Country / Territory
Related contacts
Related contacts
Related contacts
By: Chad Ellsworth
Despite months of vigorous debate over the EB-5 Regional Center program and the introduction of multiple draft bills, Congress did not reach a consensus and no legislation was passed in 2015, resulting in a “clean” extension of the EB-5 Regional Center Program without any changes until September 30, 2016. However, the short-term renewal of the program sets the stage for the debate over EB-5 reform to be rejoined later this year, which could lead to more stringent requirements for foreign investors starting October 1, 2016. That debate began anew this week with a hearing before the Senate Judiciary Committee, in which legislators and other officials began discussing potential changes, and one senior official suggested that even with no legislative changes, further regulations were likely.
One of the most vigorously debated EB-5 issues in the past year was the definition and designation of Targeted Employment Area (“TEA”), those regions that qualify for the downward adjusted minimum investment of $500,000, with many proposals seeking to toughen the current standards significantly.[1] The potentially tightened requirements for TEA designation would likely mean fewer urban EB-5 projects, which are currently popular with many individual investors.
Under the current legislation, many EB-5 investors tend to favor well-known urban areas as it can be easier for them to conduct on-site due diligence and monitor a project’s progress when they visit the United States, as many individuals customarily travel to large urban centers (e.g. California, New York, Florida, Illinois, Texas, etc.). Moreover, when selecting urban projects many investors look for TEAs given the lower $500,000 investment amount. Under the existing law, a TEA is a rural area or one that has an unemployment rate of 150 percent of the national average. Further, the designation of a TEA is usually clear under current law as state governments are vested with broad authority to designate high unemployment areas. Current regulations provide state officials broad discretion in setting TEA borders, and as a result, high-unemployment TEAs can extend across multiple census tracts and include tracts that are geographically distant from the tract where the investment project is located (“Project Location”), so long as they remain consistent with regional commuting patterns and economic needs.
However, it is probable any new EB-5 legislation implemented after September 30, 2016 could incorporate many of the proposed provisions introduced in 2015. Again, the core proposed changes to TEA designation, if enacted, are expected to significantly change current practice and potentially limit investors’ options in an urban environment.
If the proposed changes to TEA definitions are enacted in the future, many urban projects that meet current requirements may no longer qualify as a TEA. Even if such definitions are not enacted, a senior government official at this week’s Senate Judiciary Committee suggested that USCIS is considering future regulations on the designation of TEAs including limitations on the discretion of state governments to designate TEAs. The practical implication for future EB-5 investors is that they may no longer be able to invest the downwardly adjusted investment amount in an urban project. While EB-5 legislative and/or regulatory changes are not certain to occur after September 30, 2016, investors who do not act promptly may risk losing the option to invest with many popular urban EB-5 projects.
An analysis of the TEA standards included in the December 12, 2015 draft[2] legislation, titled the American Job Creation and Investment Promotion Reform Act of 2015, and how they would apply to urban projects in New York City is included in Part II of this blog.
This is part 1 in a two part series. Click here to read part 2.
[1] Under some draft legislation, changes to the minimum investment amount in TEAs were also proposed, with some bills raising the threshold in a TEA region to $800,000 or $1 million. Notably, the December 12 draft of proposed EB-5 legislation, developed as compromise legislation following the introduction of several bills in 2015, proposed a raise to $800,000.
[2] The December 12 draft was never formally finalized as a bill, but was introduced as a working draft under the above title. This draft is analyzed in this discussion as it is the latest version of the proposed legislation.
Country / Territory
Related contacts
Related contacts
Related contacts
Explore more at Fragomen
Media mentions
Partner Julia Onslow-Cole discusses necessary changes to the UK immigration system to help businesses thrive.
Media mentions
O diretor Gustavo Kanashiro compartilha como os cidadãos luso-brasileiros poderiam potencialmente solicitar o visto E-2 dos EUA para investidores.
Fragomen news
The AILA NJ Chapter presents Director & Pro Bono Counsel Barbara Camacho with the Pro Bono Champion Award.
Podcast
Members of Fragomen's Education Practice discuss the UK's digitisation of the immigration system and its impact on the UK education sector.
Blog post
Senior Manager Alfred Chong and Senior Business Immigration Consultant Jonathan Ying discuss the steady rise of Japan's tourism sector, applications for permanent residency and the overall appeal of Japan as a place to live.
Awards
Fragomen and TBB received the “Partnership with an International Charity” award at the 9th Annual Better Society Awards.
Media mentions
Partner Louise Haycock shares how the UK’s salary threshold is impacting businesses.
Media mentions
Nomadic Director Kim Conway discusses technology’s impact on the business travel landscape at the 2024 GBTA Canada Conference.
Media mentions
In an interview, Partner David Grunblatt shares his thoughts on the challenges impacting the future of immigration law.
Video
Partner Charles Johanes discusses key tips on managing workforce ratios and other localisation requirements across the APAC region.
Blog post
Associate Anastasija Vasiljeva discusses the digitalisation of the UK immigration system, how these changes are designed to enhance efficiency and security and how student sponsors and visa nationals must stay informed and compliant.
Video
Senior Immigration Consultant Elisabeth Kamm discusses changes to the Schengen Area that travelers should be aware of and how they can ensure they are prepared to meet immigration requirements.
Media mentions
Partner Julia Onslow-Cole discusses necessary changes to the UK immigration system to help businesses thrive.
Media mentions
O diretor Gustavo Kanashiro compartilha como os cidadãos luso-brasileiros poderiam potencialmente solicitar o visto E-2 dos EUA para investidores.
Fragomen news
The AILA NJ Chapter presents Director & Pro Bono Counsel Barbara Camacho with the Pro Bono Champion Award.
Podcast
Members of Fragomen's Education Practice discuss the UK's digitisation of the immigration system and its impact on the UK education sector.
Blog post
Senior Manager Alfred Chong and Senior Business Immigration Consultant Jonathan Ying discuss the steady rise of Japan's tourism sector, applications for permanent residency and the overall appeal of Japan as a place to live.
Awards
Fragomen and TBB received the “Partnership with an International Charity” award at the 9th Annual Better Society Awards.
Media mentions
Partner Louise Haycock shares how the UK’s salary threshold is impacting businesses.
Media mentions
Nomadic Director Kim Conway discusses technology’s impact on the business travel landscape at the 2024 GBTA Canada Conference.
Media mentions
In an interview, Partner David Grunblatt shares his thoughts on the challenges impacting the future of immigration law.
Video
Partner Charles Johanes discusses key tips on managing workforce ratios and other localisation requirements across the APAC region.
Blog post
Associate Anastasija Vasiljeva discusses the digitalisation of the UK immigration system, how these changes are designed to enhance efficiency and security and how student sponsors and visa nationals must stay informed and compliant.
Video
Senior Immigration Consultant Elisabeth Kamm discusses changes to the Schengen Area that travelers should be aware of and how they can ensure they are prepared to meet immigration requirements.