Written by: Taher Kameli, Esq.
Would you like to be a resident of the United States? The United States, often referred to as the “land of opportunity”, is considered an attractive destination for many immigrants, with its strong economy, high level of education, health care, and standard of living, political freedoms, and diverse culture. If you are interested in residing in the United States, you should note that important dates will be forthcoming before the end of year 2019 for the United States’ residency by investment program (known as the “EB-5 program”).
On July 24, a new rule was published that makes material changes to the EB-5 program in 2 key areas. First, the new rule changes the minimum investment amount requirements under the EB-5 program. The new rule significantly increases the minimum investment amount under the EB-5 program from $500,000 to $900,000 for projects located in a “targeted employment area” (generally rural areas and areas with high levels of unemployment) (“TEA”) and from $1,000,000 to $1,800,000 for the less common situation of projects not located in a TEA.
These changes represent the first increase in the applicable EB-5 program minimum investment amounts since 1990. The new rule also provides that the minimum investment amounts will automatically adjust for inflation every 5 years. Second, the new rule changes how TEAs will be determined. The new rule eliminates the ability of a state in the United States to designate an area as “high-unemployment” (a key part of the definition of a TEA); instead, these designations would now be made by the Department of Homeland Security. It is believed that the Department of Homeland Security will be less permissive than the states in the United States have been in combining census tracts to “gerrymander” an area as “high-unemployment”.
These changes are due to be effective on November 21, 2019. It is expected that there will be a surge of new EB-5 program filings before this November 21 date, as immigrants try to take advantage of the current, “pre-change” rules governing the EB-5 program, including, in particular, to try to save $400,000 of investment funds ($500,000 vs. $900,000).
In addition to this forthcoming November 21 date, another key forthcoming date for the EB-5 program is September 30, 2019. A key part of the EB-5 program – the “regional center” program, which allows qualifying projects to count indirect jobs and induced jobs, as well as direct jobs, to meet the requirement that an EB-5 investment will create 10 jobs per qualifying investment – is due to expire on September 30, and must be reauthorized by Congress.
While Congress has frequently in the past reauthorized the “regional center” program of the EB-5 program just before it was due to expire, there is no guarantee that Congress will do so again on September 30, 2019. In addition, it is possible that as part of any reauthorization of the “regional center” program of the EB-5 program, Congress may also change the general requirements of the EB-5 program, including in a manner that may make the new rule published on July 24 (and due to be effective on November 21) moot and obsolete.
While observers thus need to be aware of the forthcoming key September 30 and November 21 dates concerning the EB-5 program, there is one other pending development concerning the EB-5 program. In August, Republican Senator from Kentucky Rand Paul announced that he was asking his fellow senators to sign a “joint resolution” that would stop the new rule concerning the EB-5 program published on July 24 (and due to be effective on November 21) from taking effect.
Senator Paul stated, “By significantly raising the minimum investment levels required for foreign investors to become eligible petitioners under the EB-5 program, this rule may undermine the very purpose of the program, which is to create jobs and grow the economy. . . . Moreover, the rule would severely restrict the role of the states in determining the targeted employment areas”. It remains uncertain if Senator Paul’s efforts will be successful.