While most people in the U.S. were planning their summer vacations in late June 2019, the EB-5 industry was jolted from its summer slumber by the news that on June 27, 2019, the Office of Management and Budget (OMB) completed its review of draft of new regulations for the EB-5 Regional Centre program, entitled EB-5 Immigrant Investor Program Modernization.
OMB review is the second to last step in the regulatory process before a new regulation becomes effective. Essentially, OMB put investors and the entire EB-5 industry on notice that regulatory changes are likely coming in the very near future.
Typically, after OMB completes its review of proposed new regulations, the regulatory agency that prepared the regulations will publish them as a “Final Rule” in the Federal Register shortly afterwards and give the public between 30 days to 60 days to get ready before the new regulations become effective.
In the case of the new EB-5 regulations, the Department of Homeland Security (DHS) first proposed the EB-5 Immigrant Investor Program Modernization regulations in the last days of President Obama’s administration, on January 13, 2017. In early 2017, DHS opened the draft regulations for comments from the public and received nearly 300 comments, most of which found the proposed EB-5 regulations to be unworkable, requiring significant modifications.
Now, almost two-and-a-half years later, there is immense speculation in the EB-5 industry as to what regulatory changes have actually been adopted by DHS after OMB completed its review. The text of the draft EB-5 regulations has not been released to the public, and DHS has not issued any public statements or notices about the draft regulations.
Until the Final Rule is published in the Federal Register, the content of the Final Rule is completely unknown. It is safe to say that the EB-5 investment threshold will increase and specific requirements concerning the designation of what is considered a Targeted Employment Area (TEA) will change, however, it is not clear what the specifics will be.
As background, the initial draft regulations proposed in 2017 under the Obama Administration sought to impose two significant changes. First, the draft EB-5 regulations purported to more than double the minimum investment amount per investor, from $500,000 to $1.35 million for investments in TEA’s, and from $1 million to $1.8 million for non-TEA investments.
Second, the initial draft EB-5 regulations also proposed to transfer the authority to designate TEA’s from state governments to the federal DHS in Washington, D.C. — a change that many predict will yield significant delays and additional costs. The initial draft EB-5 regulations offered a 30-day grace period before they became effective–meaning investors could still take advantage of the previous investment amounts for those 30 days until the Final Rule is in place.
A full two years passed between the original draft EB-5 regulations and the proposed regulations that were finally delivered by DHS to OMB in February 2019. The text of the draft EB-5 regulations was not disclosed to the public.
Nevertheless, it is publicly known that EB-5 industry representatives offered harsh criticism of the original draft EB-5 regulations. Those criticisms continued during the OMB’s review of the draft regulations, with EB-5 industry delegations meeting with OMB to express their concerns.
“Our understanding of the OMB’s review is that it is likely that the original draft EB-5 regulations did not survive untouched after OMB completed its review “Consistent with Change”. Rather, our industry liaisons indicate that the Final Rule is likely to increase the minimum investment threshold from $500,000 to $900,000 in TEA’s, and from $1 million to $1.5 million in non-TEAs.”
“We further understand that the designation of TEA’s is indeed likely to be centralized in the DHS, essentially becoming the responsibility of USCIS, as stated in the original draft EB-5 regulation. We further expect that the 30-day grace period is likely to increase by 90 days, allowing investors a 120-day period to file under the previous regulations before the EB-5 Final Rule is in place.”
As the industry waits for the Final Rule to be announced by the Federal Register, the House successfully passed Bill 1044 (365 to 65 vote) which addresses waitlists for all employment-based visa categories. The act would eliminate the 7% country cap for EB-5 Green Cards while implementing a transition period of FY 2020 to FY 2022. If the bill is passed by the Republican-controlled Senate there would be various outcomes for EB-5 investors. Some of the most notable being:
Consequently, the passing of HR 1044 could cause the EB-5 industry to slow down or completely shut down due to the new length of processing time. That is unless new investors are open to longer wait times.
Depending on if and when HR 1044 passes the Senate (known as S.386) and the date the Final Rule is publicized by the Federal Register – investors could be facing a harsh reality of increased wait times as well as increased investment amounts. While it is certain the Final Rule will be published, HR 1044 still needs to pass through the Senate, leaving the wait times to still be determined.
Unless the President takes executive action to cancel any of the aforementioned items regarding the EB-5 program, changes are imminent to the EB-5 program. While the contents within the Final Rule are still the object of speculation – EB-5 program change is inevitable.
Now more than ever before it is vital to pick a regional centre with experience and expertise to navigate the EB-5 landscape on behalf of investors.
“Investors always need to perform due diligence on their investment and immigration options, and now is the time to select a regional centre that can provide options that exceed industry standards,” said Nicholas A. Mastroianni, III, President of U.S. Immigration Fund (USIF).
“Investors considering the program with the ability to act now, should absolutely work with an experienced regional centre to take advantage of the program in its current form – and before any number of changes could cause the opportunity to invest to completely cease to exist,” he continued.
“With 6,000 clients across the globe and approved regional centers in the world’s most thriving cities USIF provides unmatched opportunities for foreign investors and their families to obtain residency through the EB-5 program. We welcome any and all inquiries and will be travelling throughout India, Dubai and South Africa in July and August.
We invite investors to consult with us and ask any questions they may have regarding these program changes. Our primary objective is to help investors achieve their immigration goals through our investment options.”
“The draft EB-5 regulations are likely to be published in a Final Rule, and these regulations are going to dramatically impact new investors. There is no choice but to get ready. That means to stay informed, work with experienced regional centers and attorneys, and plan ahead,” said Ignacio Donoso, Founder and Managing Partner of Donoso and Associates, a boutique business immigration law firm based in Washington, D.C.
In regards to HR1044, Attorney Donoso added: “The impact of HR1044 is likely beneficial for Chinese-born EB-5 investors who have been bogged down by a long waiting list since 2015, and fortunately, is likely not going to significantly impact new Indian-born EB-5 investors, who are still looking at an approximately 5-6 years wait if they invest today. HR1044 is primarily going to improve the waiting lists for Indian and Chinese EB-2 and EB-3 applicants — but their waiting lists are so long that any improvements will be incremental and will take many years.”