EB-5 Immigrant Investor Program Modernization in Final Rulemaking

On January 13, 2017, a few days before the new administration took office, the Department of Homeland Security (DHS) issued notice of proposed rulemaking in the Federal Register to amend its regulations governing the employment-based, fifth preference (EB-5) immigrant investor classification. Generally, the EB-5 program provides a path to U.S. Lawful Permanent Residence to immigrant investors willing to invest $1,000,000 (or under certain circumstances $500,000) of lawfully obtained capital in a commercial enterprise in the U.S. The resulting impact is to create 10 qualified full-time jobs for U.S. workers from each EB-5 petitioner’s investment.

After notice was given in the Federal Register of the proposed rulemaking, a public comment period followed and closed in April 2017. For almost two years since, the Department of Homeland Security has been quiet on the issue of the proposed regulations. This silence was interrupted during a recent U.S. Citizenship and Immigration Services (USCIS) Stakeholder call in November 2018 when a caller asked for the status and it was confirmed by USCIS that the proposed regulations were indeed proceeding through the formal rulemaking process.

On February 22, 2019, the formal rulemaking process became reality when it was announced that DHS had sent the proposed final rule to the Office of Management and Budget (OMB) for review. To put this in perspective, in the rulemaking process, this is step 8 of 9 before the final rule is published and an effective date set.

As of the date of this article, it is not possible to predict what exactly the final rule will contain. What is known are the proposed changes described on January 13, 2017, which are as follows:

1. As proposed, the current minimum $500,000 capital contribution level for projects in target employment areas (TEA) would increase to $1,350,000, almost three times the current rate;
2. The higher level, as proposed, would increase to $1,800,000 from the current level of $1,000,000 for high employment areas;
3. The proposed rule also contains changes to reform TEA designations;
4. Further, authority to determine the TEAs would be assigned to DHS, not to each State;
5. Additionally, the proposed rule would offer priority date protection. Specifically, EB-5 petitioners would be able to retain their priority date of an approved EB-5 petition for use in connection with any subsequent EB-5 immigrant petition;
6. The rule, as proposed, would also grant protection to the family of the investor (defined as spouse and children) at the removal of conditions stage if not included with the principal investor. For instance, if the investor were to pass away the spouse and children would have an established procedure available to them to file the removal of conditions on their own;
7. DHS also proposed flexibility of interview location for USCIS interviews which could be scheduled in the residential jurisdiction of the EB-5 petitioner.

While the latter are positive protections for the investors, the increase in the capital contribution amounts are unsettling. There is serious concern these higher amounts could severely damage a program that is already experiencing challenges due to lengthy adjudication delays of petitions as well as visa quota backlogs for certain countries.

It is important to note, in trying to predict what may happen with the final rule, there is no solid timetable as to when to expect the final rule and effective date. We also do not know what the final rule will say. DHS has had the proposed rule for almost two years since the public comment period and it is not known what DHS has done to change or modify the initial proposal. There could be the inclusion of positive elements to protect investors. However, while the increase in amount required for the capital contribution has been on the horizon for many years, and has never been increased since the program was established almost thirty years ago, it is hoped that any increase of the capital contribution would be milder than published in January 2017.

When concerned parties ask me questions about this, I answer that anything is possible since it is unknown what changes were made to the proposed rule before it was received at the OMB over the last two years. It is further unknown if changes will be made at the OMB level; what those changes could be; how long that process will take and then how long DHS will take to review and publish a final rule once received from the OMB. Last, the effective date is also unknown.

Out of an abundance of caution and with a new rule looming full of unknowns, it is best to be proactive and diligent in deciding whether to proceed with an EB-5. Immigrant Investors should also be of the mindset to be flexible enough to tolerate changes that may be announced relatively suddenly by the OMB and DHS in the upcoming weeks or months when the final rule is published.