WASHINGTON, July 17, 2019 /PRNewswire/ -- While most people
in the U.S. were planning their summer vacations in late
June 2019, the EB-5 industry was
jolted from its summer slumber by the news that on June 27, 2019, the Office of Management and
Budget (OMB) completed its review of draft of new regulations for
the EB-5 Regional Center program, entitled EB-5 Immigrant Investor
Program Modernization. OMB review is the second to last step
in the regulatory process before a new regulation becomes
effective. Essentially, OMB put investors and the entire EB-5
industry on notice that regulatory changes are likely coming in the
very near future.
Typically, after OMB completes its review of proposed new
regulations, the regulatory agency that prepared the regulations
will publish them as a "Final Rule" in the Federal Register shortly
afterwards and give the public between 30 days to 60 days to get
ready before the new regulations become effective.
In the case of the new EB-5 regulations, the Department of
Homeland Security (DHS) first proposed the EB-5 Immigrant Investor
Program Modernization regulations in the last days of President
Obama's administration, on January 13,
2017. In early 2017, DHS opened the draft regulations
for comments from the public and received nearly 300 comments, most
of which found the proposed EB-5 regulations to be unworkable,
requiring significant modifications. Now, almost two-and-one-half
years later, there is immense speculation in the EB-5 industry as
to what regulatory changes have actually been adopted by DHS
after OMB completed its review. The text of the draft EB-5
regulations has not been released to the public, and DHS has not
issued any public statements or notices about the draft
regulations.
Until the Final Rule is published in the Federal Register, the
content of the Final Rule is completely unknown. It is safe to say
that the EB-5 investment threshold will increase and specific
requirements concerning the designation of what is considered a
Targeted Employment Area (TEA) will change, however, it is not
clear what the specifics will be.
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As background, the initial draft regulations proposed in 2017
under the Obama Administration sought to impose two significant
changes. First, the draft EB-5 regulations purported to more
than double the minimum investment amount per investor, from
$500,000 to $1.35 million for investments in TEA's, and from
$1 million to $1.8 million for non-TEA investments. Second, the
initial draft EB-5 regulations also proposed to transfer the
authority to designate TEA's from state governments to the federal
DHS in Washington, D.C. -- a
change that many predict will yield significant delays and
additional costs. The initial draft EB-5 regulations offered a
30-day grace period before they became effective – meaning
investors could still take advantage of the previous investment
amounts for those 30 days until the Final Rule is in place.
A full two years passed between the original draft EB-5
regulations and the proposed regulations that were finally
delivered by DHS to OMB in February 2019. The text of the
draft EB-5 regulations were not disclosed to the public.
Nevertheless, it is publicly known that EB-5 industry
representatives offered harsh criticism of the original draft EB-5
regulations. Those criticisms continued during the OMB's
review of the draft regulations, with EB-5 industry delegations
meeting with OMB to express their concerns.
Our understanding of the OMB's review is that it is likely that
the original draft EB-5 regulations did not survive untouched after
OMB completed its review "Consistent with Change." Rather,
our industry liaisons indicate that the Final Rule is likely to
increase the minimum investment threshold from $500,000 to $900,000 in TEA's, and from $1 million to $1.5
million in non-TEAs. We further understand that
designation of TEA's is indeed likely to be centralized in the DHS,
essentially becoming the responsibility of USCIS, as stated in the
original draft EB-5 regulation. We further expect that the
30-day grace period is likely to increase by 90 days, allowing
investors a 120-day period to file under the previous regulations
before the EB-5 Final Rule is in place.
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CURRENT RATES
As the industry waits for the Final Rule to be announced by the
Federal Register, the House successfully passed Bill 1044 (365 to
65 vote) which addresses waitlists for all employment-based visa
categories. The act would eliminate the 7% country cap for EB-5
Green Cards while implementing a transition period of FY 2020 to FY
2022. If the bill is passed by the Republican controlled Senate
there would be various outcomes for EB-5 investors. Some of the
most notable being:
- EB-5 investors from China
would have 3-5 years reduced from initial wait times.
- Indian investors with priority dates of 2017 and earlier would
not see much change, however, Indian investors with 2018-2019
priority dates would experience a 3-4 increase in wait time.
- Vietnamese investors with a priority date in 2016 would not
experience a notable difference while Vietnamese investors with
priority dates in 2018-2019 would see a 2-3-year increase in wait
times.
- Past EB-5 investors from other countries with priority dates
after 2017 would experience a 3-5-year increase in wait times.
- Future EB-5 investors from any country who file soon after the
date of implementation would have a 7-8 year waiting period
for a visa.
Consequently, the passing of HR 1044 could cause the EB-5
industry to slow down or completely shut down due to the new length
of processing time. That is, unless new investors are open to the
longer wait times.
Depending on if and when HR 1044 passes the Senate (known as
S.386) and the date the Final Rule is publicized by the Federal
Register – investors could be facing a harsh reality of increased
wait times as well as increased investment amounts. While it is
certain the Final Rule will be published, HR 1044 still needs to
pass through the Senate, leaving the wait times to still be
determined.
Unless the President takes executive action to cancel any of the
aforementioned items regarding the EB-5 program, changes are
imminent to the EB-5 program. While the contents within the Final
Rule are still the object of speculation – EB-5 program change is
inevitable.
Now more than ever before it is vital to pick a regional center
with experience and expertise to navigate the EB-5 landscape on
behalf of investors. "Investors always need to perform due
diligence on their investment and immigration options, and now is
the time to select a regional center that can provide options that
exceed industry standards," said Nicholas
A. Mastroianni, III, President of U.S. Immigration
Fund (USIF).
"Investors considering the program with the ability to act now,
should absolutely work with an experienced regional center to take
advantage of the program in its current form – and before any
number of changes could cause the opportunity to invest to
completely cease to exist," he continued. "With 6,000 clients
across the globe and approved regional centers in the world's most
thriving cities USIF provides unmatched opportunities for foreign
investors and their families to obtain residency through the EB-5
program. We welcome any and all inquiries and will be traveling
throughout India, Dubai and South
Africa in July and August. We invite investors to consult
with us and ask any questions they may have regarding these program
changes. Our primary objective is to help investors achieve their
immigration goals through our investment options."
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"The draft EB-5 regulations are likely to be published in a
Final Rule, and these regulations are going to dramatically impact
new investors. There is no choice but to get ready. That
means to stay informed, work with experienced regional centers and
attorneys, and plan ahead," said Ignacio
Donoso, Founder and Managing Partner of Donoso and
Associates, a boutique business immigration law firm based in
Washington, D.C. In regards
to HR1044, Attorney Donoso added: "The impact of HR1044 is likely
beneficial for Chinese-born EB-5 investors who have been bogged
down by a long waiting list since 2015, and fortunately, is likely
not going to significantly impact new Indian-born EB-5 investors,
who are still looking at an approximately 5-6 years wait if they
invest today. HR1044 is primarily going to improve the
waiting lists for Indian and Chinese EB-2 and EB-3 applicants --
but their waiting lists are so long that any improvements will be
incremental and will take many years."
For more information contact pr@usifund.com