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Consequences of the Expiration of the EB-5 Regional Center Program

Consequences of the Expiration of the EB-5 Regional Center Program

Foreign nationals who dream of relocating to the United States, U.S. business owners, immigration attorneys, and many other individuals have benefitted from the remarkable success of the EB-5 industry, especially since the 2008 financial crisis made more apparent the need for a reliable source of funding. Indeed, since EB-5 capital is frequently available at below-market rates, it has helped thousands of businesses and real estate development projects succeed. What is more, United States Citizenship and Immigration Services (USCIS) requires every EB-5 investor to create at least 10 jobs through their capital. This criterion is one of the cornerstones of the EB-5 investment industry, and it has resulted in reduced unemployment in many areas across the country.

The EB-5 process is also characterized for being relatively straightforward, and USCIS is transparent when adjudicating EB-5 visa applications. Investors who are careful to comply with the applicable regulations can be confident that they will receive USCIS approval, and thousands of foreign nationals are now enjoying U.S. permanent residency, and even citizenship.

However, the second half of 2021 and the start of 2022 has been a watershed period for the EB-5 program. For more than seven months, the regional center EB5 investment model, once the most popular investment type, has been defunct. What have been the consequences of this prolonged lapse?

Economic Funding Put on Hold

According to a report by Invest in the USA (IIUSA), a trade association for the EB-5 industry, the expiration of the regional center program has put approximately $15 billion in investment funding at risk. This is surely an unconscionable amount of capital to go to waste only because Congress failed to reach an agreement on EB-5 reform. U.S. businesses may need EB-5 funding more than ever due to the volatile economic environment caused by COVID-19.

At the same time, USCIS is no longer processing I-526 visa petitions from regional center investors. If these investors try to get their capital back from their regional center projects, all of the valuable funding may be lost. It is important to note that there is no guarantee that the regional center program will be reauthorized, even though that scenario seems increasingly possible. In addition, USCIS could choose to deny all pending I-526 petitions from regional centers, but the agency is unlikely to take such a drastic measure.

Job Creation Is At Risk

IIUSA estimates that about 487,000 jobs that would be created by regional center investors are now at risk. It is also worth noting that regional center-sponsored projects are allowed to count standard W-2 positions as well as indirect and induced employment. These last two types of jobs are a result of the EB-5 funding’s positive economic impact on the community, so entire areas may lose out on economic development and job creation.

An Unfair Situation for investors

The thousands of foreign nationals who have invested in regional center projects but now find that USCIS has placed them in processing limbo may understandably feel frustrated. In many cases, the EB-5 investment may have represented the entirety of a family’s life savings; investors who complied with USCIS regulations should be allowed to proceed with the EB-5 process. To this end, the U.S. government should enact a provision for regional center investors, enabling them to have their I-526 petitions adjudicated even if the program is still lapsed. Of course, a complete, long-term reauthorization of the regional center program would be the optimal solution, but a grandfathering clause may be even more urgent.

It is clear that Congress should address the lapse of the EB-5 Regional Center Program as quickly as possible. Foreign investors and U.S. businesses should not be deprived of their respective rights to a visa and to investment funding.