Since 1990, the EB-5 Immigrant Investor Program has provided a relatively quick and simple pathway for foreign investors to obtain U.S. green cards for themselves, their spouse, and their unmarried children younger than 21. Even throughout the turmoil of 2020, with much of the United States shut down due to the COVID-19 pandemic, the program has pattered along, infusing new bouts of foreign EB-5 investment capital into the U.S. economy. But the EB-5 program hasn’t been without its fair share of strife in 2020—from the threat of a massive United States Citizenship and Immigration Services (USCIS) furlough to demonization and unfounded claims of fraud from U.S. senators, the EB-5 program needs help to turn around, improve its image, and continue creating new jobs for U.S. workers.
Senators Chuck Grassley (R-IA) and Patrick Leahy (D-VT) have long formed a bipartisan partnership to improve and promote the EB-5 program, serving as living proof of the immigration program’s ability to cross party lines. The two senators have worked tirelessly to strengthen integrity without stifling the program and optimize the benefits that EB5 investment capital can bring to the United States while offering foreign investors and their family members promising new lives in the land of the free. To this end, Senator Grassley has introduced Bill S.2540 – EB-5 Reform and Integrity Act of 2019 to the Senate, cosponsored by Senator Leahy.
What Does Bill S.2540 Propose?
In brief, the EB-5 Reform and Integrity Act of 2020 proposes measures to increase EB-5 program integrity, clamp down on fraud, and reauthorize the ever-popular EB-5 Regional Center Program through 2025. Under the proposed bill, those qualified to make EB5 investments and regional centers operating lawfully would enjoy stronger protections, while fraudsters and others engaging in illegal activities would be more stringently weeded out.
Reauthorization of the Regional Center Program through 2025
While the EB-5 program offers investors two pathways to make their EB-5 investment—direct investment and regional center investment—the majority of investors opt to invest through an EB-5 regional center. The advantages of regional center EB5 investment are manifold—for example, regional center investors are generally not required to involve themselves in the daily management of the new commercial enterprise (NCE) and may count indirect and induced jobs toward the job creation requirement, facilitating the process of obtaining U.S. permanent residency.
Despite its popularity, the EB-5 Regional Center Program is not a permanent U.S. government program, which means it is subject to frequent re-evaluations and reauthorizations. While discontinuation is highly unlikely, the program’s temporary status leaves its future uncertain. The proposed bill would see the EB-5 Regional Center Program extended through 2025, solidifying it in U.S. law for a substantial period.
Stricter Regional Center Integrity Measures
While fraud in the EB-5 program is rare, it does still exist. To more strongly combat fraud in regional centers, the proposed bill would stipulate that 10% of the jobs counted toward a regional center project’s job creation requirement be created directly. It would also require regional centers to retain records for five years and undergo an audit in five-year intervals at a minimum.
Another integrity measure targeting EB-5 regional centers is the proposal to require project-specific business plans with a prospective regional center’s Form I-924 petition. As of December 14, 2020, such inclusion is optional and constitutes an exemplar application, expediting the I-526 approval process for those who have made an EB5 investment in a previously approved project.
Perhaps most importantly in terms of fraud prevention is the preclusion of certain people from work in an EB-5 regional center, as stipulated under the proposed “bona fide requirements” of EB-5 regional center involvement. Those who have previously committed fraud offenses, have received an adverse order from a financial regulator, are inadmissible for immigration to the United States, or have been listed, reprimanded, or disciplined for fraud are not permitted to work with an EB-5 regional center.
A Second Chance at Job Creation
While the majority of EB-5 investors succeed in creating the necessary 10 jobs for U.S. workers within their two-year investment period, not all do. Those worried that their EB5 investment capital will not create all 10 jobs within two years should be cheering on Bill S.2540, as it offers investors an extra year to fulfill the job creation requirements. The same rules apply to the extra investment time as to the standard two-year investment period: the EB-5 investment capital must remain at risk for the duration of the period.
The EB-5 industry has long lamented the slow processing times for EB-5 petitions, which have even been ruled unreasonably slow in court. USCIS’s snail-like pace, particularly under Sarah Kendall, chief of the Immigrant Investor Program Office (IPO), has contributed to a drop in EB-5 demand, with foreign investors instead opting to pour their capital into countries like Canada or Australia.
Bill S.2540 endeavors to bring changes to the EB-5 program’s longstanding problems with processing times. Under the proposed EB-5 reform bill, USCIS would be required to conduct a fee study no later than one year following enactment. It would then set fees at an appropriate level to carry out petition processing according the following schedule:
- 180 days for regional center designations and exemplar applications
- 90 days for regional center designations and exemplar applications in targeted employment areas (TEAs)
- 240 days for investor petitions
- 120 days for investor petitions in TEAs
A Promising Future for EB-5
Should Bill S.2540 pass, the EB-5 program will undergo significant changes that will make it more appealing to foreign investors and help it better fulfill its Congress-defined goals of stimulating the U.S. economy and creating new jobs for U.S. workers. Those with EB-5 investments would enjoy swift processing times and an extra year to meet the job creation requirement, reigniting interest in the immigration program.
The bill is only in its beginning stages as of December 14, 2020, so its future is impossible to predict. It’s worth it for EB-5 industry participants to keep an eye on this bill as it moves through the bodies of government, as the changes it can bring to the EB-5 program are significant and more than welcome.