EB-5 Regional Center Program Extended

EB-5 Regional Center Program Extended Through Dec. 9, 2016

On September 29, 2016, one day before the EB-5 Regional Center Immigrant Investor Program (EB-5 Regional Center Program) was set to expire, President Obama signed the Continuing Resolution, passed by Congress. The Continuing Resolution is a temporary solution to continue funding of government operations and most of its agencies, including the EB-5 Regional Center Program, until December 9, 2016.


Designed as a way to uplift the nation’s economy and generate job creation, the EB-5 Regional Center program was created in 1992. The purpose of this program is to set aside EB-5 visas for participants who invest in new commercial enterprises associated with regional centers approved by the U.S. Citizenship and Immigration Services (USCIS). At the head of these Regional Center projects are developers who utilize investment funds as an alternative financing source to fund their businesses.


Benefits of investing through an EB-5 regional center include more lenient job creation requirements, including the allowance of indirect jobs to meet the minimum 10 full-time jobs creation requirement. Direct jobs are actual full-time jobs created by the EB-5 investment and result in an employer-employee relationship. Indirect jobs, on the other hand, are any jobs that are created due to the economic growth of the investment. For instance, suppliers and services used by the new commercial enterprise. By including indirect jobs in the job creation count, the EB-5 Regional Center Program makes it easier for investors to meet the 10 full-time jobs requirement.


Another benefit of investing through an EB-5 regional center is that these  centers are often located in Targeted Employment Areas (TEA), designated by the state government as high unemployment areas. Currently, 98 percent of EB-5 regional centers are located in TEAs. Typically, investors are required to invest $1,000,000 in the new commercial enterprise. However, if the investment is located within a TEA, investors are only required to invest $500,000. As a result, the number of EB-5 regional center applicants has surged in recent years. As of September 6, 2016, USCIS has approved 861 regional centers. In 2015, investments in these regional centers made up 98.4% of all EB-5 applications.


The economic impact of EB-5 investments highlights the benefits of the program. According to the IIUSA, the national trade association for the EB-5 Regional Center Program, it is estimated that spending associated with EB-5 regional center investors has contributed $3.58 billion to the U.S. GDP and supported over 41,000 jobs in the 2013 fiscal year.


However, despite the economic benefits, there has been much controversy surrounding the EB-5 Regional Center Program. Issues include the ethical dilemma of allowing wealthy investors to ‘buy’ their way into the United States. Additionally, because most regional centers are located in TEAs, critics have questioned the actual economic benefit of EB-5 regional center investments. Other issues include the allowance of ‘indirect jobs’ in the total job creation count, which broadens the scope of jobs created to be outside the newly established commercial enterprise. By allowing ‘indirect jobs’, critics question whether any direct, job-creating businesses are being formed.


In the midst of this scrutiny, there have been many proposed reforms of the EB-5 Regional Center Program. The latest reform, the American Job Creation and Investment Promotion Reform Act of 2016, was introduced earlier this month. This proposed reform would implement new, stricter criteria and reauthorize the EB-5 Regional Center program for a period of five years. The proposed reforms include increasing the amount of invested capital to $800,000 and $1,200,000 for TEA and non-TEA investments, respectively. The proposed reform would also allow the Secretary of Homeland Security to narrow the definition of TEAs without being bound by Federal or State governments. Limitations would  additionally include narrowing the eligibility of immigrant investors,  enforcing stricter compliance with U.S. Securities laws, and limiting the source of funds to be invested in the commercial enterprise. The markup of this latest bill has been postponed, with a new action date to be determined.


As the expiration of the EB-5 Regional Center program rapidly approaches, federal lawmakers continue to struggle with attempts to redefine the program while meeting demands of fewer restrictions by the program’s developers. It appears that the EB-5 Regional Center program is here to stay; however, reforms to its current structure are expected.


Author Biography:

Daphne Wang Carman is an Associate Attorney at Universal Law Group Licensed to practice law in the State of Texas, her practice focuses on all aspects of Immigration Law. Daphne obtained her B.A. in Government from the University of Texas at Austin and her J.D. from the University of Houston Law Center.