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Direct Investment Becomes Central to the EB-5 Industry

Direct Investment Becomes Central to the EB-5 Industry

Until June 2021, foreign nationals who wanted to participate in the EB-5 Immigrant Investor Program had two investment options: direct investment and investment through the regional center program. Although both investment models have their own advantages, regional center-sponsored projects were more popular mainly because they offered flexible job creation criteria.

Creating at least 10 full-time jobs is one of the essential criteria that investors need to satisfy to be eligible for an EB-5 investment visa. When a foreign national makes a direct EB-5 investment, they must ensure that these 10 jobs are created directly; at least 10 people must be employed on the EB-5 project’s payroll. However, for investments made through the regional center program, indirect and induced positions (a result of the project’s economic impact) also count. Due to this provision, regional center investors found it easier to fulfill the job creation criteria.

While the regional center program enjoyed more popularity, direct EB-5 investment also has some unique benefits. When a foreign national invests in a direct EB-5 project, they are usually involved in managing the organization’s daily operations. Thus, they receive more control over how the funds are used. Direct EB-5 projects are usually smaller and have fewer investors. This means that direct investors often earn more significant returns than their regional center counterparts.

In 2021, three major developments have changed the way foreign nationals can participate in the EB-5 industry, making direct investment projects more popular than ever.

The Suspension of Regional Center Investment

Direct investment is an integral part of the EB-5 program, meaning that it does not require reauthorization by the government. The regional center program, on the other hand, needs to be reauthorized by Congress periodically.

In 2021, Congress did not reauthorize the regional center program before its expiration on June 30, leaving direct EB-5 investment as the only route to an EB-5 visa. As of December 2021, the program has not yet been reauthorized.

The Invalidation of the EB-5 Modernization Rule

On June 22, 2021, a court order invalidated the EB-5 Modernization Rule, reducing the minimum EB-5 investment requirement to only $500,000 for projects located in targeted employment areas (TEAs). As the regional center program has not been in effect since June 2021, only direct investors can take advantage of this reduced minimum investment threshold.

Many experts believe that the minimum amount will be raised once again. United States Citizenship and Immigration Services (USCIS) has already filed an appeal to this effect. It is recommended that investors should start the process as soon as possible to take advantage of the lowered minimum threshold of $500,000.

“Current” Status for all Direct Investors

Due to the popularity of the EB5 investment program amongst investors from certain nationalities, including Vietnam, India, and China, USCIS has set cutoff dates for applicants from oversubscribed countries. Thus, investors from certain countries can only apply for and receive their visas within the specified cutoff dates. Investors from China, for example, have been facing restrictions since 2015 due to the high volume of EB-5 visa petitions from that country.

However, as of December 2021, anyone investing in a direct EB-5 project enjoys “Current” status, irrespective of their nationality. This means that all direct investors can apply for and receive their visas once their I-526 petitions have been approved by USCIS. Investors must remember that if the regional center program gets reauthorization from Congress, cutoff dates will again be applicable for regional center investors.

Investing in Direct EB-5 Projects

Due to these recent changes, the current situation is highly favorable for foreign nationals investing in direct EB-5 projects. Prospective EB-5 investors interested in taking advantage of the current situation should consult an immigration attorney and start the process before any further changes take place.