Of all the immigration programs to the United States, the EB-5 Immigrant Investor Program has some of the best outcomes for both the immigrant and the U.S. The program grants permanent residency to eligible immigrant investors who make qualified EB-5 investments in U.S. businesses that create a minimum of 10 full-time jobs for U.S. workers.
The program’s minimum required investment is $1.8 million as of November 2019, when the Modernization Rule was implemented. One important caveat to this rule is that this investment amount can be reduced to $900,000 when investors invest in a project located within a targeted employment area (TEA).
What Is a TEA and How Is It Created?
The EB5 investment program provides a tremendous boost to the U.S. economy and U.S. workers every year. To incentivize investing in the areas with the most need, the TEA program offers a lowered minimum investment for certain projects. There are two ways TEAs can be designated.
The first way is if an area has high unemployment. Areas with an unemployment rate 50% above the U.S. average qualify for TEA designation. The second way for an area to be designated as a TEA is if an area is sufficiently rural. Areas with a population below 20,000 people that fall outside metropolitan statistical areas and that do not border towns or cities with populations exceeding 20,000 people can qualify under this designation.
United States Citizenship and Immigration Services (USCIS) designates TEAs based on submissions by EB-5 investors or project developers. The burden is on the applicant to argue that their project deserves TEA designation—for EB-5 investors, this usually forms part of the I-526 petition. While this may sound like a large inconvenience and does increase the workload required for an application, it also allows investors some leeway when defining their TEAs.
How Can EB-5 Investors Create TEAs Using Census Tracts?
The Modernization Rule’s enactment changed how investors can customize and create TEAs. Previously, tracts could be combined even if they were not directly next to the census tract in which the project is located. Under the updated rules, additional census tracts must be directly adjacent to the target census tract. In other words, when viewed on a map, the additional tracts must touch the target tract. Consequently, areas that would have qualified as TEAs before November 2019 may no longer qualify based on the updated rules.
The simplest way to determine whether an area qualifies as a TEA is to use the EB5 Affiliate Network TEA map, which automatically calculates whether a project location fall under a high-unemployment or rural TEA. It also automatically calculates TEA designation based on combined census tracts.
If an I-526 petition does not achieve TEA designation, investors would be required to invest a minimum of $1.8 million in the project they have chosen. Therefore, working with an EB-5 professional, whether to confirm TEA designation or prepare an I-526 petition, could lead to significant long-term savings.