Reauthorization of the EB-5 Regional Center Program: a Boon for Foreign Investors and the National Economy
In recent years, the EB-5 Investment Green Card Program has gained popularity among high net-worth individuals seeking the freedom and flexibility to live and work in the United States. This visa allows foreign investors and their immediate family to obtain a Green Card to live permanently in the United States by investing in a business that creates at least 10 jobs for qualifying U.S. workers. The investment amount is $1 million. This number is reduced to $500,000 if the investor invests in a targeted employment area, which is a rural or high unemployment area.
The investment amount is also reduced to $500,000 if the investor invests in a designated regional center. In 1992, Congress expanded the EB-5 program by permitting the designation of Regional Centers to pool EB-5 capital from multiple foreign investors for investment in USCIS-approved economic development projects within a defined geographic region. Regional centers can be publicly or privately owned or be a public-private partnership. These centers maximize the program's job creation benefits by facilitating the investment of significant amounts of capital in large-scale projects often in coordination with regional economic development agencies which use the EB-5 funds to leverage additional capital.
Since the financial crisis in 2008, the EB-5 Regional Center program has also gained popularity with borrowers looking for alternative sources of investment capital often at below market interest rates. From the investor perspective, going the EB-5 investment visa route through a regional center avoids the usual requirement of having family connections, securing a job or running an actively traded business, which makes it an attractive option for retirees or students. Investors in regional centers take a hands-off approach, leaving the day-today management of the investment to the regional center staff.
According to Invest In the USA, the industry trade association for the EB-5 Regional Center Program, since 2008, the EB-5 Regional Center Program has generated over $11.92 billion in foreign investment. Today, 95 percent of all EB-5 capital is raised and invested by Regional Centers. There are currently 38 regional centers in Texas and Dallas has become a national leader in utilizing EB-5 capital for economic development. As of 2013, EB5 Capital invested in Texas was $174,187,500, it supported 2737 jobs, contributed $208,034,491 to the US GDP, $32,259,897 to federal taxes and $7,240,110 to state/local tax revenue $7,240,110. Dallas Mayor Michael Rawlings describes the EB-5 Regional Center Program as " a key economic driver… creating desperately needed jobs in a tough economic environment."
On Dec. 11, 2015, Congress extended the EB-5 Regional Center program for an additional year without change until Sept. 30, 2016. Such the economic driver that it is, Congress should permanently authorize the program or at least extend it until September 2019. More pressing, Congress should increase the number of EB-5 visas available annually and/or count only the principal investor toward the annual visa cap. Currently, only 10,000 EB-5 investment visas are issued a year and that number includes the family members of the investors. Without an increase in the number of visas available, it is likely that there will be visa retrogression—that is, more applications than visas available resulting in wait times for visas to become available and delays for investors and their families in receiving their green cards. Already, Chinese citizen investors are experiencing visa retrogression. The issue of increased EB-5 visa numbers must be addressed if the program is going to continue and thrive.
Even though there have been no changes to the EB-5 program in its current form, that does not mean that additional changes to the program will not be made during the current fiscal year. There is talk that the investment amount will increase to at least $1.5 million for direct investments and $800,000 for investments in Regional Centers Programs and in high unemployment and rural areas. In the coming months, Arizona Senator Jeff Flake intends to introduce a bill that has garnered broad bipartisan support and is welcomed by the EB-5 community. That bill seeks to implement certain integrity measures into the program including: 1. USCIS oversight visits to project and Regional Center locations to ensure that projects have been accurately represented to USCIS and investors; 2. requiring that the bona fides of Regional Center and project principals be verified, including background checks; 3. giving USCIS broader discretion to reject EB-5 applications because of fraud and/or national security concerns; and 4. requiring greater transparency from USCIS in their adjudication of EB-5 applications.
Given the tremendous economic impact of the of the EB-5 program, Congress should permanently authorize the Regional Center Program with an increase in numbers of visas available for investors so that this program can continue to grow and positively impact the United States.
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