Understanding the Changes in the EB-5 Program, and Reform and Integrity Act
The EB-5 program has undergone many changes in recent years, the most recent being the Reforming American Immigration for Strong Employment (RAISE) Act and the EB-5 Reform and Integrity Act of 2019. Foreign investors can now access visas through the EB-5 program.
The Reform and Integrity Act of 2019 seeks to ensure that investments made by foreign nationals are legitimate, secure, and in compliance with U.S. immigration laws. It also increases government oversight that is designed to improve efficiency and prevent fraud. The most important change under the new regulations is an increase in the minimum investment amount required to qualify for an EB-5 visa.
Overview of the EB-5 Program
The EB-5 Program is a popular visa program that allows foreign investors to obtain a green card by investing in U.S. businesses and projects. It has been around since 1990, but recent changes to the program have been made with the passing of the Reform and Integrity Act in 2019.
Under this new legislation, certain requirements must be met for investors to qualify for the EB-5 Program. Specifically, they must invest at least $900,000 in a “Targeted Employment Area” and create at least ten full-time jobs for U.S citizens or Legal Permanent Residents within two years of approval. Additionally, all investment capital must be “at risk”, meaning it could potentially be lost if the business does not succeed.
The Reform and Integrity Act also changes the criteria for defining a “Targeted Employment Area” from one that was based on unemployment rates to one based on median salary levels. This aims to ensure investments are going into areas that need it most and also create jobs with higher than average wages. Moreover, those wishing to apply for the program must submit their applications through Form I-526, together with all the required supporting documents such as proof of investment funds, business plans, and evidence of job creation potential.
Reform and Integrity Act and Its Impact on EB-5 Program
The EB-5 Program is a source of investment in the U.S. economy that provides visas to foreign investors who make substantial financial investments in the U.S. The Reform and Integrity Act, which was passed into law in December 2019, has made significant changes to the EB-5 Program and has had an immense impact on its landscape. Some of the changes include:
- A raise from $500,000 to $900,000 for the threshold of investments that are eligible for regional centers;
- An increased cap on visa numbers to 10,000 per year;
- A new definition of “targeted employment area” includes rural areas and areas with extremely high unemployment rates;
- Stricter rules and oversight on regional centers aimed at preventing fraud; and
- An increased capacity for adjudications and oversight by USCIS (U.S. Citizenship and Immigration Services).
These changes make it easier for potential investors to navigate the program while also making sure that it remains financially secure for all involved parties. With more streamlined regulations and more efficient adjudication processes, the EB-5 Program is now better equipped than ever to attract investors from around the world and provide important pathways to permanent residency in America.
Changes to the EB-5 Program Under the Reform and Integrity Act
The Reform and Integrity Act was passed in July 2020 and brought about several changes to the EB-5 program, including:
- Raising the investment threshold from $500,000 to $900,000 for investments in qualified targeted employment areas (TEA) which includes rural areas and those with high unemployment.
- Modifying the definition of a TEA allows for investments outside of a rural area but still within an area of high poverty or unemployment.
- Strengthening the fraud detection system by requiring all EB-5 investment projects to undergo criminal background checks.
- Introducing periodic site visits for regional centers to ensure compliance and fraud prevention.
- Providing greater transparency by mandating that investors be informed of their rights and responsibilities.
The reforms serve as further evidence that the U.S. government is taking a proactive approach to strengthen the integrity of this popular immigration program and ensure deserving investors are properly served.
Changes to Minimum Investment Amounts
On November 21st, 2019, the Reform and Integrity Act of 2019 (RIVA) was signed into law and has since made significant changes to the EB-5 Program. One such change involves the minimum investment amount that investors must contribute.
Previously, investors had the option of with an investment of either $500,000 or $1 million to invest in a qualifying commercial enterprise located in a Targeted Employment Area (TEA). With the passing of RIVA, all investments must be at least $900,000 depending on the location. The new legislation also raised existing regional center investment amounts:
- In a TEA- the minimum investment amount is now $900,000
- Outside of a TEA- the minimum investment amount is now $1.8 million
These increases apply to all petitions filed on or after November 21st, 2019. For those EB-5 investors who filed their petitions before RIVA went into effect, the old minimum investment requirements will still apply.
Changes to Targeted Employment Area Definitions
The Reform and Integrity Act makes significant changes to the targeted employment area definitions for the EB-5 Program. These changes make it more difficult for investors to take advantage of the program, as well as provide additional protections for US monthly wages. Under the new regulations, there are two types of targeted employment areas (TEAs):
- High Unemployment Areas- This area has an unemployment rate that is at least 150% of the national average. It must also be located in a metropolitan or rural area or both.
- Rural Areas– Rural areas are non-metropolitan areas with a population of fewer than 20,000 people.
TEAs must have all their borders included in a single census tract or a combination of adjacent census tracts that have a combined population of no more than 20,000 people. Finally, no individual census tract can comprise more than 25% of the total population to be considered a TEA under the new regulations.
Targeted Employment Areas Expansion
As part of the new regulations, the Reform and Integrity Act has sought to expand Targeted Employment Areas (TEA). A TEA is an area with a high unemployment rate that meets the criteria set by USCIS, and this classification allows for lower investment amounts for foreign investors applying for the EB-5 Visa.
The Reform and Integrity Act has replaced the statistical area delineation method with a gerrymandering method, allowing state governors to submit decision letters certifying their state’s TEAs.
This certification process provides more flexibility in designating TEAs than strictly relying on statistical evidence and takes into account local economic needs at a higher granular level. In addition, these state-designated TEAs must be contiguous areas, eliminating the ability to pick out singular census tracts that have high unemployment rates. By expanding the definition of targeted employment areas, states are better able to respond to local economic development needs with foreign investment from potential EB-5 visa holders.
New Job Creation Requirements
The Reform and Integrity Act has introduced major changes to the job creation requirements for the EB-5 program. Previously, to qualify for the EB-5 Program, investors must create 10 full-time U.S. jobs either directly or indirectly (through a third party). Under the new regulations, investors must now:
- Create at least 10 full-time U.S. jobs directly
- Hire at least two full-time U.S. employees located in an area of high unemployment with a rate of at least 150% of the current U.S. national average
- Make reasonable efforts to ensure that their investments benefit economically depressed areas that require economic revitalization
- Applicants should also take into consideration that any indirect or induced jobs created by their investments will not count towards the 10 full-time jobs requirement under the new regulations of the EB-5 Program.
It is therefore important for investors to assess their project type carefully when making their application to make sure they comply with all applicable requirements given by the Reform and Integrity Act.
New Definition of “In the United States”
The Reform and Integrity Act has made a significant change to the definition of “in the United States” as it applies to investments in the EB-5 Program. “In the United States” now refers to actual investments rather than investors, whereas before it referred to both investors and their capital investments.
This new definition of “in the United States” is meant to provide clarity on where investors must make their capital investments for them to receive permanent legal residency. For example, if an investor wants to invest in an EB-5 project located in New York City, they must now invest their capital directly into that project. Their capital can no longer be placed into an Investment Entity based in another country that invests in the project located in New York City. Moreover, funds must be entered into the United States via a U.S. financial institution before they can be considered invested “in the United States” under this new definition. This means that foreign currency transfers or other forms of foreign transfers are not acceptable for capital contributions under this new definition.
These changes aim to ensure that only legitimate investments are made into U.S.-based projects and businesses through EB-5 Program by clarifying what a valid investment looks like under current law. By outlining these expectations from investors up front, the EB-5 Program is better able to monitor and regulate its investment activities while still encouraging foreign investment into the United States economy.
New Security Measures to Ensure Investor Funds Are Legitimate
The Reform and Integrity Act of 2019 also includes new security measures to ensure that investor funds being used for the EB-5 program are legitimate. These measures are aimed at detecting, deterring, and punishing fraud, money laundering, terrorism, and other criminal activities. The new rules include:
- Increased vetting of individuals involved in the EB-5 program
- Strengthening of background checks for individuals involved in the EB-5 program
- Enhanced scrutiny of all documents related to EB-5 investments
- Potential for investors to be disqualified from participating in the EB-5 program due to certain criminal activity or terrorism-related concerns
- Creation of an Anti-Money Laundering Advisory Board to review applications regularly and detect any suspicious activity related to the investment process
- The requirement that all EB-5 investors have their identity verified through a biometric screening process
- New security protocols are in place for adjudicating visa petitions under the EB-5 program, including increased due diligence and additional site visits by USCIS personnel when necessary
Teleconferencing and online technology can now be used to handle certain aspects of processing applications under the EB-5 program as part of a risk mitigation strategy. These measures are intended to ensure that only legitimate investments are accepted into the program and that fraud or criminal activities do not go undetected or unpunished.