There were a number of significant changes to the EB-5 investment program in 2021, which had far-reaching impacts on both EB-5 investors and business owners.
In June 2021, the controversial EB-5 Modernization Rule was invalidated. This amendment, which was introduced in 2019, had made several changes to the EB-5 regulations, including the minimum investment thresholds and how targeted employment areas (TEAs) were designated. As a result of the repeal, the investment thresholds were lowered once again, and responsibility for decisions related to TEAs moved away from the Department of Homeland Security (DHS) to individual states.
Another change that occurred in June 2021 was the suspension of the popular EB-5 Regional Center Program. The regional centers had been the most popular option for EB5 investment. When Congress failed to pass legislation that would revalidate the program, it expired on June 30.
This event had two major consequences for the EB-5 investment industry in the second half of 2021. First, United States Citizenship and Immigration Services (USCIS) stated that it would no longer process I-526 petitions related to regional center investments. This was bad news for foreign nationals who had already made their EB-5 investment and filed their I-526 petitions through a regional center.
Second, with the regional center program closed, direct EB-5 investment projects have received more attention. While regional centers offered certain benefits to investors, such as more flexible criteria for calculating job creation and reduced involvement in EB-5 projects, direct investment is gaining more popularity. The direct EB5 investment model is not subject to reauthorization by the government, which makes it a more secure route.
As the industry adjusts to the changes from 2021, it is important to remember that the situation is unlikely to remain static. In this article, we look at the possible changes that may occur in the EB-5 investment industry in 2022.
Will the EB-5 Investment Amounts Increase?
Since the invalidation of the Modernization Rule, the minimum investment threshold for TEA projects is $500,000, and the amount for non-TEA projects is $1,000,000. However, there is nothing stopping USCIS and the DHS from introducing new regulations to raise these investment thresholds once again. EB-5 industry experts predict that the U.S. government will include raised investment amounts in any reformative legislation related to the EB5 investment program. The result may be minimum investments set even higher than they were under the Modernization Rule ($900,000 and $1,800,000 for TEA and non-TEA projects).
Therefore, foreign nationals considering joining the EB-5 investment program are encouraged to start the process as soon as possible.
Tighter Restrictions on TEA Designation
With the overturn of the Modernization Rule, the designation of TEAs is no longer the responsibility of the DHS but has returned to the hands of state labor departments. Each state is able to set its own rules related to how high-unemployment TEAs are calculated and often allow more census tracts to be combined. This policy makes it easier to achieve TEA status, thus attracting more investors.
It is likely that the DHS will try to regain control of these criteria.
How Will Regional Center Visa Petitions Be Processed?
The decision by USCIS to halt the adjudication of regional center I-526 petitions has left numerous foreign nationals in a state of uncertainty. Many regional center investors are concerned that their petitions may be denied as a result of the suspension of the program. While this is a possibility, it is unlikely: it would doubtless trigger a large number of lawsuits.
However, if Congress does not take action to reauthorize the regional centers soon, some resolution must be offered to regional center investors. Industry experts believe that there may be legislation allowing the “grandfathering in” of investors who filed their I-526 petitions through regional centers, even if the regional center program is not revalidated.
The Popularity of the EB-5 Program
While the changes in regulations over the last year have led to some adjustments, the EB-5 investment program continues to be a popular route for foreign nationals to relocate to the United States. Many new EB-5 investors subscribed to direct EB-5 projects in 2021and filed their I-526 petitions.