Even as the world descends further into COVID-induced chaos in 2021, potential for large-scale positive reform swirls about the EB-5 industry. A month and a half into the year, EB-5 investment stakeholders have witnessed freshly inaugurated President Biden’s pledge to overhaul the U.S. immigration system by clearing up backlogs, shortening processing times, and removing country-based allocation limitations. The EB-5 Immigrant Investor Program could also see a dedicated reform with the EB-5 Reform and Integrity Act proposed by long-time EB-5 allies Chuck Grassley (R-IA) and Patrick Leahy (D-VT).
The looming sunset date of the EB-5 Regional Center Program, set at June 30, 2021, provides an urgent impetus to implement the act. Without it, industry leaders fear the EB-5 program’s overwhelmingly popular regional center program, which has contributed billions to the U.S. economy, could be terminated, with Congress judging it too problem-ridden. But even if the possible termination of the regional center program were not a concern, the EB-5 Reform and Integrity Act would still bring highly welcomed change that EB5 investment stakeholders have long sought after.
Long-Term Regional Center Program Reauthorization
One benefit of the act is that it would introduce some much-needed stability into the EB-5 program. As it stands in February 2021, the regional center program is only temporary, necessitating constant reauthorization by Congress. The program’s previous coupling with broader government funding bills effectively protected it from termination, but its divorce from the group bill in the reauthorization in December 2020 now leaves it to fend for reauthorization on its own. The proposed EB-5 reform would address the issue of regional center authorization, securing authorization for a five-year period.
Strengthened Protections for EB-5 Investors
Regional center EB-5 investment offers numerous benefits to investors, making it far more popular than direct investment. Those who make an EB5 investment through a regional center enjoy easier job creation requirements, far lighter managerial duties, and can leverage the EB-5 expertise of experienced regional center managers. Nonetheless, some investors are concerned with the possibility of fraud or poor management on the part of the regional center and are more comfortable with direct EB-5 investment because the structure places them closer to the new commercial enterprise (NCE).
The proposed reform bill addresses concerns of integrity in regional centers, mandating that regional centers draft annual statements certifying their compliance with all relevant regulations. They must explain all pending or recently resolved litigation or bankruptcy proceedings involving the regional center, NCE, or job-creating entity (JCE) and accounting for all foreign capital invested in those entities. A statement for each affiliated NCE must be drafted, detailing such information as the total amount of EB5 investment capital injected, how the capital is being spent, proof that all funds from EB-5 investors have been committed to the project, details about the progress toward the project’s goals, and a report of all jobs created or preserved. These annual statements must be made available to any EB-5 investment participant who requests them.
The EB-5 Reform and Integrity Act’s protection of investors doesn’t stop at compliance and transparency reports—it extends to preserving the immigration rights of EB-5 investors duped by fraudsters. Though the incidence rate of fraud in the EB-5 program is extremely low, some investors are still deceived and have their immigration eligibility revoked as a result. Under the proposed bill, EB5 investment participants in this situation would receive a notice from the Department of Homeland Security and be given 180 days to submit an amendment or notice to secure continued EB-5 eligibility. They would keep the priority date of their I-526 petition, and their children would be protected from aging out.
Extra Time for Job Creation
The current regulations of the EB-5 program allocate two years to an EB-5 investor to create at least 10 new full-time jobs for U.S. workers as they live in the United States as a conditional permanent resident. The proposed act would offer investors who failed to create the necessary number of jobs in the two years one more year to satisfy the job creation requirement, resulting in more U.S. jobs created and more successful EB5 investments.
The EB-5 Reform and Integrity Bill Could Change the EB-5 Program’s Future
If the EB-5 industry rallies together to have the proposed bill enacted, it would have long-lasting effects on the EB-5 program and, as a result, the U.S. economy. By extending the authorization of the EB-5 Regional Center Program by five years, it would ensure the program continues to pump EB-5 capital into the U.S. economy, which could prove invaluable as the country recovers from the debilitating effects of COVID-19.
But the EB-5 community should be excited about the act for more than just the regional center program extension. The proposed integrity measures would revolutionize certain aspects of the EB-5 program, protecting investors and honest EB-5 actors while addressing outsiders’ concerns of fraud and abuse. It could help transform the program’s reputation, opening the door to more support from within and outside of the United States. While it doesn’t address all the issues EB-5 investment stakeholders face, it would go a long way in improving the EB-5 landscape.