Since June 2021, EB-5 regulations and procedures have undergone several changes, many of which have been unexpected. Still, project developers and investors have benefitted from the June 22, 2021 repeal of the EB-5 Modernization Rule. This court ruling found that the Modernization Rule had been implemented improperly in November 2019. As a result, EB-5 investment regulations reverted to their pre-November 2019 status.
However, United States Citizenship and Immigration Services (USCIS) filed an appeal against the court’s decision on August 23, 2021. If successful, this appeal would have brought back Modernization Rule guidelines and had a significant impact on the EB-5 industry; for instance, individual states would no longer be authorized to designate targeted employment areas (TEAs). More importantly, the minimum EB-5 investment thresholds of $500,000 for TEA projects and $1,000,000 for non-TEA projects would have been raised to $900,000 and $1,800,000, respectively. In the past few months, foreign nationals from a variety of countries have been able to invest in U.S. businesses and begin the EB-5 visa application process thanks to these reduced investment thresholds.
To the relief of many EB-5 professionals, USCIS withdrew its appeal against the Modernization Rule court ruling on January 5, 2022. It seems that the lower investment amounts and other pre-November 2019 regulations will remain in place for the time being. Both foreign nationals interested in the EB-5 investment visa and U.S. business owners in need of investment capital will benefit from the more accessible investment threshold of $500,000.
Could the Modernization Rule be Reimplemented?
Despite the withdrawal of USCIS’s appeal, the EB-5 industry still faces the possibility of going back to Modernization Rule guidelines. USCIS or the Department of Homeland Security (DHS) could take legislative action to raise the EB-5 investment thresholds once more. In fact, an appropriations bill due in February 2022 might be an ideal vehicle to pass legislation reforming the EB-5 program. Of course, it is unclear if or when USCIS or the DHS will take such action.
In the meantime, foreign nationals who wish to make an EB5 investment at only $500,000 should act quickly to find a suitable project. Due to the legislative lapse of the EB-5 Regional Center Program, all EB-5 investments must be direct for the time being. The direct investment model offers several enticing benefits for investors and project developers.