EB-5 Reform on the Horizon – If the Palm House Hotel Debacle Does Not Precipitate Congressional Action, What Will?

Many EB-5 stakeholders predict that the recent advance of the controversial “TEA” regulations to the final review stage at OMB indicates that these regulations will be imminently released. They also contend that Congress would promptly enact legislative “reform” to counter the effect of these regulations, especially the increase in the minimum investment amounts. As explained below, we are highly skeptical that the regulations5 will be finalized in the foreseeable future; instead, we believe they will continue to wallow in regulatory limbo while OMB exercises its discretion as empowered by Executive Order 12866.

The political agenda of those who make these predictions is obvious. Repeatedly, EB-5 proponents intentionally mischaracterize the regulations as “Obama-era” regulations. However, there is no evidence that the reform of the EB-5 Program (the “Program”) or the elimination of TEA abuse was a priority, or even a focus, of President Obama. If the regulations should be labeled, the “Grassley-era regulations” would be more appropriate. As the industry is well aware, then Chairman of the Senate Judiciary Committee, Charles Grassley (R-IA), an ardent supporter of President Trump and a foe of President Obama, was the driving force behind these regulations.