Since the introduction on June 3, 2015 of the bipartisan American Job Creation and Investment Promotion Reform Act by Senators Patrick Leahy (D-Vt.) and Chuck Grassley (R-Iowa) the Grassley / Leahy Bill, there is increased discussion on whether potential projects should file an I-924 “exemplar” petition prior to September 30th, 2015, the date on which the Regional Center program is set to expire, and the impetus for the bill. While most EB-5 practitioners understand that changes to the program are imminent, there remains debate on what actions are most prudent to pursue in the short term to address the upcoming changes.
While a detailed description of the changes are beyond the scope of this article, there are several key provisions in the currently proposed bill that should impact the decision on filing an I-924 Exemplar prior to the approval of any legislation:
(1) Proposed Increase in the minimum per investor amounts from $500K to $800K for TEAs and $1M to $1.2M in non-TEAs;
(2) Proposed changes to the definition of TEA, including prohibiting the aggregation of census tracts by limited TEA status to only a single-census tract;
(3) Proposed changes to what sources of capital may count towards job creation numbers;
(4) Proposed changes to the number of direct versus indirect jobs may be counted towards each person’s 10 job requirement;
(5) Proposed requirement that future projects must have an approved I-924 Exemplar before any investor’s I-526 Petition can be filed with respect to that project.
When deciding whether to file an I-924 Exemplar the project should go through a list and evaluate several criteria.
(1) Is the project at a stage where sufficient facts exist to support an I-924 Exemplar ?
(2) Does the project work today from a job creation and TEA standpoint?
(3) Can the team fully assemble the required documentation prior to September 30th, or whenever the bill is passed? It is important to note that the trigger for the new changes will be the effective date of the proposed bill, which could be prior to the end of September or after September if there is an extension.
(4) Do your offering documents include sufficient disclosure on the proposed legislation and its potential effects and risk factors?
The above are some of the key questions a sponsor should consider prior to filing for an I-924 Exemplar. If the above can be met the value of an I-924 Exemplar filing is very clear.
The key benefits to filing an I-924 Exemplar now rather than waiting for any changes to the legislation include:
(1) Grandfathering-in the existing definition of TEA
(2) Grandfathering-in the minimum investment amount of $500,000 in a TEA
(3) Grandfathering-in the existing way that jobs are calculated and how sources of capital are used for job creation
(4) The ability to bring the project to market and fundraise prior to I-924 Exemplar approval
These key benefits above make it extremely clear that if the project is in the position where an I-924 Exemplar could be filed before September 30th, then it is highly advantageous to do so. The best path forward is to file the I-924 Exemplar petition with an already approved Regional Center to ensure that the project sponsor can bring the project to market prior to USCIS I-924 Exemplar approval after the new regulations come into effect.
By “locking in” a project under the existing requirements and definitions, the project will be positioned for fund raising success, particularly as existing projects become scarce. We predict that there will be high demand for any high quality project that has grandfathered in the lower investment amount and the easier to use TEA definition.
Our recommendation is that any projects serious about using EB-5 funding should consider filing an I-924 Exemplar prior to the approval of any pending legislation, currently due to be passed in some form or another by September 30th. However, the decision for a project sponsor to file for I-924 Exemplar will be heavily project specific.
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