Congress is Creating an Economic Catastrophe by Failing to Take Action on EB-5

Since the expiration of The EB-5 Regional Center Program on June 30, 2021, investors have waited with anticipation for any news regarding the processing of their EB-5 applications. Unfortunately, this week, investors with approved I-526 petitions, who have been waiting patiently for their visas, received very problematic notices from the National Visa Center (NVC):

 

Notably, the NVC has clearly stated, “[t]he National Visa Center (NVC) will not act on any new or pending EB-5 visa petitions as described above until further notice. Please do not submit any additional fees or forms to NVC.

Immigrant investors who followed all of the rules, invested in the United States in approved regional center projects, had their I-526 applications approved and waited patiently for available visas are now learning that they may not be able to ever obtain their visas because of the June 30, 2021 expiration of the EB-5 Regional Center Program. Many investors (especially those from China and India) have been waiting patiently in extensive visa backlogs for years.

Currently, the only available route for the Regional Center Program to continue is for Congress to take action and pass legislation reauthorizing the program. Before the EB-5 Regional Center Program expired on June 30, 2021 United States Senators Chuck Grassley (R-IA) and Patrick Leahy (D-VT), in a bipartisan attempt, sought a unanimous consent vote on their EB-5 reform act, which would have reauthorized the EB-5 Regional Center Program through 2023, that effort was blocked by one Senator — Senator Lindsey Graham (R-SC)

Since then, there has been little news regarding Congressional efforts to reauthorize the Regional Center Program. While industry groups and insiders are optimistic that the Regional Center program will eventually be reauthorized, until Congress takes action thousands of EB-5 investors will be left in limbo waiting to receive a visa.

Now the dilemma – over the last several years, foreign nationals from all over the world have invested their hard-earned assets into the United States based on the promise they would be eligible to receive an EB-5 visa. These EB-5 investors have contributed Billions of dollars into real estate development projects in cities and towns throughout the United States. 

However, most EB-5 investors who participated in the Regional Center Program are limited partners who signed onto limited partnership agreements. These agreements may contain clauses permitting EB-5 investors to demand a return of all of their capital if EB-5 visas are not available. 

Furthermore, under common law, EB-5 investors may be able to demand a return of their investment capital under the contract principle of “frustration of purpose.” According to the Cornell Law School’s Legal Information Institute, frustration of purpose is defined as follows:

Under contract law, an excuse that can be used by a buyer for non-performance of contractual duties when a later and unforeseen event impedes the buyer’s purpose for entering into the contract, and the seller at the time of entering the contract, knew of the buyer’s purpose. 

If Congress fails to reauthorize the Regional Center Program soon, it’s only a matter of time before EB-5 investors begin filing lawsuits against Regional Centers seeking an immediate return of their capital.  This could amount to billions of dollars being sucked out of the U.S. economy at a time when the U.S. is still suffering as a result of the Covid-19 pandemic. 

According to the U.S. Bureau of Labor Statistics report released on September 13, 2021, the U.S. economy created only 235,000 jobs this August, when it had been averaging 586,000 jobs in months prior.  With billions of dollars in EB-5 construction financing potentially at risk, failure to reauthorize the Regional Center Program could certainly lead to large losses in key construction jobs.

Despite the clear and present danger that failure to reauthorize poses, Congress has failed to even begin to address the issue since June 30th. Considering the potential economic impact, it’s obvious that Congress needs to act quickly to address the Regional Center Program’s lapse in authorization. 

Simply put, Congressional gridlock on EB-5 reauthorization is an act of political malpractice that is quickly leading to an inevitable economic train wreck.

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