Immigrant Investor Program in Limbo as Regulations Stall

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By Laura D. Francis

The EB-5 immigrant investor program may soon be at a tipping point as lawmakers squabble over program changes and U.S. Citizenship and Immigration Services continues to sit on regulations originally proposed by the Obama administration.

Sen. Charles Grassley (R-Iowa) and Rep. Bob Goodlatte (R-Va.) May 17 renewed their call for the USCIS to finalize the regulations, which would address two of the lawmakers’ primary concerns: increasing the minimum investment amounts and reworking how “targeted employment areas” are determined. The regulations also would impose anti-fraud measures.

The EB-5 program awards green cards to foreign nationals who invest $1 million in a commercial enterprise that creates at least 10 U.S. jobs. If the project is located in a rural area or TEA—an area with high unemployment—the immigrant can instead invest $500,000.

The flash point has become the regional center portion of the program, which allows immigrants to pool their investments and count indirect job creation toward the visa requirements. Regional centers, the bulk of EB-5 investments, gained attention in the past few years when the Securities and Exchange Commission started targeting them for securities fraud investigations.

More Visas Needed

But “the biggest issue” in the EB-5 program is that Chinese investors are “looking at 15 years until they get their green card approved,” Abteen Vaziri, a director with Greystone EB5 Holdings in New York, told Bloomberg Law May 17.

There are 10,000 EB-5 visas available each year, but they’re further limited by per-country caps. Chinese investors have been in a backlog for several years, while investors from Vietnam recently hit their limit. India is likely to be next.

If some relief isn’t available soon, “this will completely shut down the market,” Vaziri said. U.S. investor visas are competing with other countries such as Cyprus, Canada, Australia, and the U.K., he said. Why, he asked, would investors wait 15 years for a U.S. visa if they could get one tomorrow in another country?

“I don’t know what’s going to happen,” Miami immigration attorney Randall Sidlosca told Bloomberg Law May 17. “I think everyone maybe is hoping that Congress takes action,” said Sidlosca, who practices with Cozen O’Connor. “My money, unfortunately, is not on Congress.”

USCIS can change the minimum investment amount and TEA definition through regulation, but Congress has to pass a law to increase visa numbers, he said. It’s possible that the regulations could settle enough issues with the EB-5 program that lawmakers are willing to make the regional center program permanent, he said.

But “I don’t think they’re going to be in favor of increasing visa numbers,” Sidlosca said.

Obama Administration Proposal

The proposed regulations would increase the minimum investment amounts for the first time in the program’s history and give the USCIS the exclusive power to determine what counts as a TEA. That authority currently lies with the states.

The public comment period for the proposal ended in April 2017, but the agency thus far hasn’t finalized the regulations.

“Per the Administrative Procedures Act, we cannot comment on the proposed rulemaking process,” agency spokesman Steve Blando told Bloomberg Law May 18. USCIS Director L. Francis Cissna “reiterated his intention to finalize the rule and is committed to improving the program absent Congressional action,” he said.

But the regulations may not help things, Vaziri said. The TEA issue, for instance, really boils down to smaller states competing with larger ones for EB-5 funds, he said.

Immigrant investors gravitate toward metropolitan areas because they want to settle in communities where immigrants from their countries already live, Vaziri said. Not only that, but the SEC’s targeting of regional centers in smaller, more rural states has pushed many investors into the larger regional centers in the cities, he said.

Even in a wealthy area such as Manhattan, a regional center project creates jobs for the surrounding area, “which is exactly what it was intended to do,” Vaziri said. There are neighborhoods around New York with higher unemployment rates than some of the rural areas where Grassley and Goodlatte would rather have EB-5 funds directed, he said.

Raising the minimum investment amounts also is likely to slash the number of EB-5 investors by 65 percent or 70 percent, Sidlosca said.

“It’s completely false” that the EB-5 program is for Chinese millionaires who are “buying” citizenship, Vaziri said. Rather, “it’s people who are basically selling their homes so their kid can have a better life” in the U.S., he said.

The proposed increase—to $1.8 million, $1.35 million for projects in TEAs—would put the program out of reach for most potential investors, Vaziri said. It also would drive the remaining investors toward large, city-based regional centers that are more adept at handling higher sums of money, he said.

Policies Don’t Change Much

The agency did issue a pair of EB-5 policy updates in May, but they’re not likely to have much impact.

The first reaffirms existing agency guidance on investors’ ability to maintain their immigration status while the USCIS is processing their green card applications.

It also confirms that investors can still get permanent residence even if not enough jobs exist when the USCIS makes a decision. If the 10 jobs were created and considered permanent when the project started, that counts, the agency said.

The policy confirms what had been happening in administrative proceedings, Sidlosca said. The USCIS had been denying investors’ applications and putting them in removal proceedings because the jobs no longer existed. Immigration judges were reversing that decision, he said.

The second policy says investors can’t use the “tenant occupancy” method for calculating whether 10 jobs were created. Under that method, an EB-5 investor who funded an office building or retail space would count the jobs created by tenants renting space in the building.

But investors have all but completely abandoned that method of calculating job creation, Vaziri said. The USCIS had been denying petitions on the ground that the tenant jobs weren’t being created by the investment—they were just moving from one location to another, he said.

“It’s not going to impact any developers because most saw the writing on the wall,” Sidlosca said.

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