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The TEA Designation Process Following the June 2021 Repeal of the Modernization Rule

The now-defunct EB-5 Modernization Rule made several controversial changes to the EB-5 investment industry on November 21, 2019. The prevailing view among EB-5 stakeholders was that the Modernization Rule was ultimately detrimental to their interests. Much to their relief, the Modernization Rule was invalidated on June 22, 2021—a district court found that the rule had been implemented improperly by the Department of Homeland Security (DHS). As a result, all the changes made by the Modernization Rule were reversed.

Perhaps the most notable results of the district court’s ruling were the reduced investment requirements and the changes in the TEA designation process. The minimum EB5 investment amounts were lowered to $500,000 for targeted employment area (TEA) projects and $1,000,000 for non-TEA projects (the Modernization Rule had increased these amounts to $900,000 and $1,800,000). Since investments in TEAs can now be made at only $500,000, interested foreign nationals should become familiar with the TEA designation process.

Changes to TEA Regulations as of June 22, 2021

A TEA is either a rural or a high-unemployment area that needs EB-5 investment capital to expand its local economy and generate jobs. Rural TEAs cannot be located within a metropolitan statistical area (MSA) or on the outskirts of a city or town with a population of 20,000 or more. On the other hand, high-unemployment TEAs must have an unemployment rate that is at least 150% greater than the United States’ national average.

Census tracts, small statistical areas whose boundaries are set by the Census Bureau, can be combined to form a TEA. Since census tracts are relatively permanent, they make it easy to compare historical statistics. The Census Bureau delineates the borders of each census tract based on its population, which usually ranges from 1,200 to 8,000. EB-5 investors can examine the average unemployment rate of a group of census tracts to determine whether they constitute a high-unemployment TEA.

The TEA designation process and the rules governing census tract combination changed significantly following the deauthorization of the Modernization Rule.

How TEAs Are Designated

As of June 22, 2021, state labor departments are in charge of designating TEAs (under the Modernization Rule, the DHS held this responsibility). To obtain proof that their project is located in a TEA, EB-5 investors must request a TEA designation letter from the state labor department in question. Later, they should include the letter when they send Form I-526 to United States Citizenship and Immigration Services (USCIS).

State Regulations on Census Tract Combination

Before the overturning of the Modernization Rule, the census tract in which an EB-5 project was located could be combined only with directly adjacent census tracts (tracts whose borders touched those of the EB-5 project’s tract). The current regulations are much less restrictive—an EB-5 project’s census tract can now be combined with contiguous as well as directly adjacent tracts.

However, states have varying restrictions on how many census tracts can be combined to form a TEA. Many states, including New Jersey and Florida, do not impose a limit on the number of census tracts that can be used. New York and Illinois are among the states that have moderate restrictions on census tract combination. Specifically, Illinois requests that applicants combine only the minimum number of tracts needed to fulfill the TEA criteria.

Several states have more stringent restrictions—California, for instance, dictates that only 12 contiguous census tracts can be used to create a TEA. Other states that are strict regarding census tract combination include Kentucky, North Carolina, and Texas. The TEA designation process is particularly complex in Texas because local or county governments are responsible for evaluating potential TEAs. These smaller governments may be unfamiliar with TEAs and the EB5 investment industry in general.

Determining Whether a Project Site Qualifies as a TEA

To determine whether a project is located in a TEA, you have to find out whether the project location can be considered a rural or a high-unemployment area. Therefore, you need to research the geographic area and the population and/or employment levels. The easiest solution is to check the EB5AN free national TEA map, but you can also do the research yourself.

How to Find Geographic Information about a Project Site

To find information such as whether the area falls within an MSA and the census tract number of the project site, start with a Wikipedia search to learn more about the city or town. The entry should indicate the county and MSA, if any, and a rough estimate of the population.

To find the census tract number, enter the project’s address in the FFIEC Geocoding/Mapping System on the Federal Financial Institutions Examination Council website. Here you can also find the census tract numbers of directly adjacent tracts and confirm whether the project location falls within an MSA.

How to Find Population and/or Employment Data about a Project Site

Finding the relevant population and/or employment data to support your request for TEA designation can be difficult. In its Policy Manual, USCIS notes that “acceptable data sources for purposes of calculating unemployment included U.S. Census Bureau data (including data from the American Community Survey) and data from the Bureau of Labor Statistics (including data from the Local Area Unemployment Statistics)” when referring to data sources states used during the TEA designation process. While USCIS points out these potential data sources, it does not automatically approve any specific data set.

When gathering data to support a request for TEA designation, the focus should be on using reliable and verifiable data that is internally consistent and that will remain valid for the desired period. The onus is on the applicant to demonstrate that the area falls within a TEA. While the information publicly available from government departments and agencies is reliable and verifiable, it is seldom internally consistent.

Internal consistency refers not only to the source of the data but also to the period the data covers. For example, if you use American Community Survey (ACS) data to determine the unemployment rate in the project area, you must use ACS data to determine the national unemployment rate. Similarly, if you use the annual national unemployment rate, you cannot compare it to the monthly unemployment rate for the project area. It is also generally better to use annual rates, as this allows you to base the designation request on underlying data with a longer validity period.

Navigating Publicly Available Employment Data

The calculations used to determine whether a project qualifies as a TEA are complicated, and the information is not presented in a user-friendly format. Additionally, it is difficult to find data sets that are reliable, verifiable, and internally consistent. To save time and ensure accurate results, it’s generally best to work with an EB-5 consultant.

If you want to try to find the data yourself, or if you’re simply curious about the data available, start by reviewing the U.S. Census Bureau’s Guidance for Labor Force Statistics Data Users. The U.S. Census Bureau developed this page to “explain which data sources to use and how to make comparisons.”

You can use the following data sources for the data component of a TEA designation request:

  1. Bureau of Labor Statistics (BLS) annual unemployment data, which is published at the national, MSA, and county levels. The BLS also publishes monthly data, but this is not particularly useful in the EB-5 context, as you would have to update the information each month as the underlying data changes. The main site contains several useful pages.
  2. ACS data published by the U.S. Census Bureau, which bridges gaps in the BLS data, with the latest five-year data published in December 2020. The BLS data doesn’t include information at the census tract level or for cities and towns outside MSAs. To combine ACS and BLS data, practitioners use the census-share methodology.
  3. State Labor Market Information programs provide reliable and verifiable unemployment data, but you must remember to consider internal validity if you use this information. Make sure the underlying data sets are the same when comparing the unemployment rate in the potential TEA to the national unemployment rate.

How to Calculate Unemployment Rates for TEA Designation

You can calculate the required unemployment rates using ACS five-year data only or the census-share methodology.

ACS five-year data includes unemployment data by census tract. The latest data set, which covers 2015 to 2019, was released in December 2020, and it sets the unemployment rate at 5.32%. Thus, for an area to qualify as a high unemployment TEA, it would have to have an unemployment rate of 7.98% or higher (at least 150% of 5.32%).

Alternatively, you can use the census-share method, which combines ACS five-year data with BLS one-year data. This method yields more current results because BLS data is updated annually for a single year. The national unemployment rate for 2019 published by BLS was 3.66%, so the corresponding unemployment rate threshold for TEA qualification using the census-share methodology would be 5.49% or higher (at least 150% of 3.66%).

When using the census-share method, we calculate a single census tract’s (or contiguous census tracts’) share of a larger geographic area’s employment and unemployment. The annual average unemployment rates the BLS publishes in its Local Area Unemployment Statistics focus on larger geographic areas, but TEA designation involves smaller areas—typically census tracts. Consequently, we must supplement the BLS data to estimate unemployment rates for census tracts.

The census-share methodology requires two data elements: (i) the most recent BLS annual average unemployment data for the larger area in which the target site is situated and (ii) unemployment data for the smaller target area. While census data was initially used for these calculations, in May 2013 USCIS began to accept ACS data.

Finally, when combining census tracts, you have to calculate the weighted average unemployment rate for the group of tracts. Base the calculation on civilian labor force data, not on total labor force data. You’ll need data on the labor force and the number of unemployed people in each census tract.

  • To calculate the weighted unemployment rate for the TEA, add together the number of unemployed people in each tract.
  • Next, add the civilian labor force number of each census tract to calculate the civilian labor force for the TEA.
  • Divide the total number of unemployed people by the civilian labor force.
  • Multiply the result by 100 to find the unemployment rate. You can compare this value to the national unemployment rate.

When it comes to these calculations, the simplest option is to consult the EB5AN TEA map; it offers an interactive, fully automated national map, which provides instant results for any U.S. address using all four of the USCIS-approved calculation methodologies for TEA qualification: (i) ACS five-year data methodology; (ii) census-share methodology; (iii) county-level BLS methodology; and (iv) rural methodology. The map also offers the option to automatically generate a TEA qualification report delivered via email.

Examples of Unemployment Rate Calculations

The following two examples show unemployment rates calculated using ACS five-year data, and the census share method for 333 1st St. S, St. Petersburg, Pinellas County, FL 33701.

In some cases, a target site can qualify as a high-unemployment TEA under only one of the USCIS-accepted TEA calculation methodologies, but fail to qualify under others. A target site needs to qualify under only one methodology to qualify as a TEA.

The target site is located in census tract 286 of Pinellas County, FL; we have included five adjacent tracts (205, 212, 216, 215, and 287) in the calculation. The table below contains the relevant 2015–2019 ACS five-year data for the census tracts.

1. TEA qualification calculation using the ACS five-year data methodology

Tract 286, where the target site is located, has an unemployment rate of 5.91%, but based on the ACS five-year calculation methodology, the combined area has a weighted unemployment rate of 10.16%. The corresponding unemployment rate threshold for TEA qualification using the ACS five-year data methodology is 7.98%. Thus, based on this calculation method, the target site qualifies as a high unemployment TEA using the ACS five-year methodology.

The weighted average is calculated as follows:

909 (total unemployed people) ÷ 8,943 (civilian labor force) x 100 = 10.16%

2. TEA qualification calculation using census-share methodology

To obtain the percentage share of Pinellas County employed and unemployed populations for the census tracts in our example, we divide the total number of employed people in the census tracts by the number of employed people in the county and multiply the result by 100. We do the same for the unemployed population.

The census and county data in the table below was drawn from the 2014–2018 ACS five-year data.

 Civilian Labor forceEmployedUnemployedUnemployment rate
Census Tracts (286, 205, 212, 287)5,7185,08463411.09%
Pinellas County, FL472,955446,12026,8355.67%
Census Tract Share 1.14%2.36% 

To calculate the census-share unemployment estimate for the census tracts that constitute our target TEA, we apply the shares calculated in the previous step to the 2019 BLS unemployment data, derived from the Labor Force Data by County, 2019 Annual Averages table. For the census-share methodology, we use the 2014–2018 ACS five-year data since this is the correct corresponding data set for the 2019 BLS unemployment data.

 Civilian Labor forceEmployedUnemployedUnemployment rate
Pinellas County, FL494,185479,47214,7132.98%
Census Tract Share 1.14%2.36%
Disaggregated Census Tract Data5,8125,464348

Based on the census-share method, the tracts that form our target TEA have a combined average unemployment rate of 5.99%. The corresponding unemployment rate threshold for TEA qualification using the census-share methodology is 5.49%. Thus, using the census-share methodology, this project location does qualify as a high unemployment TEA using the census-share methodology.

How Should You Formulate Your TEA Designation Request?

Present a letter requesting TEA designation to the state agency responsible for TEA designation at the project site, and include a TEA report to show why you believe the area qualifies as a TEA. The TEA analysis report should include the following information:

  • A definition of the geographic area and its suitability for classification as a TEA, with specific reference to the relevant EB-5 policies or regulations
  • The sources of the population and employment data used
  • An explanation of the methodology used and the steps followed in all calculations
  • A justification of why the TEA analysis is reasonable

This information will make it easy for the state agency to see the basis of your argument and the factors you consider in requesting TEA designation.

EB5AN’s free national TEA map allows users to download TEA qualification reports for any project address in the United States. Reports are automatically generated, and EB5AN strongly advises that all EB-5 related documentation be reviewed by an immigration expert before inclusion in any documentation package, petition, or filing.

The TEA determination must be valid when the EB-5 investor makes his or her investment or when the investor files the I-526, whichever comes first. The underlying data must remain valid for the period required, so it’s generally better to use annual data.

Who Should Apply for TEA Designation?

The short answer is that every I-526 petition should be accompanied by a TEA designation letter that demonstrates to the USCIS that the project site in question does qualify as a TEA at the time of filing the I-526 petition.

To navigate the complex TEA designation process, work with EB5 Affiliate Network. Learn more about our EB-5 Project TEA Qualification Report service, which includes a TEA Qualification and Analysis Report and Census Tract Map based on the latest data available.

If Your Project Qualifies as a TEA, the Next Step is to Order a Report

Our TEA Report provides USCIS with a detailed, easy to follow analysis of the census tract assembly methodology and calculation needed to meet the USCIS unemployment EB-5 TEA requirements.