When the COVID-19 pandemic swept across the globe in early 2020, it disrupted the lives of nearly everyone on the planet. With mass lockdowns and public life shutting down in most countries, the pandemic has shattered economies, destroyed livelihoods, and ripped families apart, as well as led to thousands of deaths. For investors in the EB-5 Immigrant Investor Program, the temporary suspension of routine visa processes at U.S. embassies and consulates has delayed their journey toward a U.S. green card, representing an obstacle to their plans of a life of freedom in the United States.
However, the pandemic’s impact on the EB-5 program is not all bad. EB-5 investors stand to benefit in a few ways from the impacts of the pandemic and the responses to it.
Possibility of Extra EB-5 Visas in FY2021
The EB-5 program isn’t the only area of immigration that’s been severely affected by the COVID-19 pandemic. Notably, family immigration visas have also experienced a major slowdown, with thousands of family-based visas unlikely to be issued before FY2020 ends on September 30, 2020. This matters to EB-5 investors because any unused family-based visas are carried over to employment-based immigration programs in the next fiscal year, meaning the unused family visas translate into thousands of extra EB visas in FY2021. EB-5 investors are entitled to 7.1% of EB visas, which could result in a substantial boost in EB-5 visas in FY2021.
Each year, any unused EB-5 visas are carried over to the EB-1 program in the following year, and United States Citizenship and Immigration Services (USCIS) may be left with thousands of unissued EB-5 visas at the end of FY2020. However, the gain from the family-based visas is expected to be considerably larger, offsetting any losses the EB-5 program experiences in FY2020. Each month, 40,000 family-based visas are available, so for each month no family-based visas are granted, the EB-5 program gains another 2,840 visas. Considering that families, just like EB-5 investors, have been unable to receive visas for months due to the closures of U.S. embassies and consulates, EB-5 participants can expect the largest visa boost in the program’s history.
More Leftover Visas for Backlogged Countries
Chinese EB-5 investors have long borne the brunt of EB-5 backlogs. With only three countries—China, India, and Vietnam—ever experiencing backlogs in the program’s history, China outshines the rest by a long shot, with Chinese EB-5 investors regularly waiting as long as five years for I-526 adjudication. While the Indian EB-5 final action date advanced by leaps and bounds in early 2020 and became current in July 2020, signaling the end of the Indian backlog, Chinese investors still suffer through extremely long wait times.
Adding to the hardships for Chinese EB-5 investors in 2020 is addition of Hong Kong investors to the Mainland backlog, following an executive order signed in July 2020 in response to a controversial security law introduced to the autonomous zone by Beijing authorities. With Hong Kong no longer receiving special treatment for U.S. immigration purposes, Hong Kong EB-5 investors are now treated as Chinese applicants, increasing the wait times for investors from both regions.
The good news is the lower number of EB-5 visa petitions in 2020, which increases the number of EB-5 visas left over for Chinese EB-5 investors. Each country is only entitled to approximately 700 EB-5 visas per year, but any leftover visas are granted to investors from backlogged countries, generally China. The Chinese EB-5 investors who have been waiting the longest for their U.S. green cards may benefit from this phenomenon in 2020.
Lower Risk of Redeployment of EB-5 Capital
One of the key requirements of the EB-5 program is that the invested capital must remain “at risk” throughout the duration of the investment period, which means it must incur both the opportunity for gain and the risk of loss at all times. Any EB-5 investor’s capital will be “at risk” for at least two years, the duration of their conditional permanent resident status. However, depending on when the funds are released from an escrow account to the new commercial enterprise (NCE), an investor’s EB-5 capital may actually need to be invested for four or five years.
The problem with such long investment periods is that they often exceed the time necessary to pay back the EB-5 capital. When an EB-5 project is completed and sold or refinanced, the EB-5 capital must either be paid back to the investors or redeployed in other projects, but investors who have not yet filed their I-829 petition to remove the conditions from their permanent resident status must maintain the “at risk” status of their EB-5 capital. Thus, they have no choice but to redeploy the capital in other projects, without ample time to scrutinize or analyze the new projects, putting them at financial risk.
Under these circumstances, the difficult operating and construction environment brought on by the pandemic is a good thing. Many projects have had to halt construction or operations for months, but the clock for EB-5 investors keeps ticking. This means EB-5 investors have incurred a lower redeployment risk throughout the pandemic, potentially saving them from rash, risky investments they would have otherwise had to make.
The Immigration Ban Benefits EB-5 Investors
On April 22, 2020, President Trump signed into law a proclamation temporarily banning most forms of immigration for 60 days. EB-5 investors were exempt. A handful of senators who saw the ban as too lenient penned an open letter to the president requesting that the ban be extended to EB-5 investors, citing common misconceptions about the program, such as rampant fraud.
Fraud does occur in the EB-5 program, but it is rare, and the program’s benefits to the U.S. economy and U.S. workers far outweigh the risks. Fortunately, Trump seemed to agree, because when the ban was extended, effective June 24, 2020, until the end of the year, it was expanded to include new classes of employment-based immigrants, but EB-5 investors remained exempt.
The immigration ban is good for EB-5 investors. As of August 2020, U.S. embassies and consulates have begun a phased resumption of visa services, and although each office differs depending on local circumstance, this means many EB-5 investors are now or will soon be eligible for visa interviews to receive their U.S. green cards. With most immigration pathways temporarily suspended, EB-5 investors are likely to experience shorter wait times and may receive their visas faster than in normal times.