Longstanding EB-5 Visa Program Undergoes Significant Changes

As of November 21, 2019, the United States EB-5 immigrant visa, employment-based fifth preference category, or EB-5 Immigrant Investor Visa Program, will be revised for the first time since its 1990 enactment. The revisions, promoted as modernization, stem from no congressional or statutory revision of the 1990 law but instead from the Secretary of Homeland Security's authority to revise regulations that “ensure the overall economic security of the United States.”

For nearly three decades, the EB-5 program has raised billions of dollars in capital for U.S. companies that create U.S. jobs in high unemployment or rural areas of the U.S. In exchange for a multiyear, risk-prone path to becoming lawful permanent residents, foreign nationals invest at least $500,000, or $900,000 after November 21, 2019, to capitalize U.S. businesses that will employ at least 10 new U.S. full-time workers. Most such investments are made in businesses located within targeted employment areas with high unemployment, otherwise known as “TEAs,” or rural areas. Such targeted investments lower the investment threshold to $500,000 (or $900,000 after November 21, 2019). Outside of rural areas or TEAs, the foreign national must invest at least $1 million – a number that will rise to $1.8 million after November 21, 2019.

Below is a summary of the significant changes that will affect the EB-5 program as of November 21, 2019:

1. Higher Investment Amounts: The Secretary of Homeland Security’s rule changes increase TEA or rural area investments from $500,000 to $900,000, and non-targeted EB-5 investment amounts correspondingly increase from $1 million to $1.8 million. The final rule also anticipates that future inflationary increases in investment mandates will occur every five years.

2. Priority Date Retention: Because of the adverse consequences that befall many EB-5 investors who are defrauded by EB-5 regional centers, or whose EB-5 investments fail to create the requisite jobs, USCIS will allow an investor’s second qualifying investment, as reflected in a second EB-5 application, to benefit from the priority date (filing date) of the first EB-5 petition. Such priority date retention will expedite processing of the subsequently filed EB-5 petition and preserve EB-5 benefits for children of investors who would otherwise attain 21 years of age, the maximum age an investor’s children may attain and still derivatively benefit from the EB-5 investment.

3. TEA Designations: To address persistent complaints that the designation of what constitutes a TEA is too malleable and not genuinely related to an area’s high unemployment, the new TEA definitions mandate that only USCIS, not state or local governments, will determine what constitutes a TEA. In designating a geographic area as a TEA, USCIS will rely on a combination of census tracts that include the tract or contiguous tracts in which the investment’s job-creating enterprise is principally doing business, including any or all directly adjacent census tracts. If a city or town not contained within a metropolitan statistical area has a population of 20,000 or more and has experienced an average unemployment rate of at least 150% of the national average unemployment rate, such cities or towns will automatically qualify as TEAs.