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The Benefits of Reauthorizing the Regional Center Program

The Benefits of Reauthorizing the Regional Center Program

As of November 2021, it has been more than four months since Congress allowed the EB-5 Regional Center Program to expire on June 30, 2021. The EB-5 investment industry was thus left without its most popular and practical investment model. Since then, there has been much speculation among EB-5 industry members about how regional center investment might be reauthorized; many hope that EB-5 reform, including renewal for the regional center program, will be attached to a legislative vehicle in Congress. However, due to the unpredictable nature of such legislation, EB-5 investors and project developers can only speculate as to when Congress will act.

Before the June 30 suspension, the vast majority of EB-5 investments were made through regional center-sponsored projects. In fact, an August 2021 study found that 93.4% of all EB-5 visa petitions had been filed by regional center investors. Regional centers, which are designated by United States Citizenship and Immigration Services (USCIS), manage EB-5 funds and act as service agents for the EB-5 industry.

Due to the central role of the regional center program, EB-5 investors and project developers are eager to see it reauthorized. The return of regional center investment will benefit both the EB-5 industry and the U.S. economy at large.

Benefits for the EB-5 Industry

The regional center EB5 investment model benefitted investors in many ways; for instance, the job creation requirements for regional center-sponsored projects were quite flexible. In addition to counting direct employment (jobs that appear on the project’s payroll), regional center investors could also calculate indirect and induced employment. Indirect and induced jobs are created by a regional center project’s positive economic impact. These criteria made it much easier for regional center investors to generate at least 10 full-time jobs and thus qualify for their EB-5 visas.

In addition, regional center investors were typically given very light managerial duties. Most regional center projects subscribed their investors as limited partners, allowing them to vote on important business decisions but not requiring their participation in day-to-day management. This managerial structure was convenient for investors and undoubtedly contributed to the popularity of regional center projects.

In contrast, now that regional centers cannot operate, all EB-5 investments must be direct. Direct EB-5 projects can count only direct full-time jobs and typically require their investors to have a more active role in business management. Many more foreign nationals will surely make EB-5 investments once the regional center program is revalidated.

Reauthorization is also urgent due to USCIS’s visa processing policies: after the June 30 suspension, the agency announced that it would halt the processing of all existing I-526 petitions associated with regional centers. This decision leaves thousands of regional center investors in limbo. If these investors lose confidence that the regional center program will be reauthorized, they could try to get their EB-5 investment funds back, thus putting regional center projects in an uncomfortable position. However, these issues can be solved if Congress acts quickly to pass legislation that revalidates the regional center program.

Benefits for the U.S. Economy

The EB-5 investment industry has created tens of thousands of jobs for U.S. workers and poured billions of dollars into U.S. businesses—all at no cost to taxpayers. Moreover, the EB-5 program encourages investors to choose projects located in targeted employment areas (TEAs), which need economic development. The valuable source of EB-5 investment capital provided by the regional center program has undoubtedly bolstered the nationwide economy.

The regional center component of the EB-5 program has provided investors, project developers, and the U.S. economy with innumerable benefits. It remains unclear when Congress will pass the legislation needed to reauthorize regional center EB-5 investment, but doing so will aid not only the EB-5 industry but the United States as a whole.