Free EB-5 Project Evaluation Targeted Employment Area (TEA) Analysis

The investment threshold of the EB-5 Program is dependent on the location of the project. For projects located within what are known as targeted employment areas (TEAs), the threshold is currently $500,000. Otherwise, the threshold is $1,000,000.

Targeted Employment Area (TEA) Basics

The targeted employment area designation is issued by specific agencies in each state and can be based upon either population or unemployment rate.

Areas of high unemployment qualify as TEAs if their rate of unemployment is 150% that of the national average. This rate changes every year, but for 2015, the national rate of unemployment was 5.3%, meaning an area qualifies as a targeted employment area if it has an unemployment rate of at least 8.0%.

Rural areas are those with low populations according to census data—they cannot be located in municipalities with populations greater than 20,000 and must not be in metropolitan statistical areas (MSAs).

Because the data changes each year, targeted employment area designation letters must be refreshed annually, and there is no guarantee an area previously designated a targeted employment area will remain one.

Determining if an Area Can Qualify As a Targeted Employment Area

While it is possible that an entire city or county could have an unemployment rate that qualifies it for TEA designation, most TEAs are determined by census tract. The U.S. Bureau of Labor Statistics (BLS) does not, however, publish employment data by census tract. Most states publish a list of certified TEAs, but it is important to note that new TEAs can be issued by designated state agencies using the census-share methodology.

Basically, this methodology uses American Community Survey (ACS) data to consider the unemployment rate of two or more contiguous census tracts in a given county or group of counties. This data is used in conjunction with current BLS data for the appropriate county or counties to determine if the census tracts in question qualify as a targeted employment area on the basis of high unemployment.

Targeted Employment Area Issuance Varies by State – Example: CA

The census-share methodology often enables projects located in a census tract that does not qualify as a targeted employment area by itself to be grouped with other census tracts whose average unemployment rate qualifies the area for TEA designation. Each state agency has a different set of rules for combining census tracts, though, and these particular differences must be considered when applying for a special targeted employment area support letter.

For instance, California limits the number of contiguous census tracts to 12. Also, the specific data used varies by state—some states use the prior year’s data while others use the data from the most recent 12 months; New York, on the other hand, uses data from 2000. In addition to these differences, some states have formed special districts that affect targeted employment area designation. In general, certain states are friendlier to applicants seeking new combined census tract TEAs, and some are not.