HomeBlogUncategorizedEB-5 Immigrant Investor Program 2019 Updates: What’s Changed?

EB-5 Immigrant Investor Program 2019 Updates: What’s Changed?

The Department of Homeland Security (DHS) and United States Citizenship and Immigration Services (USCIS) announced amendments to the EB-5 Immigrant Investor Program on July 24, 2019. These updates, which are formally called the EB-5 Modernization Rule, went into effect on November 21, 2019.

Important revisions to the EB-5 investment program include an increase to minimum investment amounts, a restructuring of targeted employment area (TEA) designations and the retaining of priority dates for certain EB-5 petitioners. The final rule also clarified how conditions on permanent residency can be removed and included small changes meant to streamline the application process.

Minimum EB-5 Investment Amounts Increased from $1 million to $1.8 million

As of November 21, 2019, EB-5 immigrant investors who invest in projects outside TEAs are now required to invest $1.8 million, up from $1 million, while investors in TEA-qualified projects are required to invest $900,000, up from $500,000.

For the first time since Congress created the EB-5 investment program in 1990, this minimum investment increase also accounts for inflation. The new rules lay out a plan for how minimum EB-5 investment amounts will be automatically adjusted for inflation every five years. The first such adjustment will take place in 2024.

The rule grandfathered in EB-5 immigrant investors who filed I-526 petitions before the changes went into effect on November 21, 2019. The increased minimum investment amounts do not affect these EB-5 petitioners.

Restructured Designation Process for TEAs

The DHS will now designate TEAs instead of individual states. This change was made to increase uniformity across the EB-5 investment program and reaffirms Congress’ desire to encourage investment in areas with the greatest economic need.

The application requirements for the two different types of TEA designations, either for high unemployment or ruralness, have similar processes. Both types of applications require the presentation of reliable and verifiable data to USCIS. The burden is on the applicant to prove either that an area is rural and does not fall within a metropolitan statistical area (MSA) or on the outskirts of an urban core, or that an area has an unemployment rate of 150% the national average. Possible sources of data applicants can provide include the Bureau of Labor Statistics or the United States Census Bureau.

An important reminder for both investors and developers is that an EB-5 project’s area must qualify as a TEA on or before the date of investment or I-526 filing. TEA data changes between when a petitioner places the investment in escrow and when the I-526 petition is filed could cause a target area to not qualify as a TEA.

USCIS also requires that a designated TEA area either possesses a single census tract where the new commercial enterprise (NCE) primarily does business or tracts directly adjacent to the primary tract for an EB-5 project to qualify. This change is meant to ensure that investments go to areas with the greatest economic need. Previously, census tracts could be combined, allowing areas to qualify as TEAs due to the counting of tracts outside or bordering the NCE’s primary area of operation.

Under these rule changes, some areas that were previously designated as TEAs will no longer qualify. This heightens the need for those involved in the EB-5 investment program to investigate prospective areas of investment as well as projects. A good resource is the free EB5AN TEA map.

Retained Priority Dates for EB-5 Petitioners

In certain situations, EB-5 petitioners can retain an approved EB-5 immigrant petition’s priority date. An EB-5 petitioner can then use this priority date for a subsequent EB-5 immigrant petition.

For instance, if the DHS terminated a regional center associated with an applicant’s original petition, that applicant would retain their original priority date if they needed to file a new petition. Likewise, if an applicant were required to submit a new petition due to material changes to parts of the qualifying investment based on altered business conditions, they would retain their original priority date. If an applicant files multiple petitions, they can also use the earliest qualifying petition’s priority date.

An important note is that petitioners can use priority dates only once. If a priority date is used by an applicant to obtain conditional permanent residence, that priority date is no longer available if the applicant submits another petition.

EB-5 investors will also not be able to retain a priority date if their immigrant petition was revoked due to either “fraud or a willful misrepresentation of a material fact” or if their approval was found to be predicated on a material error. Additionally, EB-5 investors cannot pass on priority dates to family members.

Retaining priority dates will be particularly useful when visa demand exceeds supply.

Changes to the Application Process

The rule updates explain how some derivative family members who already have lawful residency but are not included in the principal EB-5 applicant’s petition can have their residency’s conditions removed.

The new rule also includes revisions to the application process. Interviews can now occur at the office where the I-829 petition is being adjudicated or at the investor’s business or residence. The biometric data component has also been streamlined, making the issuing of green cards simpler and lowering the applicant’s cost.

To learn how the new rule may impact your EB-5 investment application, contact us today.

Below is an overview of the new changes, taken from Table 2, Summary of Changes and Impact of the Adopted Provisions, of the Federal Register:

TABLE 2: SUMMARY OF CHANGES AND IMPACT OF THE ADOPTED PROVISIONS
CURRENT POLICY ADOPTED CHANGE IMPACT
PRIORITY DATE RETENTION
Current DHS regulations do not permit investors to use the priority date of an immigrant petition approved for classification as an investor for a subsequently filed immigrant petition for the same classification. DHS will allow an EB-5 immigrant petitioner to use the priority date of an immigrant petition approved for classification as an investor for a subsequently filed immigrant petition for the same classification for which the petitioner qualifies, unless DHS revokes the petition’s approval for fraud or willful misrepresentation by the petitioner or revokes the petition for a material error. Benefits:

  • Makes visa allocation more predictable for investors with less possibility for large fluctuations in visa availability dates due to regional center termination.
  • Provides greater certainty and stability regarding the timing of eligibility for investors pursuing permanent residence in the U.S. and thus lessens the burden of unexpected changes in the underlying investment.
  • Provides more flexibility to investors to contribute to more viable investments, potentially reducing fraud and improving potential for job creation.

Costs:

  • None anticipated
INCREASES TO INVESTMENT AMOUNTS
The standard minimum investment amount has been $1 million since 1990 and has not kept pace with inflation – losing almost half its real value.

Further, the statute authorizes a reduction in the minimum investment amount when such investment is made in a TEA by up to 50 percent of the standard minimum investment amount. Since 1991, DHS regulations have set the TEA investment threshold at 50 percent of the minimum investment amount.

Similarly, DHS has not increased the minimum investment amount for investments made in a high employment area beyond the standard amount.

 DHS will account for inflation in the investment amount since the inception of the program. DHS will raise the minimum investment amount to $1.8 million to account for inflation through 2015 and includes a mechanism to automatically adjust the minimum investment amount based on the unadjusted CPIU every 5 years.

DHS will retain the TEA minimum investment amount at 50 percent of the standard amount. The minimum investment amount in a TEA will initially increase to $900,000.

DHS is not changing the equivalency between the standard minimum investment amount and those made in high employment areas. As such, DHS will set the minimum investment amounts in high employment areas to be $1.8 million and follow the same mechanism for future inflationary adjustments.

 Benefits:

  • Increases in investment amounts are necessary to keep pace with inflation and real value of investments;
  • Raising the investment amounts increases the amount invested by each investor and potentially increases the total amount invested under this program.
  • For regional centers, the higher investment amounts per investor will mean that fewer investors will have to be recruited to pool the requisite amount of capital for the project, so that searching and matching of investors to projects could be less costly.

Costs:

  • Some investors may be unable or unwilling to invest at the higher levels of investment.
  • There may be fewer jobs created if significantly fewer investors invest at the higher investment amounts.
  • For regional centers, the higher amounts could reduce the number of investors in the global pool and result in fewer investors, thus potentially making the search and matching of investors to projects more costly.
  • Potential reduced numbers of EB-5 investors could prevent certain projects from moving forward due to lack of requisite capital.
  • An increase in the investment amount could make foreign investor visa programs offered by other countries more attractive.
TEA DESIGNATIONS
A TEA is defined by statute as a rural area or an area that has experienced high unemployment (of at least 150 percent of the national average rate). Currently, investors demonstrate that their investments are in a high unemployment area in two ways:

1) providing evidence that the Metropolitan Statistical Area (MSA), the specific county within the MSA, or the county in which a city or town with a population of 20,000 or more is located, in which the new commercial enterprise is principally doing business, has experienced an average unemployment rate of at least 150 percent of the national average rate; or

2) submitting a letter from an authorized body of the government of the state in which the new commercial enterprise is located, which certifies that the geographic or political subdivision of the metropolitan statistical area or of the city or town with a population of 20,000 or more in which the enterprise is principally doing business has been designated a high unemployment area.

 DHS will eliminate state designation of high unemployment areas. DHS also amends the manner in which investors can demonstrate that their investments are in a high unemployment area.

1) DHS will add cities and towns with a population of 20,000 or more outside of MSAs as a specific and separate area that may qualify as a TEA based on high unemployment.

2) DHS will amend its regulations so that a TEA may consist of a census tract or contiguous census tracts in which the new commercial enterprise is principally doing business if

  • the new commercial enterprise is located in more than one census tract; and
  • the weighted average of the unemployment rate for the tract or tracts is at least 150 percent of the national average.

3) DHS will also amend its regulations so that a TEA may consist of an area comprising the census tract(s) in which the new commercial enterprise is principally doing business, including any and all adjacent tracts, if the weighted average of the unemployment rate for all included tracts is at least 150 percent of the national average.

 Benefits:

  • Rules out TEA configurations that rely on a large number of census tracts indirectly linked to the actual project tract by numerous degrees of separation.
  • Potential to better stimulate job growth in areas where unemployment rates are the highest, consistent with congressional intent.

Costs:

  • This TEA provision could cause some projects and investments to no longer qualify as being in high unemployment areas. DHS presents the potential number of projects and investments that could be affected in Table 5.
Current technical issues:

  • The current regulation does not clearly define the process by which derivatives may file a Form I-829 petition when they are not included on the principal’s petition.
  • Interviews for Form I-829 petitions are generally scheduled at the location of the new commercial enterprise.
  • The current regulations require an immigrant investor and his or her derivatives to report to a district office for processing of their permanent resident cards.
 DHS will amend its regulations to include the following technical changes:

  • Clarify the filing process for derivatives who are filing a Form I-829 petition separately from the immigrant investor.
  • Provide flexibility in determining the interview location related to the Form I-829 petition.
  • Amend the regulation by which the immigrant investor obtains the new permanent resident card after the approval of his or her Form I-829 petition because DHS captures biometric data at the time the immigrant investor and derivatives appear at an ASC for fingerprinting.
  • Add 8 CFR 204.6(n) to allow certain investors to remain eligible for the EB-5 classification if a project’s offering is amended or supplemented based upon the final rule’s effectiveness.

Conditions of Filing

Benefits:

  • Adds clarity and eliminates confusion for the process of derivatives who file separately from the principal immigrant investor.

Costs:

  • Total cost to applicants filing separately will be $91,023 annually.

Conditions of Interview

Benefits:

  • Interviews may be scheduled at the USCIS office having jurisdiction over either the immigrant investor’s commercial enterprise, the immigrant investor’s residence, or the location where the Form I-829 petition is being adjudicated, thus making the interview program more effective and reducing burdens on the immigrant investor.
  • Some petitioners will benefit by traveling shorter distances for interviews and thus see a cost savings in travel costs and opportunity costs of time for travel and interview time.

Costs:

  • None anticipated.

Investors Obtaining a Permanent Resident Card

Benefits:

  • Cost and time savings for applicants for biometric data.

Costs:

  • None anticipated.

Eligibility Following Changes to Offering

Benefits:

  • An amendment to a project’s offering based on the final rule’s provisions might not result in the denial or revocation of a petition.

Costs:

  • None anticipated.

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