Immigrants seeking a green card via investment will have to pay a lot more under a new Homeland Security Department regulation that has been years in the making.
The final regulation overhauling the EB-5 immigrant investor program, released July 23, bumps up the minimum investment amounts required for a green card for the first time in nearly 30 years. The minimums, currently at $500,000 and $1 million, will rise to $900,000 and $1.8 million when the regulation becomes effective Nov. 21.
The lower investment amount is less than the DHS’ original proposal of $1.35 million in January 2017, a particular area of concern for EB-5 stakeholders.
The regulation also allows immigrants who already applied for green cards under the EB-5 program to keep their place in line.
It also reworks how the government determines those areas of the country where the lower amount can be invested and the investor can still get a green card. Under the program, the lower amount is allowed in rural areas or areas of high unemployment, known as “targeted employment areas.”
The regulation doesn’t do anything to relieve a growing green card backlog, which has resulted in Chinese nationals—the biggest users of the program—facing a 16-year wait for the roughly 10,000 visas available each year.
A lawsuit pending in federal district court in Washington is challenging the DHS’ method of counting EB-5 investors’ spouses and children against the cap, which the complaint says contributes to that backlog. The judge hearing the case already has indicated that it’s unlikely the challenge will win.
Congressional Action Possible
The EB-5 program allows immigrants to invest a minimum amount in a U.S. commercial entity that creates at least 10 jobs for U.S. workers. The regional center portion—which makes up about 95% of the EB-5 program—allows immigrants to pool their investments and count indirect job creation toward the visa requirements.
The program has attracted more than $27 billion in investments since fiscal year 2008, according to Invest in the USA, a trade association representing regional centers.
The regional center program has existed for decades in “pilot” format, having never been permanently authorized by Congress. That’s resulted in multiple rounds of debate among lawmakers over the program’s fate.
The new regulation, which also contains various anti-fraud measures, could settle that dispute. Or not.
The program is set to expire Sept. 30, nearly two months before the regulation is set to go into effect. Each time the program comes up for renewal, “the ever-elusive deal” to overhaul EB-5 visas “is always punted” in favor of the status quo, said Doug Rand, a former assistant director for entrepreneurship in the Obama White House who worked on the EB-5 proposal.
“But this time it’s going to be looming under these new rules,” so “there’s an extra incentive” to make changes because the regulation ensures that the status quo is no longer an option, said Rand, co-founder and president of Seattle immigration services company Boundless Immigration Inc.
The regional center program has come under fire as a magnet for fraud in the wake of a series of Securities and Exchange Commission enforcement actions against various regional centers and their operators. That includes the Jay Peak ski resort in Vermont, which previously had been held out as a gold standard for the program.
Grassley and Leahy also have attacked the program as allowing too much money to flow into more wealthy urban areas rather than the economically distressed rural areas it was intended to target.
“Thankfully, President Trump is doing what Congress failed to do for too long,” Grassley said in a statement. “By implementing these EB-5 rules, he is keeping his word to drain the swamp and bring new opportunities to rural America as well as communities in need.”
“Far from serving as a tool for economic development and job creation in underserved areas, in recent years the EB-5 program has merely served as a corporate subsidy for wealthy developers in our nation’s most affluent communities,” Leahy said in a statement. “We still need to do more to root out fraud within the program, but this rule change will go a long way toward cleaning it up.”
Senate Minority Leader
Representatives for Schumer didn’t respond to a request for comment on the regulation.
The regulation removes the states’ authority to designate TEAs, a practice critics say has led to gerrymandering in order to attract investments. Instead, the DHS will determine TEAs, using a formula based on census tracts.
The regulation also allows any city or town with high unemployment and a population of at least 20,000 to qualify as a TEA, as long as the city or town is outside what the government considers a metropolitan statistical area.
But states are in a better position to determine what areas have high unemployment, said Chad Blocker, an immigration attorney with Fragomen, Del Rey, Bernsen & Loewy in Los Angeles. “This is not their area of expertise,” he said of DHS officials who are now tasked with making the determination.
“It’s really going to narrow the areas that do qualify as TEAs” and “could slow down projects” if the DHS doesn’t act as swiftly as the states when making TEA determinations, Blocker said. “I don’t think we fully understand just yet what that impact is going to be.”
“Our members that utilize the EB-5 program are very concerned about the uncertainty and disruption this new rule will inflict upon their operations,” said Jon Baselice, executive director of immigration policy at the U.S. Chamber of Commerce. There are other “serious concerns” that the regulation doesn’t address, and the Chamber plans to work with Congress on EB-5 overhaul legislation, he said.
But Rand said there’s been too much “line-drawing” by the states that’s resulted in a chunk of EB-5 investments going to luxury hotels in wealthy areas. “Any fan of good government would be a fan of this regulation,” he said.