Authored by: Christian Triantaphyllis – Partner at Jackson Walker
On November 21, 2019, U.S. Citizenship and Immigration Services’ (USCIS) final rule (New Regulations) came into effect that makes a number of significant changes to its EB-5 Immigrant Investor Program. New developments under the final rule include: Raising the minimum investment amounts; revising the standards for certain targeted employment area (TEA) designations; giving USCIS responsibility for directly managing TEA designations; clarifying USCIS procedures for the removal of conditions on permanent residence; and allowing EB-5 petitioners to retain their priority date under certain circumstances.
Among these major changes in the final rule to EB-5 Program, the method in which a TEA is designated so that an EB-5 project qualifies for the $900,000 investment level rather than the $1.8 million investment level, has left potential EB-5 investors with the most confusion.
How the DHS will Determine A TEA
Instead, the USCIS will make such designations directly based on revised requirements in the New Regulations and will limit the make-up of census tract-based TEAs in order to help ensure TEA designations are done fairly and consistently, and more closely adhere to congressional intent to direct investment to appropriate areas.
Defining a TEA
– Rural TEAs
Under the New Regulations, a “rural area” is defined as any area outside of a metropolitan statistical area or a city or town with a population of 20,000 or more. In practice, to be qualified as a rural TEA, an EB-5 project in the I-924 Exemplar filing, or an EB-5 investor in the I-526 petition, must include in the filing the U.S. census data demonstrating that the location of the EB-5 project is one that is both outside a metropolitan statistical area and has a population of less than 20,000. USCIS will review the I-526 petition, for example, and in that process will review the census tract data to approve the TEA qualification.
– High Unemployment TEAs
Under the New Regulations, an area in a metropolitan location may be designated as a TEA if (A) the investment is located in a metropolitan statistical area, a county within a metropolitan statistical area, or a city or town with a population of 20,000 or more, in which the investment is principally doing business which has experienced an average unemployment rate of at least 150% of the national average unemployment rate; and (B) the area encompassing the census tract in which the investment is principally doing business, which may include any or all census tracts directly adjacent to such tract, has a weighted average of unemployment for each census tract of at least 150% of the national average unemployment rate. In practice, to be qualified as a high unemployment TEA, an EB-5 project in the I-924 Exemplar filing, or an EB-5 investor in the I-526 petition, must include a census tract study demonstrating that either the project’s single census tract, or if necessary the study may include census tracts directly adjacent to the project’s census tract, satisfies the 150% unemployment rate requirement. USCIS does not automatically approve any particular methodology to calculate the unemployment rate for determination of TEAs, but will review the I-526 petition, for example, and in that process will review the census tract study to approve the TEA qualification.
That means that in either the rural TEA or high unemployment scenario, the burden is on the petitioner to provide USCIS with evidence documenting that the area where the petitioner has invested is rural or a high unemployment area at the applicable time of determination, and such evidence should be reliable and verifiable. USCIS believes that the unemployment data provided to the public by both the Census Bureau through the American Community Survey (ACS) and the Department of Labor’s Bureau of Labor Statistics (BLS) qualify as reliable and verifiable.
Always remember, although a Regional Center EB-5 project may get a TEA qualified at the time that it applies for I-924 Exemplar designation from the USCIS, the TEA will be adjudicated by USCIS at the time the investor submits his or her I-526 petition, or makes his or her investment in the EB-5 project, whichever occurs first. If the EB-5 project uses an escrow to hold funds until a later date, the TEA is determined based on the time of filing the I-526 petition with USCIS.
TEA designation reforms are outlined in the New Regulations in order to address gerrymandering of high-unemployment areas, meaning deliberately manipulating the boundaries of an area to obtain the TEA designation. Gerrymandering of such areas was typically accomplished by combining a series of census tracts to link a prosperous project location to a distressed community to obtain the qualifying average unemployment rate.
Updating EB-5 Project Documents and Due Diligence
In order to adjust to the New Regulations, EB-5 projects and investors alike need to consider what project documents need updates. EB-5 projects must change all reference to TEAs in its project documents so that they clearly explain that the New Regulations give USCIS responsibility for directly managing TEA designation. Further, the project documents should clearly explain how the project site does indeed qualify as a TEA, either through rural or high unemployment requirements. Therefore, an investor considering an EB-5 project should review the Private Placement Memorandum and comprehensive business plan to determine whether the project is seeking the TEA designation in the correct manner, and make sure that a census tract study, which can include an explanatory letter, is included in the project’s set of documents that will be included in the I-526 petition. The census tract study should include data that is current, meaning the unemployment data that is available for the year in which the investor invests and files his or her I-526 petition. Being aware of the need to have this type of proper documentation will enable an EB-5 investor to better protect themselves and ensure that their investment project is in a TEA.
Any guidance provided by LCR regarding Targeted Employment Area designations are strictly business services and are not to be construed as legal advice. All information provided by LCR is general information based upon USCIS guidance and standards. Each prospective EB-5 investor must consult with, and rely solely upon an experienced EB-5 immigration attorney to obtain individualized advice and guidance about any decision in related to the preparation and filing of an immigration petition.
On November 21st, 2019, the new regulations came into force, which includes the increase in the minimum investment amount to be $900,000 for TEA approved projects and $1.8 Mn for Non-TEA projects. Please consult your immigration attorney or LCR Commercial Representative for further information.
Christian A. Triantaphyllis is an immigration and real estate attorney with first-hand experience representing foreign nationals and immigrant investors in cross-border and business immigration matters, usually dealing with regional centers and direct investments.
Christian has become particularly experienced assisting foreign nationals from around the world through the EB-5 visa program, preparing and filing I-526 petitions and I-829 petitions for regional centers and direct investors. Christian takes pride in easing the process for his clients to work through the demanding EB-5 immigrant investor process by employing an approach to meeting the immigration goals that is thorough, knowledgeable, and enthusiastic.
Further, Christian advises foreign nationals on immigration law compliance matters in accordance with U.S. Citizenship and Immigration Services, U.S. Customs and Border Protection, and the U.S. Department of State.
Christian cut his teeth as a global citizen serving in the United States Peace Corps as a health sector volunteer, and went on to intern with the International Criminal Tribunal for the Former Yugoslavia in the Netherlands. Christian is a conversational speaker of
Spanish and Chichewa (Malawi).