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GET READY FOR SUBSTANTIAL CHANGES TO THE EB-5 PROGRAM

EB-5 Modernization Rule Will Bring Most Significant Changes Since the Program Was Created in the Early 1990s

Changes are on the horizon for the USCIS’ EB-5 program, and potential foreign investors are eager to find out how they may be affected. On June 28, 2019, the Office of Management and Budget (OMB) completed their review of the USCIS’ proposal for EB-5 investment increases and restrictions related to the Target Employment Area part of the program. The new regulations are now ready for publication in the Federal Register. Once that occurs, the regulations can go into effect in a minimum of 30 days.

EB-5 Investment Minimum Amounts Likely to Change

The most crucial change to the regulations is that the standard investment required for the EB-5 program is slated to be raised from the current $1 million to $1.8 million for those engaged in their own commercial projects; and the Targeted Employment Area (TEA) investment requirement may increase from $500,000 to $1.35 million for those investing in Regional Center projects or their own job creation projects located in a TEA. This latter TEA investment requirement was originally established to allow EB-5 applicants to invest funds into regional areas that are considered either to be rural, or to suffer from high unemployment.

The overall goal of the EB-5 program continues to be to create more U.S. jobs. For their projects, potential investors need to hire, or preserve the jobs of, a minimum of 10 U.S. workers.

Greater Oversight of TEA Locations Within the EB-5 Program

Secondly, the Federal Government plans to assume control of TEA investment, even though the government has traditionally left it in the hands of states to decide which parts of their regions qualify as TEA. Since EB-5’s inception in the early 1990’s, TEA designations have been controversial. State governments have often been accused of granting this status to areas that may be seen as more attractive to investors (and therefore more financially lucrative), while ignoring struggling regions that could clearly benefit more from this designation.

What These EB-5 Program Changes Will Mean

There has undoubtedly been strong opposition to the new rules, since they were proposed in January 2017. Not only will foreign investors be forced to provide larger financial investments minimums, but they will also face a heightened standard in ensuring that the entire amount comes from an easily traceable and explainable source. This part of the process has always been challenging for investors, but it will become even more so under the new rules.

As it relates to TEA investments, it is unclear at this point how the Federal Government will choose TEAs in each state—a task previously determined by states—and how this will impact investors. This specific change has the potential to send smaller investors seeking out other countries with more attractive and accessible foreign investment programs.

What Actions EB-5 Investors Can Now Take

Now that the OMB has taken the final step, many potential EB-5 applicants are expected to seek out investment opportunities before the new rules go into effect. Those who are already in the process of applying for the EB-5 program will need to pay special attention to both the publication and the implementation dates. Amendments in their paperwork may be needed, to concur with the new monetary increases and TEA designation changes. Efficiency is key, and having the I-526 petition grandfathered based on the rules currently in place would be most ideal.

 

 

 

 

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