Free EB-5 Evaluation Summary of New EB-5 Rule Changes

EB-5 Immigrant Investor Program Modernization: 2019 Updates to the EB-5 Program

On July 24, 2019, the Department of Homeland Security (DHS) and United States Citizenship and Immigration Services (USCIS) published the long-awaited final rule amending the EB-5 Immigrant Investor Program in the Federal Register. The rule comes into effect 120 days after publication, on November 21, 2019. The most significant changes relate to increased minimum investment amounts, targeted employment area (TEA) designation, the retention of priority dates for EB-5 petitioners, and procedures for the removal of conditions on permanent residence.

Minimum EB-5 Investment Amounts

From November 21, 2019, the minimum EB-5 investment amount will increase from $1 million to $1.8 million, while the investment amounts for projects within TEAs will increase from $500,000 to $900,000. This increase, the first since the program was implemented in 1990, accounts for inflation, and according to the new rules, minimum investment amounts will automatically adjust for inflation every five years, with the first adjustment taking place in 2024.

While the standard minimum investment amount increased to the amount expected, the TEA-based minimum investment amount came in below expectations, at $900,000 rather than $1.35 million. Thus, the final rule maintains the 50% minimum investment ratio.

Any I-526 petitions filed before the effective date of November 21, 2019, will be grandfathered under the current rules, so the minimum investment amounts of $500,000 and $1 million will still apply. Those who want to take advantage of these lower amounts while they still can should act now to start the investment process.

TEA Designation

TEAs will no longer be designated at the state level; instead, DHS will fulfil this function. This change has been made to ensure consistency in adjudications and adherence to the congressional intent to drive investment in areas most in need of economic development.

The definition of a rural TEA remains unchanged, but after the rule takes effect, specially designated high unemployment TEAs must fall outside of metropolitan statistical areas (MSAs). The unemployment rate of 150% the national average will still apply. Some areas will qualify as TEAs whether they fall within MSAs, cities or towns outside MSAs, or counties within MSAs, but these designations will be based on federally published data. The change affects specially designated TEAs.

When applying for special designation based on a high unemployment rate, applicants will need to follow a similar process to the current one for rural TEA designation. That is, they will need to apply directly to USCIS, using reliable and verifiable data, such as that published by the Bureau of Labor Statistics and the U.S. Census Bureau, to support their applications.

Additionally, the EB-5 project area must qualify as a TEA on the date of investment, or the date of I-526 filing. Changes in TEA data that occur between the date on which an investor places the investment amount in escrow and the filing of the I-526 petition could mean that the target area no longer qualifies as a TEA. This could have serious repercussions for investors and developers alike.

Finally, to ensure that investments reach the intended communities, a specially designated TEA must include a single census tract in which the new commercial enterprise is primarily doing business, or tracts that are directly adjacent to the primary tract. This change is intended to stop the practice of combining census tracts to cause an area that would not usually qualify as a TEA to qualify because of the inclusion of tracts outside or on the periphery of the business’s primary area of operation.

These changes mean that some areas that currently qualify as TEAs will no longer qualify. Thus, those participating in the EB-5 program must carefully research potential investment areas and projects using resources such as the EB5AN TEA map.

The Retention of Priority Dates for EB-5 Petitioners

In some cases, EB-5 petitioners will be able to retain the priority date of an EB-5 immigrant petition that has been approved and to use it with any subsequent EB-5 immigrant petition. For example, this would apply to an applicant who needs to file a new petition because DHS terminated the regional center associated with the original petition or because of material changes to aspects of the qualifying investment caused by changes in business conditions.

Additionally, if an applicant has filed multiple petitions, the person will be entitled to use the earliest qualifying priority date. However, a priority date can be used only once, so if an applicant uses a priority date to obtain conditional permanent residence, that priority date will not be available for any subsequent petitions.

EB-5 investors whose approval was revoked because of “fraud or a willful misrepresentation of a material fact” or because the approval was based on a material error will not be eligible to retain their priority dates. Priority dates cannot be passed on to family members either.

Being able to retain a priority date will be particularly useful when visa demand exceeds supply.

Procedures for the Removal of Conditions on Permanent Residence

The new rule clarifies the process that must be followed by certain derivative family members who are lawful residents but who are not included in the principal applicant’s petition. The rule further introduces greater flexibility regarding interview locations by allowing interviews to take place at the office adjudicating the I-829 petition, the investor’s business, or the investor’s residence. It also streamlines the process of collecting biometric data, thus simplifying the issuing of green cards and reducing costs for applicants.

To take advantage of the current EB-5 program rules, or to learn more about the implications of the new rules, contact us today.

For a more comprehensive overview of the changes brought about by the final rule, please see the excerpts from Table 2, Summary of Changes and Impact of the Adopted Provisions, as published in the Federal Register:

Table 2: Summary of Changes and Impact of the Adopted Provisions
Current Policy Adopted Change Impact
Priority Date Retention
Current DHS regulations do not permit investors to use the priority date of an immigrant petition approved for classification as an investor for a subsequently filed immigrant petition for the same classification. DHS will allow an EB-5 immigrant petitioner to use the priority date of an immigrant petition approved for classification as an investor for a subsequently filed immigrant petition for the same classification for which the petitioner qualifies, unless DHS revokes the petition’s approval for fraud or willful misrepresentation by the petitioner, or revokes the petition for a material error. Benefits:

  • Makes visa allocation more predictable for investors with less possibility for large fluctuations in visa availability dates due to regional center termination.
  • Provides greater certainty and stability regarding the timing of eligibility for investors pursuing permanent residence in the U.S. and thus lessens the burden of unexpected changes in the underlying investment.
  • Provides more flexibility to investors to contribute to more viable investments, potentially reducing fraud and improving potential for job creation.
  • Costs:

  • None anticipated
Increases to Investment Amounts
The standard minimum investment amount has been $1 million since 1990 and has not kept pace with inflation – losing almost half its real value.

Further, the statute authorizes a reduction in the minimum investment amount when such investment is made in a TEA by up to 50 percent of the standard minimum investment amount. Since 1991, DHS regulations have set the TEA investment threshold at 50 percent of the minimum investment amount.

Similarly, DHS has not increased the minimum investment amount for investments made in a high employment area beyond the standard amount.

DHS will account for inflation in the investment amount since the inception of the program. DHS will raise the minimum investment amount to $1.8 million to account for inflation through 2015, and includes a mechanism to automatically adjust the minimum investment amount based on the unadjusted CPIU every 5 years.

DHS will retain the TEA minimum investment amount at 50 percent of the standard amount. The minimum investment amount in a TEA will initially increase to $900,000.

DHS is not changing the equivalency between the standard minimum investment amount and those made in high employment areas. As such, DHS will set the minimum investment amounts in high employment areas to be $1.8 million, and follow the same mechanism for future inflationary adjustments.

Benefits:

  • Increases in investment amounts are necessary to keep pace with inflation and real value of investments;
  • Raising the investment amounts increases the amount invested by each investor and potentially increases the total amount invested under this program.
  • For regional centers, the higher investment amounts per investor will mean that fewer investors will have to be recruited to pool the requisite amount of capital for the project, so that searching and matching of investors to projects could be less costly.
  • Costs:

  • Some investors may be unable or unwilling to invest at the higher levels of investment.
  • There may be fewer jobs created if significantly fewer investors invest at the higher investment amounts.
  • For regional centers, the higher amounts could reduce the number of investors in the global pool and result in fewer investors, thus potentially making the search and matching of investors to projects more costly.
  • Potential reduced numbers of EB-5 investors could prevent certain projects from moving forward due to lack of requisite capital.
  • An increase in the investment amount could make foreign investor visa programs offered by other countries more attractive.
TEA Designations
A TEA is defined by statute as a rural area or an area that has experienced high unemployment (of at least 150 percent of the national average rate). Currently, investors demonstrate that their investments are in a high unemployment area in two ways:

1) providing evidence that the Metropolitan Statistical Area (MSA), the specific county within the MSA, or the county in which a city or town with a population of 20,000 or more is located, in which the new commercial enterprise is principally doing business, has experienced an average unemployment rate of at least 150 percent of the national average rate; or

2) submitting a letter from an authorized body of the government of the state in which the new commercial enterprise is located, which certifies that the geographic or political subdivision of the metropolitan statistical area or of the city or town with a population of 20,000 or more in which the enterprise is principally doing business has been designated a high unemployment area.

DHS will eliminate state designation of high unemployment areas. DHS also amends the manner in which investors can demonstrate that their investments are in a high unemployment area.

1) DHS will add cities and towns with a population of 20,000 or more outside of MSAs as a specific and separate area that may qualify as a TEA based on high unemployment.

2) DHS will amend its regulations so that a TEA may consist of a census tract or contiguous census tracts in which the new commercial enterprise is principally doing business if

  • the new commercial enterprise is located in more than one census tract; and
  • the weighted average of the unemployment rate for the tract or tracts is at least 150 percent of the national average.

3) DHS will also amend its regulations so that a TEA may consist of an area comprising the census tract(s) in which the new commercial enterprise is principally doing business, including any and all adjacent tracts, if the weighted average of the unemployment rate for all included tracts is at least 150 percent of the national average.

Benefits:

  • Rules out TEA configurations that rely on a large number of census tracts indirectly linked to the actual project tract by numerous degrees of separation.
  • Potential to better stimulate job growth in areas where unemployment rates are the highest, consistent with congressional intent.
  • Costs:

  • This TEA provision could cause some projects and investments to no longer qualify as being in high unemployment areas. DHS presents the potential number of projects and investments that could be affected in Table 5.
Current technical issues:

  • The current regulation does not clearly define the process by which derivatives may file a Form I-829 petition when they are not included on the principal’s petition.
  • Interviews for Form I-829 petitions are generally scheduled at the location of the new commercial enterprise.
  • The current regulations require an immigrant investor and his or her derivatives to report to a district office for processing of their permanent resident cards.
DHS will amend its regulations to include the following technical changes:

  • Clarify the filing process for derivatives who are filing a Form I-829 petition separately from the immigrant investor.
  • Provide flexibility in determining the interview location related to the Form I-829 petition.
  • Amend the regulation by which the immigrant investor obtains the new permanent resident card after the approval of his or her Form I-829 petition because DHS captures biometric data at the time the immigrant investor and derivatives appear at an ASC for fingerprinting.
  • Add 8 CFR 204.6(n) to allow certain investors to remain eligible for the EB-5 classification if a project’s offering is amended or supplemented based upon the final rule’s effectiveness.

Conditions of Filing

Benefits:

  • Adds clarity and eliminates confusion for the process of derivatives who file separately from the principal immigrant investor.
  • Costs:

  • Total cost to applicants filing separately will be $91,023 annually.
  • Conditions of Interview

    Benefits:

  • Interviews may be scheduled at the USCIS office having jurisdiction over either the immigrant investor’s commercial enterprise, the immigrant investor’s residence, or the location where the Form I-829 petition is being adjudicated, thus making the interview program more effective and reducing burdens on the immigrant investor.
  • Some petitioners will benefit by traveling shorter distances for interviews and thus see a cost savings in travel costs and opportunity costs of time for travel and interview time.
  • Costs:

  • None anticipated.
  • Investors Obtaining a Permanent Resident Card

    Benefits:

  • Cost and time savings for applicants for biometric data.
  • Costs:

  • None anticipated.
  • Eligibility Following Changes to Offering

    Benefits:

  • An amendment to a project’s offering based on the final rule’s provisions might not result in the denial or revocation of a petition.
  • Costs:

  • None anticipated.