EB-5 Regional Centers: An Indispensable Economic Development Tool in the 21st Century


The EB-5 Regional Center Program (the “Program”) is responsible for tens of billions of dollars in capital investments and tens of thousands of American jobs. It is critical for lawmakers to understand the detrimental consequences to the U.S. economy if they allow EB-5 to lapse or expire.


From 2005 to 2015, over $15 billion in foreign direct investment (“FDI”) flowed into the U.S. from across the world thanks to the EB-5 Regional Center Program. During this time, and especially in the years that followed the Great Recession, the Program became a potent economic development tool for diverse communities and industries across the country. More than $14 billion of the $15-plus billion (or 93%) in EB-5 capital was invested in the U.S. in the years following the financial crisis of 2008.

Today, the EB-5 regional center industry needs to lead the stakeholder community in educating the government, media, and public about the important work going on across the country due to the Program—creating vital American jobs at no cost to taxpayers.  It is essential that the EB-5 regional center industry work toward reform, improvement and reauthorization of the Program to achieve a more efficient and sustainable program for the future and to ensure it can continue, without a lapse, to provide investment and jobs to American communities, both big and small.
Thanks to our shared success in building this multi-billion dollar EB-5 capital market, regional centers will play an integral role in the U.S. economy for years to come.

$18 Billion Reasons EB-5 Must Continue

As the EB-5 regional center industry debates reform measures to include in reauthorization legislation, it is important that we understand the real world consequences of letting the Program expire, something some key lawmakers have publicly stated should happen. The industry knows that any outcome that results in a program lapse or expiration would be a disaster for the U.S. economy with lingering and irreversible damage.

A lapse in the Program would mean that more than $18 billion in FDI (12% of U.S. FDI in 2015) that is already injected or waiting to be injected into the economy through EB-5 projects would be thrown into chaos—along with tens of billions of dollars in other project financing that is leveraged and reliant on the finance structure of EB-5 capital projects. Based on guidance from the federal government, investors with petitions already in the process would no longer have statutory basis for adjudication under the rules that governed the Program at the time of filing.
Without the Program, investors will have no grounds for I-829 adjudication and will be left hanging in the balance, their petitions suspended in bureaucratic purgatory. Funding for affected projects would be halted and the U.S. would watch litigation destroy the potential for EB-5 capital to support hundreds of thousands of American jobs.

Actions to Improve EB-5 Program Integrity

Program integrity is a priority for Congress, as seen in various bipartisan bills. Some measures include background checks for regional center owners, banning participation by certain convicted criminals, forbidding foreign ownership of a regional center and addressing national security concerns related to EB-5. Overwhelmingly, the entire industry supports improved integrity measures to weed out the fraudsters, cheats and criminals while allowing the rest of the industry to contribute to the American economy through job creation and economic development. EB-5 is on the White House’s “unified regulatory agenda” to update the Program’s regulations for the first time since the early 1990s and this will occur as USCIS enhances its capabilities protecting program integrity.

In the last few years, IIUSA has worked tirelessly to develop meaningful self-regulatory processes that hold its members and the industry to the highest standards of ethical business practices. IIUSA has a long history of supporting reforms that would improve program integrity, including those proposed by the legislative and executive branches. Following a process of constructive engagement and comprise, legislation that includes integrity measures are now under consideration as a single and broadly supported reform and reauthorization bill.

Code of Ethics and Best Practices

Since 2014, IIUSA’s membership has approved five new and updated several other best practices documents that strive to hold its members and the industry to the highest standards possible. This includes the Code of Ethics and Standards for Professional Conduct, which was approved along with an enforcement procedures process which include a vehicle to file complaints against bad actors. IIUSA also has recommended best practices for regional centers, anti-money laundering/know your customer efforts, engaging with sales intermediaries, and a securities law white paper. These, combined with the Code of Ethics and enforcement procedures, set a high bar for how the industry is expected to operate. Lastly, IIUSA keeps the industry informed of essential intelligence on compliance, market dynamics, and ever-evolving best practices through various education offerings.  Long story short, EB-5 is not a spectator sport.


‘Mend It, Not End It’

The pieces of the puzzle are on the table and many of them are already in place for EB-5 reauthorization and reform.  As many supporters in the Senate stated in an EB-5 hearing earlier this year, Congress must “mend it, not end it.” During this hearing, we learned about the implications of even a short lapse in program authorization, something that would cost the U.S. economy billions of dollars—a shock the financial system cannot afford and one that would launch a litigation frenzy in which everyone loses. The onus is on the industry to use our collective voice to spur Congress to reform and reauthorize this vital part of the post-recession economy in the U.S.
Years of success, advocacy, experience and relationship building have led us to this moment. The EB-5 industry and Congress are in an optimal place to negotiate durable reform that results in a stronger, more efficient EB-5 program.  The message for all of us to carry is simple: the EB-5 regional center program must be reauthorized without a lapse or countless communities, regional centers, and investors will face desperate times and years of protracted, expensive court proceedings.

Author: Peter D. Joseph, Executive Director, IIUSA


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