{5:24 minutes to read} Article by Kevin Dowling

A significant portion of the visas issued under the EB-5 visa program have gone to investors who have invested using “Regional Centers.” The law which provides for Regional Centers was initially described as a “Pilot Program” when originally adopted in 2003, and has never been included in a permanent legislative provision. Instead, Congress has provided for renewals through temporary enactments, the latest of which expires this Sept. 30, 2015.

In the past, Congress has reauthorized the Pilot Program without making substantive changes, but this year things may be different.  This expectation is due in part to the change of control in Congress. For example, the new Chairman of the Senate Judiciary Committee is Charles Grassley, a Republican from Iowa, who has not been on record as being such a strong supporter of the EB-5 visa program.

Nevertheless, Grassley has been joined by the ranking Democrat on the Judiciary Committee, Patrick Leahy, in co-sponsoring a bill to extend the Pilot Program. However, if enacted, the bill would make significant changes in the entire EB-5 program.

This bill should have a good chance of passing in the Senate and seems to have some support from the Administration, although its prospects in the House, and therefore its chances of being enacted as is, are more difficult to gage.

Increase in Investment Amounts

The bill increases the investment amount required to obtain an EB-5 visa. Specifically, the amount of investment for a project in a “targeted economic area” (“TEA”) increases from $500,000 to $800,000 and for a non-TEA project, from $1 million to $1.2 million.

Targeted Economic Area Calculations

Another change which is in the bill is the methodology used to determine whether a given location is in a TEA.  In particular, there is a move away from determinations of TEA status being made by the states and toward USCIS having exclusive jurisdiction in making those decisions.

There is also discussion of precluding the use of multiple census tracts to construct a TEA, which is a procedure that has been widely used by many in urban and suburban areas. If adopted, the practical effect would likely be to substantially reduce the number of locations in urban areas and suburban areas that might be considered to be in TEAs. Presumably this would channel more of the EB-5 investments toward non-TEA projects which require the higher investment amount.

Source of Funds

Another considerable change that may occur is restrictions on acceptable sources of funds that petitioners may use to make an EB-5 investment.  For example, gifts, to be acceptable, may only be provided by donors who are immediate family members.  Equally loans will only be accepted if issued by a financial institution and not from an individual, a family member or a company. Currently, many investors borrow against their ownership interests in the companies which they wholly or partially own or obtain loans from friends, family members or colleagues.

Other changes which USCIS seems to be already implementing are to require that any loans be for a fixed term, bear an interest rate and require the borrower/investor to post acceptable collateral. CIS is also requiring independent verification from third parties such as employers and other entities, to prove the actual payment and amounts of salaries, wages, dividends, etc., to the person who is providing the funds.

Regional Centers

With regard to regional centers, the bill would require a pre-approval process before any investors file their individual petition, whereas currently that step is not required. This is likely to result in a longer period of time before the first investors get their green cards.  Regional centers would undergo heightened levels scrutiny and would have to pay a $20,000 annual fee to USCIS with the intention that it will fund a USCIS audit process.

It’s hard to know how much of all this will get adopted into law.  The end result might be that Congress could let the Pilot Program expire or simply roll over the existing law.  Most experts expect a renewal, but with substantive changes being made to the whole EB-5 Program.  Some or all of the changes discussed above are likely to feature in the renewal. Therefore, consulting with an expert in already complex EB-5 processes and laws will be even more crucial than it already was.

 

Kevin Dowling, Esq
Of Counsel

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