Significant Developments in the EB-5 Program

The EB-5 Reform and Integrity Act of 2022 (the RIA) brought sweeping changes to the popular EB-5 Immigrant Investor Program, promising to make it much more efficient, transparent, and secure for investors and, as a result, causing an upsurge in EB-5 applications in the months following the enactment of the reform bill.

While the new legislation impacted the program across the board, in this article, we will focus on some key recent developments that all potential investors must be aware of while planning their EB-5 investment in order to make a well-informed decision.

Set-Aside Visa Quota

Proposed as an innovative solution to overcome the excessively long processing times for applications from high-demand countries, such as India, China, and Vietnam, the 32% quota of set-aside visas was an exciting announcement. The provision offers a golden chance to investors, especially from countries with huge backlogs, to complete their immigration process in the shortest possible time by allowing them to skip the long queue in the unreserved category and receive their EB-5 visa as soon as their EB-5 petition is approved.

The Visa Bulletin for March 2024 lists all the three set aside visa categories, i.e., 20% quota for rural areas, 10% quota for high-unemployment regions, and 2% quota for infrastructure projects, as “C” or current, which means that there is no backlog or waiting time at present under these reserved categories.

This allows Chinese and Indian investors to avoid additional years of processing times caused by these countries’ backlog of EB-5 application.

Investment Capital Requirement

The RIA increased the minimum capital investment to $1,050,000 for standard EB-5 projects, albeit keeping it much lower at $800,000 for projects in designated targeted employment areas (TEAs), i.e., rural and high-unemployment areas.

Investing in a TEA is not only more affordable for investors but also benefits the U.S. government by encouraging investments in the regions that need economic stimulation and job creation.

Partial Investment Option

Investors facing liquidity constraints can start the EB-5 process even if they do not have the required funds at the time of filing their application. Instead of waiting to arrange for the full investment amount before submitting the I-526E petition, they have the option to pay partially at the time of application and provide the balance amount within a set period, usually six to twelve months.

However, not all projects allow partial investments, and investors must find projects that do not require full payment with the EB-5 petition. Moreover, the plan for liquidity must be in place, and supporting documentation for the source of funds must be submitted along with the petition.

Investment Sustainment and Redeployment Policy

Before the RIA, EB-5 petitioners were required to keep their funds “sustained” and “at risk” in an EB-5 project until the end of their two-year conditional residency period. Because an EB-5 investor’s conditional residency period may not have ended by the time the project is ready to repay the capital, this often requires EB-5 projects to redeploy investor funds into another project—thus keeping the funds “at risk.”

The new law introduced changes that strengthened the redeployment policy by officially allowing NCEs to redeploy EB-5 investor funds anywhere in the United States.

However, in a significant amendment to the sustainment period, EB-5 investments made after the enactment of the RIA are now expected to remain invested only for a minimum of two years from the time they are made available to the EB-5 project.

While it is unlikely for most reliable EB-5 projects to repay funds after only two years, this eliminates the need for redeployment in many cases—a major benefit for investors.

This amendment is not applicable for pre-RIA investors, who must sustain their capital and keep it invested “at risk”— sometimes through redeployment—until the completion of their conditional residency.

Documentation to Prove the Legal Source and Trail of Funds

For a successful EB-5 petition, investors need to prove with extensive documentation that the capital invested, or actively in the process of being invested, was obtained from a lawful source and through lawful means. This requirement applies to the capital investment amount as well as to funds used to pay administrative costs and fees related to the investment.

Employment earnings, proceeds from the sale of property, gifts, loans, inheritance, and liquidation of investment portfolio are all acceptable sources of funds.

For petitions filed on or after May 14, 2022, gifts and loans are explicitly listed as legal sources of funds, provided they were gifted or loaned to the investor in good faith and do not evade any restrictions imposed on permissible sources of capital.

Investors relying on gifts or loans as a source of funds must demonstrate their legality by submitting the requisite evidence for the donor or, if not a bank, the lender.

Following the landmark verdict in the Zhang v. USCIS case, which ruled that unsecured loans were to be classified as a legitimate source of funds for EB-5 investments, EB-5 investors can now utilize both secured and unsecured loans to fund their EB-5 investments. The RIA reinforced this ruling by excluding a bank loan from the requirement of proving its legitimacy as a lawful source of funds.

In addition to demonstrating the legal source of funds, investors also need to provide evidence for the verification of the legal path of funds, i.e., the details of the movement of investment capital from its origin to the moment the funds reach the escrow account or the business account of the NCE.

Proving the eligibility of the source and path of funds is one of the most time-consuming and crucial aspects of an EB-5 petition, and it must be done using the expertise of an immigration lawyer familiar with the EB-5 program requirements.

Concurrent Filing and Adjustment of Status

Under the RIA, EB-5 investors already residing in the United States on a valid non-immigrant visa are eligible to file Form I-485 for adjustment of status (AOS) concurrently with their EB-5 application through EB-5 Concurrent Filing.

This provision allows applicants to continue staying in the United States while their EB-5 petition is being processed.

Once the I-485 petition for AOS is filed, the applicants can apply for a work permit and advance parole, after which they can work legally in the United States and travel abroad without the risk of abandoning their I-485 petition.

This facility is an excellent opportunity for H-1B workers reeling under the spate of mass layoffs to secure their future. By making an EB-5 investment and applying for AOS, they can continue to live and work in the United States without any fear of deportation due to job loss.

Violation Waiver for EB-5 AOS Applicants

Before the RIA, EB-5 applicants who failed to maintain lawful status in the U.S., worked without authorization, or otherwise violated the terms of their visa could not apply for adjustment of status, even if otherwise eligible. The RIA amended this rule to allow EB-5 investors to file for adjustment of status even if they had spent up to 180 days out of status or had worked without authorization for up to 180 days.

In addition to the facility of concurrent filing, this amendment gives laid-off H-1B workers additional time to file an application for adjustment of status along with an EB-5 visa petition, allowing them sufficient time to plan their investment.

Update to Visa Availability Approach for Form I-526

On July 18, 2023, United States Citizenship and Immigration Services (USCIS) announced an update to the visa availability approach to managing the inventory of I-526 petitions for more efficient adjudication.

It states that the USCIS Immigrant Investor Program Office (IPO) will group petitions by NCE with filing dates on or before November 30, 2019, and assign multiple petitions associated with the same NCE to the same adjudicator(s). This method will enable IPO to increase processing efficiency, reduce the backlog and Form I-526 completion times, and support consistency and accuracy in adjudications while maintaining fairness, given the closeness in the filing dates of these petitions.

Notably, the update does not mention I-526E petitions filed post-RIA and gives no indication how USCIS plans to process the new I-526E petitions. Besides, Form I-526E is also missing from the USCIS webpage for processing times, leaving new investors guessing how long it will take for their petition to be adjudicated.

New Form I-956K for EB-5 Promoters

On January 4, 2023, USCIS published Form I-956K, Registration for Direct and Third-Party Promoters.

The form aims to implement the accountability measures in the EB-5 program stipulated under the RIA, which requires all direct and third-party promoters to register with USCIS.

The purpose of the form is to determine the credibility of direct or third-party promoters (including migration agents) of a regional center, an NCE, an affiliated job-creating entity, or an issuer of securities offered to immigrant investors. It will also ensure compliance of the promoters with USCIS and Security and Exchange Commission (SEC) policies, laws, and regulations.

The enactment of the RIA has brought momentous reforms in the EB-5 program, but some of the amendments are still in the process of implementation. Some of the guidelines are open to interpretation, and it is advisable for investors to seek guidance from trusted EB-5 consultants before proceeding with their investment. For more information on how to make a successful EB-5 investment or raise EB-5 funding, schedule a free consultation with EB5AN.