Solving the EB-5 Quota Backlog
June 2, 2016
Country / Territory
Among all the vexing issues facing the EB-5 program these days (e.g., program integrity issues, changes to required investment amounts, proposed TEA limitations, job creation methodologies, etc.), possibly none is more critical to the future of the program than addressing the large and growing backlog in the EB-5 category for Chinese nationals. For some time, demand for EB-5 green cards in China far exceeded the statutory limit on this category and it has been projected that Chinese-born applicants who have recently filed for EB-5 immigrant classification must endure a backlog of 6-7 years before they can receive their conditional permanent resident status.
Impact of EB-5 quota backlog
Although Chinese citizens continue to file the vast majority of EB-5 petitions, the quota backlog has already had a chilling effect on demand for the EB-5 category in China. Potential Chinese investors in the U.S. economy are undoubtedly looking at options in other countries as well as other U.S. immigrant categories to accomplish their personal and business objectives. Demand for EB-5 green cards is also increasing in other parts of the world and some have hinted that an EB-5 backlog may be needed for citizens of Vietnam at some point in the next year or so if demand from that country continues to grow. As delays and backlogs increase, investors will go elsewhere. All this adds up to lost investment and job creation opportunities for the United States.
The core issue behind the EB-5 quota backlog
The essence of the problem is that the visa allocation for the EB-5 category, like other employment-based immigration categories, has remained constant for the past quarter of a century. During the past six years, demand has grown to unprecedented and unanticipated levels and, despite all of the uncertainties facing the program, demand for EB-5 visas remains strong. To remain viable and to ensure the EB-5 program accomplishes its dual goals of encouraging foreign investment and job creation, the issue must be addressed in a manner that provides potential investors and their families with confidence that their green cards can be issued in a reasonable time period.
Potential solutions to resolve the EB-5 quota backlog
The potential solutions to the problem are not inherently complex but by no means are they simple. The following are some of the more likely scenarios, all of which may require Congress to take legislative action:
Recapture. It is important to remember that the EB-5 category was largely if not almost completely under-utilized for most of its history. There are statistical projections indicating that as many as 190,000 EB-5 immigrant visas have gone unused throughout the history of the program. Recapturing these visas would eradicate the existing visa backlog for Chinese citizens and eliminate the prospect of backlogs for the foreseeable future. Recapturing previously allocated but unused visas would seemingly be less controversial than increasing the quota as it could be argued that there would be no real increase in the size of the visa category. Unfortunately, this option (like the option of counting only the investor and not accompanying family members in the allocation) has been tried for other visa categories in other legislative contexts in the past and has not gained much traction.
Increase the Quota. One would naturally assume that if demand exceeds supply and if satisfying this additional demand would be beneficial to the U.S., that increasing the supply is in the national interest and is the best path forward. Despite the inherent logic of this argument, increasing any immigration quotas is likely to be extremely controversial in the current political environment and may only be accomplished if combined with other legislative provisions that could prove unpalatable.
Carve-outs. While not truly a solution in a pure sense, creating EB-5 quota carve-outs for certain types of EB-5 investments could enable backlogged investors to circumvent the standard EB-5 backlog. The public policy goal of the carve-out is to give investors an incentive to invest in a particular sector and/or attract additional capital to a particular region. Examples would include investing in infrastructure projects as well as projects located in rural areas or in urban redevelopment zones.
During the April 13, 2016, Senate Judiciary Committee hearing on the EB-5 program, the leadership of both the House and Senate Judiciary Committees [Reps. Robert Goodlatte (R-Va.) and John Conyers (D-Mich) and Senators Chuck Grassley (R-Iowa), and Pat Leahy (D-Vt.)] all voiced continued support for an EB-5 program that contained new methods to enhance accountability and transparency. This is a critical juncture for the future of the EB-5 program and if the program is to remain viable to potential investors, this transparency must also extend to users of the EB-5 category. Investors will continue to participate in the EB-5 program only to the extent they have clarity as to the reasonable time period during which their green cards will be issued. The status quo is not a realistic option.
