On June 27, 2019 it was posted that OMB had finished its review of the new EB-5 regulations proposed during the Obama-era back in January of 2017. The proposed regulations included raising the minimum investment amounts to $1.3 million and $1.8 million for TEA and non-TEA investments respectively.  This is widely believed to be the death nail to the EB-5 program as the minimum requirements would push the program out of reach for a vast majority of past participants.

What Does it Mean for EB-5 Investors today?

The review has been concluded but it is uncertain whether all the new regulations would be adopted as originally drafted or amended to different terms. We have no way of knowing what the final provisions will be until they are published publicly. What we do know is that the regulations and requirements for EB-5 will never be more friendly than they are today. There is not one favorable aspect of the new regulations that would justify an EB-5 investor to wait and think things “will get better”.  Act now if you have any desire to pursue EB-5 investments to obtain a greencard. 

What Do Prospective EB-5 Investors Do Now?

If you believe that EB-5 investment under “today’s” terms (Minimum $500,000 investment) is your best path toward a greencard, then you need to file an I-526 petition immediately and lock in your priority date. Even if you don’t have $500,000 available, you are able to file with a partial capital commitment into either our Graduate Student Housing Project or 1900 Broadway. Contact us now either on our chat desk or by making an appointment for details.

Behring is working 24/7 and offering full support to all investors to file I-526 petitions as soon as possible before this opportunity is gone forever.

Department of Homeland Security (Post from OMB)

AGENCY: DHS-USIS

RIN: 1615-AC07

STATUS: Concluded

TITLE: EB-5 Immigrant Investor Program Modernization

STAGE: Final Rule

ECONOMICALLY SIGNIFICANT: No

RECEIVED DATE: 02/22/2019

LEGAL DEADLINE: None

COMPLETED: 06/27/2019

COMPLETED ACTION: Consistent with Change

 

Full Review of the Proposed Regulations

(Source: EB-5 Insights)

On January 13, 2017, the Department of Homeland Security (“DHS”) published a Notice of Proposed Rulemaking Making (“NPRM”) seeking to amend the current EB-5 regulations.  As required by the Administrative Procedure Act, DHS has published the  NPRM in  the Federal Register for notice to the public and has given the public a three (3) month period to provide comments.  All public comments are due to DHS by April 11, 2017.   We previously summarizedthe NPRM; this blog takes a more in depth look at the proposed new regulations.

The new regulations have been expected for quite some time from the Department.  Generally, the NPRM covers several areas, including: (1) priority date retention for approved I-526 Petitions; (2) an increase to the minimum investment amounts required for EB-5; (3) modifications to how targeted employment areas (“TEAs”) are determined and designated; and (4) other clarifications to the EB-5 program.

Priority Date Retention

The NPRM brings the concept of priority date retention to the EB-5 program; it has long been available in other categories of business immigration.  A priority date is the date on which the I-526 Petition is received at the U.S. Citizenship and immigration Services (“USCIS”) for processing (i.e. the filing date).  In an era of visa retrogression where demand for EB-5 green cards exceeds the annual allotment of EB-5 green cards, an earlier priority date is more advantageous than a later one, as the priority date establishes the investor’s place in line to obtain conditional permanent residence.

DHS is proposing to allow an investor to retain an earlier priority date from a previously approved I-526 Petition.  If an investor needs to file a new I-526 petition due to a material change in his or her investment, or if USCIS terminates the regional center from the initial investment, retaining an earlier priority date from a previously approved petition will be very advantageous and may save the investor years of waiting to obtain a new conditional green card.

It should be noted that a priority date cannot be retained if the original I-526 Petition was revoked by USCIS due to fraud or misrepresentation or USCIS material error.  Moreover, the priority date cannot be transferred to another investor.  Consequently, an investor cannot transfer his or her priority date to another family member if the family chooses to switch members acting as the principal investor.  For example, a parent born in Mainland China fearing that his or her child may “age out” and become ineligible for immigration benefits cannot transfer his or her priority date to a child if the parent now seeks to make the child the investor and the child files a new I-526 Petition with USCIS.

Increased Investment Amount

DHS is proposing to increase the minimum investment amount for both TEA and non-TEA investments to “ensure that program requirements reflect the present-day dollar value of the investment amounts established by Congress in 1990,” as stated by DHS.  To that end, DHS seeks to raise the minimum investment amount to $1.35 million for EB-5 projects located in a TEA and to $1.8 million for EB-5 projects that are not located in a TEA.  This change would represent an adjustment for inflation from 1990 to 2015 as measured by the unadjusted Consumer Price Index for All Urban Consumers (CPI-U).

Many stakeholders had expected, and feared, an increase to the minimum investment amounts for EB-5 for some time.  Several bills were introduced in the 114th Congress  seeking to increase the investment amount required for EB-5; however, none were passed.  Additionally, several of the legislative proposals sought to retroactively apply the increased investment amount to investors who previously had filed an I-526 Petition with USCIS.

Importantly, it seems that the NPRM does not seek to retroactively apply the new increased investment amount to investors that have filed their I-526 petitions with USCIS.  However, the final rule will need to be clarified with respect to transition and grandfathering.  The proposed rule states that the increased investment amount will only be required for those I-526 Petitions filed by investors on or after the effective date of the new regulations.  That effective date is not yet known, but given that public comments are due on April 11, 2017 and USCIS will likely take many months to review and analyze the public comments (at least 90-120) days) and then  incorporate any changes from those comments into the new regulations, it is likely that the effective date will not be until sometime in the summer of 2017 or later.  It is also very possible that DHS will decide not to proceed with the NPRM, as there will be a new administration overseeing and directing DHS/USCIS as of January 20, 2017.

TEA Determinations

DHS notes in the NPRM that almost all EB-5 Petitions filed with USCIS are for projects or new commercial enterprises located within a TEA.  Much like the increased investment amount, reforming the TEA designation process was another frequent issue raised in the EB-5 reform bills considered by Congress over the past two (2) years and considered during Judiciary Committee Hearings.  With the NPRM, DHS does several notable things: (1) modifies the definition of TEAs to have a consistent national standard; and (2) remove the states from the TEA designation process and vests USCIS with sole power to designate TEAs.

DHS is proposing to amend the definition of “rural area” to mean any area other than an area within a metropolitan statistical area (“MSA”) or within the outer boundary of any city or town having a population of 20,000 or more based on the most recent decennial census of the United States.  High unemployment TEAs are now defined as any of the following that have at least 150% of the national unemployment rate: (1) a Metropolitan Statistical Area (“MSA); (2) a county; (3) a city or town with a population of more than 20,000; (4) a census tract; or (5) a group of contiguous census tracts.  If the MSA, county, city/town, and individual census tract do not meet at least 150% of the national unemployment rate, a TEA still can be designated by looking at a group of census tracts.  Previously, many states designated TEAs using a grouping of contiguous census tracts, with the average unemployment rate determined by taking the normal average of each census tract.  Additionally, many states put no numerical limitation on the amount of census tracts that could be aggregated to make a high unemployment TEA.

The NPRM, however, limits the amount of census tracts that can be used.  Specifically, the EB-5 project can look to the census tract(s) where the project is located.  From there, the EB-5 project also can include the surrounding census tracts that are immediately adjacent to the census tract(s) where the project is located.  Thus, DHS has not numerically limited the amount of census tracts that can be aggregated to make a TEA area as some states, such as California, have done previously.  Instead, DHS chose to geographically limit the census tracts to only those immediately adjacent to the tract(s) in which the project is located.

Moreover, USCIS now will use a weighted average when determining the unemployment rate for the grouping of census tracts instead of using the normal average.  To do this, USCIS will divide the labor force data for the census tract by the total labor force data for the grouping of census tracts, and then multiply it by the unemployment rate for that census tract.  By using a weighted average in this manner, DHS may be seeking to curtail the use of census tracts with high unemployment with little population to obtain a high unemployment rate TEA designation.  DHS has stated they believe using the weighted average mirrors the Congressional intent of the statute that allows for high unemployment TEAs.

Finally, states will no longer have the ability to designate high unemployment rate TEAs.  Instead, USCIS will make the designation using the standards outlined above and in the NPRM.  What is not clear from the NPRM is whether there will be any ability for designations to be made prior to I-526 Petition or I-924 Application adjudication.  Thus, it seems impossible for an EB-5 petitioner or project to obtain a high unemployment rate TEA designation in advance of filings with USCIS.

Miscellaneous Provisions

There are several other miscellaneous provisions in the NPRM.  First, the NPRM allows derivative applicants (spouses and children of the investor) to file an I-829 Petition on their own if the investor is unable or unwilling to file the I-829 Petition, assuming that the investor was otherwise eligible to have the conditions removed on permanent residence.  While the regulations previously allowed for dependents to file their own I-829 Petition if the investor is deceased or if the spouse is divorced from the investor, the NPRM seemingly expands this to include situations where the investor is simply not willing to file the I-829 Petition.  Interestingly, this may protect dependents where the investor has abandoned his or her conditional permanent residence, but this will need to be clarified through the notice and comment process.

Finally, DHS is amending the “active management role” requirement of the regulations, which previously required investors to have an active role in the investment, either through day-to-day management or policy formulation rights.  DHS recognizes that investors, particularly in a pooled investment vehicle, may have minimal policy formulation rights in the new commercial enterprise, and that a mostly passive role is sufficient to meet the requirement.