The EB-5 investment industry underwent a significant change on June 30, 2021: the EB-5 Regional Center Program expired. Regional center investment had been the EB-5 program’s most popular investment type; the vast majority of EB-5 investors used to choose regional center-sponsored projects. As of November 9, 2021, the regional center program is yet to be revalidated.
Only a few days before the regional center program was suspended, a court ruling overturned the EB-5 Modernization Rule and thus lowered the EB-5 investment threshold to only $500,000. This decision has made the EB-5 program accessible to more foreign nationals around the world.
Direct EB-5 investment, the program’s other investment type, is now the sole option for investors and project developers. Many foreign nationals have chosen to make direct investments of $500,000 during the second half of 2021. Since direct investment is an integral component of the EB-5 program and does not rely on government renewal, many foreign nationals now prefer this investment model. Direct investment is ideal for businesses with smaller offerings, and direct EB-5 investors are often involved in day-to-day business management.
However, many investors still prefer regional center projects.
Recent developments indicate that regional center investment may be nearing reauthorization. If the regional center program is indeed revalidated, the EB-5 industry will benefit greatly.
How Reauthorization Could Take Place
Many EB-5 industry stakeholders agree that Congress will only reauthorize the regional center program if a bill to that effect is included in a larger legislative vehicle. It seems that Congress may have to pass such a legislative vehicle soon to avoid a shutdown of the U.S. government due to lack of funds. Some analysts believe that Congress will pass an omnibus bill, which could well include new regulations for the EB-5 program, such as the reauthorization of its regional center component.
Of course, the EB-5 industry can only speculate about how Congress will avert the possible government shutdown, and there is no guarantee that their legislation will reauthorize regional center investment. If, however, Congress does choose to address the EB-5 program, it may also make unwelcome changes such as raising the minimum investment amounts.
Why Reauthorization is Urgent
Many EB-5 investors and project developers have been inconvenienced by the lapse in the regional center program. United States Citizenship and Immigration Services (USCIS) announced that it would cease to process pending I-526 petitions associated with regional centers and that it would no longer accept such petitions from regional center investors. This policy could cause investors to lose confidence in the EB-5 program and try to get their capital back, which would put project developers in a difficult position. Moreover, many of the visas allotted for the EB5 investment program could go unused.
Even though the EB-5 industry has been hindered by the expiration of the regional center program, the EB-5 program as a whole still retains its popularity. Even more investors and project developers are expected to join the EB-5 industry once regional center investment can resume.