The COVID-19 pandemic that began in early 2020 wreaked havoc on the entire world, bringing normal life to a halt and destroying economies everywhere. Everyone around the world has been affected by the pandemic, and EB-5 investors are no exception. The temporary closures of all U.S. embassies and consulates have made it impossible for investors to apply for their EB-5 visa, increasing the already long wait times associated with the EB-5 Immigrant Investor Program. While the pandemic and the obstacles it has created have delayed many EB-5 applicants’ immigration journey, not all of the pandemic’s impacts on the EB-5 program are negative. In fact, there are some ways that EB-5 investors could benefit from the COVID-19 pandemic.
Potential for Extra EB-5 Visas in FY2021
All forms of immigration have been affected by the COVID-19 pandemic. Many types of visas have experienced major slowdowns and possibly even higher denial rates. Family immigration visas are one example that has experienced significant slowdowns, resulting in thousands of family-based visas that will not be issued before the end of FY2020. This is good news for EB-5 investors because any unused family-based visas are carried over to employment-based immigration programs in the next fiscal year, which, in this case, could result in thousands of extra employment-based visas available in FY2021. The EB-5 program is entitled to 7.1% of EB visas, so EB-5 investors could see a significant increase in the available EB-5 visas in FY2021.
It is also important to note that any unused EB-5 visas are carried over to the EB-1 program in the next fiscal year. At the end of FY2020, there could be thousands of unissued EB-5 visas that would be carried over to the EB-1 program. Despite the loss of these unused visas, the gain from the family-based visas is still expected to be much greater, nonetheless resulting in an overall boost in available visas for the EB-5 program. There are 40,000 family-based visas available every year, and due to the closures of U.S. embassies, many families have been unable to receive their visas for months. For each month that family-based visas are not granted, the EB-5 program gains 2,840 visas, which may result in the largest visa boost in the history of the EB-5 program.
Extra Visas for Backlogged Countries
Chinese investors have dominated the EB-5 program for most of the program’s history. China, India, and Vietnam are the only three countries to ever experience EB-5 visa backlogs, and China’s backlog is much larger than either other country has ever experienced. Currently, EB-5 investors from China can expect to wait up to five years for their I-526 petitions to be adjudicated. Indian EB-5 investors were fortunate in 2020 to have their final action date advance and become “current,” ending the Indian backlog. However, the end of China’s backlog still cannot be seen.
Chinese investors also face a new challenge in 2020 following an executive order signed in July that groups Hong Kongers in with Chinese Mainlanders due to a controversial national security law introduced by Beijing authorities. Before this order, Hong Kong investors were considered separate from Mainland investors. However, now that Hong Kong investors are treated as Chinese applicants, the backlog has increased along with the expected wait times.
Although 2020 has brought a lot of bad news for Chinese EB-5 investors, there are still some positive effects. In 2020, there has been a lower number of EB-5 petitions filed, which results in a larger number of leftover EB-5 visas available for Chinese investors. For each fiscal year, every country is allotted 700 EB-5 visas. If any visas are left over, they are issued to EB-5 investors from backlogged countries. Because Chinese investors have the largest backlog, they could greatly benefit from receiving these extra visas. This is especially good news for investors who have experienced longer than usual wait times.
Lower Risk of Redeployment of EB-5 Capital
For an investment to qualify for the EB-5 program, the capital must remain “at risk” during the investment period—i.e., two years, which is the length of their conditional permanent resident status. Unfortunately, it is possible that an investor’s capital will need to be at risk much longer. Depending on when the money was released from an escrow account to the new commercial enterprise (NCE), the capital may need to remain “at risk” for up to four or five years.
The risk for EB-5 investors is that two years is often too long for a single investment. If an EB-5 project is completed and sold, the investment capital must be paid back to the investor or redeployed in other projects. If the investor has not yet filed their I-829 petition, their capital must remain “at risk” to continue to qualify them for an EB-5 visa, which can lead to investors having to redeploy their capital into another EB-5 project without properly evaluating the project and the amount of risk it poses.
Because of the COVID-19 pandemic, many construction projects and business operations have been significantly delayed, which is good news for investors who do not want to redeploy their capital. Even if construction is halted on an EB-5 project, the two-year investment period for EB-5 investors doesn’t freeze. This makes it less likely that investors will have to redeploy their investment capital in potentially risky projects.
The Immigration Ban Could Lead to Shorter Wait Times
President Trump signed into law an executive order on April 22, 2020, that temporarily suspended most types of immigration for 60 days. Two months later, when the proclamation was about to expire, he extended the immigration ban and expanded the types of immigration included under it. Luckily, EB-5 investors were not included in either immigration ban.
The exclusion of EB-5 investors from the ban was not met without resistance, however. A handful of senators urged President Trump to extend the immigration ban to include EB-5 applicants, citing misconceptions about EB-5 fraud to defend their case. However, President Trump seemed to disagree because when the immigration ban was extended, it continued to exclude EB-5 investors.
In August 2020, United States embassies and consulates started a phased resumption of visa services, with individual consulates making their own decisions based on local conditions, which has allowed some EB-5 investors to schedule visa interviews and proceed with their EB-5 process. Since most other forms of immigration are suspended for the rest of the year, EB-5 investors will likely experience shorter wait times when receiving their EB-5 visas.