The death of EB-5 has been greatly exaggerated

The death of EB-5 has been greatly exaggerated

Earlier this year we discussed the uncertain future of the EB-5 Visa Program, one of the most successful inbound investment programs of recent years, as evidenced by the $5.2 billion dollars the program has generated in the past ten years alone. Although the EB-5 Visa Program was set to expire on September 30, 2015, Congress approved a temporary extension that allowed the program to continue through December 11, 2015. But notwithstanding the growing popularity and success of the program and the enthusiasm about it from US domestic developers and property owners, it has always engendered some concerns and criticism. And so, here in early December, its future hangs in the balance. Supporters say the program should be renewed because it generates employment opportunities and funds domestic businesses that rely on these types of investments, but critics claim the program is poorly regulated and tainted by fraud and a certain odor of unseemliness. With the potential expiration of the program set to occur later this week, it is uncertain whether the program will lapse, become permanent, be temporarily extended “as is”, or extended with significant reformations.

One of the major issues ­­­­­critics of the program assert is the manipulation by urban developers and government officials of what projects are considered to be located in a “targeted employment area,” commonly abbreviated as a “TEA.” The determination of a TEA is important because the program only requires $500,000 from each investor if the project is located in a TEA, while $1 million is required for projects not located in a TEA. TEAs seem to be in the eye of the beholder and some assert that there are regularly and frequently “manufactured” by gerrymandering districts so that even successful major urban cities get TEA status. Once these TEAs are approved locally, they are almost always accepted “as is” since it is the United States Citizenship and Immigration Services’ policy to defer to state determinations of the “appropriate boundaries of a geographic or political subdivision that constitutes the targeted employment area.” Many feel this practice is contrary to the legislative intent of the drafters and therefore this aspect of the program should be significantly more regulated.

Look, the purpose of this blog is not to take sides in this particular debate and no one in this day and age could possibly claim to be shocked that governments and real estate interests are working closely together to insure that EB-5 benefits are available for projects that both developers and government officials want to get done (but it would be easy to build up a little indignity here, wouldn’t it?). But let’s look at what’s likely to happen and give everyone a heads up about the shape of this program for next year and for years to come.

In order to alleviate some of the concerns of the program’s critics, Representative Patrick Leahy (D) originally introduced the American Job Creation and Investment Promotion Reform Act of 2015 (the “Leahy Bill”) or S. 1501 on June 3, 2015. Since its introduction, the Leahy Bill has been revised and has received support from many organizations, such as the More American Jobs Alliance (MAJA), the Leadership Conference on Civil and Human Rights (LCCR), and Invest in the USA (IIUSA), which is the largest and oldest trade association representing EB-5 regional centers and stakeholders, with members responsible for over 95 percent of EB-5 investments nationwide.  This is the Leahy Bill that Congress is staring at right now.

If approved, the revised Leahy Bill would provide some significant reformations, including:

  • Extending the program until September 30, 2019.
  • Raising the lower investment threshold to $800,000 for projects in TEAs and provides for an automatic adjustment on minimum investment amounts in 2021.
  • Establishing an “EB-5 Integrity Fund” which will consist of an annual fee of $25,000 from each regional center, or $10,000 if a regional center has twenty (20) or fewer total investors in the preceding fiscal year, to allow the Department of Homeland Security to conduct audits, investigate fraud claims, and visit development sites.
  • Creating two main visa categories for TEAs: (i) 2,000 visas will be set aside every year for immigrants who invest in rural areas and (ii) 2,000 visas will be reserved for immigrants who invest in priority urban investment areas. The purpose behind this reformation is to ensure that funds will be distributed to non-urban environments, providing for an equal distribution of investments amongst a variety of development settings.
  • When determining the area of a TEA, the tracts used must either be a census tract or a contiguous census tract, which may not consist of more than twelve (12) tracts and must include each census tract contiguous to the census tract where the project is physically located.
  • Eligibility for designation as a TEA will be determined by the Secretary of Homeland Security, who will not be bound by any such determination from any other governmental or nongovernmental entity.
  • The designation of a TEA will be valid in two (2) year increments.
  • Requiring criminal and other background checks of regional center and project principals.


The Leahy Bill makes a lot of sense when looked at from a lot of different directions, but politics being what they are, who knows where this will go. It’s also a large and complicated bill addressing a large and complicated topic and it may just be too much for our poor elected officials this late in the year (Christmas parties, fundraising, fundraising, fundraising…). The alternative is certainly that this gets a stop gap extension. This is not going away. So don’t throw away your EB-5 compliance manual just yet.  As soon as we know where this is going, we will update you.  My bet is for a little can kicking.



  • New York

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