If a foreign national makes an EB-5 investment in a qualifying project and fulfills the various requirements laid out by United States Citizenship and Immigration Services (USCIS), they—and their immediate family members—will receive permanent resident status in the United States. In terms of qualifying for a green card, all EB-5 projects are equal—all successful EB5 investments lead to the same outcome. But depending on the type of project one invests in, their EB-5 investment journey may be simpler, easier, or more attainable. For many investors, this means making their EB5 investment in a targeted employment area (TEA).
A TEA is an area—usually a census tract or a conglomeration of census tracts—that Congress has determined to be particularly in need of economic stimulation and job creation. TEAs come in two flavors: high-unemployment TEAs and rural TEAs. Directing EB-5 investment capital into TEAs is, of course, in the government’s best interest, as it can drive economic growth in America’s most in-need communities. But thanks to a special incentive introduced by Congress, it’s also in the best interest of EB-5 investors, as it cuts the minimum required investment amount in half.
How Are TEAs Defined?
Rural TEAs are the easier of the two types to define and calculate. To be classified as a rural TEA, an area must simply house fewer than 20,000 inhabitants, not be within a metropolitan statistical area (MSA) as defined by the Office of Management and Budget, and not directly border a city or town with a population of 20,000 or more. The population statistics must be derived from the most recent ten-year U.S. census.
High-unemployment TEAs, however, are the more common of the two. To be considered a high-unemployment TEA, an area must be urban (i.e., not rural) and exhibit an unemployment rate of at least 150% of the national average. Historically, individual states designated TEAs, but regulation changes in July 2019 ushered in a new era, in which the Department of Homeland Security (DHS) oversees TEA designation. Under this system, individual investors are required to submit evidence to justify halving their EB5 investment amount.
High-unemployment TEAs are far more challenging to achieve designation for than rural TEAs. Investors must provide the most recent unemployment statistics for the area in question as well as for the United States as a whole. The measured period must be identical, and the data-collecting body must be the same. Generally, USCIS accepts American Community Survey (ACS) and Bureau of Labor Statistics (BLS) data, but both are imperfect—ACS data is available at the census tract level, but it spans five years. BLS data covers annual time periods, but it is only published at the national, MSA, and county levels. This typically leaves EB-5 investors with a choice: use the five-year ACS data solely, or combine the ACS and BLS data to derive a one-year unemployment rate estimate. While investors usually use BLS’s annual unemployment report, released each year in April, creating a rolling average using monthly BLS data over a one-year period may also be plausible.
Why Should EB-5 Participants Invest in a TEA?
EB5 investments aren’t cheap—a foreign national needs to inject at least $1.8 million into a non-TEA project to be eligible for a U.S. green card. When fees for immigration lawyers and, if applicable, EB-5 regional center operators are factored in, the amount is even higher. Depending on their country of origin, a foreign national may also need to spend some money obtaining the documentation to prove the lawful sources of their funds, a key requirement for any EB-5 investment. A minimum required investment amount of $1.8 million is simply too much for some investors.
When the minimum required investment amount is halved to $900,000, an EB-5 investment suddenly becomes much more affordable. Whether they can afford a $1.8 million EB5 investment or not, most investors feel more comfortable with the lower amount—but this incentive is only available to those who invest in a TEA project.
How Do Investors Prove TEA Designation?
When an applicant making an EB5 investment in a TEA project compiles their I-526 petition—the first petition filed by any EB-5 investor—they must enclose evidence justifying the TEA designation of the project. Regardless of the type of TEA they are working with, they must provide documentation showing where the project principally conducts business and maps that make clear the census tract(s) included in the proposed TEA.
If the TEA is a rural TEA, the investor must then show, based on the most recent ten-year U.S. census, that the area contains fewer than 20,000 inhabitants. If it is a high-unemployment TEA, the investor must provide the above-mentioned five-year ACS data, paired with BLS one-year data if desired, to show that the TEA has an unemployment rate at least 50% higher than the national average during the same period.
USCIS is aware that statistics and demographics can change, so even if the population or unemployment data of a given TEA changes after the submission of the I-526 petition, the investor is safe. However, any changes before the submission of the petition could jeopardize the TEA approval, so an investor must be careful to include the most recent data available.
Those who make an EB-5 investment through a USCIS-approved EB-5 regional center—and most EB-5 investors do—have an easier time with the TEA designation process, as the regional center will usually provide the necessary evidence to prove TEA designation. Investors can lean on the regional center’s expertise to craft a detailed TEA designation application with a maximized chance of success.