This month, on May 16, 2022, Section 3 of the EB-5 Reauthorization and Integrity Act of 2022 went into effect. Titled “Reauthorization and Reform of the Regional Center Program”, this 10,000 word section of the new legislation provides an improved foundation for the investors pursuing Regional Center projects, but it is also causing complications and delays.
Other sections of the law, such as the investment levels, have been in place since passing on March 15. Equally, EB-5 Direct projects, where a single investor supports a new business (like LCR’s Denny’s investments), can be filed today, but no company in the industry can offer Regional Center investments at this time because of how the USCIS is interpreting Section 3 of the law.
LCR has already posted a recent summary of this new law that details the most important new provisions, but in the last two months we are seeing the impact in how the agency has decided to implement the new changes.
For our clients who have already invested, all of the updates from the US government are good. The new legislation has a number of provisions that help clients:
- Grandfathering – the protection from changes in legislation or lapses
- Concurrent Adjustment of Status – a way for investors who are in the US to apply for US residency, working permits and travel permits while waiting for their I-526 petition (whether Direct or Regional Center) to be adjudicated,
- Processing Time Targets – between 90-180 days for I-526 petitions and 240 days for I-829 Removal of Conditions adjudication.
We are happy to report we are also seeing clients receive appointment dates for their consular interviews and successful adjustment of status notices. The USCIS has clearly recognized the issues in processing that have occurred during the pandemic, because they have also announced new actions to reduce backlogs and provide relief to work permit holders.
For new investors interested in entering the program, the picture is less clear. There is a lot of detail in the new legislation for the DHS to implement as legislation.
- Integrity Protections – The new legislation restricts anyone who has had a felony conviction or large civil penalty from being involved in managing regional center projects.
- Fee Disclosure & Third-Party Promoters – To avoid mis-representation in the sales process, all third-parties promoting the funds must register with the SEC, have written contracts, promise to disclose their fees to the investors and follow guidelines on how to present the visa process.
- Fund Administration – To avoid issues of co-mingling funds or not handling funds correctly, all projects need to maintain separate accounts for each investor.
- Reporting – Reporting requirements on fund performance and regional center annual statements have been increased.
The USCIS has held one listening session on April 29, and another is scheduled for May 26, but it is not clear the government is clearly understanding the industry’s concerns. The changes are not significant for LCR since we have always used, for example, fund administration and done comprehensive reporting.
Recertification of Regional Centers
The most controversial issue is a decision by the USCIS to require all regional centers to reapply for their status using an I-956 form. The concern here is the delay it will take for the regional centers to be recertified since the government has stated no project exemplars or individual investment petitions will be accepted from existing regional centers.
- Potential for Overturning in the Courts – The declaration that all roughly 600 existing regional centers are unauthorized has led members of the industry to sue the government. If successful, existing regional centers will be able to file new investors immediately. The judge for the case has committed to a ruling by mid June.
- Congressional Letter – Four senior members of the Congress (Nadler, Schumer, Conrnyn and Graham) have written a letter to the DHS requesting they take a different approach and manage a “Transition” to the requirements of the new legislation.
- No Regional Center Applications – The USCIS has published on its site and stated in court documents that it is requiring any company proposing Regional Center projects to first reapply and be certified.
More Delays Unless Using EB-5 Direct
The implications for investors interested in using the EB-5 program to move to the United States is that there is a new delay if they choose a regional center project and there may be other delays as new forms, regulations and guidance is published.
For clients that are concerned about a further delay because they haven’t won the H-1B lottery, or because they want to apply for a work permit while still on an F-1 visa, or because a child is turning 21, we are recommending they consider an EB-5 Direct offering which can be filed today.