In light of the EB-5 regional center program’s expiration on June 30, 2021, many EB-5 investors and industry stakeholders are concerned about the EB-5 investment program’s future. However, despite the cause for concern, most industry representatives remain convinced that the regional center program will be reauthorized shortly. Many are pointing to direct investments as a viable option in the interim.
Will the EB-5 Investment Program Be Reauthorized?
Senators Grassley (R-IA) and Leahy (D-VT) have led the push for the reauthorization of the EB-5 regional center program. Their bill, called the EB-5 Reform and Integrity Act of 2021, would have authorized the program through 2023. However, when the senators pushed for a unanimous consent vote, Senator Lindsey Graham (R-SC) blocked the effort. With the Senate on its summer recess, the EB-5 regional center program expired on June 30, 2021.
Despite the program’s expiration, EB-5 industry stakeholders remain confident because the program is unlikely to end permanently. The regional center program has poured billions in foreign capital into the U.S. economy, and many senators’ constituents will not want the program to disappear.
The EB-5 regional center program could potentially be reauthorized as part of a spending bill in Fall 2021. The longer timeframe would give senators and lobbying groups more time to negotiate. Although it may be disappointing for EB-5 industry stakeholders to hear that the program will not be reauthorized immediately, they can be sure that these efforts would secure the long-term authorization of the EB-5 regional center program.
What Happens Once the Program Expires?
Those who have already made an EB-5 investment may find it unsettling to hear that the program is about to expire. However, the recent history of the program’s previous expiration periods shows that there is nothing to fear.
In December 2018, the federal government failed to pass the omnibus spending package to which the EB-5 regional center program was attached. This led to a federal government shutdown and the de facto expiration of the EB-5 regional center program.
Following the regional center program’s expiration, the Department of Homeland Security (DHS) released the following statement.
“The EB-5 Immigrant Investor Regional Center Program expired at the end of the day on Dec. 21, 2018, due to a lapse in congressional authorization to continue the program. All regional center applications and individual petitions are affected. . . We will continue to receive regional center-affiliated Forms I-526, Immigrant Petition by Alien Entrepreneur, and Forms I-485, Application to Register Permanent Residence or Adjust Status, after the close of business on Dec. 22, 2018. As of Dec. 22, 2018, we will put unadjudicated regional center-affiliated Forms I-526 and I-485 (whether filed before or after the expiration date) on hold for an undetermined length of time…. USCIS will provide further guidance to the public if legislation is enacted to reauthorize, extend, or amend the regional center program.”
Even though DHS announced that it would put any incoming I-526 applications on hold, it was implied that these applications would be processed once the program was reauthorized. It seems that DHS will handle pending petitions after June 30, 2021 in a similar manner. Any pending petitions will presumably be put on hold until the program is reauthorized. Once the program is reauthorized, United States Citizenship and Immigration Services (USCIS) will likely resume processing applications.
What Does This Mean for Investors Who Invested at $500K?
On June 22, 2021, just a few days before the regional center program expired, the U.S. District Court for the Northern District of California ruled that former acting DHS Secretary Kevin McAleenan did not have the authority to institute the EB-5 Modernization Final Rule. The new regulations set forth by the Modernization Rule, including the raising of the minimum investment amount for TEA projects from $500,000 to $900,000, were also invalidated by the court ruling.
This court ruling meant that EB-5 regional center investors could make their investments under the pre-November 2019 guidelines during a short period. Under these guidelines, the minimum investment amount was $500,000 for TEA projects and $1,000,000 for non-TEA projects.
While DHS has released no specific information regarding how these investors will be treated until the program is reauthorized, most EB-5 industry representatives believe that these investors will be classified along with those who had invested at the $900,000 minimum amount for TEA projects.
What Does This Mean for Direct Investments?
Even though the vast majority of EB-5 investors choose to make their EB-5 investments through regional centers, there is another way to make EB-5 investments: EB-5 investors can participate in the EB-5 program by investing directly in their projects. Although direct investments have been fairly uncommon, several EB-5 industry representatives have suggested that they will become more widespread until the EB-5 regional center program is reauthorized.