U.S. Congress created the EB-5 Immigrant Investor Program in November 1990 to spur economic growth in the United States via the capital of foreign investors. In exchange for a large investment that funds the creation of at least 10 full-time jobs occupied by U.S. workers, EB-5 investors receive U.S. green cards for themselves and their immediate family members, giving them the right to live, work, and study in the United States of America.
Since most EB-5 investors participate in the EB-5 program primarily to obtain U.S. permanent residence and not for financial gain, they generally prefer to invest the minimum allowed amount. Until November 2019, the minimum required investment amount was $1,000,000, which was increased to $1,800,000 when the EB-5 Modernization Rule came into effect. However, EB-5 projects in special zones, called targeted employment areas (TEAs), only require a minimum investment of half of the default amount. That means EB-5 investors working with a project in a targeted employment area only need to invest $900,000.
What Qualifies as a TEA?
Targeted employment areas can be found all across the United States. Instead of specifically defining particular areas, United States Citizenship and Immigration Services (USCIS) defines a set of criteria used to determine the TEA status of an area, so it is up to the investor to determine whether a given EB-5 project qualifies for the lower investment amount. There are two types of targeted employment areas: high-unemployment TEAs and rural TEAs.
High-Unemployment TEAs
A high-unemployment TEA is an area that has an unemployment rate 150% higher than the national average. For example, in 2019, the average U.S. unemployment rate was 3.66%, so in 2020, an area must have an unemployment rate of at least 5.49% to qualify as a high-unemployment TEA. Additionally, high-unemployment TEAs must be located in towns or cities with more than 20,000 residents or in an area that the Office of Management and Budget defines as a metropolitan statistical area (MSA).
Rural TEAs
A rural targeted employment area is simply any area outside an MSA that has a population of fewer than 20,000 inhabitants. EB-5 investors must use the most recent 10-year U.S. Census data to determine the population of a given area.
Obtaining TEA Designation
Since USCIS does not make targeted employment area determinations in advance, it is up to EB-5 investors and project developers to obtain TEA designation themselves. In some cases, project developers apply for exemplar status for their EB-5 project, which represents USCIS approval that the project meets EB-5 requirements. If an EB-5 project with exemplar status has TEA designation, EB-5 investors can rest easy knowing USCIS will highly likely accept their documents demonstrating the project’s TEA qualifications.
In other cases, trying to demonstrate targeted employment area status is more uncertain, but with careful preparation, most EB-5 investors are successful. EB-5 investors can include the following forms of evidence in their I-526 petition to demonstrate to USCIS that the area of their EB-5 project qualifies as a TEA:
- Statistics on population and geographic data compiled by the Office of Management and Budget that indicate the region qualifies as a rural TEA
- Recent unemployment statistics sourced from the U.S. Bureau of Labor Statistics Local Area Unemployment Statistics (LAUS) office that indicate the region qualifies as a high-unemployment TEA
- Other third-party data and statistics that indicate the region has an unemployment rate 150% higher than the national average or fewer than 20,000 inhabitants
No matter what data an EB-5 investor uses to apply for targeted employment area designation, it must be credible and verifiable. When using data originating from a source other than the U.S. government, the EB-5 investor should demonstrate the credibility of the party, and in all cases, EB-5 investors should explain the methodology used and why it supports their claim for TEA designation.
TEA Projects at Regional Centers
Both direct and regional center EB-5 projects can qualify for TEA status, as long as they are in a targeted employment area. However, EB-5 projects associated with regional centers are more likely to be located in a TEA because regional centers specifically seek out the most attractive EB-5 projects to investors. The vast majority of EB-5 investors choose regional center EB-5 projects in targeted employment areas because they offer a wealth of investor benefits, including access to a lower minimum investment amount, lower immigration and financial risk, and the ability to count indirect and induced jobs toward the 10-job job creation requirement.