EB-5 Modernization: Final Rule Takes Effect 11/21/2019
On July 24, 2019, United States Citizenship and Immigration Services (USCIS) published the long-awaited final version of the EB-5 Immigrant Investor Program Modernization Regulation in the Federal Register. The regulation was proposed by the Department of Homeland Security (DHS) back in January 2017 in an effort to amend its regulations governing the EB-5 immigrant investor classification, and was reviewed by The Office of Management and Budget (OMB) last month.
The final rule takes effect in 120 days, on November 21, 2019. Any I-526 petitions filed on or after this date must comply with the new rules which will make these significant changes to the current EB-5 program:
1) Priority Date Retention
“Priority Date” is the date that establishes the petitioner’s position in line for an immigrant visa number should it become available. Normally, it is the date the petition was filed with USCIS. By allowing EB-5 petitioner to retain that priority date, it can avoid further delays on immigrant visa processing associated with the loss of priority date if circumstances beyond petitioner’s control require the filing of a new petition such as the termination of a regional center associated with the initial petition. The priority date retention provision could provide significant benefit for EB-5 investors from oversubscribed countries, such as China.
2) Increases to the Investment Amounts
Currently, the minimum for EB-5 investment are $1 million for standard investment and $500,000 for targeted employment area. Effective 11/21/2019, the EB-5 investment thresholds will increase to $1.8 million for standard EB-5 investment, and $900,000 for targeted employment area, an increase of 80%. The investment thresholds will be subject to automatic increases for inflation every five years, measured by the unadjusted Consumer Price Index for All Urban Consumers.
3) Targeted Employment Area (TEA) Designations Reform
Currently, U.S. states have the broad ability to designate certain geographic and political subdivisions as high-unemployment areas qualifying them as TEA. Effective 11/21/2019, DHS will eliminate such ability of the states and make such TEA designations itself directly, using standards that will restrict investment to more strictly demarcated areas. The reform will help ensure TEA designations are done fairly and consistently, and more closely adhere to congressional intent to direct investment to areas most in need.
4) File I-829 Removal of Conditions Separately
DHS requires certain derivative family members of EB-5 investors to file their own petitions to remove conditions on their permanent residence when they are not included in a petition to remove conditions filed by the principal investor.
What’s next for the final rule?
As discussed, the final rule takes effect in 120 days, on November 21, 2019. Rules created by administrative agencies should only possess a prospective effect, and as such, the final regulation should only apply the changes to future I-526 filings on or after the effective date. Between Federal Register publication and the effective date, the new regulation will be sent to Congress and the Government Accountability Office for review. Congress has almost never disapproved a rule at this point.
To benefit from the existing EB-5 rules, prospective investors should balance their interests and make a qualifying capital contribution and file their investor petition without delay, with the consideration of the advantages of current investment opportunities and the risks of the expected filing surge. In addition, the changes to TEA determinations could mean that certain types of projects, such as certain urban development projects that have proven to be most desirable to foreign investors in recent years, may no longer be eligible in the future. However, it is still unknown the specific process DHS would adopt to take over such TEA determination power from the states and when it might adopt a policy on the eligibility of existing TEA and the projects therein.
This article is for informational purposes only. If you have any questions, please contact the Troglia Kaplan, LLC.