The Immigration Act of 1990 sets the parameters of the EB-5 program, including the goal of creating jobs within targeted employment areas (TEAs) and the provision for a lesser financial commitment by EB-5 investors who invest in projects within such areas. Though the program has proven successful at providing these locations with job opportunities, recently, criticism of the TEA guidelines has surfaced. The debate centers on the ability of multiple investors to invest smaller amounts by funding projects in prosperous cities through a regional center. Here, we consider the definition and implications of TEAs and the disagreement surrounding their designation.
What is a TEA?
A TEA is defined as a rural area or a region in which unemployment is at least 150% of the national average. By investing in one of these areas, EB-5 investors may contribute $500K rather than the typical program requirement of $1 million. Most investors choose to invest the lesser amount, so there’s no question that TEAs are integral to the program’s effectiveness.
Congress made the unemployment level the key determinant of locations targeted for capital infusion by the program; this means areas of high average income and low employment may be targeted rather than areas of low average income and high employment, sometimes counterintuitively. Though situations like these are at the root of criticism of the EB-5 program,one of its primary goals is job creation, and it’s hitting the target.
Who designates TEAs, and how?
Specified state agencies are responsible for designating TEAs according to the available economic data. The Immigration Act of 1990 allows for each state to fit the EB-5 program’s TEAs for its own needs rather than taking a one-size-fits-all federal approach, whether that means designating large rural areas or small urban neighborhoods. Although the states have latitude to choose which areas to target for job creation, U.S. Citizenship and Immigration Services (USCIS) corroborates the data used to make the designations as they review I-526 petitions for approval or rejection.
Because a TEA is defined according to its average unemployment level, projects located in economically flourishing areas can still fall within a TEA. A project located in an affluent neighborhood surrounded by a group of impoverished neighborhoods is one example. An upscale hotel built in an area like this one can profit from the area’s tourism while also providing economic growth and employment opportunities for the surrounding areas.
One argument against the Immigration Act’s TEA designation guidelines is that they are too narrow in their consideration of what makes a region a candidate for economic stimulus, and they should include factors such as income, crime rates, and education levels. This view leads critics to assert that EB-5 investment capital is being applied to areas that don’t really need it, and would be more advantageous elsewhere. While a wider perspective regarding economic need could be beneficial, the current criteria for TEA designation satisfy the EB-5 program’s stated goal of creating jobs where they’re needed.
TEA Implications for Investors
EB-5 investors can’t ignore the advantages provided by a TEA project—it allows them to invest half the amount of capital to gain the same permanent residency.
Since unemployment figures change from time to time, TEA designations also change. When an EB-5 regional center obtains official Form I-924 approval from USCIS, it can also request a TEA designation; however, conditions may change in the regional center’s geographic coverage area. The state may also change the way it determines targeted employment areas. When such situations arise, a regional center’s TEA status may be affected. For this reason, USCIS verifies each project’s TEA status at the time of an investor’s I-526 filing.
Investors should consult an experienced immigration attorney and take care to obtain written confirmation of TEA designation from their regional center before placing their EB-5 funds at risk.
To learn more about targeted employment area designation or to find out whether your project is in a TEA, send us a message at EB5 Economist or call us at (800) 775-1988. We guarantee a response within just 24 hours.