As of February 10, 2022, the EB-5 investment industry is at a watershed period in its history. With more than seven months since the expiration of the regional center program, the industry is now looking to Congress to pass EB-5 reform in an upcoming appropriations bill. The spending bill, which was originally due in December 2021, has been postponed, and there was at first no indication that it would address the issues in the EB-5 program.
However, on February 3, 2022, a draft of a potential EB-5 bill was leaked, leading to speculation that EB-5 reform would indeed be forthcoming. The leaked draft would reauthorize the regional center program until 2027 and introduce measures to ensure integrity and transparency in EB-5 offerings. These adjustments, along with new criteria for targeted employment area (TEA) designation, would be widely well-received.
The bill also raises the minimum EB-5 investment threshold from only $500,000 to $700,000. This substantial increase would make the EB-5 visa significantly less accessible to foreign nationals. What is more, any foreign nationals planning to make an EB-5 investment at $500,000 now have to act quickly: it may be only a few more days or weeks before these changes are made in the upcoming appropriations bill.
The following is a concise overview of the EB-5 investment process meant to help interested foreign nationals get started as quickly as possible.
Preparing the EB-5 Investment Funds
The first step is to retain an immigration attorney with ample EB-5 experience. The more EB-5 investors an attorney has worked with successfully, the more reliable they will be.
One of the most important factors that foreign nationals must consider is that all EB-5 capital is examined by United States Citizenship and Immigration Services (USCIS) to ensure its legality. The agency does allow investors to use virtually any lawful source of funds, but it requires copious evidence tracing the funds back to their source. This is typically one of the most challenging aspects of the EB-5 process, and investors are thus advised to prepare the source-of-funds documentation as early as possible. Sources of funds such as salary payments and secured bank loans can be easier to document when compared to inherited or gifted capital.
USCIS also requires EB-5 funding to remain at risk—there can be no contractual rights to repayment, and EB-5 investors must acknowledge the possibility of substantial financial losses. Moreover, the reduced investment amount of $500,000 only applies to EB-5 businesses in TEAs—all other offerings require a minimum investment of $1,000,000.
Choosing the Right EB-5 Offering
It is crucial to select an EB-5 offering that fulfills all USCIS criteria. The best EB-5 projects are careful to follow USCIS guidelines and thus make it more likely for their investors to receive permanent residency. One of the foremost requirements is for each EB-5 investment to create at least 10 jobs. In the direct EB-5 model, which is currently the sole investment option, all of these positions must be W-2 jobs that are preserved for at least two years and employ authorized U.S. workers. Investors should look for projects that aim to create more than 10 jobs per EB-5 investor.
Foreign nationals also need to evaluate an EB-5 project’s chances of succeeding financially. EB-5 capital should be a relatively small portion of the total capital structure, and the project’s operator should have a reliable track record.
The $500,000 Threshold May Be Raised Soon
It remains unclear exactly when EB-5 reform will come about, and Congress may not include changes to the EB-5 program in the upcoming appropriations bill. However, the EB5 investment thresholds are still likely to rise in the near future, and foreign nationals who cannot afford to invest more than $500,000 may only have a few days or weeks left to begin the EB-5 process.