United States: Final EB-5 Modernization Rule Clears Federal Review

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At a glance

• The Office of Management and Budget has cleared a final regulation expected to make significant changes to the EB-5 immigrant investor program — the last step in the regulatory process before the rule is published and implemented.
• The Department of Homeland Security is seeking to increase EB-5 investment thresholds and limit the types of development projects that qualify for the program. As originally proposed, the rule would increase the minimum standard EB-5 investment to $1.8 million and the minimum Targeted Employment Area (TEA) investment to $1.35 million. Current minimums are $1 million and $500,000.
• The final rule will remain confidential until released for publication, which is expected to occur in the coming days. Until the regulation is implemented – no less than 30 days after publication – the EB-5 program will remain subject to current rules, including investment thresholds.

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A closer look

The Department of Homeland Security has received federal approval of a final regulation that could increase EB-5 investment minimums and give the federal government exclusive authority to designate Targeted Employment Areas (TEA), the rural and high-unemployment areas that qualify for EB-5 investment at a lower threshold.

The Office of Management and Budget (OMB) has cleared the regulation – the last stage of the federal regulatory process. The terms of the regulation and its implementation date will remain confidential until released for publication in the Federal Register, which is expected to occur in the coming days.

Though the details of the final rule will not be released until publication, DHS's proposed rule, published in January 2017, sought significant changes to the EB-5 program, including:

• Higher investment thresholds. DHS proposed to increase the minimum investment for TEAs to $1.35 million, from $500,000 – an increase of 170%. The minimum non-TEA investment would increase by 80% to $1.8 million, from $1 million. Investment thresholds would be subject to automatic increases every five years, keyed to the Consumer Price Index.
• Exclusive federal authority to designate TEAs. The proposed rule sought to give USCIS the exclusive authority to designate TEAs, based on a new methodology that would restrict investment to more strictly demarcated areas. If implemented, this could limit the types of urban development projects that have proven most desirable to foreign investors in recent years. Currently, U.S. states have broad authority to designate high-unemployment TEAs, in recognition of their superior knowledge of local demographics and employment needs.
• Priority date retention for foreign investors. As proposed, USCIS would permit EB-5 petitioners to retain their priority date – the date that fixes their place in line for an immigrant visa number – if circumstances beyond their control require the filing of a subsequent EB-5 petition. This provision could aid 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. If finalized, priority date retention would be a significant benefit to EB-5 investors from countries subject to multi-year immigrant visa backlogs.
• Ability of dependents to file Form I-829 separately from the principal investor. The proposed rule would permit the spouse and children of an EB-5 investor to file their own Form I-829 petition to remove conditions on permanent resident status if they were not included in the principal investor’s petition.

DHS received nearly 850 comments on the proposal. Many commenters urged the agency to refrain from making changes that Congress itself has declined to pass and that could reduce interest in the EB-5 program.

The agency could proceed with the regulation as originally proposed or incorporate changes in response to the public comments it received.

What’s next for the final rule and what foreign prospective investors should do now

Changes to the EB-5 program will not take effect until the final regulation is published and implemented. Publication could occur in the coming days. Implementation is expected to occur no less than 30 days after publication; DHS could not implement the rule immediately upon publication unless it shows good cause to do so.

To benefit from existing EB-5 rules, prospective investors must make a qualifying capital contribution and file their investor petition without delay. The anticipated changes to TEA determinations could mean that certain types of projects may no longer be eligible for EB-5 investment in the future, though it is not yet known when USCIS would take over the TEA determination process from the states and when it might adopt a policy pertaining to the eligibility of existing projects.

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