Members of the U.S. House Committee on the Judiciary expressed support during a hearing on Wednesday for efforts to increase the minimum investment needed to participate in the EB-5 immigrant investor program and for rescinding the ability of states to designate high unemployment areas for investment.
Committee Chairman Rep. Bob Goodlatte, R-Va., labeled as “common sense” a set of reforms proposed in January by the U.S. Department of Homeland Security that would increase the minimum investment for program participants from $1 million to $1.8 million in most areas and from $500,000 to $1.35 million in targeted high unemployment areas, while exclusively reserving for DHS the power to designate high unemployment areas.
“The EB-5 investor visa program ... is currently riddled with fraud and abuse and has strayed away from the program Congress envisioned when it created the program decades ago,” Goodlatte said. “The facts make it clear that this program is in desperate need of reform.”
The EB-5 program currently provides green cards to foreign nationals who invest at least $500,000 in a U.S. project that creates at least 10 jobs, but the program has been plagued by a spate of fraud suits, including a high-profile case involving a Vermont ski resort.
David North, a fellow at the nonprofit Center for Immigration Studies, said that although the American economy could do without the program — which is set to expire in April — if the political realities call for its survival, then at least the amount raised through it should increase.
“We have no need for an EB-5 program,” North said. “Macroeconomic data indicates that it brings in 1 to 3 percent of the flood of foreign money invested in the U.S. every year, and it brings it in in such a convoluted way that almost invites corruption and theft.”
DHS is seeking to reserve for itself the power to designate high unemployment areas known as targeted employment areas, or TEAs. The proposed rules would allow any city or town with a population of 20,000 or more and an unemployment rate of at least 150 percent of the national average to be designated a TEA, but would remove the ability of states to designate high unemployment areas and reserve that power for the DHS.
Rep. Darrell Issa, R-Calif., questioned why investments through the program should not be targeted exclusively to areas in need, rather than allow some of the funds to be utilized in areas such as Manhattan, N.Y. and Beverly Hills, California, he said.
Sam Walls, president and COO of the nonprofit Arkansas Capital Corp, agreed, noting that a U.S. Government Accountability Office report released in September found that only 3 percent of investments through the program are directed to rural areas.
“Under the current regulations, virtually any area of the country, including some of the most affluent areas, can easily obtain TEA status,” he said. “This has rendered the incentive meaningless, and corrodes the congressional intent underlying the provision.”