Under the new EB-5 regulations set out by the Homeland Security Department (‘DHS’), persons seeking a green card through investment will now need to foot a much steeper bill. The regulations have been years in the making.
The final regulation passed on July 23, overhauls the EB-5 program for investors increasing the minimum investment amounts required for a green card. Such a change hasn’t happened in three decades. The regulation is effective as of November 21; the minimum investment amount will increase from $500,000 and $1 million to $900,00 and $1.8 million, respectively.
The minimal investment amount is, in fact, less than what was proposed initially of $1.35 million in January 2017. The stakeholders of the EB-5 have expressed significant concerns on the dramatic increase.
The new regulations; however, rework how the government will determine borders where the investment of the lower amounts can be made. These “target employment areas” are typically rural areas with high unemployment rates.
Importantly, the new regulation that contains measures to combat fraud, which has been prevalent in the program. These anti-fraud measures aim to settle the long debates in Congress over the future of the EB-5 visa.
No Relief for Green Card Backlogs
Nevertheless, the new regulations do not implement any means to reduce the current backlog on green cards. Applicants from China are the greatest users of the program and now appear to be set, in some cases, for waits of up to 16 years for the visas.
There is a challenge in the Federal District Court in Washington. A pending lawsuit is contesting the DHS’s means of counting the EB-5 investors’ children and spouses against the cap. The practice is said to be causing the backlog. However, the hearing judge of the case, to date, has suggested that it is doubtful that the challenge will be successful.
The goal of the EB-5 program is for persons to invest a minimum amount in a United States corporation, partnership or trust, which generates a minimum of 10 jobs for native workers. To date, about 95% of the program is made up of the regional center portion. This division allows investors to be able to pool capital and also count indirect creation of jobs towards the requirements of the visa.
At Least $900,000 payable for Green Cards under new regulation
For decades, the regional center program has operated on a ‘pilot test’ mode. It has never been permanently authorized by Congress. Its ‘pilot’ status has caused heated debate amongst the various representatives with a number of formal rounds of debate on the fate of the program.
Patrick Leahy (D-Vt.) and Sens. Charles Grassley (R-Iowa) who led a committee were the main opponents of the maintenance of the EB-5 program in its current form and went so far as to propose its termination entirely. Sen. Dianne Feinstein (D-Calif.) has also mirrored the concerns.
The EB-5 program has been under attack due to the precipitation of acts of fraud. The Security and Exchange Commission has enforced actions against a number of regional centers and their operators. Jay Peak ski resort located in Vermont was also controversially included in the actions notwithstanding that previously it was held out to be a program flagship.
Redirecting EB-5 Investments
Leahy and Grassley have also attacked the program for failing to stop money flowing into more wealthy urban areas at the expense of rural areas that are more economically distressed, the latter destination being the intention of the program.
Charles Schumer (D-N.Y.) the Senate Minority leader argues that EB-5 project approvals in urban areas should be acceptable only where the projects create job opportunities for the workers who commute from rural areas.
Nonetheless, important changes will roll-out. The program strips authority from the States’ to designate target employment areas and gives it to the DHS who will employ the formula based on the census tracts. Also, it allows any town and city with a population of about 20,000 and unemployment to qualify to be a target employment area.