The 1992 EB-5 Immigrant Investment Pilot Program (the “Regional Center Program”), a subset of the original 1990 EB-5 regulations (the “EB-5 Program”), should be permitted to expire on September 30, 2015. The original premise of the EB-5 Program in 1990 was that each immigrant investor must create at least 10 real, full-time jobs for U.S. citizens and/or permanent residents that were at least 35 hours a week at or above the minimum wage level. However, in 1992, Congress enacted the Regional Center Program attempting to popularize it in the hopes of meeting the 10,000 immigrant investor visa limit allocated to the EB-5 immigration category. Under the Regional Center approach, developers were afforded the right to count indirect and induced jobs towards the total 10 job requirement. The United States Citizenship and Immigration Services (“USCIS”) defines indirect jobs as those held by persons who work outside the newly established commercial enterprise. However, in most cases, indirect jobs are not actual jobs but are subjectively derived from forecasted economic impact studies effectively reducing the 10 jobs requirement by 50 percent to 5 real jobs, or even less.
Currently, it is estimated that 15,000 investors are in the queue, which is enough to take up the investor quota for many years as it translates into 45,000 individuals when you include the eligible family members of investors. Approximately, 85-90 percent of these 15,000 individuals and their families originate from the People’s Republic of China. Thus, it now makes economic sense to return EB-5 back to its original intent by requiring each immigrant investor to hire 10 real employees and create 10 real, American jobs.
Congress is struggling to come to understanding about the future of the Regional Center Program within EB-5. Many EB-5 insiders predict that there will be an 11th hour attempt pressed by special interest groups to attach a blanket Regional Center program extension as a rider to the continuing resolution spending bill. A blanket EB-5 Regional Center extension next week would be tragic. If there was a short term Regional Center Program extension for even 3 months, this would result in at least 6,000 EB-5 visa petitions or 18,000 individual EB-5 petitions being filed over the next 90 days with USCIS considering that presently 2,000 EB-5 conditional visa petitions are filed per month. Hence, such an extension would stretch the present EB-5 backlog from 5 years to 7 years. A Regional Center Program extension and the resulting lengthy EB-5 backlog would directly benefit the largest real estate development projects in affluent areas such as those found in lower Manhattan due to the marketing advantages these types of large glamorous projects have in China. Further, recent EB-5 history has evidenced that the larger the EB-5 project, the greater the susceptibility to fraud.
More importantly, a short-term Regional Center extension would discourage any attempts for much needed Regional Center reform since any future legislation would not take effect for many years to come as a result of the large number of petitions already on file with USCIS.
The Regional Center program should be allowed to expire on September 30 in order to maximize U.S. job creation, deter EB-5 fraud, and promote EB-5 investment in rural and truly distressed U.S. markets. A short-term extension to the Regional Center Program would undermine the true intentions of the original 1990 regulations governing the EB-5 program while jettisoning the opportunity for sufficient legislative review of the Regional Center Program.