Policy Issues

EB-5 Investor Program

ISSUE

Congress created the EB-5 regional center program in 1992 to stimulate economic development projects in the United States by attracting capital from foreign investors to our shores. After substantial vetting of eligible projects, potential investors, and their sources of capital, foreign nationals may obtain a green card under the fifth employment-based visa category (that is, “EB-5”). The investment capital must be at risk and create at least 10 jobs for American workers. EB-5 visas provide foreign investors with legal residency, but not citizenship, in the U.S.

The nationwide economic impacts that flow from the EB-5 program are considerable. According to a March 2019 study, from FY’2014-2015, the Regional Center program attracted $10.98 billion of foreign capital investments to projects throughout the U.S., and supported more than 355,000 U.S. jobs – roughly 6 percent of all job gains over that period.

The EB-5 regional center program is scheduled to expire on September 30, 2019 – unless Congress takes action to extend it on or before that date. The program’s extension, while not guaranteed, is expected. Congress has provided short-term EB-5 extension (lasting only months at a time) on almost 20 occasions since September 2015.

These numerous, short-term Congressional extensions without lasting legislative reforms are a key reason why the regional center program has become de-stabilized. Prolonged visa “backlogs” and wait-times have slowed in-bound investments considerably in recent years – compared to the robust EB-5 capital market that emerged following the Great Recession’s liquidity crisis in traditional bank lending and lasting at least through the middle of this decade.

Recent regulations finalized by the U.S. Customs and Immigration Service (USCIS) are scheduled to take effect on November 21, 2019, assuming Congress extends the program by September 30, 2019 and does not enact legislative reforms that supersede the agency’s rule. USCIS’s new rule will greatly increase the levels of required investments to qualify for EB-5 visas. The new rule will also change definitions for “Rural” and “High Unemployment” Targeted Employment Areas (“TEAs”) that may attract capital at lower investment levels. Specifically, the new USCIS rule would raise TEA investment levels from $500,000 to $900,000 (TEA projects); and from $1 million to $1.8 million (non-TEA projects).

Position

Action from Congress is long overdue to reform the EB-5 Regional Center Program. The cycle of short-term “clean” extensions should stop. Congress should stabilize the program with multi-year reforms that deter investor fraud, maximize national security safeguards, and fairly balance geographic- and market- distribution so that rural and urban areas alike can fairly compete for EB-5 capital. In addition, legislative reforms must shorten the chronic backlog in EB-5 visa availability to attract foreign capital from our allies to our shores and drive job creation for American workers.

Background

A broad coalition of EB-5 stakeholders – including groups such as the EB-5 Investment Coalition, Invest in the USA (IIUSA), The Real Estate Roundtable, the Rural Alliance, and the U.S. Chamber of Commerce – have urged Congress to enact comprehensive EB-5 reforms that include the following:

“Integrity Measures” to bolster national security and fraud deterrence, such as: enhanced authority for the Department of Homeland Security to obtain biometric information from person involved with EB-5 regional centers; and establishment of an “EB-5 Integrity Fund” paid for by program participants for project site visits by DHS investigators;
Expanded TEA definitions to define more areas as “Rural,” and synchronize economically distressed urban TEAs with “Opportunity Zones” designated by the U.S. Treasury Department;
Robust visa “set asides” so investors in Rural and Urban Distressed projects can get their green cards quicker than other EB-5 petitioners, along with automatic expedited visa processing for these TEA investors;
Substantial increases of investments amounts to $800,000 (TEAs) and $900,000 (non-TEAs), so both levels of the EB-5 market can function – with a one-year, stepped-up period for all investments at a uniform $650,000 level to transition to new requirements; and
Payment of an optional “backlog reduction fee” to hasten EB-5 visa availability, as an additional revenue source for Congress to devote to other programs it deems in the nation’s interest.

EB-5 LINKS:

EB-5 Nationwide Economic Impact Study (March 13, 2019)
Rural-Urban Stakeholder Letter Urging Congressional EB-5 Reform (May 17, 2019)
EB-5 Economic Impact Map (prepared by Invest in the USA [IIUSA])
U.S. Customs and Immigration Service (USCIS) EB-5 Regulation (effective November 21, 2019)