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Huge Change Planned to EB-5 Investment Visa Program

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By Charles Foster, Immigration Attorney

HOUSTON: The EB-5 Regional Center program is being extended through the balance of the fiscal year through September 30, 2017 as is; what we call a “clean extension.”  I’m on the Board of IIUSA, the largest industry organization and in the past the EB-5 Regional Center industry was more than happy to have the proverbial “can kicked down the road” and take it as it is.  I joined the IIUSA Board precisely because we in fact need the reform specifically the so-called “integrity measures” to provide further protection to EB-5 investors as well as an increase in visa numbers.  Sooner or later the backlog in visa numbers will hurt all petitioners, although it is primarily hurting petitioners from the People’s Republic of China.

 Another reason why we need reform is that during the winding down days of President Obama’s Administration, the U.S. Citizenship and Immigration Services issued some extensive regulations which would reform the EB-5 Regional Center program by regulation.  The general consensus was that these proposed regulations would be very harmful and would seriously damage the EB-5 Regional Center program, particularly with the large proposed increases in the minimum investment amount.

The period for comments has ended and we could anticipate that final regulations could be issued by September 30, 2017.  Thus, the industry has come together to try to find a consensus position and in particular, supported the effort of Texas’ own U.S. Senator and Majority Whip John Cornyn to bring all parties together on a consensus bill for EB-5 Regional Center reform.  However, the Chairman of the Judiciary Committee, U.S. Sen. Chuck Grassley, a Republican from the State of Iowa, has been the primary moving force to bring about EB-5 reform which, in the opinion of Sen. Grassley, needed to give greater preference (as he thought was originally intended) to rural projects and truly distressed urban area projects.  They wound up with competing bills drafted by Sen. Grassley’s staff as well as a rough outline of the bill drafted by Sen. Cornyn’s staff.  Many of the differences have been resolved and it looks like we will be coming to an agreement between all the parties that the EB-5 Regional Center industry can support.

It is certain that all the legislation contains significant integrity provisions that protect the investors and clarifies that an interest in an EB-5 Regional Center project constitutes a security, thus making the offers subject to all the rules and regulations of the Securities and Exchange Commission.  It is also very clear that the definition of a “Targeted Economic Area” (TEA) will be significantly revised so there are much fewer urban TEA’s and, according to the terms of Sen. Cornyn’s bill, only those that meet the definition of “distressed” TEA’s will qualify for the lower dollar amount.   The current minimum dollar amount is $1,000,000.00 unless you invest in a TEA and in that case it is $500,000.  As a practical matter, by accumulating census tracts, today virtually all projects qualify for the minimum investment amount of $500,000.  Thus, we could expect a significant increase in the minimum investment.  The difference, as now proposed, is that the TEA investment would be increased to $800,000 and the normal minimum investment, as proposed by Sen.

Cornyn, would be $925,000 or a differential of $125,000.   Sen. Cornyn original proposed a $50,000 differential but in order to accommodate Senator Grassley, he has moved to a much larger differential.

The take away is that this legislation could pass sometime in the next 30-60 days, if not sooner.  Thus, potential investors should be aware that if they want to take advantage of the current $500,000 minimum investment amount rather than what is most likely for most projects to be a minimum investment amount of at least $925,000, they should make their investment decision soon as to which project they wish to invest in through the EB-5 Regional Center program.

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