On Dec. 17, 2015, two days after Senate and House leadership recommended a “clean” extension of the EB-5 program until Sept. 30, 2016, Senator Flake, with Senator Cornyn and Senator Schumer, introduced S.2415: “EB-5 Integrity Act of 2015.” This is the first piece of legislation regarding EB-5 reform since the EB-5 program’s original sunset date of Sept. 30, 2015. It is the sixth bill introduced in the 114th Congress that seeks to exclusively reform the EB-5 program.
Unlike most of the bills introduced in this Congress, this bill includes a provision for permanent reauthorization of the EB-5 program. Much of the proposed reforms focus on integrity measures that have been championed by the EB-5 industry throughout the year. The majority of the provisions mirror the reforms sought in S.1501 and the discussion drafts that circulated amongst stakeholders in November and December 2015. The following are some of the main integrity measures designed to reform the EB-5 program:
Regional Center Program: Shall be permanently reauthorized. Sets out job creation requirements, and prohibits the use of investor money to purchase publicly available bonds. Provides guidelines for Regional Center amendments.
Business Plan for Preapproval: Application must be filed prior to an investor’s filing of a petition. Lays out the numerous requirements for the business plan. Approval of the business plan will be binding on future adjudication.
Annual Statements: Required, with numerous requirements.
Bona Fides of Persons Involved with a Regional Center: Background checks required for those involved with the Regional Center.
Foreign Ownership: Not allowed, and a foreign government may not lend financial support.
Securities Laws Compliance: Annual certification required.
EB-5 Integrity Fund: Requires either a $20,000 or $10,000 fee per regional center, and $1000 per investor.
Direct and Third Party Promoters: Must register with USCIS and meet certain thresholds. Investors must sign a disclosure reflecting an understanding of the rules and procedures and the fees involved.
Source of funds: Gift restrictions and loan restrictions enumerated. Documentation includes a provision for seven years of tax returns.
Effective dates: All amendments made under the Regional Center will be effective 90 days after date of enactment. The provisions governing source of funds and amendments to the Regional Center will be effective date of enactment.
GAO and IG reports: Mandatory.
Transparency: Measures will be put in place to ensure no preferential treatment and that all communication is monitored.
This bill does not include provisions that define Targeted Employment Areas or address minimum investment amounts. It is very likely that once Congress returns from the winter recess and into the New Year, negotiations and lobbying efforts will begin again in anticipation of the EB-5 program’s expiration on Sept. 30, 2016.