The need for reform has long been noted in the EB-5 Immigrant Investor Program community, but action has been slow. Ever-lengthening processing times have plagued the program since roughly 2014, when the infamous Chinese backlog was born. The EB-5 Regional Center Program, which allows foreign nationals to make an EB-5 investment through an approved regional center instead of directly in the new commercial enterprise (NCE), remains a temporary program subject to continual reauthorization. The public image of the economy-boosting residency-by-investment program is abysmal, with laypeople associating the program with the few stories of fraud that have preoccupied the media. All these issues can be solved with EB-5 reform, and that’s precisely what the EB-5 Reform and Integrity Act aims to do.
The EB-5 Reform and Integrity Act, drafted by bipartisan senatorial duo Chuck Grassley (R-IA) and Patrick Leahy (D-VT), has been on the table for several months, particularly entering the limelight following the divorcing of the EB-5 Regional Center Program from the omnibus funding bill it has traditionally been renewed alongside. With the regional center vying alone for reauthorization before its sunset date of June 30, 2021, industry leaders fear reform is the only way to secure the program’s future. Termination of the popular program could be disastrous for EB5 investment participants, and it would significantly impact the EB-5 program’s ability to foster the U.S. economy, spelling bad news all around.
On March 18, 2021, Grassley and Leahy finally officially introduced their reform bill to Congress. With this, the gears have been set in motion to finally reform the EB-5 investment landscape. Following the introduction, EB-5 industry trade association Invest in the USA (IIUSA), which has been rallying for the bill on the belief that it is the only way to achieve reauthorization, voiced its support for the bill.
Industry Leaders Optimistic
Grassley and Leahy have worked alongside IIUSA to draft the bill, which addresses various problem areas in the EB-5 program. If all had gone according to plan, the bill would have been introduced in December 2020 as part of the federal omnibus budget, but since the bill was unfinished at the time, its inclusion was ultimately impossible. With the EB-5 program given a sunset date of June 30, 2021, the clock is ticking, and the time to enact reform is growing smaller—which is why the EB5 investment world has been relieved to hear of the bill’s formal introduction in Congress.
The primary concerns of the bill revolve around integrity, security, and transparency, tightening anti-fraud regulations and better protecting the interests of honest, good-faith EB-5 investment participants, project developers, and regional centers. More stringent security measures would also improve the program’s public image and help the program combat its demonization in the press. The legislation the bill has laid out would provide these necessary protections while simultaneously allowing the program to prosper and continue to pour billions of foreign capital into the U.S. economy—a win-win.
Another key issue the bill addresses is long-term reauthorization for the regional center program. If the EB-5 Reform and Integrity Act passes, it will reauthorize the EB-5 Regional Center Program through 2026. While not permanent reauthorization, a five-year reauthorization would do wonders for the short-term future of the EB-5 program, with foreign nationals able to comfortably make EB5 investments without fear of sudden regional center program termination.