Stringent New EB-5 Regulations Take Effect November 21

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At a glance

• The minimum standard EB-5 investment will increase to $1.8 million and the minimum Targeted Employment Area (TEA) investment to $900,000.
• USCIS will have the exclusive authority to designate TEAs based on a new methodology that could limit urban development projects.
• EB-5 petitioners will retain their original place in the green card queue if circumstances beyond their control – such as a material change in a project business plan – require them to file a new petition.
• Existing rules will continue to be in effect for Form I-526 investor petitions filed before November 21, 2019.  However, a currently approved Regional Center project that does not meet the new criteria will no longer be eligible for EB-5 investment as of November 21, 2019.

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The issues

U.S. Citizenship and Immigration Services has released a long-awaited final regulation that will make significant changes to the EB-5 Immigrant Investor Program, including an 80% increase in investment minimums and restrictions that will limit EB-5 projects in urban areas. The new rules will take effect on November 21, 2019.

Key changes to the EB-5 program are discussed below.

Higher investment thresholds

As expected, the minimum for standard EB-5 investments will increase to $1.8 million, from $1 million.

The minimum investment for a Targeted Employment Area will increase to $900,000, from $500,000. USCIS had originally proposed to increase in the minimum TEA investment to $1.35 million, but elected not to raise the threshold to this degree.

Investment thresholds will increase automatically every five years, keyed to the Consumer Price Index for All Urban Consumers (CPI-U).

Stricter criteria for designating Targeted Employment Areas

The new regulations will eliminate state involvement in the designation of Targeted Employment Areas and limit TEAs to strictly demarcated areas.

Under existing rules, a TEA is a rural area or one that has an unemployment rate of 150 percent of the national average. States are vested with broad authority to designate high unemployment areas, and program rules allow officials to set TEA borders that best reflect local demographics. High-unemployment TEAs can thus extend across multiple census tracts and include areas that are geographically distant from an investment project, but are consistent with regional commuting patterns and economic needs, in which state governments have the most expertise.

The new regulation will grant USCIS the authority to designate high unemployment TEAs and eliminate state involvement.  It will also restrict a TEA to the immediate area around an EB-5 project, such as a census tract or contiguous tracts and adjacent areas. USCIS will no longer permit the inclusion of more remote high-unemployment areas from which U.S. workers may commute to TEA jobs.  This new methodology will mean that it will be more difficult for urban development projects – among the most sought-after by foreign investors – to qualify for the lower EB-5 investment threshold.

Impact on approved Regional Centers

The new eligibility criteria mean that many approved Regional Centers may no longer qualify for EB-5 investment after November 20, 2019. 

USCIS has decided not to allow approved Regional Centers to seek investment under existing regulations after November 20. If a Regional Center does not meet the new EB-5 eligibility criteria, its approved I-924 application (and any amendments) will expire on November 21, as will any approved exemplar I-526 – even if the project has not filled all of its approved investor slots.  A legal challenge to this provision of the new regulation is possible.

Priority date retention for foreign investors

EB-5 petitions can retain their priority date – the date that fixes their place in line for a green card number – if circumstances beyond their control require the filing of a subsequent EB-5 petition. Priority date retention will allow foreign investors whose initial EB-5 petition is detrimentally affected by the termination of a Regional Center or a material change in a business plan to file a petition under the new rules and retain the prior priority date – and this is particularly relevant to investors who are from countries subject to multi-year immigrant visa backlogs.

What foreign investors should do now

There is still time for foreign investors to benefit from existing EB-5 regulations before the new rules take effect. Prospective investors must make a qualifying capital contribution and file their I-526 investor petition prior to the November 21, 2019 effective date of the new rules.

This alert is for informational purposes only. If you have any questions, please contact the immigration professional with whom you work at Fragomen.