Direct Investment Takes Center Stage in the EB-5 Industry

For several years, EB-5 investors have been able to choose between two investment models: direct and regional center investment. Until recently, the vast majority of EB-5 investors chose regional center-sponsored projects, which enjoy flexible job creation criteria; they can count direct employment (jobs that appear on the company’s payroll) as well as indirect and induced jobs. Since indirect and induced jobs result from an EB-5 project’s positive economic impact on local businesses, regional center investors usually find it easier to meet the job creation threshold of at least 10 full-time positions. In contrast, direct EB-5 projects can count only direct employment.

Despite the more relaxed job creation criteria for regional center investors, direct EB-5 projects offer several unique advantages. For instance, direct EB-5 investors typically have more control over how their EB-5 capital is used and can choose to participate in daily business operations. Direct EB-5 projects are usually smaller in scope than regional center projects and subscribe fewer investors; as a result, direct investors often gain higher returns.

In the second half of 2021, three developments have caused direct EB-5 investment to take center stage in the EB-5 industry. These events show that there has never been a more ideal time to make a direct EB5 investment.

The Expiration of the Regional Center Program

Unlike direct EB5 investment, which is an integral part of the EB-5 program, regional center projects depend on periodic government reauthorization. Congress failed to reauthorize the regional center program before the June 30, 2021, expiration date, so all EB-5 investments must now be direct. Since the expiration of regional center investment, numerous investors have come to realize that direct projects are advantageous in many ways. In addition, it is unclear when the regional center program will be reauthorized.

The Repeal of the EB-5 Modernization Rule

A June 22, 2021, court ruling found that the controversial EB-5 Modernization Rule had been instituted improperly. This landmark decision lowered the minimum EB-5 investment amount for targeted employment area (TEA) projects to only $500,000. Due to the expiration of the regional center program, only direct EB-5 investors can benefit from this reduced minimum threshold. Many EB-5 visa petitions associated with direct investment projects have been filed in the second half of 2021.

Foreign nationals interested in making an EB-5 investment of only $500,000 should keep in mind that the investment threshold could be raised at any time. In fact, United States Citizenship and Immigration Services (USCIS) has already filed an appeal of the aforementioned court ruling.

All Direct Investors Achieve “Current” Status

Due to the high volumes of EB-5 investors from countries such as China, India, and Vietnam, investors from certain nationalities have at times been subject to cutoff dates. These cutoff dates restrict when investors can apply for and receive their EB-5 visas. However, all direct EB-5 investors will achieve “Current” status as of December 2021, meaning that they will be able to apply for and receive their visas as soon as their I-526 petitions are approved. Chinese investors, the only nationality that was oversubscribed prior to the December 2021 Visa Bulletin, had been subject to cutoff dates since 2015.

It is worth noting that, should the regional center program be reauthorized, regional center investors will be subject to cutoff dates.

Making a Direct EB-5 Investment

These recent trends in the EB5 investment industry indicate that direct EB-5 projects now hold a crucial position. Interested foreign nationals should work with an experienced immigration attorney, identify a suitable direct EB-5 project, and subscribe before the minimum investment threshold is raised once more. Evidently, the direct EB-5 investment model is an ideal way to begin the EB-5 process and gain permanent residency in the United States.