U.S. EB-5 Program May Be Changing

The U.S. EB-5 green card by investment program is on the verge of the most significant legislative changes in more than two decades.

Established in 1990, the program has been virtually unchanged for more than two decades.  The central focus of the program is job creation – the foreign national’s investment must create 10 jobs for U.S. citizens or permanent residents.

There are two types of EB-5 investments – direct and regional center.  The direct program is for an investor starting his own business.  The result of the investment must be 10 new full-time employees.

The regional center program involves an investment in a project created by a developer, such as a hotel, health care facility or residential project.  The investor generally does not play an active management role.  For regional center projects, jobs created indirectly by the investment – such as construction jobs – can be counted.

The regional center program, which constitutes about 90% of the all of the EB-5 investors, is a temporary program that has been renewed on many occasions.  However, the latest extension was for less than three months through December 11, as compared to previous extensions that have generally been three years at a time.  The reason is that the U.S. Congress is debating various amendments to the program that are likely pre-conditions to a longer term extension.  If passed, the amendments would include an increase in investment amount from the present $500,000 (or $1 million in certain geographical areas) to $800,000 (or $1,200,000 in non‑targeted areas).  Perhaps the most significant impediment to passage of legislation is a heated debate between rural state senators and urban state senators, the former wanting the legislation to incentivize investments in rural areas and the latter wanting to continue the present program that has resulted in significant investments in projects in urban areas.

Also in contention is the issue of effective dates.  Some in Congressional leadership want to make the effective date retroactive, which would be highly controversial and would greatly prejudice investors who invested their money under the present rules.

Although, as of the present date, it is possible that major legislation will be signed into law before the present expiration of December 11, it is more likely that there will be another extension of one year or less. As part of that extension, leadership in the House and Senate will likely insist on inclusion of certain “integrity measures” to insulate the program from fraudulent developers, threats to national security and regional center owners and developers with criminal or securities violations in their backgrounds.  If that happens, 2016 will likely be the pivotal year for substantive changes in the program.

Author: H. Ronald Klasko Esq., Managing Partner, Klasko Immigration, Law Partners, LLP

www.klaskolaw.com