Last week Tuesday and Wednesday, February 2nd and 3rd, Congress held hearings on proposed changes to the United States’ Visa-Investor program, EB-5.
The popular program was launched by Congress in 1990, as part of the omnibus Immigration Act of that year. Essentially, the program’s purpose is intended to stimulate and strengthen the economy by giving foreign businesspeople a pathway to permanent residency and eventual citizenship in exchange for a significant investment, in the form of a business venture. The program has grown in the ensuing decades but not without controversy, including numerous allegations of fraud and other impropriety – leading to several overhauls in that time, in the 1990s and 2000s. The last set of official changes made to the program were in 2009 where processing of applications were centralized in the California Service. It should be underlined that the program is not permanent; however, it has consistently been reauthorized.
Nevertheless, a number of important players in the making of U.S. Immigration policy, including the Secretary of the Department of Homeland Security, and several members of the Senate Judiciary Committee, have refocused our collective attention on persistent problems with the program.
The Congressional hearings discussed changes intended by the “EB-5 Integrity Act of 2015”, which include scrutiny and modification of: Investment Amounts, Targeted Employment Area Definitions, Job Creation Requirements, Processing Changes, Documentation Requirements, Source of Fund Criteria, and Regional Center Oversight and Compliance. A possible counter-point though – in exchange for many of these prospective changes aimed at reigning-in ongoing problems with the program, the proposed Senate Bill would actually make the program permanent, eliminating the Congressional reauthorization.
The current iteration of the authorized EB-5 program has the following general requirements:
1) $500,000 for investments in a Targeted Employment Area (TEA) – either rural or high employment.
2) $1,000,000 for non-TEA investments.
3) Creation and maintenance of at least 10 full-time jobs for qualifying U.S. workers within 2 years.
As a practical matter, the vast majority (some 90%) of EB-5 investors utilize intermediaries designated as Regional Centers. To make a rough (and I hope not too crude) an analogy, these Regional Centers are like hedge fund managers or investment bankers, who work with the prospective investor to fine-tune and submit a proposed business plan or prospectus.
The proposed changes are widely considered to implicate significant and impactful changes to the program, including the number of interested and/or successful applicants. The application process is long, complex, and document-intensive. Persons considering the program are invariably advised to consult and utilize qualified attorneys. This would especially be the case if any of the proposed changes are legislated.