Since 1992, two years after the dawn of the EB-5 Immigrant Investor Program, the regional center route of the EB-5 investment journey has been the preferred pathway to the United States for foreign nationals. The EB-5 Regional Center Program’s popularity is attributable to a number of factors, including the following:
- the relative security of making an EB-5 investment through an approved EB-5 regional center with experienced business, investment, and EB-5 professionals
- the freedom associated with not needing to be involved in day-to-day management at the new commercial enterprise (NCE), allowing investors to, for example, make an EB5 investment in a project in Florida but set up home in Oregon
- relaxed job creation requirements that allow investors to count indirect and induced jobs, instead of just direct jobs, toward the minimum 10 jobs their EB5 investment must create
Given the obvious advantages of EB-5 regional center investment, it has become the clear favorite, with most EB-5 investment participants opting for the regional center route. However, regional center investments face one uncertainty that those who invest directly in an NCE bypass: the possibility of termination of the EB-5 Regional Center Program.
The History of EB-5 Regional Center Program Reauthorizations
The problem with the EB-5 Regional Center Program is that it is not a permanent U.S. government program, leaving open the possibility of termination without warning. Considering that the EB-5 Regional Center Program funnels billions of foreign capital directly into new U.S. businesses, generally in rural or high-unemployment areas in need of economic stimulation (also known as targeted employment areas, or TEAs), a sudden termination of the program is almost unthinkable. Nonetheless, while EB-5 investment participants and stakeholders act on the assumption that it will be continually reauthorized, the EB-5 world must acknowledge the possibility, however slim, of an abrupt sunset of the program.
Congress introduced the EB-5 Regional Center Program in 1992, two years after the creation of the EB-5 program itself. It was initially approved for five years until 1997, undergoing periodic reauthorization, typically of a few years at a time, until 2015. Matters then took a turn toward chaos, with the appropriations process leading to short-term reauthorizations of just a few months at a time. Bundled in with a myriad of other government funding bills and immigration programs, the EB-5 Regional Center Program fell victim to bureaucratic inefficiency, with deliberations on other programs impacting the reauthorization of the lucrative Regional Center Program.
As of January 2021, the latest EB-5 Regional Center Program sunset date suggests Congress may be gearing up to consider the program independently. Since 2015, the program has typically been reauthorized for only a few months or until the next September 30, which marks the end of the fiscal year. With the most recent reauthorization announced in December 2020, the EB-5 Regional Center Program is set to expire on June 30, 2021, separating it from the rest of the programs in the appropriations bill. Time will tell how Congress treats the program going forward.
What Would Happen If the EB-5 Regional Center Program Were Terminated?
The uncertainty of Congress’s sporadic extensions of the EB-5 Regional Center Program begs the question of what would happen in the event of sudden termination. The EB-5 world has faced this question before, such as in 2012, when a three-year authorization period was coming to an end and EB-5 investment participants were not yet accustomed to constant extensions. When the issue was raised in a January 2012 stakeholder meeting, United States Citizenship and Immigration Services (USCIS) sidestepped the question, responding merely that it did not have a response at the time and would address the matter when and if it occurred.
Clearly dissatisfied with UCSIS’s non-answer in January, EB5 investment stakeholders brought the question back in a May 2012 stakeholder meeting, this time receiving a more detailed—although still vague—response. USCIS explained that all regional center designations would automatically expire (i.e., all EB-5 regional centers would automatically be terminated) and USCIS would no longer possess the authority to issue new regional center designation.
The clear lack of policy regarding a possible sunset of the EB-5 Regional Center Program should be construed positively—it suggests Congress has no intention of terminating the popular EB5 investment route. Undoubtedly, if the EB-5 Regional Center Program were terminated, the United States would lose out on billions in foreign investment capital, and lawsuits from disgruntled foreign investors whose pathway to a permanent life in the United States was suddenly pulled out from under them could begin to pile up. That’s not to mention regional center operators and lobbyists, who rally passionately to maintain the popular EB-5 investment pathway, as well as supportive politicians such as Lindsey Graham (R-SC).
IIUSA Government Affairs Webinar
On the subject of government affairs and how they may affect the EB-5 program, industry association group Invest in the USA (IIUSA) is holding a free webinar on February 3, 2021. Interested EB-5 stakeholders should consider attending and even emailing questions in advance to email@example.com. The webinar will cover, among other topics, updates to legislation, the EB-5 reform bill proposed by Senators Grassley and Leahy, ongoing litigation related to the Freedom of Information Act, and the June 30 sunset date of the EB-5 Regional Center Program.