The EB-5 program allows foreign investors to invest in projects in the United States and receive green cards (permanent residence) in return. The idea is to encourage investment and job creation in the United States. Since 1990 when the EB-5 program was established, EB-5 regional centers have facilitated tens of billions of dollars in capital investments from foreign investors and supported hundreds of thousands of American jobs, according to IIUSA: Invest in the USA. U.S. Citizenship and Immigration Services (USCIS) statistics show that as of January 7, 2021, there were 673 approved regional centers.
For the most part, the EB-5 program works well, but there have been issues. For example, many investors do not control the projects they’ve invested in, and there have been concerns about fraud or misuse of investor funds. A new bill would reauthorize through 2026 the EB-5 Regional Center Program, currently set to expire at the end of June 2021. It also would increase accountability for regional centers and provide new protections for investors. In another development, Secretary of Homeland Security Alejandro Mayorkas ratified an EB-5 final rule issued in November 2019.
Details of these developments are summarized below.
On March 18, 2021, Sens. Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vt.) introduced the EB-5 Reform and Integrity Act of 2021. Notably, the new bill would allow good-faith regional center investors who were defrauded the ability to continue participating in the program if they were not involved with the fraud and they associate with EB-5 entities in good standing, and meet all other program requirements. The bill also would provide investors and petitioners with administrative appellate review of certain DHS decisions and adjudications.
The new bill addresses concerns in other ways too. For example, the senators’ summary explains that the bill would:
- Require regional centers to have policies and procedures in place to protect against fraud
- Require regional centers to file proposed EB-5 project business plans with DHS
- Require more disclosures to investors regarding material business risks and conflicts of interest
- Require DHS approval of business plans, which would be binding for subsequent investors in the same project unless there is evidence of fraud, misrepresentation, or a material change
- Strengthen the definition of “created jobs” to ensure that job creation statistics are supported by validated methodologies and the jobs are new and not simply relocated or estimated to be created
- Require that regional centers notify DHS of significant changes to their structure
- Require DHS to audit regional centers every five years and to perform site visits
- Require regional centers to provide annual statements to DHS and to their investors
- Require background checks of regional center and project principals
- Clarify that EB-5 project offerings are subject to U.S. securities laws
- Strengthen DHS’s ability to vet foreign investor capital
- Require that EB-5 projects utilize a fund administrator or commission an independent annual audit to prevent the misuse of investor funds
The bill also includes a measure to decrease petition processing times, which the senators’ bill summary notes “have been plagued by massive delays.” It would accomplish this by requiring fees to be adjusted “to the rate necessary to achieve quicker processing.”
Several changes to the EB-5 immigrant investor program took effect November 21, 2019, under a final rule published by the Department of Homeland Security (DHS). The new rule provided priority date retention for certain EB-5 investors, increased the required minimum investment amount to $1.8 million ($900,000 for targeted employment areas (TEAs), eliminated states’ role in prioritizing investments and gave DHS sole authority to make TEA designations, favored lower-population areas and limited sizes for TEA designations, and clarified USCIS procedures for the removal of conditions on permanent residence.
Behring Regional Center subsequently sued, claiming the rule was “arbitrary and capricious.” During a hearing in the case on March 22, 2021, the federal judge referenced the possible invalidity of those changes, referring to the appointments of acting DHS secretaries in 2019 that did not conform to laws governing the line of succession, which multiple courts have found to be improper. The judge ordered briefs from both sides and set a tentative hearing date for May 6, 2021. However, Secretary Mayorkas signed a statement on March 31, 2021, ratifying the final rule and thus mooting the order-of-succession issue.
For advice in specific situations, contact your Miller Mayer attorney.
- Text of bill
- “Reauthorizing and Reforming the EB-5 Regional Center Program: EB-5 Reform and Integrity Act of 2021,” Fact Sheet, Sen. Grassley
- “Grassley, Leahy Introduce New EB-5 Investor Visa Integrity Reforms,” Press Release, Sen. Grassley, Mar. 18, 2021
- “Leahy, Grassley Introduce EB-5 Investor Visa Integrity Reform Bill,” Press Release, Sen. Leahy, Mar. 18, 2021
- “Judge Likely to Block Trump Era Changes to Immigrant Investor Program,” Courthouse News Service, Mar. 25, 2021
- Approved EB-5 Immigrant Investor Regional Centers, USCIS, February 4, 2021
- EB-5 Immigrant Investor Program, USCIS
- Behring Regional Center LLC v. Wolf et al.
- EB-5 Immigrant Investor Program Modernization, Final Rule, USCIS, July 24, 2019
- “A Deep Dive Into the Data Lake of EB-5 Regional Centers Statistics,” IIUSA: Invest in the USA, Jan. 1, 2020
- EB-5 Reform: What’s in the Proposed Bill?”, EB-5 Daily, Mar. 22, 2021