The EB-5 Immigrant Investor Program is famous for offering foreign nationals the opportunity to immigrate permanently to the United States in exchange for an EB-5 investment in a qualifying U.S. business, termed “new commercial enterprise” (NCE) in the EB-5 world. Though the EB5 investment journey may be quicker and easier than many other routes of immigration, it’s still a lengthy process that demands significant criteria and paperwork from participants. An EB-5 investment is characterized by a few key petitions, but meeting the requirements for those petitions can be difficult and time-consuming.

Form I-526: The Initial Petition

Form I-526 is what officially kicks off an applicant’s EB-5 investment journey. This is an investor’s first interaction with United States Citizenship and Immigration Services (USCIS). But investors must dedicate significant time and effort to preparing the I-526 petition, including setting up their EB-5 investment itself. An investor should carefully consider their investment options and choose an EB-5 project that aligns with their needs and goals. They should also conduct due diligence on prospective regional centers, if they, like most applicants, are making an EB5 investment through a regional center.

Prospective EB-5 investors are strongly encouraged to consult with an experienced EB-5 immigration attorney to discuss their individual needs, goals, and circumstances. An EB-5 lawyer can help an investor determine the best type of EB-5 investment for them and their family and guide them through the preparation process for the I-526 petition. Most importantly, they can help investors navigate the fund-sourcing aspect of the petition, generally cited as the most challenging and time-consuming aspect.

USCIS needs to know that any EB-5 investment funds it handles have come from lawful sources. Thus, investors are required to present proof of the lawful sources of their EB5 investment capital. EB-5 capital can come from any number of sources—including multiple sources—as long as the investor can prove its legality. USCIS demands an extremely rigorous fund-sourcing process—for example, showing the sale of a real estate asset alone isn’t sufficient. The investor must also show how they sourced the money to originally purchase the asset as well.

When the I-526 petition is finally compiled, the investor pays the processing fee and files it with USCIS. Processing times vary, but typically, it takes between two and five years for I-526 adjudication, depending on the investor’s country of citizenship.

After I-526 Approval: Obtaining Permanent Residency

Simply obtaining I-526 approval does not automatically grant a foreign national and their immediate family members permanent resident status. Instead, EB-5 investment participants must undertake another process to obtain the status, which further delays their relocation to the United States.

If an applicant has made their EB5 investment from overseas—as most EB-5 investors do—they must submit Form DS-260 to the U.S. Department of State (DOS). DOS verifies the investor’s admissibility and invites them and any family members accompanying them to the United States to schedule a visa interview at their local U.S. embassy or consulate. After a successful interview, an applicant is granted access to the United States, and their two-year conditional permanent residency starts upon landing in the United States.

Foreign nationals already residing in the United States under a different visa status are also eligible to make an EB-5 investment, and while their journey is generally identical to overseas applicants, it does differ at the post-I-526 stage. Domestic investors do not go through consular processing—instead, they file Form I-485 with USCIS to adjust their immigration status. Upon approval of their I-485 petition, their conditional permanent residency period begins.

Form I-829: The Final Petition

Form I-829 can only be filed within the final 90 days of an EB5 investment participant’s two-year conditional permanent residency period. The purpose of the petition is to remove the conditions and grant the petitioner unrestricted permanent residency rights in the United States, and to have these conditions removed, an investor must prove that their EB-5 investment did, in fact, meet all the criteria of the EB-5 program.

An investor must satisfy several criteria for a successful EB-5 investment, including maintaining the EB5 investment capital at risk throughout the entire investment period and creating a minimum of 10 new jobs for U.S. workers. Those who make EB-5 investments directly in an NCE must present 10 new jobs on the payroll of the NCE, but those who invest through a regional center need only present a third-party economic calculation using approved methodology that indicates at least 10 direct, indirect, or induced jobs. The I-829 petition must be submitted with evidence to support the fulfillment of these criteria, as well as the filing fee and biometrics fee. If the I-829 petition is approved, the investor and any included dependents have the conditions removed and become fully fledged permanent residents of the United States.

The popularity of the EB-5 Immigrant Investor Program is undeniable—since 2008, the program has skyrocketed in demand, becoming a popular means of obtaining U.S. permanent resident status for foreign investors around the world. Nonetheless, the program remains controversial in the United States, and a sea of policy issues undermine its effectiveness for EB-5 investment participants, project developers, other EB-5 stakeholders, and the U.S. economy alike. While foreign investors have flocked to the program to earn U.S. permanent resident status for themselves and their immediate family members, the ever-slower processing times at United States Citizenship and Immigration Services (USCIS) and the agency’s retroactively applied rule changes frustrate those who make EB5 investments.

Lawsuits from disgruntled EB-5 investment stakeholders are not uncommon and can have drastic impacts on the program, overturning previous regulations. One famous example is Zhang v. USCIS, where the courts ruled against USCIS’s assertion that unsecured loans constituted indebtedness and thus not a valid source of EB-5 investment capital. Even more dramatically was the case of Behring Regional Center LLC v. Chad Wolf et al., which resulted in the Modernization Rule being overturned. The Modernization Rule had increased the minimum required EB-5 investment amounts by 80% and tightened the rules governing targeted unemployment area (TEA) designation, making EB5 investments far more expensive and harder to qualify for the lower TEA investment amount.

Then, among the U.S. public, the EB-5 program holds a negative reputation of fraud and corruption. This is in part due to the negativity bias of the media, which capitalizes on any instances of fraud in the EB-5 program, while, naturally, not reporting on the many successful and honest EB-5 investments. Politicians are often reluctant to offer support for the program, despite its positive influences, due to its controversial nature. Some politicians have even taken a hardline stance against the program, alleging rampant fraud.

Indeed, the EB5 investment world is swirling with legislative problems and regulatory issues, which is pushing some would-be investors away to residency-by-investment programs in other countries. The program’s dire need for reform has been the pivotal EB-5 investment topic of the first half of 2021, with reform seen as the only way to save the EB-5 Regional Center Program from expiration on June 30, 2021. And sure enough, when the Senate failed to enact the much-needed reform, the program expired, causing major headaches and delays for EB-5 investment stakeholders of all kinds. So, there is no shortage of policy issues in the EB-5 program.

Fraud and National Security Concerns

Perhaps the most common criticism of the EB-5 program is the doors it opens for fraudulent activities and national security risks. One U.S. senator even noted the egregious possibility of the EB-5 program for spies from the Chinese Communist Party to gain U.S. permanent residency rights. When adjudicating petitions, USCIS may flag EB-5 investors with ties to foreign adversaries or with connections to organized crime or terrorism, but the agency may not deny immigration rights to an applicant simply based on national security concerns, indeed opening the door to abuse by malicious actors.

Fraud is also a major concern for EB-5 stakeholders and the U.S. public alike. A few famous cases of EB-5 investment fraud have tarnished the program’s image in the media, and while most EB-5 stakeholders are honest and act in good faith, the industry has been pushing for meaningful reform for years. For one thing, USCIS requires investors to show the lawful sources of their EB5 investment capital, but when records date back decades in countries with poor documentation systems, it’s hard for USCIS to truly verify the source of funds. Project developers may also defraud investors in Ponzi schemes, creating fake projects that simply siphon off EB-5 investment funds for the enrichment of the project leaders. Finally, EB-5 regional centers may also participate in fraud, fooling investors with aggressive promotion tactics that lead investors to believe regional centers are government-run.

USCIS has taken measures to confront and stem problems of fraud in the EB-5 program, but without comprehensive program reform, it’s difficult to truly move forward. Since 2018, the agency has worked more closely with the Federal Bureau of Investigation (FBI), Immigration and Customs Enforcement (ICE), and the Securities and Exchange Commission (SEC) to identify instances of money laundering or other fraudulent activities, as well as national security issues including potential terrorists or spies. Proposed changes, such as the ability to terminate regional centers involved in criminal activity, the ability to prevent individuals with criminal records from being principals of regional centers, and the authority to audit regional centers, could go a long way in allowing USCIS to more effectively root out EB-5 fraud.

USCIS Data Collection Issues

Another major area of policy issues in the EB-5 program is USCIS’s poorly organized data collection methods. USCIS’s failure to digitalize much of its data, instead relying on heaps of paperwork, makes it difficult to trace necessary tidbits of information and effectively identify irregularities that could indicate fraud. Historically, USCIS has also requested relatively little information from EB-5 investment participants, omitting even information that could aid in detecting fraud. Gradually, the agency has been expanding the amount of information it collects and the ways it interacts with it, but there remains much room for improvement.

In 2017, USCIS increased the number of in-person site visits made to EB5 investment projects, finding more than 30% to be “not operating as expected,” whether because they were deserted, had gone out of business, or were not undertaking the activities they had claimed to. A historical lack of site visits could mean there is a sizeable number of EB-5 projects who have gotten away with fraudulent activities undetected.

USCIS’s failures in data collection also impede the ability of EB-5 investment stakeholders to calculate the economic impacts and job creation figures of the EB-5 program. USCIS only verifies that at least 10 jobs have been created per investor instead of tracking the precise number of jobs each investor created, significantly undercutting the total number of jobs created. Overall, USCIS data provides stakeholders with little insight into where EB5 investment capital goes.

Petition Processing Issues

For EB-5 investment participants, one of the worst policy issues at USCIS has been the adjudication times for EB-5 petitions, which have steadily increased over the 2010s as program demand shot up. In particular, Chinese investors face extremely long processing delays, due to country-based restrictions on annual visa allocation. Some investors have grown frustrated at their long waits and even submitted lawsuits to withdraw their EB5 investment and give up their ambitions to immigrate to the United States.

In 2018, USCIS hired a slew of new employees dedicated to EB-5 petition adjudication to help speed up processing times, which did improve the situation. But in 2019, processing times increased significantly again, with USCIS attributing the delays to strengthened measures to ensure integrity. In April 2020, the immigration agency introduced a new I-526 petition processing strategy that prioritized petitions from applicants whose countries did not face an EB-5 visa backlog, asserting that this move would help streamline processing and speed up the process for those who don’t face backlogs. 2020 was an unusual year in many ways, and USCIS couldn’t have predicted the pandemic that swept the world—but the visa availability processing approach didn’t appear to decrease processing times. Processing times is one of the areas that most EB-5 reform initiatives target, pushing for USCIS to return to reasonable processing times.

The EB-5 Immigrant Investor Program is one of the best ways for foreign nationals and their families to relocate to the United States and enjoy the country’s thriving economy and delightful culture. To qualify for permanent resident status, foreign nationals must make an EB5 investment in a qualifying U.S. enterprise and create or preserve at least 10 full-time jobs. Moreover, potential EB-5 investors received encouraging news on June 22, 2021—the EB-5 Modernization Rule had been invalidated, so the required minimum investment amounts decreased to $500,000 for targeted employment area (TEA) projects and $1,000,000 for non-TEA projects. Since United States Citizenship and Immigration Services (USCIS) or the Department of Homeland Security (DHS) could take action to raise these minimum amounts, EB-5 investors should take advantage of this opportunity while it lasts.

Admittedly, interested foreign nationals may feel apprehensive about making an EB-5 investment due to the June 30, 2021 suspension of the regional center program. Still, they can be confident that the program will be reauthorized in the coming months—after all, the regional center program previously expired in December 2018 but was later resumed. In fact, the program may be reauthorized in Fall 2021 as part of a spending bill.

Regardless of whether potential investors are interested in investing directly or making a regional center investment once the program is reauthorized, the following guidelines will help them prepare for the EB-5 investment process.

Procure Source-of-Funds Documentation

USCIS has put in place strict guidelines regarding the source of funds of EB-5 investments. When filing Form I-526, investors must provide exhaustive evidence that outlines the sources of their funds and proves their legality. To make matters more complicated, the required documentation will vary depending on the source of funds in question. For instance, EB-5 investors using funds gained from real estate sales will have to submit a property ownership certificate and purchase and sales contracts. On the other hand, foreign nationals who use gifted EB-5 capital will have to procure a written gift agreement signed by both parties. Proving the legality of EB-5 investment funds can be difficult and time consuming, so be sure to gather all the relevant documentation as early as possible.

Work with EB-5 Professionals

The many regulations governing the EB5 investment industry can be confusing to foreign nationals who are new to the program and want to minimize their investment risk. If a foreign national’s EB-5 investment does not comply with all the applicable guidelines when their I-526 petition is filed, USCIS may deny their application or send a request for evidence (RFE). Therefore, EB-5 investors should hire an experienced immigration attorney. Investors can also work with EB-5 consulting firms, which can help them keep up with the rapidly-changing EB5 investment industry.

Identify a Suitable EB-5 Investment Opportunity

Interested foreign nationals should start doing research on available EB-5 projects as soon as possible. When evaluating potential EB-5 investment opportunities, they should be on the lookout for high-risk or suspicious projects that do not have contingency plans in case of a capital shortfall. The safest EB-5 projects have taken steps to ensure their completion even if they do not gather all the planned capital, and EB-5 consultants can help identify such projects. For example, EB5AN offers highly reliable EB-5 projects and has a 100% I-526 and I-924 project approval rate.

Making a successful EB-5 investment requires careful planning and research, but it can lead to a new life in the United States. Schedule a meeting with EB5AN to learn more about current EB-5 investment projects.

United States Citizenship and Immigration Services (USCIS) has released the Visa Bulletin for August 2021, which contains thrilling news for the EB-5 investment industry. In many cases, the monthly Visa Bulletin reports long, stagnant wait times for EB-5 investors from backlogged countries. In contrast, the August 2021 Visa Bulletin has positive news for Chinese and Vietnamese investors.

Chart A of the Visa Bulletin, “Final Action Dates for Employment-Based Preference Cases,” shows that Vietnam has finally achieved “C” (current) status. This means that the long backlog for Vietnamese EB-5 investment visas has been resolved, and Vietnamese investors no longer have to wait until the final action date catches up with their I-526 priority date. Now, every Vietnamese investor with an approved non-regional center I-526 petition is eligible to apply for conditional permanent resident status through the EB-5 program. This is certainly wonderful news for all Vietnamese foreign nationals who have made an EB-5 investment. Vietnam had been experiencing a visa backlog since 2018, but its final action date leaped forward by two years in the July 2021 Visa Bulletin.

China’s situation has also taken a positive turn: the final action date for Chinese EB-5 investments advanced one week from November 8, 2015, to November 15, 2015. This may seem like a very small step forward, but any improvements in the final action date for China are always welcome—after all, the final action date for China remained the same for almost a year prior to the June 2021 Visa Bulletin. The one-week jump in the Chinese final action date follows an even more significant two-month advancement in the July 2021 Visa Bulletin.

Foreign nationals planning an EB5 investment should keep in mind that the final action dates for regional center investments are all marked as “U” (unauthorized) because of the June 30 expiration of the regional center program. As of that date, USCIS is not accepting I-526 petitions associated with a regional center. Still, USCIS has asked regional center EB-5 investors to continue to answer requests for evidence (RFEs), which leaves the door open to a future reauthorization of the program. In fact, the regional center program may be reauthorized as part of a fall 2021 spending bill.

In contrast to Chart A, Chart B of the August 2021 Visa Bulletin, “Dates for Filing of Employment-Based Visa Applications,” is devoid of encouraging news. China’s date for filing of December 15, 2015, has not advanced in over 12 months. This means that Chinese foreign nationals who have made an EB-5 investment and have an I-526 priority date after December 15, 2015, are not allowed to file their visa applications with the National Visa Center (NVC).

The above news indicates that the EB-5 investment industry is changing rapidly. If you are considering an EB-5 investment, schedule a free consultation to learn more about available opportunities. EB5AN is here to guide you through the EB5 investment process and help you enjoy the many benefits of relocating to the United States.

There’s hardly a person in the world who hasn’t been affected by the worldwide pandemic caused by the COVID-19 virus. With millions of deaths, small businesses decimated, and public life entirely shut down, the world has never seen anything like it. EB-5 investment stakeholders were among those affected—2020 was, in various ways, not a good year for the EB-5 Immigrant Investor Program.

U.S. Embassy and Consulate Shutdowns

The first way the pandemic affected EB-5 investors was through the mass shutdowns. In March 2020, United States Citizenship and Immigration Services (USCIS) closed all offices nationwide, canceling all visa appointments and only partially reopening in June 2020. Overseas, all U.S. embassies and consulates suspended routine visa services, staying open only for emergencies. This meant that EB5 investment participants could no longer schedule or attend visa interviews, even if they already had I-526 petition approval. Unable to complete this final step of securing an EB-5 visa, investors were left in limbo, with no way to claim the conditional permanent resident status they had earned through their EB-5 investment. Services were phased back in starting in August 2020, but decisions were left up to the individual consulates based on the situation in the respective country.

Immigration Bans

Immigration and travel bans around the world have been a key mark of the pandemic, with most countries restricting access to foreign nationals. The United States, under the Trump administration, was no exception: in April 2020, Trump announced a ban on most forms of employment-based immigration for 60 days, eventually extending it to run through the rest of 2020. EB-5 investment participants were initially exempt, much to the disappointment of certain U.S. senators, who wrote to Trump to ask the EB-5 program to be similarly banned, citing hyperbolic allegations of widespread fraud. EB5 investment stakeholders struck back, pointing out all the positive impacts the EB-5 program has had on the U.S. economy and development, all at no cost to the U.S. taxpayer.

When the Trump administration extended the immigration ban, they also tightened it to include more classes of immigrants—but to the relief of EB-5 participants, the EB-5 program was still exempt. Of course, in reality, it wasn’t that simple: investors still had to overcome the various travel restrictions in place in other countries. Some countries had exit bans on their citizens, and others refused to allow layovers, meaning that some investors who were technically permitted to enter the United States still couldn’t travel.

Economic Impacts

When talking about the EB-5 program, it’s important to remember that EB-5 investors aren’t the only stakeholders. EB-5 project developers are also key actors in the program, and in some cases, the devastating economic impact of the COVID-19 pandemic brought their projects to a screeching halt. The hospitality and tourism sectors were particularly decimated, and hospitality happens to be one of the biggest industries for EB-5 projects. The single largest industry is commercial real estate development, which was also badly affected. Not only did these impacts force many projects to suspend development, but they also hurt the ability of EB5 investment participants to create the 10 full-time jobs needed for EB-5 program requirements. The high rates of unemployment that quickly followed the initial shutdowns also altered which areas of the United States qualify as targeted employment areas (TEAs), affecting projects with investors who had yet to file their I-526 petitions.

USCIS Funding Shortages

Unsurprisingly, USCIS saw a steep drop in the number of immigration petitions received in the wake of the COVID-19 pandemic and lockdowns. USCIS largely funds its activities through the processing fees received with petitions, so when this cash supply was suddenly cut off, the agency suffered. USCIS announced massive furloughs in August 2020, although the immigration body was ultimately able to skirt the furlough by reducing spending and upping revenue. The shortfall was addressed in a funding bill for 2021, which approved hikes to premium processing fees to help the agency stay afloat. The bill also required USCIS to provide Congress with a five-year plan to address processing inefficiencies and improve processing times for all types of immigrants. Since premium processing is not available for EB5 investment stakeholders, the change had little impact on the EB-5 program, although the five-year plan will.

There is a great deal of uncertainty surrounding the current state of the EB-5 Immigrant Investor Program. June 2021 was a pivotal month in the history of the EB-5 program—on June 22, the U.S. District Court of the Northern District of California ruled to invalidate the EB-5 Final Rule. This measure had raised the minimum investment amounts to $900,000 for targeted employment area (TEA) projects and $1,800,000 for non-TEA projects. The court’s ruling caused the minimum investment amounts to return to their pre-November 2019 status of $500,000 for TEA projects and $1,000,000 for non-TEA projects. Of course, these lower amounts were a great incentive for individuals considering an EB-5 investment.

Just a few days later, on June 30, 2021, the regional center program was suspended because the Senate failed to pass the EB-5 Reform and Integrity Act of 2021, which would have reauthorized the program for three more years. As a result, United States Citizenship and Immigration Services (USCIS) has ceased to process all I-526 petitions associated with a regional center EB5 investment.

During this tumultuous period for the EB-5 program, USCIS published the processing statistics for January to March 2021 (FY2021 Q2). The number of processed I-526 and I-829 petitions remained remarkably low, which reflects the Immigrant Investor Program Office’s (IPO’s) reduced productivity levels. This trend is especially disappointing in light of the lower demand caused by the ongoing COVID-19 pandemic—in theory, USCIS adjudicators should have more time available to take care of incoming petitions. Still, the receipt statistics do show some improvement for Form I-829.

Possible Effects of the Regional Center Program’s Expiration

The processing data shows how urgent and critical it is for the regional center program to be reauthorized by the government. By the end of March, there were over 13,000 unprocessed I-526 petitions. The regional center program’s suspension has undoubtedly caused difficulties for thousands of investors (past data shows that the vast majority of EB-5 investments are made in regional centers).

The regional center program’s inactive status may be good news for direct EB-5 investors and I-829 applicants. Given that USCIS will no longer accept I-526 petitions associated with regional centers, more adjudicators should be available to work on direct EB-5 investment I-526 petitions and I-829 petitions. If this is the case, then the existing backlog of I-526 petitions could be processed in its entirety by the end of 2021. Of course, these are all conjectures—there is no way of knowing exactly when the reauthorization of the regional center program will take place.

On the bright side, the receipt data for Form I-829 is positive when compared to the statistics from the previous quarter: from January to March 2021, there was a total of 1,053 received I-829 petitions. This means that an increasing number of EB-5 investors are completing their conditional permanent residence period and applying for permanent residence. In contrast, only 98 I-526 petitions were received during this period.

As mentioned, the uncertainty surrounding the regional center program and the EB5 investment minimum amounts makes it difficult to predict what the trends for the following quarter will look like. Nonetheless, investors can be sure that the regional center program will likely be reauthorized in the near future.

More than 30 years have passed since the EB-5 Immigrant Investor Program was introduced in 1990, and a lot can change over three decades. The program spent its first two decades with little attention, issuing only a small portion of its annual 10,000 EB-5 investment visas. But after the 2008 financial crisis, popularity skyrocketed as projects turned to the EB-5 program to secure financing otherwise impossible to attain. Then, the situation reversed, and the EB-5 program faced more demand than it could handle, with lengthy backlogs forming for EB5 investment participants from high-demand countries like China and Vietnam.

Even as the EB-5 program careened through the 2010s in drastically different circumstances than its first two decades, the program regulations remained the same. EB-5 reform is needed—it’s been necessary for several years, and it’s still necessary in July 2021. But when Congress failed to pass comprehensive EB-5 legislation reform, the Department of Home Security (DHS) took matters into their own hands by releasing the Modernization Rule in November 2019. The new regulations transformed the EB-5 program in three main ways, generally to the displeasure of EB-5 investment participants and other stakeholders.

Priority Date Retention

Priority date retention is the only Modernization Rule change received positively by EB5 investment stakeholders. This change allows EB-5 investors to retain the priority date of their original I-526 petition when filing subsequent I-526 petitions, which may be necessary if, for example, the investor’s affiliated EB-5 regional center is terminated through no fault of their investor. Against the backdrop of ever-increasing backlogs, low productivity at United States Citizenship and Immigration Services (USCIS), and rampant regional center terminations, priority date retention can be invaluable indeed. According to DHS, this change generally received positive feedback.

Minimum Investment Amount Hike

Praise for the priority date retention change paled in comparison to the outrage directed at DHS’s 80% hike to the minimum EB5 investment amount. When the Modernization Rule regulations went into effect on November 19, 2019, the minimum investment amount for regular EB-5 projects leaped from $1 million to $1.8 million overnight. For targeted employment area (TEA) projects, the rate increased by the same percentage, climbing from $500,000 to $900,000. Suddenly, countless prospective investors were priced out of the market, and EB5 investments were nowhere near as attractive as they once had been.

DHS argued the hike was necessary to stay in line with inflation. When factoring in inflation, the $900,000 and $1.8 million amounts are roughly equivalent to the value of $500,000 and $1 million in 1990. The Modernization Rule also implemented measures to continually increase the minimum investment amounts in line with inflation in increments of five years, with the next scheduled increase in 2024.

Naturally, EB-5 investment stakeholders were upset about this new development—some prospective investors had to give up their dreams of U.S. permanent residency, some projects lost access to high-quality EB-5 funding, and some regional centers faced difficulties attracting investors under the higher investment amounts. However, since the regulation had been announced a few months in advance, the industry saw a surge in EB5 investments as applicants rushed to beat the November 19, 2019, deadline.

Tightened TEA Designations

The third and final major change the Modernization Rule introduced to the EB-5 program was restrictions on TEA designations. Traditionally, TEAs have been designated by the respective state, which resulted in uneven designation and different criteria nation-wide. These state-by-state discrepancies, coupled with instances of gerrymandering to designate affluent urban areas as TEAS, were cited as a key reason behind DHS’s decision to tighten DHS regulations and centralize the designation determination at USCIS.

As many as 43% new commercial enterprises (NCEs) with TEA designation were affected by the changes, according to DHS statistics, and not only because USCIS is stricter with designations than some states had been. The new regulation also made it more difficult to group census tracts together to create a TEA, as had been common practice previously. Under the Modernization Rule, an investor can only include census tracts directly adjacent to the one where the NCE is physically located, dramatically cutting down on the ability to create new tracts.

Opposition and Repeal

A few disgruntled EB-5 regional centers challenged the Modernization Rule in court, arguing it had been illegitimately enacted and asking the courts to repeal the regulations. Many EB5 investment stakeholders could empathize with the regional centers grievances but saw the lawsuit as an unnecessary distraction when faced with the dire issue of looming expiry for the EB-5 Regional Center Program. But to the industry’s surprise, the courts indeed overturned the Modernization Rule, reverting the EB-5 program back to its pre-November 2019 state.

For around a week, EB-5 investors rushed to submit their I-526 petitions at the lower $500,000 or $1 million amounts. With the shock ruling having been delivered so shortly before the regional center program expired, there was little time to take advantage of the presumably temporary lower EB-5 investment amounts. On June 30, 2021, the regional center program did indeed expire, and as of July 13, 2021, USCIS is no longer accepting I-526 petitions affiliated with regional centers, although direct investors may still file with the lower minimum investment amounts. The Modernization Rule will likely be reinstated, but the future of the EB-5 program is uncertain in these chaotic times.

The U.S. government’s administrative decisions regarding the EB-5 Immigrant Investor Program have occasionally resulted in sudden or unexpected changes to the program’s regulations. For example, the EB-5 industry was rocked by the news that the regional center program had expired on June 30, 2021. Under the program, foreign nationals were able to make EB-5 investments through economic units known as regional centers. EB-5 investment projects affiliated with regional centers enjoyed less strict job creation requirements—they were allowed to count direct, indirect, and induced employment. Therefore, foreign nationals who made a regional center EB-5 investment could create the 10 required jobs more easily than if they were only counting direct employment. Further, these investors only had to show United States Citizenship and Immigration Services (USCIS) that their EB-5 investment funds had been spent according to the regional center project’s business plan. Regional center projects consequently became the most popular way to make EB-5 investments.

However, this changed after the Senate failed to pass the EB-5 Reform and Integrity Act, a bill that would have reauthorized the regional center program through 2026. Senator Lindsey Graham blocked the request for a unanimous consent vote on the bill. The Senate went on summer recess, and the regional center program thus expired on June 30, 2021.

Despite this temporary setback, foreign nationals planning an EB-5 investment can rest assured that the EB-5 program is still up and running. Given the program’s many economic benefits, the U.S. government will likely continue to support EB-5 investments. Interested foreign nationals can still invest in EB-5 projects directly and apply for permanent resident status.

What Are Direct EB-5 Investments?

Direct EB-5 investments are made not through a regional center but directly in the EB-5 project in question. They differ from regional center investments in many other ways. For example, a foreign national who makes a direct EB5 investment is usually much more involved in the day-to-day operations of the business. Direct EB-5 investors gain significant control over their investment but have to spend significant time and resources overseeing the business. As a result, direct investors typically want to make sure that their EB-5 investment yields significant returns, and they are usually responsible for making sure that the project complies with all applicable laws. In contrast, many regional center investors are only interested in gaining permanent resident status through their EB-5 investment and are not heavily involved in business operations.

Perhaps the most important difference between direct and regional center investments is the way job creation is calculated. As mentioned previously, regional center projects can count direct, indirect, and induced jobs. On the other hand, non-regional center EB-5 projects can count only direct employment. Direct employment involves hiring employees on the EB-5 project’s payroll—these must be full-time jobs and last at least two years to be counted toward the requirement of 10 total jobs. For the most part, such jobs are either ongoing operational positions associated with the EB-5 project or construction jobs. In addition to these guidelines, USCIS sets out many other criteria for directly created jobs.

Moreover, foreign nationals who are looking for direct investment opportunities should note that non-regional center EB-5 projects are structured very differently from regional center projects. A major difference is that the new commercial enterprise (NCE) and the job-creating entity (JCE) must essentially be the same. The NCE is the business that receives the EB-5 investment, and the JCE is the project development entity in charge of creating the required jobs. Due to this requirement, the sources of funds, investment terms, and role investors play can be radically different for direct and regional center projects.

All of the above information indicates that making a direct EB5 investment requires careful planning and significant effort to ensure that the project complies with USCIS guidelines. It can be difficult for EB-5 investors to keep track of the plethora of regulations governing direct investments, so they would do well to hire experienced EB-5 consultants and a knowledgeable immigration attorney. The expertise these professionals provide will prove to be indispensable. Many EB-5 investors who did not work with EB-5 professionals or take the time to learn about USCIS regulations were unable to receive their coveted permanent resident status.

Historical Trends in Direct EB-5 Investments

The following graphic shows several intriguing trends in the history of direct EB-5 investments:

Even though regional center investments have usually been more common in recent years, direct investments have enjoyed several periods of popularity—until the 2008 economic crisis, it was more common for EB-5 investors to receive their visas through direct investments. 2015 was another positive year for direct investments because the regional center program’s looming expiration date motivated foreign residents to choose non-regional center projects, which have no expiration date.

Direct EB-5 investments will likely surge in popularity given the temporary suspension of the regional center program, and EB-5 investors will be able to take advantage of the reduced minimum investment amounts of $500,000 for targeted employment area (TEA) projects and $1,000,000 for non-TEA projects. As these investment amounts may be raised, foreign nationals interested in making an EB5 investment should act quickly. Book a free consultation with EB5AN to learn more about available projects.

When marketed to prospective foreign investors, the EB-5 Immigrant Investor Program is generally framed in terms of its benefits to foreign investors: for a one-time, largely passive EB-5 investment, a foreign national from any country can relocate to the United States and gain permanent residency for themselves and their immediate family members. But an EB5 investment doesn’t just benefit the investor—it’s also good for the U.S. economy and U.S. workers.

U.S. companies structure their projects for EB-5 investment funding, a cheaper alternative to most sources of funding. This extra funding gives them security as they develop their condominiums, hotels, restaurants, and other enterprises. New U.S. jobs are created for the construction workers to build these projects and for employees to staff them. In the case of a new hotel or restaurant, the business may have a positive economic impact on the wider community, driving more traffic to nearby businesses. In this way, the EB-5 program is a fantastic economic stimulant for in-need local U.S. economies, all at zero cost to the U.S. taxpayer.

Economic Impact of the EB-5 Program

Congress’s intention with the EB-5 program was, of course, the economic growth described above. In fact, one of the key requirements of the EB-5 investment program is that every investor must show that their investment has created at least 10 new jobs for U.S. workers. But data on the precise economic impact of this valuable program is scarce. A government study conducted in 2012 and 2013 found $5.8 billion in EB5 investment capital raised by more than 11,000 individual investors, creating an estimated 174,039 jobs for U.S. workers. A later study conducted by EB-5 stakeholder groups showed the flow of roughly $11 billion through the EB-5 program in FY2019, resulting in approximately 355,200 new jobs. Two-thirds of EB-5 investment capital has been poured into construction—real estate projects are particularly popular within the space. Hotels, restaurants, and health care facilities are other fairly common EB-5 industries.

Where the economic impact of EB5 investment strays from Congress’s original aim is in the location of investment. Most EB-5 investment capital has gone to affluent urban districts, with a liberal interpretation of targeted employment areas (TEAs) allowing these regions to qualify for the lower TEA investment amount. In November 2019, the Modernization Rule restricted the previously broad definition of a TEA, reducing the number of projects that qualified for this special status and raising the overall EB5 investment amount by 80% to account for inflation over the program’s first 30 years. In June 2021, the Modernization Rule was challenged and overturned in court, causing the TEA rules to revert back to their broader, pre-Modernization Rule state. As of July 8, 2021, the future of TEA regulations is uncertain.

Who’s Investing in the EB-5 Program?

The EB-5 program is popular for investors around the world—but that wasn’t always the case. For its first decade of existence, the EB-5 program was severely underused, with hardly any foreign nationals making an EB-5 investment. As more people caught wind of the program and it began to be marketed in China, it started to pick up—FY2005 saw 346 EB-5 visas issued, up from only 64 in FY2003. By FY2009, that figure had increased to more than 3000. The key turning point for the EB-5 program was 2008, when the financial crisis prompted project developers to turn to EB-5 for financing they couldn’t get elsewhere.

China has long dominated the EB-5 program, accounting for as many as 85% of all issued EB-5 visas in FY2014. In FY2019, this figure dropped to 47%, but China remains the largest EB-5 country by a large margin. Other key EB-5 countries include India, Vietnam, South Korea, Taiwan, and Brazil, but none have come close to China’s volumes. That’s not necessarily a bad thing—China’s thirst for EB5 investment has created a lengthy backlog for investors from the country. The backlog first surfaced in 2014, and still, in July 2021, thousands of Chinese investors face major delays because of their nationality. Vietnam has also faced a backlog since 2018, but it’s expected to clear up by September 2021.

The backlogs are a result of the country-cap system of United States Citizenship and Immigration Services (USCIS). No one country is permitted to receive more than 7% of EB-5 visas per fiscal year, although they may claim leftover visas if there are no eligible investors from non-backlogged countries. Since this system doesn’t consider the differences in population size and EB-5 demand among countries, certain nations are more susceptible to developing a backlog in the EB5 investment program than others. The fact that spouses and children of EB-5 investors are granted visas from the EB-5 visa pool rather than extra, derivative visas also clogs up the system, since each EB-5 investor, on average, has two dependents also claiming visas.

The EB-5 Immigrant Investor Program is widely viewed as an asset to the U.S. economy. Since 1990, the EB-5 program has allowed foreign nationals to apply for permanent resident status after investing the required amount of capital in a qualifying U.S. business. Since every EB5 investment must create the required number of jobs, the program helps reduce unemployment and provides U.S. businesses with invaluable support. Additionally, successful and high-net-worth foreign nationals are able to relocate to the United States through the EB-5 program and further benefit the country with their expertise.

Despite the EB-5 program’s positive impact, it has occasionally experienced turbulent periods due to the government’s administrative decisions. For instance, on June 22, 2021, a U.S. district court ruled that the EB-5 Modernization Final Rule must be deauthorized. The Final Rule, which had come into effect on November 21, 2019, raised the minimum required EB-5 investment amounts to $900,000 for targeted employment area (TEA) projects and $1,800,000 for non-TEA projects. After the June 22 decision, however, these amounts were restored to $500,000 for TEA projects and $1,000,000 for non-TEA projects. These lower minimum amounts were certainly good news for foreign nationals considering an EB-5 investment—many more potential investors would now be motivated to participate in the EB-5 program. However, United States Citizenship and Immigration Services (USCIS), which governs the EB-5 program, did not immediately react to the court’s decision. USCIS’s silence on the matter may have caused some uncertainty among investors wanting to take advantage of the newly lowered EB5 investment amounts. How would USCIS react to the Final Rule’s deauthorization?

USCIS finally broke its silence on July 7, 2021, and released a statement on its website regarding the court decision. The statement says the following:

“On June 22, 2021, the U.S. District Court for the Northern District of California, in Behring Regional Center LLC v. Wolf, 20-cv-09263-JSC, vacated the EB-5 Immigrant Investor Program Modernization Final Rule (PDF). While USCIS considers this decision, we will apply the EB-5 regulations that were in effect before the rule was finalized on Nov. 21, 2019, including:

• No priority date retention based on an approved Form I-526;
• The required standard minimum investment amount of $1 million and the minimum investment amount for investment in a Targeted Employment Area (TEA) of $500,000;
• Permitting state designations of high unemployment TEAs; and
• Prior USCIS procedures for the removal of conditions on permanent residence.

In other words, we are applying the regulations in effect before Nov. 21, 2019, on this website and in the USCIS Policy Manual, Volume 6, Part G, Investors. In addition, we again will accept the April 15, 2019, version of Form I-526, Immigrant Petition by Alien Entrepreneur, because the Nov. 21, 2019, version of the form reflects updates from the now-vacated rule.”

Evidently, USCIS has accepted the overturning of the EB-5 Final Rule. This statement confirms that USCIS will apply the lower investment amounts and the other pre-November 2019 regulations. Foreign nationals interested in making an EB-5 investment can now rest assured that USCIS is complying with the court ruling and that the reduced investment amounts have indeed come into effect.

However, potential EB-5 investors must act quickly to take advantage of this opportunity. USCIS or the Department of Homeland Security (DHS) may take administrative or legal action to overturn the court ruling and reinstate the higher EB-5 investment amounts. Schedule a free consultation with EB5AN to discover available EB-5 investment opportunities.