To avoid a long-term government shutdown, the President and Congress just agreed to a defense spending budget for FY 2018 and FY 2019. The agreement also included a decision to provide continuing funding to several federal programs, including the EB-5 Program, through March 23, 2018. Labeled as the Continuing Resolution, this portion of the legislation also laid out an outline of a long-term budget agreement, which is expected to be included in an omnibus spending bill before the funding expiration date.
This latest Continuing Resolution is part of a pattern that has been ongoing since September 2015. There has not been a long-term extension of the EB-5 Program since President Obama signed S.3245, granting a three-year extension to the program beginning in September 30, 2012.
Unfortunately, a short-term continuation like this recent one leaves the long-term future of the EB-5 Program up in the air. Truth be told, we don’t know exactly what will happen to the Program. There have been several bills passed around between the House and Senate over the past couple of years, but none have gone anywhere. In the first part of 2018, there have been several proposals related to immigration, but none directly related to the EB-5 Program
EB-5 Changes Looming Ahead
The direct investment option of the EB-5 Program has been permanent since 1990 and does not require the same renewal process that other aspects of the program do. The Immigrant Investor Pilot Program, however, is another story. This part of the EB-5 Program involves indirect investments through regional centers and was created in 1992. Unlike the direct investment option, the Pilot Program allows project managers to count direct, indirect, and induced jobs in the job creation total instead of just direct jobs. This allows projects that may not result in businesses with multiple direct hires to obtain EB-5 funding.
Over the years since the implementation of the Pilot Program, Congress has become concerned with the rapid growth of the program, and as a result, there have been several proposed bills to modify the program. Up to this point in time, none of these bills have been passed, but there are several recent proposals that are still pending and may affect the future of the program.
One such bill, the American Job Creation and Investment Into Public 4 Works Reform Act of 2017 (H.R.3471), which was introduced on July 27, 2017, proposes increasing the minimum investment amounts from $500,000 to $800,000 (for investments in projects in targeted employment areas and infrastructure and manufacturing projects) and $1 million to $1.2 million (for all other investments) as well as an extension of the Pilot Program through September 30, 2022.
A similar bill, the American Job Creation and Investment Promotion Reform Act of 2017, proposes a similar increase for target employment area investments but no increase for other investments (the $1 million would remain the same). It suggests the same extension of the Pilot Program and also proposes including military areas, rural areas, and priority urban areas in the definition of targeted employment areas and setting aside a certain number of EB-5 visas specifically for projects in rural and priority urban areas.
A third bill, the EB-5 Immigrant Investor Visa and Regional Center Program Comprehensive Reform Act of 2017, proposes an additional year’s extension for the Pilot Program and suggests changing the minimum investments from $500,000 to $800,000 and $1 million to $925,000. It also proposes setting aside EB-5 visas for rural projects and including military areas, distressed rural areas, and distressed urban areas as three separate categories of targeted employment areas.
There are additional proposed bills floating around, but these are the most recent and thus the most likely to have an impact on the future of the EB-5 program.
What Comes Next
Frustrated with the delay in reforming the EB-5 Program, United States Citizenship and Immigration Services (USCIS) has stated that it will implement its own reforms to the EB-5 Program if Congress does not take action to do so by April 2018. Also campaigning for urgent reforms are Senator Grassley (R-Iowa) and Representative Bob Goodlatte (R-Virginia), who are acting Chairs of the Senate and House Judiciary Committees, respectively.
Senator Grassley pushed several months ago to have a proposed reform bill passed by February 2018 and implemented in 30 to 90 days following approval. Senator Grassley and Representative Goodlatte have specifically pushed for adjustment of the definition of targeted employment areas to include rural and urban distressed areas. Their proposed reform would also increase the minimum investment amount for projects specifically in the new category of TEAs to $925,000 instead of $500,000. It would also increase the minimum amount for other projects by $25,000. Unconfirmed rumors have circulated about additional proposals, such as setting aside EB-5 visas for projects in rural areas, requiring a minimum number of direct jobs, changing some of the interview procedures, and more.
While there is very little information currently available about all the details of the proposed reforms, it is expected to become public information before April 2018. Several EB-5 stakeholders have been actively involved in working with Senators and Representatives to advocate for reforms that include small, gradual increases in the minimum investment amounts rather than large leaps that could hamper the success of the program as well as a greater number of EB-5 visas set aside. We’ll keep you apprised of all changes as the news trickles in.