Immigration
Action Item: The nine-month extension of the EB-5 Program provides a temporary reprieve to the real estate developer and foreign investor communities while Congress and industry groups grapple with a more comprehensive overhaul of the Immigrant Investor Program.
The EB-5 Investor Visa Program has been extended with no changes until September 30, 2016. The extension of the EB-5 Program came as part of the omnibus spending bill that Congress agreed to on December 15. The extension includes the controversial Regional Center Program that has been under congressional scrutiny. The debate regarding reforms to the program has been intense with developers weighing in heavily on how some of the proposed changes would negatively impact the program and investment into the United States. Unable to compromise on what reforms to enact, Congress chose to extend the program for one year—as opposed to a multiple year or permanent reauthorization—while further debate takes place.
As reported in our recent Foundation newsletter (December 2015), the EB-5 Regional Center Program was scheduled to sunset on September 30, 2015, but received an extension until December 11, 2015, through a continuing resolution signed by President Obama. As September 30 approached, Senators Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vermont) introduced a bill to reform the EB-5 Program that would have increased the minimum investment amount to $800,000 for investments in a Targeted Employment Area (“TEA”) and $1.2 million for investments not in a TEA. The bill would have revised the statutory definition of a TEA to include a rural area, a closed military base, or an area consisting of a single census tract that had 150 percent of the national average unemployment rate. The legislation would have also added major reporting and compliance requirements for both Regional Centers and enterprises associated with Regional Centers.
In recent weeks, further negotiations with industry organizations and legislators led to a draft bill that would have increased the minimum investment amount for a Regional Center to $800,000, but kept the higher threshold of one million dollars for non-TEA projects and entities. The bill in its most recent form would also have tightened the statutory definitions of TEAs to ensure more EB-5 projects would be developed in rural areas, as opposed to the current trend of project development in urban areas. The legislation was also going to create additional annual caps for rural specific projects within the overall EB-5 visa allocation. As negotiations continued over the draft language, it appears that all parties agreed that the process was too rushed, and industry groups and legislators felt they did not have enough time to fully evaluate the reforms and their potential impact on the program.
For the next nine months, EB-5 developers can still market their projects at $500,000, under the current TEA rules, and foreign investors do not have to invest the higher threshold amounts considered in the proposed legislation in order to participate in the program. However, both developers and investors know that changes are coming. In a presidential election year, with immigration being one of the hot-button topics, both developers and individual investors should closely monitor the debate and negotiations preceding the next potential renewal of the program on September 30, 2016.
