Navigating the changes to the EB-5 program published in the Federal Register in July 2019 is challenging considering the length and complexity of the Final Rule. Nevertheless, current and future program participants should understand the most important changes, which come into effect on November 21, 2019, to understand how the new rules affect their futures within the program.
Although the full effects of the EB-5 program updates will become clear only after the rules have been implemented and in force for some time, three key changes will have an immediate effect.
1. Minimum Investment Amounts Are Increasing
From November 21, 2019, the minimum investment amount in a project located within a targeted employment area (TEA) will increase from $500,000 to $900,000. Similarly, the minimum investment amount in non-TEA projects will increase from $1 million to $1.8 million.
These increases are tied to inflation, and the new rules include a framework for future inflation-related increases. The Department of Homeland Security (DHS) is set to increase the investment amounts every five years, with the next increase due in 2024.
2. TEA Designation Criteria Are Changing
The new EB-5 rules contain significant changes to the management of TEAs, especially those in urban areas. TEAs are currently designated at the state level, and state agencies are allowed some flexibility about designation to direct funding to areas they feel most need economic growth. As of November 2019, DHS will manage the designation of TEAs, and industry stakeholders are uncertain about how the department will apply the new rules.
Moreover, although the definition of rural high unemployment areas will not change, it will change for urban areas. Under the existing rules, several contiguous census tracts can be combined to form a high unemployment area. But DHS has indicated that under the new rules, the focus should be on the single census tracts or directly adjacent tracts in which projects will be located.
The most significant outcome of this change is that many existing projects may no longer qualify as TEA projects once the new rules come into effect. According to a 2018 analysis conducted by the trade association for the EB-5 Regional Center Program, Invest in the USA (IIUSA), only a third of EB-5 projects included in its study sample would qualify as TEA projects after the implementation of the new rules because of the changes to the treatment of contiguous and adjacent census tracts. EB-5 program participants should contact their EB-5 economists to confirm whether their project locations will still qualify as TEAs after the new rules come into effect.
3. Some EB-5 Investors Will Be Able to Retain Their Priority Dates
From November 21, 2019, some EB-5 investors will be able to retain their priority dates. The priority date, or filing date, is the date that fixes an applicant’s place in the queue for a green card number. This change will allow investors who have obtained I-526 approval, who have not yet secured conditional permanent residency, and who are at risk of losing the opportunity to secure a green card because of unexpected material changes to their applications during delays in the EB-5 process to retain their priority dates.
The new rule applies to investors who are in the United States on temporary nonimmigrant visas or who are undergoing consular processing. It does not apply to investors who have secured conditional residency or investors who made fraudulent misrepresentations during the submission of their petitions. The Final Rule does not specify whether this change will apply to investors who are awaiting the outcome of their I-526 petitions.
By filing new I-526 petitions and investing in EB-5 projects at the revised investment amounts, qualifying investors will be able to keep their places in the visa line. Investors who face setbacks such as termination of the regional centers with which their projects were affiliated or material changes to projects and applications that jeopardize the success of their I-829 petitions will find this change particularly helpful.
The update to priority date retention rules lessens the effects of the discrepancy between rigid policies and the changes projects and investors undergo over time, especially considering the time it takes to complete the visa process. However, further changes are needed to fully address these problems.