The EB-5 Immigrant Investor Visa Program has been turbulent the last few years. The first major change requires a look back in November 2019 when USCIS increased the required investment amounts from $500,000 in a TEA (Targeted Employment Area) and $1 million in a non-TEA to $900,000 and $1.8 million, respectively. This increase was almost immediately challenged with litigation in federal court. In June 2021, a federal court found that the increase in investment amounts was invalid, thereby reducing the minimum investment amount for TEA projects back to $500,000. The court also found the change in the definition of a TEA to be invalid. This ruling was made only days prior to the expiration of the EB-5 Regional Center Program on June 30, 2021, when Congress did not timely reauthorize the program, resulting in the current lapse of the EB-5 Regional Center Program.
While the EB-5 Immigrant Investor Visa Program itself is a permanent program created by legislation, the EB-5 Regional Center Program is not; however, the Regional Center Program has been reauthorized many times for different lengths of time since its inception. To date, this almost 6-month lapse is the longest lapse the program has ever experienced. The lapse is significant because the majority of EB-5 investments are made through the EB-5 Regional Center Program due to certain advantages it provides the investors such as allowing investors to passively invest through a limited partnership or limited liability company. In the Philadelphia tristate area alone, the Regional Center Program has a significant impact, these major projects included EB-5 investments: the Pennsylvania Convention Center, Aker Philadelphia Shipyard, SEPTA Key, Courtyard by Marriott Hotel at the Philadelphia Navy Yard, the University City Science Center, Agusta Aerospace's plant expansions, and the Pennsylvania Turnpike's reconstruction to name a few.
With the EB-5 Regional Center Program in lapse, thousands of investors have found themselves in limbo with the risk of losing both their investment and immigration benefits, if the program is not extended. The pandemic has further negatively impacted many investment projects – either failing or at risk of failing – due to the economy's slow recovery.
Investors, regional centers, and project developers have been in a state of suspension in these uncertain and unprecedented times, deciding if they should act based on the assumption that the EB-5 Regional Center Program will be continued. Whether or not the program will be extended, the consensus within the EB-5 industry seems to be that the EB-5 Regional Center Program should be extended and that investors who have invested and filed I-526 petitions should be grandfathered no matter what happens now or in the future to the program.
There is also the question of whether the minimum investment amount will remain at $500,000. It is not going out on a limb to state that the investment amount will increase. The more difficult question is when and by what means. Assuming the EB-5 Regional Center Program is reauthorized before the investment amount is increased, there may be a window of opportunity for $500,000 regional center investments. Investors would be taking the risk that the court of appeals could reverse the district court's June 2021 decision and neither the court nor USCIS would grant relief to investors who invested $500,000. However, such investors would not be at risk of a legislative or regulatory increase in the investment amount since those actions would be prospective only. Only a court decision could have a retroactive impact.
Investors who wish to invest in a regional center EB-5 project should have all their documentation prepared in advance and ready to file as soon as the EB-5 Regional Center Program is reauthorized, with the hope that the extension of the program occurs before any legislative, regulatory or judicial action that would increase the minimum investment amount.
Currently, the only path forward for investors who wish to pursue an EB-5 visa is through a direct investment scheme, where the investment is made directly into the job-creating business. In pursuing a direct investment, several options are available to the investors. An investment of $900,000 or above in a targeted employment area is the safest option. A second option is for an investor to present a business plan anticipating a $900,000 investment of which $500,000 is invested at the time of filing the I-526 petition and with documentation that the remaining $400,000 is immediately available, lawfully sourced and the investor has a commitment to complete the investment. A third and riskier option is for an investor to make a $500,000 investment in a TEA and with the investor prepared to invest an additional $400,000 if that becomes necessary. The riskiest option is for an investor to make a $500,000 investment without the ability to invest any additional amount.
Regional centers and developers are also facing challenging issues. The recommended strategy is for developers to craft the projects based on $500,000 TEA investments if the EB-5 Regional Center Program is extended before the investment amount is increased. However, the project documents must anticipate the possibility that at some point during the offering process the investment amount will increase. The project documents must also address issues involving different investment amounts, whether the investors who invested different amounts would receive the same interests, and whether and how investors can increase their investments to meet any increased minimum investment level. Basically, project developers have to be willing to spend substantial resources to develop a project knowing the uncertainty of the EB-5 Regional Center Program and the minimum investment amount.
As expected, many investors, project developers, and regional centers have been taking a cautious “wait and see” approach, while others view the present time as being on the cusp of unprecedented investor demand and opportunity if the stars align to have the EB-5 Regional Center Program reauthorized and the minimum investment amount remains at $500,000.