In June 2021, the popular EB-5 Regional Center Program was suspended. Regional centers had been the investment model of choice for foreign nationals looking to relocate to the United States through the EB-5 investment program. Over 93% of EB-5 investments were made through regional centers, with less than 7% being made through the direct EB-5 investment route. However, Congress failed to pass legislation reauthorizing the regional center program, and so it expired on June 30.
There were a number of reasons for the popularity of regional centers. First, they offered EB-5 investment opportunities without heavy managerial involvement. Second, regional center investors also benefitted from including indirect and induced jobs in their job creation calculations, making it easier to fulfill the requirements set out by United States Citizenship and Immigration Services (USCIS).
In the days leading up to the program’s expiration, a large number of regional center investors filed I-526 petitions. The overturn of the Modernization Rule earlier that month meant that the minimum investment amounts had been lowered to their 2019 rates, with qualifying investments starting from $500,000 in targeted employment areas (TEAs). Many foreign nationals who had been considering making an EB5 investment rushed to take advantage of this situation.
However, as the regional center program expired, USCIS announced that it would not process any pending I-526 petitions associated with regional center projects. It was hoped that Congress would move quickly to reauthorize the regional center program, but as of February 2022, the program is still nonoperational.
This has left thousands of foreign nationals unable to proceed in the EB-5 visa process. These investors complied with the EB-5 regulations, but are now unable to relocate to the United States. The situation has consequences for multiple areas of the EB-5 industry.
Regional Center EB-5 Projects Are Vulnerable
With no certainty on if or when their visa petitions will be processed, regional center investors may soon begin requesting to withdraw their EB-5 investment capital. This would be a significant setback for EB-5 businesses working with regional centers.
Furthermore, if USCIS decides to deny the pending regional center petitions, it is possible that the investors involved may open litigation against the EB-5 projects. As well as being an expensive and time-consuming issue for all parties, the situation would undoubtedly cast shadows on the reputation of the EB5 investment program. Prospective investors may choose to pursue visa-by-investment opportunities elsewhere, leaving the U.S. economy missing out on valuable capital.
Possible Solutions for Regional Center Investors
While reauthorization of the regional center program would be the simplest solution, it is unclear when this may occur. Traditionally, EB-5 reform has been part of a larger piece of legislation, and it is unlikely to be considered by Congress by itself. Furthermore, the government can have difficulty reaching a consensus on the reform that would best improve the EB-5 program. As such, this solution may take some time to implement.
In the meantime, EB-5 experts have called for legislation that would “grandfather in” regional center investors who filed their I-526 petitions before the program expired. This would enable these foreign nationals to continue in the EB-5 process and mitigate investors’ apprehension about the reliability of the program. In December 2021, USCIS announced that it was “reevaluating” its decision not to process pending regional center I-526 forms.
Direct EB-5 Investment Gaining Popularity
Since the regional center program expired, a large number of foreign nationals have participated in the EB-5 program through the direct EB-5 investment model. The direct model does not rely on reauthorization, making it a more reliable and secure option. It is possible that direct EB-5 offerings will become more popular in the future of the EB-5 industry.