United States: USCIS Publishes EB-5 Modernization Rule: The Impact On The EB-5 Program

Seyfarth Synopsis: On July 24, 2019, U.S. Citizenship and Immigration Services (USCIS), the immigration-benefits component of the Department of Homeland Security (DHS), published a final regulation on "EB-5 Immigrant Investor Program Modernization" (the "Rule") to reform the EB-5 program in the Federal Register. Absent successful court challenges, or the passage by Congress of EB-5 legislation, the Rule will take effect on November 21, 2019. The Rule makes pronounced changes to the EB-5 program, including a significant increase in the investment threshold, conferral of exclusive authority to USCIS to designate Targeted Employment Areas (TEAs), and retention of priority dates for petitioners. The text of the Rule can be found here.

The changes imposed by the Rule include the following:

  • Raising minimum non-TEA investment by 80% – from $1 million to $1.8 million with automatic adjustments based on increases in the Consumer Price Index for All Urban Consumers (CPI-U) every five years;
  • ncreasing the TEA investment by 80% – from $500,000 to $900,000. In the event of subsequent adjustment to the minimum non-TEA investment, the minimum TEA investment will be automatically adjusted to remain at 50% of minimum non-TEA investment, maintaining the current ratio between the 2 investments;
  • Stripping states' authority to designate high-unemployment TEAs, thereby giving an exclusive authority to USCIS to designate TEAs;
  • Changing the definition of which geographical locations qualify for a TEA;
  • Allowing an EB-5 investor to retain the priority date (for purposes of the immigrant visa quota) in the event that, e.g., a regional Center is terminated, by filing a new Form I-526 petition and showing that there are no material changes to their investment other than securities law disclosure obligations arising because of the Rule's new requirements; and
  • Allowing the derivative family members (i.e. the spouses and children) of an EB-5 investor to file their own Form I-829 petition if they were not included in the principal investor's petition.

The changes in the requirements for qualifying as a TEA include the following:

  • Permitting cities and towns with a population of 20,000 or more outside of a Metropolitan Statistical Area to potentially qualify as TEAs based on high levels of unemployment;
  • If a new commercial enterprise ("NCE") is located in multiple census tracts, allowing the inclusion of contiguous census tracts in which the NCE is principally doing business so long as the weighted average of the unemployment rate for the tracts included is at least 150% of the national average; and
  • Allowing the inclusion of both contiguous census tracts in which the NCE is principally doing business and any adjacent tracts so long as the weighted average of the unemployment rate for the tracts included is at least 150% of the national average;

The principal effect of the changes in the TEA designation process is likely to be that obtaining a TEA designation will become more both more uniform, with a single agency (USCIS) responsible for TEA designations, and more difficult in that there will be greater restrictions on the census tracts that can be used to comprise a TEA.

Given these major changes, such as a notable increase in the minimum investment amount, the change in the authority to designate TEAs, and the narrowed down definition of TEAs, it is foreseeable that there will be an influx of EB-5 applications in an attempt to be grandfathered under the current rules. This will certainly result in further application processing delays and possibly the further tightening of standards by USCIS.

The Rule does not impose a moratorium on the filing of I-526 petitions prior to the effective date of the Rule. In fact, the Rule expressly provides that I-526 petitions filed prior to the effective date will be adjudicated based on the eligibility standards in effect as of the date of filing the petition. Accordingly, investors should take care both to invest and file their I-526 petition prior to November 21. Investment alone will not suffice.

The Rule further provides that there will be no loss of an investor's immigrant visa priority date if there are any amendments to the project documents that may be required as a result of investor disclosures under the securities laws due to the changes in the EB-5 program implemented by the Rule will not adversely affect the adjudication of such petitions. It remains to be seen how USCIS will apply this provision since the agency has kept in place its existing material-change policy which triggers a loss of priority date if a new I-526 petition is required.

A quick search on the internet shows many regional centers, and attorneys, are advocating the rapid filing of skeletal petitions in order to invest with the lower amount. A skeletal filing is made with very little information included on the source and trace of EB-5 funds by the investor. The 120-day delay between publication and implement of the Rule should make it easier to file a more fulsome application before the new standards take effect. Investors should be forewarned that the skeletal-submission approach may meet with rejection by USCIS (for lack of sufficient initial evidence) or trigger the issuance of a burdensome or impossible-to-fulfill USCIS request for additional evidence.

To the extent, however, that investors find themselves with no choice but to file something without all the relevant information and documentation, investors should at least take care to include any evidence of lawful source of funds in order to avoid request for additional evidence from the USCIS or even denials. It is also critical to review the potential source of funds with a qualified attorney to identify any potential issues with respect to either the ability to verify the source of funds or the compliance of the proposed source of funds with the requirements of the EB-5 Program as it is impossible to make changes once the investment and filing are made.

There is sometimes an alternative source of funds available which may be easier to satisfy the EB-5 requirements than the original source considered. A dialogue with an expert could ferret that information out. For example, an investor considering the use of a gift from a family member may not understand they will need to detail the legal source of those funds, which may prove more difficult than first contemplated as the gift or may not be willing or able to provide the level of detail in terms of documentation the USCIS is expecting to see.

In the context of a regional center investment, investors should be careful to diligence projects, including a detailed review of the offering documents, economic analysis and business plan, in order to protect their investment and ability to obtain permanent residence. Consideration should be given as to the impact of a slowdown of investment capital coming in to the project after the thresholds are increased, leaving projects at risk of not being completed or delayed because of inadequate funds. Investors should inquire about that impact, if any.

Of course, this final regulatory action was preceded by several years of activity on Capitol Hill in pursuit of changes to the EB-5 program, many opposed and blocked by industry, but which are reflected in the final regulation. It's possible that dissatisfaction with the Rule will create pressure on the Hill to revisit many of these provisions and result in a compromise which would trump the Rule. However, it's a lot easier to kill something on the Hill than to get it enacted. Further, it is very unclear how the replacement of Representative Bill Goodlatte (R-VA.), who was much involved in in past legislative EB-5 debates, as chair of the Judiciary Committee with Representative Jerry Nadler (D-NY) affects the Hill's dynamics. Needless to say, Chairman Nadler also has other priorities attracting his attention at this time.

Members of Seyfarth's EB-5 Immigrant Investment and Public Policy teams are closely monitoring developments and will keep you posted once the new regulation is made available. If you have any questions and/or concerns, please email the authors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions