agency actions that could give rise to such an appearance of favoritism.

Steps Taken by USCIS to Address Fraud Risks

In response to the risks identified above, the GAO recognized that the USCIS has taken some steps to mitigate fraud risks, including:

  • Changing its organizational structure: USCIS restructured its EB-5 program operations and moved all activities from California to Washington, D.C. USCIS also established a fraud specialist unit within FDNS, in addition to increasing its staff to be well equipped to ensure program integrity.
  • Establishing fraud awareness training: USCIS is committed to deterring fraud, and has invested in training programs. Examples include programs focused on detecting evidence that may indicate money laundering, and developing an “EB-5 University” to address evolving fraud issues.
  • Law enforcement collaboration: USCIS has increased its coordination with law enforcement agencies, and as such, has expanded the scope of background checks.

The GAO identified some shortcomings regarding the USCIS ability to collect information to detect and mitigate fraud risks. Specifically, the GAO identified certain programs and processes that it believed merited improvement, summarized below, and noted that USCIS is taking steps to address the concerns:

  • Electronic Database

The report found that USCIS does not have the appropriate electronic databases to conduct fraud-mitigating activities. For example, the information on Form I-924 concerning regional center principals is not required to be entered into the database, and as such, this information is never run through a database or background checks. To remedy this, USCIS will begin utilizing its Electronic Immigration System to capture all data, though the system has been delayed for nearly four years and costing over $1 billion.

  • FDNS Site Visits Are Limited

FDNS currently conducts site visits if the Immigrant Investor Program Office (IPO) staff uncovers a material concern regarding the project and the information cannot be verified. In response, USCIS plans to implement additional random site visits in 2015, and to hire eight additional EB-5 program staff for this purpose.

  • Interview of Investors Applying to Remove Conditional Permanent Resident Status

The GAO found that USCIS has not interviewed any immigrant investors applying to remove the conditions on his or her permanent resident status. The GAO recommends that interviews could lead to more information gathering and could lead to corroboration with the information given at the I-526 stage of the petition process. USCIS agreed with the GAO’s recommendation, and will develop a plan to implement enhancements to data collection procedures, including the possible use of interviews, to be completed by September 30, 2016.

  • USCIS Does Not Collect Certain Applicant Information

The GAO reported that USCIS is not capturing certain information that may help mitigate fraud. Specifically, USCIS does not collect information from third parties associated with the regional center or the project, including the businesses supported by the regional center, advisors, foreign brokers, marketers, attorneys, and advisors. USCIS has stated that it is currently drafting a revised Form I-924 to capture this information. 

National Security

A large part of the GAO report is dedicated to national security issues and USCIS’s ability to terminate or deny an application based solely on credible concerns. USCIS recognizes that national security concerns are grounds for denial at the adjustment of status stage, but it does not believe it has the authority to terminate a regional center on national security grounds unless there is an eligibility ground (relating to EB-5 eligibility) that has not been met. The GAO reported that there are some regional centers that are allowed to operate by USCIS despite national security concerns, and recognizes that currently pending legislation in Congress will address these issues. USCIS currently conducts a minimum of one fraud, national security, or intelligence assessment on the program on an annual basis, and will continue to do so.

Methodology for Calculating Jobs

The December 2013 OIG report claimed that USCIS lacked the necessary means to evaluate job creation. In response, USCIS hired 22 economists who have all undergone training. In addition, USCIS has provided its economists with access to data from the RIMS II economic model, noting that it is the model most often utilized and measures indirect and direct jobs. The GAO reported that the RIMS II data does not provide USCIS the ability to determine the exact location of the indirect jobs created through the program.

Reporting EB-5 Outcomes

The GAO reported that USCIS does not have the proper tools to track the outcomes of investment and job creation, and that as a result it may overstate or understate the economic benefits of the EB-5 program. The GAO found that 26 percent of investors have not finished the program, and as such, recommends that USCIS track all data entered on Form I-526 and I-829. USCIS concurred in the recommendation and will develop a plan to collect data on investment amounts and job creation, to be done by September 30, 2016.

A concern reflected in the GAO’s report is whether immigrant investors should be able to claim jobs created by other investors in the project who are not seeking a green card, as permitted by controlling regulations. The GAO reported the views of the IPO, which recognizes that EB-5 capital is critical to the viability of many projects. There GAO recognized that there are numerous industries, including manufacturing, that would not be able to generate the required number of jobs if it relied solely on jobs created by the EB-5 investment at current investment levels.

Study to Address Overall Program Benefits and Cost of the EB-5 Program

The GAO report recommends that the Department of Commerce’s Economics and Statistics Administration (ESA) should complete its study on the EB-5 program and its associated costs, specifically weighing the cost of running the program against the benefits that immigrant investors bring to the United States, such as tax payments, consumer spending, and job creation. The GAO believes it is important to measure a program’s net economic impact, and the GAO recommends that this study strive to do so. The USCIS IPO concurs and will include relevant program costs in the study, to be published November 30, 2015.

Conclusion

The GAO’s report highlights a number of areas for improvement within USCIS. These recommendations are largely directed toward ensuring program integrity and better collection and use of data received from regional centers and immigrant investors to measure program performance. It is noteworthy that USCIS, in its letter response to the GAO, concurred in all four of the GAO’s recommendations.

Given the breadth of the GAO’s report, please check back for additional posts following up on this overview, including examining the way in which legislation currently pending in Congress, if enacted, would address the GAO’s findings.

From left are Greenberg Traurig Attorney Kate Kalmykov, Bank of China Chairman Tian Guoli and Greenberg Traurig Attorney Laura Reiff.

Last week, Greenberg Traurig EB-5 attorneys Kate Kalmykov and Laura Reiff attended the China-U.S. Economic and Investment 2014 Annual Gala Dialogue hosted by the China General Chamber of Commerce (CGCC). CGCC is one of the largest nonprofit organizations representing Chinese enterprises in the United States. The gala served as a platform to enhance economic and business cooperation for both Chinese and U.S. enterprises through the exploration of the new collaborative model of Chinese-U.S. relations. Guests included business executives and elected officials from both China and the United States. Continue Reading Recap from 2014 China — U.S. Economic and Investment Dialogue Annual Gala

The EB-5 program contributed $3.39 billion to the U.S. GDP and supported over 42,000 U.S. jobs during 2012. This is according to the “Economic Impacts of the EB-5 Program 2012: An Economic Development Program for the 21st Century” report released by the Association to Invest in the USA (IIUSA). These results are more than double than those seen in the 2011 report.

The following results are among those highlighted by IIUSA in the 2012 report:

  • “Total economic impact, combining the benefits of EB-5 investments, household spending of immigrant investors and other EB-5 related spending, was $3.39 billion to U.S. GDP and supported over 42,000 U.S. jobs.
  • Investment represents the largest component of EB-5 spending, with approximately $1.8 billion invested by EB-5 Regional Center investors.  These investments contributed $2.5 billion to U.S. GDP and supported 33,134 American jobs.
  • Over 85 percent of EB-5 investment capital – $1.55 billion – was invested in the construction sector.  Other sectors seeing EB-5 investments include chemical manufacturing, mining, manufacturing, and power generation.
  • Pennsylvania, New York, California and Illinois top the list of states with the largest level of investment, and these saw the largest investment impacts.  For example, more than 8,000 jobs were supported in California.
  • Household spending by immigrant investors and their families contributed approximately $383 million to US GDP and supported more than 4,700 jobs in 2012.  The economic impact of household spending represents a permanent impact on the U.S. economy, as these families maintain spending patterns year after year.
  • Spending on EB-5 related immigration services contributed approximately $477 million to U.S. GDP and supported nearly 5,000 jobs in 2012.  These expenditures include spending on flights, moving services, cars, investment and legal services and government fees.”

The report uses well-established economic modeling methods to track data on I-526, I-829, and I-924A applications, as well as approval/denial statistics for EB-5 Regional Centers to determine GDP and job growth impacts. IIUSA uses data measured by state and by impacted industry sector. This includes federal, state, and local tax revenue from EB-5 investments and household spending by investors.

IIUSA is the national trade association representing EB-5 Regional Centers. To view the “Economic Impacts of the EB-5 Program 2012: An Economic Development Program for the 21st Century” report, visit the IIUSA website.

Kate Kalmykov and James Cormie recently published an article on EB-5Investors.com outlining the announcement that the Bureau of Economic Analysis (BEA) will no longer produce the Regional Input-output Modeling System II (RIMS II) that many economists rely on when calculating Regional Center jobs. This update introduces new economic methodologies for EB-5 economists when estimating the impact the EB-5 project on regional demand, economic growth and corresponding job creation.

To read the full article click here.

Congress’s stated purpose in allowing EB-5 investment in USCIS-approved regional centers was to promote “economic growth,…improved regional productivity, job creation, and increased domestic capital investment.”[1] Regional centers have admirably risen to this objective, providing rich sources of capital investment for a variety of projects across the nation. Particularly in the current economic climate where capital investment comes at a hefty premium, regional centers have pooled foreign capital investments for a relatively low price. However, the December 2009 Neufeld Memorandum illustrates that USCIS has chosen this time to enforce a rule effectively requiring regional center investments to create jobs within an artificial two and a half year time period.

In recent months, Stakeholders have reported that USCIS has begun to deny petitions for investment in regional centers that fail to forecast requisite job creation within 2.5 years of the Form I-526 adjudication, and that at the I-829 stage they cannot document the same. Understanding the untenable nature of this requirement requires a brief discussion of EB-5 job creation requirements, as well as consideration of the economic realities of regional center investment.

The regulations break down job creation requirements into three basic categories, namely direct EB-5 investment, investment in troubled businesses and regional center investment. (Investments in troubled businesses are not relevant to the current discussion.) For a direct or individual EB-5 investment, an investor must show that her new commercial enterprise has either created ten new jobs for qualifying employees or will create such jobs within “the next two years.”[2] When the two-year window begins is not clear from the regulations, but the USCIS Adjudicator’s Field Manual states that the two-year period commences six months after the Form I-526 adjudication.[3]  This effectively creates a “2.5 Year Rule” for direct EB-5 investors, which appears to be a tenable position considering the language of the regulation.

On the other hand, for investments in regional centers, the regulation merely states that a “petition must be accompanied by evidence that the investment will create full-time positions for not fewer than ten persons either directly or indirectly through revenues generated from increased exports resulting from the Pilot Program.”[4] Notably, the regulation contains no time constraints on the projected job creation, nor does it reference the time limits for direct EB-5 investment laid out only two paragraphs preceding it. The fact that the later regulation clearly leaves out the temporal restrictions of the earlier regulation suggests that no time limit was intended. Nonetheless, the Adjudicator’s Field Manual mentions a two-year requirement for regional centers as well, a requirement that USCIS insists it will enforce.[5]

Given the nature of many markets and industries this guidance appears to be unworkable.  For example, in many cities such as New York obtaining permits and completing construction alone, can take several years.  Stakeholders need to continue to flag this issue and work with USCIS to find a reasonable resolution.  USCIS has promised since November of 2011 to issue new guidance that centralizes all of the various memorandums issued by the Agency.  The time frame for job creation must be addressed in this guidance and take into business realities. 

By Kate Kalmykov and Bryan Flannery

[1] P.L. 102-395 Section 610(a)

[2] 8 CFR 204.6(j)(4)(i)(B)

[3] USCIS Adjudicator’s Field Manual 22.4(c)(4)(D)(ii)

[4] 8 CFR 204.6(j)(4)(ii)

[5] USCIS Adjudicator’s Field Manual 22.4(c)(4)(D)(ii)

 

Originally posted on eb5investors.com

Congress returns from recess in 2024 facing a daunting task: approving crucial supplemental funding while navigating the contentious terrain of immigration and border security. This delicate dance threatens to trigger a government shutdown, jeopardizing aid for Ukraine and Israel.

Funding Fallout: Immigration Intersects with Global Aid

President Biden’s $105.9 billion supplemental funding proposal aims to bolster international allies like Ukraine and Israel. However, Republican support hinges on finding common ground on immigration and border security. Senate Republicans envision tying an immigration agreement to the funding package, while House Republicans prefer separate legislation, potentially pushing HR 2, the House-passed border bill, as a prerequisite.

Failure to pass the supplemental funding could jeopardize aid to allies, while a Jan. 19 government shutdown looms if funding for four key agencies is not secured. This upcoming deadline, in addition to the tension surrounding potential impeachment proceedings against Homeland Security Secretary Mayorkas, make the atmosphere in Washington increasingly volatile.

Important Upcoming Deadlines

Past shutdowns remain top of mind. Congress narrowly avoided shutdowns twice in 2023, highlighting the ongoing budget struggles. Two upcoming deadlines may test bipartisan resolve.

There will be a partial shutdown Jan. 19 unless funding for the Agriculture, Energy & Water, Military Construction-VA, and Transportation-HUD departments is secured. Speaker Johnson (R-LA) proposes a full-year extension, but this approach may cause greater uncertainty. The deadline for the remaining eight appropriations bills is Feb. 2, at which point a wider shutdown may occur if congressmembers are not able to agree.

A government shutdown would cause non-essential personnel to be furloughed, thus disrupting national park access, delaying passport issuance, and inhibiting scientific research. Economic uncertainty would ripple through businesses and consumer confidence. In short, a shutdown would hinder both national security and domestic well-being.

Uncertain Future

With much at stake, finding common ground is paramount. Senate negotiators strive to bridge the partisan divide and craft a workable immigration agreement. Yet the question remains: will the House follow suit, or will fragmented legislation jeopardize the entire funding package? The coming weeks will test bipartisan cooperation.

The Temporary Protected Status (TPS) program has been a critical lifeline for individuals fleeing countries plagued by natural disasters, armed conflicts, or other extraordinary conditions. In recent years, the political and economic crisis in Venezuela has led to an exodus of its citizens seeking refuge in the United States and other countries. This growing need for assistance led the U.S. Department of Homeland Security in September 2023 to extend TPS designation for Venezuelan nationals, as many can no longer safely return to the country.

The Greenberg Traurig team, committed to pro bono service, continues to play a role, assisting eligible Venezuelan nationals in submitting TPS applications as well as securing employment authorization documents (EADs). In Atlanta, for example, the firm is aiding a Venezuelan student studying marketing at a U.S. university to apply for TPS. 

Individuals who are eligible for TPS are protected from deportation and can obtain employment authorization as well as travel authorization once their applications are accepted. If her application is accepted, our TPS candidate in Atlanta will have the ability to live and work in the United States without fear of deportation while Venezuela’s political and economic situation stabilizes.

In addition to assisting Venezuelan nationals, GT has worked thousands of pro bono hours and pledged resources toward aiding individuals and families from around the world who have fled their countries to seek refuge in the United States. For example, in March 2022, GT pledged up to $2 million to support the humanitarian relief efforts for Ukraine in addition to a large scale mobilization of pro bono work for refugees, and members of our Warsaw office took Ukrainian refugees into their homes. During National Pro Bono Month and beyond, the Immigration & Compliance Practice proudly dedicates time and resources to these important matters.

* Past results are not guaranteed.