Foreign nationals who participate in the EB-5 Immigrant Investor Program have two pathways to make their EB-5 investment: directly in a qualifying EB-5 project or indirectly through an approved EB-5 regional center. The EB5 investment pathway doesn’t change the outcome for successful investments: U.S. permanent resident status for the investor and their immediate family members.
However, it does influence how the investment plays out. Those who invest directly are generally required to take on heavier managerial workloads at the new commercial enterprise (NCE), but in return, these investors can exercise more control over their investments. Conversely, those who make an EB-5 investment through a regional center approved by United States Citizenship and Immigration Services (USCIS) enjoy a smaller managerial obligation at the NCE and loosened job-creation requirements that facilitate the attainment of a U.S. green card.
These benefits make EB-5 regional center investment by far the preferred EB5 investment method of program participants. But it is important to bear in mind a few caveats. For example, the EB-5 Regional Center Program is not a permanent USCIS program—it’s only temporary and is continually extended by the government, leaving room open for potential termination in the future. Furthermore, the approved status of individual regional centers is not set in stone, either. USCIS routinely terminates previously approved regional centers, and in fact, it’s terminated a record number of regional centers in 2019 and 2020.
Regional Center Terminations in Numbers
The total number of approved EB-5 regional centers has fallen considerably since 2018, when the program boasted around 800 approved regional centers across the United States. The problems for regional center owners began in November 2019, when the Modernization Rule kicked in and changed the rules for targeted employment area (TEA) designation. The regulation also nearly doubled the minimum required investment amount to $1.8 million ($900,000 for projects in TEAs), resulting in diminished investor interest. With these two changes together, the rule spelled disaster for EB-5 regional centers, and the terminations began rolling in.
In March 2020, there were a total of 772 approved regional centers nationwide. March 2020 is also when the COVID-19 pandemic struck, crippling the economy, destroying jobs and livelihoods, and temporarily pausing routine visa processes at U.S. embassies and consulates. As the pandemic raged on, another 44 regional centers met their demise, bringing the total to 728.
By August 2020, the world had begun to reopen and U.S. embassies and consulates had introduced a phased resumption of visa processes, even though the COVID-19 pandemic continued to ravage various countries. The total number of approved EB-5 regional centers had dropped by 36, leaving only 692 approved regional centers.
Now, in October 2020, there remain only 678 approved EB-5 regional centers, down 14 from August. Though the pace of termination is slowing, there is no indication of the trend reversing anytime soon, and the number of approved regional centers is expected to continue its descension as 2020 comes to a close.
Careful Due Diligence Is Imperative
With more than 100 regional center terminations since 2018, countless EB-5 investors are facing severe complications in their EB-5 investment journey. The rapid pace of regional center terminations highlights the necessity for EB-5 investors to conduct meticulous due diligence on prospective regional centers.
When considering whether to make an EB5 investment through a particular regional center, prospective investors should consider a number of factors. Examining the track record of the regional center is imperative—what is the success ratio of previous investors? Is this project similar to previous projects the regional center has worked with? How many I-526 and I-829 petitions for investors working with the regional center in the past have been approved?
It’s also important to consider the details of the specific project and project developer. Has the regional center worked with this project developer before? What is the project developer’s track record? EB-5 investors should always consult an EB-5 immigration attorney to determine whether the project and regional center work for them and their EB-5 investment goals.