The long pause in the program has brought frustration and anxiety to all industry stakeholders, especially investors
By Suresh Rajan
The EB-5 Immigrant Investor Visa is a US federal program that allows qualified foreign investors and their immediate family members to obtain permanent residency in the US by making an investment in the US that creates jobs.
The base program was created in 1990 by an act of the US Congress to stimulate the US economy through foreign direct investment and job creation in US communities. With a direct EB-5 investment, participants generally invest in businesses they must manage.
With the 1993 enactment of the Regional Center program, investors gained the option to apply for an EB-5 visa by investing in a pooled fund with other investors, which most commonly finances a job-creating development project that investors do not have to manage themselves.
Read: When will the pause in the EB-5 regional program end? (November 17, 2021)
Additionally, the Regional Center Program rules permit investors to obtain credit for indirect job creation, which expands access to the program.
The Regional Center program brings together multiple investors to fund larger projects—thus relieving investors of the need to manage the investment directly and providing needed capital to larger development projects.
The US Citizenship and Immigration Services agency (USCIS), administers the EB-5 program. Because an EB-5 investment is a US financial product offered by specialized investment firms, these investments are regulated by the US Securities and Exchange Commission.
In both the direct EB-5 program and the indirect Regional Center program, investors must document that the new business has created 10 full-time jobs.
The employee count via Regional Center can include employees hired by subcontractors (for example, construction workers and hotel staff) in the job creation plan.
The direct investment route is a permanent program, whereas the Regional Center Program was enacted as a pilot program and needs to be reauthorized by Congress periodically—resulting in the current conundrum.
Read: Increase in EB-5 visa investment almost certain, says Suresh Rajan (September 28, 2017)
EB-5 industry members are working hard with Congress to reauthorize the program soon. Last December, the reauthorization of the EB-5 Regional Center program was purposefully detached from the annual appropriations bill in order to force discussions about program reform.
The program is now paused because Congress failed to reform and reauthorize it before its June 30 sunset date. Attaching a new EB-5 bill to a “must-pass” appropriations bill to fund the US government is the most likely scenario for making the program current by the end of 2021, with December 3 as the current deadline for this bill to be voted on.
The optimism on reform and reauthorization comes from industry stakeholders having (now) worked together to present a new EB-5 reform bill, after unsuccessful previous attempts and months of having the program on pause.
Led by IIUSA, the industry association, a “term sheet” to discuss a renewed path forward among all EB-5 advocates was created, resulting in an “industry consensus bill” that was delivered to lawmakers.
The bill includes language regarding all important and relevant issues concerning the program such as what IIUSA identifies as “integrity measures and important protections for good-faith investors, including grandfathering investors to protect them from any future lapse, visa backlog relief, processing time reduction, and advanced parole.”
In fact, processing times are likely to be shortened due to legislative efforts to decrease the backlog for green card applications from family- and employment-based visas.
A proposal was presented to be attached to the current US budget reconciliation bill whereby applicants could accelerate the process by paying a fee of $5,000 (for certain employer-sponsored applicants for permanent residency) or $50,000 (for EB-5 applications). This provision would expire in 2031. We have yet to see if/how the proposal will evolve in Congress.
Read: LCR Capital Partners to host EB-5 Investor Day in Miami (July 13, 2017)
What the future holds
The long pause in the EB-5 Regional Center program has certainly brought frustration and anxiety to all industry stakeholders, especially investors who have pending petitions.
However, a bright future likely lies ahead, in that long-overdue reform seems to be shaping up at last. These new reform measures promise to make the program more reliable, just, and current.
In the meantime, the EB-5 visa program via direct investment is a valid option. This route demands more from the applicant (in terms of managing the business and job creation) and has historically been followed by fewer than 5% of all EB-5 applicants.
Applications via the Regional Center Program, which historically have been far more popular, should soon be a valid option again. As EB-5 expert Lazicki says, not validating the program benefits no one.
Investors should remain confident that despite this pause, the program should get reauthorized, resulting in only a few months’ delay in their attainment of permanent US residence.
(Suresh Rajan is the Founder and Executive Chairman of LCR Capital Partners)