For some time now, EB-5 professionals have been anticipating possible changes to the program—either through legislation or through regulation. Each time the EB-5 Program has been due for renewal over the past several years, some level of concern and speculation has arisen regarding potential changes to the program.
The EB-5 Program is once again due to be extended on April 28, 2017. As opposed to the past several extensions, in which no changes to the program have been made, several factors now indicate a high likelihood that certain aspects of the EB-5 Program will be changed.
One of the chief concerns among EB-5 stakeholders is an increase to minimum investment amounts. Whether through legislation or recently proposed regulations, the minimum investment threshold for the EB-5 Program is likely to increase soon.
Possible Legislation
In June 2015, the “Grassley Bill” was introduced, and since that time, five additional bills have been proposed to increase the minimum investment amount for EB-5 investments in targeted employment areas (TEAs) from $500,000 to as much as $1,000,000. While none of these bills were voted on, they demonstrate the very real possibility of legislative changes to the EB-5 Program.
Now, with another renewal of the EB-5 Program looming in April, a long-term extension of the program may be passed as part of broader legislation to reform EB-5. Under the new administration, Congress is being pressured to pass overall immigration reform legislation, which could also result in changes to EB-5 along with all other immigrant visa categories.
The key issue is whether legislators will begin the process of drafting a bill early enough to move it through the review and amendment process toward a vote before the program expiration date. If this process does not begin early enough, comprehensive reform is much less likely.
Proposed Rulemaking
As part of the executive branch of the U.S. government, U.S. Citizenship and Immigration Services (USCIS) administers and implements all relevant laws enacted by Congress. One way in which government agencies like USCIS implement the law is through regulation.
As early as 2014, USCIS was working to create new EB-5 regulations that included increases to the minimum investment amounts. In 2015, USCIS decided instead to wait for Congress to change the EB-5 Program through legislation.
With the election in 2016, however, it became clear that Congress would not—or could not—pass immigration legislation, whether comprehensive or specifically focused on the EB-5 Program. As a result, USCIS once again indicated its intent to change EB-5 investment minimum thresholds through regulation.
Early in 2017, the Department of Homeland Security (DHS) published a Notice of Proposed Rulemaking on the Federal Register (DHS Docket No. USCIS 2016-0006) revealing potential changes to the EB-5 Program. The January 13 publication, titled, “EB-5 Immigrant Investor Program Modernization,” proposes a number of changes to EB-5—from how priority dates are handled to how TEAs are determined. Among the most controversial proposals is the substantial increase to minimum investment amounts.
The proposed regulation would change both standard EB-5 investments and those within TEAs, increasing the minimum investment threshold from $1,000,000 to $1,800,000 for standard investments and from $500,000 to $1,350,000 for TEA investments.
USCIS based these increases on inflation. The original EB-5 legislation was enacted in 1990, and the proposed regulation uses the Consumer Price Index (CPI) to adjust the original $1,000,000 to current dollars. The minimum investment amount for TEAs is then set to 75% of the standard investment amount. In addition to setting these new values, the proposed regulation establishes an automatic inflation-based increase to these amounts every five years.
As with all Notices of Proposed Rulemaking, the recent USCIS publication has a comment period during which the public can provide USCIS with feedback. In this case, the comment period is 90 days, ending April 11, 2017.
The changes to the minimum investment amounts are substantially greater than those proposed in past draft bills and are viewed by many in the EB-5 industry as destructive—potentially resulting in a temporary halt to EB-5 investment in the short to mid term. The pushback from EB-5 professionals during the proposed regulation’s comment period may result in adjustments to these figures. Even if the final minimum investment amounts are lower than what is currently proposed, however, the EB-5 Program will almost certainly be negatively impacted, at least in the short term.
After the comment period closes, USCIS must review all of the comments it receives and then reply in writing to each with an explanation for why the suggestion was accepted or rejected. Any changes to the proposed regulation must then be approved by DHS.
A large percentage of proposed regulations are never implemented as final rules, and those that are often take 6 months or more to undergo the rulemaking process. In this case, the likelihood that the process is interrupted with legislation or some action by the Trump Administration is fairly high.
So, only time will tell if any of the proposed changes to EB-5 regulations actually take place via the rulemaking process—or if changes to the program occur through legislative action first. In either case, it seems very likely that in the coming months, the minimum investment thresholds for standard and TEA investments will be increased.
And though nothing is certain, the question, “When?” seems to now be overshadowed by a more pressing question: “By how much?”