On Sept. 8, the EB-5 Regional Center visa program was extended by Congress, without any changes, until Dec. 8.
The EB-5 program provides a pathway to legal permanent residence to foreign nationals who create at least 10 new jobs by investing $1 million directly in a business or a Regional Center (an approved enterprise). Alternatively, that amount drops by half ($500,00) if the investment is in a targeted employment area (TEA) — an area that’s hurting on the jobs front. The Regional Center program comes up for renewal every four years and is subject to the sunset provision.
Several legislators have demanded re-examination of TEAs, adjusting the level of investments — accounting for inflation, and some have even proposed the program’s elimination. Sen. Dianne Feinstein called it “U.S. citizenship for sale” and argued the morality of giving preference to wealthy investors over others who’ve faced significant challenges in their lives due to persecution and poverty.
I do believe that it’s not one program over the other. Both kinds of visa programs should co-exist. Our immigration portfolio must include policies that clearly, overwhelmingly and immediately benefit our economy, too. After all, the EB-5 program was started with job creation in mind, especially in towns and cities that need stimulation.
Rohit Kapuria was named one of the top 5 EB-5 Rising Stars by EB5 Investors Magazine in 2016. (Courtesy photo)
Rohit Kapuria, an associate at Arnstein & Lehr’s Chicago office and an expert on EB-5s, who was named one of the top 5 EB-5 Rising Stars by EB5 Investors Magazine in 2016, calls the program “crucial financing” and firmly believes that EB-5s are effective.
“The number of jobs that are created and the amount of capital deployment that has occurred because of EB-5 is significant,” he said.
An Invest in the USA (IIUSA) study of U.S. Citizenship and Immigration Services (USCIS) data on EB-5s for 2016 shows a $6.67 billion investment in our economy from this one immigration program.
“So, but for EB-5s, the large number of projects that we work on wouldn’t be completed,” Kapuria said.
The tricky and somewhat muddled aspect of EB-5s is how China has dominated the EB-5 narrative. IIUSA analysis shows that China captured 82.5 percent of EB-5 specific visas, with 10,948 I-526 filings. In contrast, Vietnam and India, second- and third-highest on the list, filed 404 and 354 applications, respectively, yielding a combined 5.7 percent.
“I actually represent a well-known regional center in San Francisco called Golden Gate Global,” Kapuria said. “They’ve done the Shipyards deal, they’ve done the Sacramento Kings deal, they’ve done Brooklyn Basin and they have a very heavy China focus.”
From his own experience, Kapuria believes that a part of China’s domination is due to brand name build-up.
“There’s actually one [project] in downtown San Francisco, which was a $350 million twin office building that I worked on,” he said. “The brand name of the Chinese company that then JV’ed [joint venture] with the U.S. company was able to help in attracting EB-5 capital. So roughly around $35 million of EB-5 capital went into that project.”
Since 1990, when the program was first created, China has consistently been ahead of other countries in EB-5 visas. Because the annual limit was set at 10,000 visas and it was ruled that no single country could use more than 7.1 percent of the available visas, it was also allowed that if no other country made it to its 7.1 percent per-country limit, the differential from every country then could be added to a single country. Other than China, no other country has reached that target as yet.
But this has also resulted in a very severe backlog for China.
“From the time an investor in mainland China invests in a project, ’til the time that they get a permanent 10-year green card — not the temporary green card — you’re looking at probably a 12- to 13-year wait,” Kapuria said.
One reason for this severe backlog is in the interpretation of the visa limit. Is it 10,000 EB-5 visas or 10,000 visas issued due to EB-5 approval, which includes immediate family?
“The state department has been interpreting the 10,000 limit as being investors and investors’ immediate family, which is [a] spouse and any child under 21,” Kapuria explained. “So when you account for total number of investors, you’re looking at approximately 3,500 investors total.”
This is an extremely short-sighted interpretation. If the original intent of the EB-5 was job creation, then shouldn’t we be assured of 10,000 times 10, or 100,000 jobs every year, instead of 35,000 jobs? It seems ludicrous that we’d undercut our own benefits. Kapuria hopes that Congress might take a second look at the original intent of the program.
“Part of the legislative push is whether Congress would be willing to clarify that intent and make it prospective,” he added.
Due to the backlog, it stands to reason that the appetite for EB-5 visas in China is declining, according to Kapuria, and the numbers do reflect this. There has been a 17 percent overall decline in the number of EB-5 filings since 2015, and a 19 percent decline for China, in particular.
A decline in EB-5 applications is also a degradation of confidence in America’s robust economy. Let’s hope Congress is able to reconcile some of the issues with the EB-5 program before December. Isn’t job growth one of the promises this administration made?