Could EB5 Investors Benefit from a Global Pandemic_ Yes – Here’s How

Could EB-5 Investors Benefit from a Global Pandemic? Yes – Here’s How

Household lockdowns en masse. Entire communities brought to an economic halt. Many businesses shuttered for good. This was the picture of the COVID-19 pandemic sweeping the globe in early 2020, and the United States was not spared these negative effects. For EB-5 Immigrant Investor Program participants, the temporary suspension of routine U.S. embassy and consulate visa processes has presented a significant obstacle on the road to a life of freedom in the United States. The standstill has ultimately meant delays on what is already sometimes a non-linear journey toward a U.S. green card.

That said, the impacts of the global pandemic – surprisingly – haven’t been all bad. In fact, there are four distinct ways EB-5 investors actually stand to benefit from the effects of COVID-19 and the response to them.

Shutdowns in 2020 to Boost Available EB-5 Visas in 2021

Along with the EB-5 program, various immigration visa programs have experienced significant slowdowns due to COVID-19. Because September 30, 2020, marks the end of FY2020, thousands of family-based visas likely won’t be issued before the annual deadline. This is potentially great news because every unissued family-based visa in one fiscal year is rolled over into employment-based visa programs in the next. This will translate to thousands of additional EB visas over the typical allotment in FY2021. Whatever the total of rollover visas, 7.1% of them will be earmarked for the EB-5 program specifically.

In the same way, any unused EB-5 visas will also be carried over to the EB-1 program umbrella in the coming year. Because of the pandemic, United States Citizenship and Immigrations Services (USCIS) may be left holding thousands of unissued EB-5 visas in the new fiscal year. Although these former EB-5 visas will be recycled through the EB-1 program, the family-based visas account for a considerably larger sum of the annual visa allocation – 40,000 family-based visas per month vs. 10,000 EB-5 visas per year.

Thus, simple math shows that every month that no family-based visas are granted translates to an additional gain of 2,840 visas rolled into the EB-5 program. Multiply that by the number of months zero visas were issued due to the closures of U.S. embassies and consulates, and it is easy to see why EB-5 participants can anticipate the largest visa boost in the EB-5 program’s history.

EB-5 Investors from Backlogged Countries Benefit First

Each country is entitled to approximately 700 EB-5 visas annually. However, leftover visas are typically granted to investors from backlogged countries first, and there are only three: China, India, and Vietnam. Indian backlogs became current in July 2020, shortly after the Indian EB-5 final action date advanced rapidly in the first months of 2020. Vietnam simply doesn’t have as many investor applicants as either India or China. This leaves Chinese investors the most widely and longest-suffering when it comes to EB-5 backlogs. In fact, it is not uncommon for Chinese EB-5 investors to wait five years for I-526 adjudication.

Stacking delays further, an executive order signed in July 2020 mandated a repeal of a security law allowing autonomous treatment of Hong Kong EB-5 investors. Hong Kong petitions are now lumped into the Mainland Chinese backlog, increasing wait times for both regions overall. For this reason, and because of the country’s already massive and long-standing backlog, Chinese EB-5 investors who have stood in wait the longest for U.S. green cards are the most likely to benefit from the 2020 phenomenon.

Reduced Project Activity Has Lowered the Risk of EB-5 Capital Redeployment

All capital invested in EB-5 program projects must remain “at risk” for the entire investment period. Put another way, the total investment must sustain the opportunity for gain and the risk of loss at all times. The investment period for EB-5 capital is a minimum of two years (the duration of an EB-5 investor’s conditional permanent resident status).

That said, factors pertaining to when funds are released from an escrow account to the new commercial enterprise (NCE) may actually cause the investment period to stretch to four or five years. For instance, if an investor has used financial institutions to source investment funds, the investment period may wind up exceeding loan terms on the capital when investment periods lengthen.

EB-5 capital must either be paid back to the investors or redeployed into other projects at the end of an EB-5 project (completed and sold or refinanced). However, when investors have not had a chance to file an I-829 petition to remove the conditions from their permanent resident status, they are required to maintain an “at-risk” status on their EB-5 capital. When this occurs, an investor doesn’t have any other choice but to redeploy their capital into other projects. This can leave an EB-5 investor without sufficient time for analysis and selection of new projects. Without the security of a thorough selection process, they are effectively putting themselves at greater financial risk.

The impact of the pandemic, in this case, could be considered a positive. Under the circumstances of months of halted construction and other operations, the clock for EB-5 investors has kept on ticking, resulting in a lower risk of redeployment throughout the pandemic. Hopefully, this has saved many investors from hasty, high-risk investment decisions that they otherwise would have been made.

The Immigration Ban Exemption for EB-5 Investors

Against the protest of senators who felt the original ban was too lenient, in June 2020, without taking into consideration the senators’ concerns, President Trump signed into law the extension of an immigration ban that was to last until the end of 2020. What were the protests about? In an open letter to the president, the senators followed up with a request for the ban to extend to EB-5 investors, citing common program misconceptions, such as rampant fraud, as support.

Note here that while fraud can occur through the EB-5 program, it is rare. Moreover, on the occasion it has occurred, it has been quickly dealt with. Overall, EB-5 program benefits far outweigh its risks to the U.S. economy and American workers. Fortunately, Trump’s penchant toward investment capital and a deep interest in outward economic success have left him erring on the side of this economically assistive program.

These events have paved the way for an easier path to U.S. permanent residency among EB-5 investors. U.S. embassies and consulates began a phased resumption of visa services in August 2020, and investors will soon be taking up visa interviews to receive their U.S. green cards again. Because of a great number of immigration pathways remaining temporarily suspended, the lane is wide open for EB-5 investors. Shorter processing and wait times at consulates are likely in the near future.

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