United States: EB-5 Reauthorization and Other Program Changes
Published: 16 March 2022
On March 15, 2022, the President signed into law H.R. 2471, which included, among other things, the EB-5 Reform and Integrity Act of 2022. This Act reauthorizes the EB-5 Regional Center Program, with significant changes; increases the minimum investment amount to $800,000 for investments in a high unemployment area, a rural area or an infrastructure project, and to $1,050,000 elsewhere; changes the way high unemployment areas are designated; and provides continued eligibility for regional center investors who invested prior to July 1, 2021. It also creates brand-new visa set asides for rural projects, TEA projects, and infrastructure projects.
What it means:
Starting in 60 days, regional centers will be able to file applications for new or existing EB-5 projects with updated business plans and investment documents. Once the regional center application is filed, new investors can file new I-526 petitions. Investors that file I-526 petitions prior to September 30, 2026, are protected from any future lapse of the regional center program. They will be able to continue the process even if the program expires on its next sunset date- September 30, 2027.
Current EB-5 Regional Center investors will be eligible to continue their immigration process. Investors with pending I-526 or I-829 petitions are immediately eligible to have those petitions adjudicated under the law. However, see our discussion below concerning processing times.
Existing non-regional center investors continue to be eligible for EB-5 visas under the prior investment amount and TEA rules. They are largely unaffected, other than potential visa backlogs and processing delays.
EB-5 Regional Center investors with pending Adjustment of status applications or visa applications will be eligible to have those applications adjudicated and visas issued. While we believe that the law provides for this immediately, USCIS and the Department of State may take the position that existing regional center investors will have to wait 60 days for visas to become available.
Current EB-5 investors will be able to file applications for an adjustment of status if they are in the U.S. and there is a visa available to them (i.e. not subject to a backlog). Please keep in mind, if the government takes the position that visas are not available for existing regional center investors for 60 days, investors will have to wait to file. Potential effects of visa backlogs and availability are discussed further below.
Investors from today forward will have to invest a minimum of $800,000 or $1,050,000. Investors in rural areas, USCIS designated high unemployment areas or infrastructure projects administered by a government agency get to invest at the lower amount.
The definition of a Rural Area is largely unchanged, and includes an area outside of any metropolitan statistical area and any city or town with a population of 20,000 or more.
A high unemployment area (Targeted Employment Area or TEA) consisting of one or more contiguous census tracts in which a new commercial enterprise is principally doing business and any adjacent census tracts may be designated by the Secretary of Homeland Security or his or her designee if the area has 150% of the national unemployment rate. A TEA designation is valid for 2 years, and an investor does not have to invest more money if the TEA does not qualify as a TEA after the 2 years. This is different than the previous TEA provisions, which allowed a state to designate a TEA based on a virtually unlimited number of contiguous census tracts.
The law creates a set-aside of 20% of available visas for rural projects; 10% for TEA projects, and 2% for infrastructure projects. These come out of the approximately 10,000 annual allocations for EB-5. Notably, investors from currently backlogged countries who invest in a rural project, TEA project or infrastructure project appear able to skip to the front of the line. This means a new investor from China who invests in a rural, TEA, or infrastructure project may be able to get a visa sooner than an investor from China who invested in 2015. Although this certainly seems unfair to the investors who have followed the rules and waited patiently for years, it is likely to mean increased demand for these projects in the short term.
Children of investors who turn 21 after the original petition is approved remain “children” for the purposes of a single, new immigrant petition filed by the parents if their I-829 is denied.
Regional centers are now subject to extensive disclosure and certification requirements and face enhanced compliance and reporting. The new requirements are lengthy and complex, and will be discussed in depth in upcoming publications.
Regional centers may still use reasonable economic methodologies to predict job creation, but only 90% of jobs can be indirect jobs. Ten percent of the jobs created by a regional center project must be direct jobs. If the job creation results from construction and the construction lasts less than 2 years, only 75% of the indirect jobs, minus the fraction of jobs equal to the fraction of two years that the project is short of a two-year duration can be counted. For example, if construction is only one year, a project could only count 50% of the 75% of jobs.
Investors wishing to pool their investments into a single business now need to do so through a regional center. The so called “pooled direct” model is no longer available for investors who file petitions after the enactment of the bill. Investors that previously invested in pooled direct projects will continue to be eligible to have their petitions approved.
The law sets new fees for petitions- an additional $1,000 per petition- and regional center annual filings- $10,000 or $20,000, and requires USCIS to conduct a fee study to determine the fees necessary to process EB-5 petitions and applications within 90 to 270 days.
The law provides some protection for investors in troubled projects. An investor in a regional center, new commercial enterprise, or job-creating enterprise whose participation in the regional center program is terminated by USCIS will have an opportunity to affiliate with a new regional center, NCE or JCE, and invest additional money to meet the job creation requirements. This allows investors who have had the misfortune of being involved in fraudulent projects the opportunity to continue the immigration process.
The law creates an EB-5 integrity fund, and requires USCIS to use it for overseas investigations and other fraud detection and compliance-related activities. This money is NOT intended to help improve processing times. It is investigative in nature. When a government agency has money it must spend on investigations, we worry that spending the money, rather than achieving the goal of the investigations, will be the motivating factor. This may potentially slow processing times.
The law allows the Secretary of DHS to determine the order and priority of processing EB-5 petitions. Petitions for investors in rural projects are to receive priority. Needless to say, with USCIS’ abysmal track record on processing times, this provision concerns us. However, Congress has indicated that it expects USCIS to set fees sufficient to enable efficient and timely processing of petitions.
Open questions:
Many of our clients are already asking when they will see action on their petitions or applications. The truth is, we don’t know yet. We believe that USCIS reassigned many or most of its EB-5 adjudicators, and it will take time to get them assigned back to EB-5 and trained on the new rules. On top of this, although the law specifically states that USCIS shall continue to process cases while it implements this legislation, we do not know if USCIS is going to take the position that all regional center petitions, including those filed before July 1, 2021, have to wait 60 days. Similarly, although we believe the law makes visas immediately available to existing regional center investors, USCIS and the Department of State may take the position that visas are not available for 60 days.
Will existing regional centers have to file new applications for designation or annual certifications to continue to do business? The law is not clear about the effect of a current designation and whether it is sufficient under the new rules. With a filing fee of $17,795, there is certainly temptation for USCIS to require new applications.
What is the impact on investors from China and other backlogged or soon-to-be backlogged countries? If roughly 3,000 visas are subtracted from the annual limit for rural, TEA, and infrastructure projects, will wait times go up? The good news is there may be extra visas available in FY2022 due to unused family-based visas from FY 2021 as a result of delays in issuing visas caused by COVID-19. The Department of State estimates that there are approximately 9,000 extra visas available to EB-5 in FY 2022 (which are likely to disappear if not used by September 30, 2022).[1] So, although approximately 3,000 visas will be taken out of the main queue, up to 9,000 may be added back in. Thus, in the first year, the effect is negligible. Unused TEA, Rural and infrastructure visas roll over into the next fiscal year in the same categories, but if unused in the next fiscal year, roll over into the general EB-5 pool. Thus, it is likely that some of the rural visas will remain unused and become available to the general pool in FY 2024. As a result, it is hard to predict what effect the new set asides will have on existing investors.
Conclusion
We are happy that the regional center program has finally been reauthorized and our many, many clients and their families who invested in good faith, filed their petitions, followed all the rules, and waited patiently will finally have a chance to complete their immigration process. However, the new law is highly complex and not always clear. We are hopeful that USCIS will provide meaningful interim guidance while it creates implementing regulations. We further hope that USCIS will implement the new law in a fair, transparent, efficient, and most importantly, timely manner.
Please check back often as we will be providing regular updates and various opportunities for our clients to learn more and ask questions.
[1] This is an unofficial agency estimate. See https://travel.state.gov/content/travel/en/legal/visa-law0/visa-statistics/immigrant-visa-statistics.html (Annual Numerical Limits for Fiscal Year 2022).
