United States: DHS Proposes Rule to Implement 2022 EB-5 Regional Center Program Legislation

The EB-5 Regional Center Program, a subcategory of the EB-5 Immigrant Investor Program, was reauthorized by the RIA with several program changes in March 2022. The statute increased the minimum investment amount for EB-5 projects to $1,050,000, from $1,000,000 as of March 15, 2022, the date of RIA enactment. At the same time, the minimum investment for targeted employment areas (TEAs) increased to $800,000, from $500,000, and the investment minimum for infrastructure projects was set at $800,000.

The RIA also set out a timeframe for minimum investment adjustments to be made every five years after January 1, 2027, and created an additional fee paid to a newly created “EB-5 Integrity Fund,” due annually for Regional Centers. Several other changes contained in the RIA are now being codified and implemented through DHS rulemaking, some of which have been in effect since March 15, 2022.

The following are the key provisions proposed by DHS in order to continue implementation of the RIA:

• Codify new investment minimums already in effect and define certain EB-5 terms to clarify meaning. The proposed rule would define certain EB-5 terms including:
  • Capital – would clarify that only tangible assets whose value can be clearly determined qualify as capital, limits trust arrangements to revocable living trusts to which the investor has unrestricted access, reinforces fair market valuation standards, and codifies longstanding case law concerning impermissible loan financing.
  • Comprehensive Business Plan – codifies longstanding case law concerning the contents of a comprehensive business plan, including marketing plans, capital requirements, organizational structure, hiring timetable, and construction schedules, which may substantially raise expectations for regional center project documentation.
  • High Employment Area – would newly define a high employment area as an area where the national average rate of unemployment is at least 150% of the unemployment experienced in the investment area.
  • Invest / Actively in the Process of Investing – clarifies when an investment is considered to be made “at risk” and requires investors “actively in the process of investing” to show more than a mere intent to invest at some point in the future, but rather the investor must have committed their capital no later than the date when they obtain their conditional permanent resident status.
  • Redeployment – would limit redeployment to regional center investors for the purpose of maintaining the investor’s capital at risk. 
• Define and increase the minimum investment amount for high employment areas to $1,400,000. The proposed rule offers a definition of a “high employment area” and increases the minimum investment amount to $1,400,000, from the standard $1,050,000. This would be the first time a high employment area is defined and treated as a separate area of investment. Under the RIA, minimum investment amounts for high employment areas can be raised every five years and cannot exceed three times the standard minimum investment amount.
• Modify existing policy to require (rather than suggest) that a foreign national’s investment would have to remain available to the job-creating entity on the date the foreign national files their immigrant visa petition with USCIS.
• Codify policies, processes, and document retention requirements related to DHS audits of EB-5 Regional Centers, which by statute must occur at least every five years.
• Define the parameters for EB-5 priority date retention. Foreign nationals would be permitted to retain an EB-5 priority date even upon the termination or debarment of a Regional Center or new commercial enterprise, or upon a material change to their initial petition, as long as they take certain steps to preserve eligibility.
• Biometrics collection may be required at the EB-5 immigrant visa petition stage, following a trend seen in practice across all USCIS benefit requests at this time.
• Codify a range of sanctions that may be applied to Regional Centers and certain associated parties in response to violations of the EB-5 program, including but not limited to violation notices, monetary penalties, suspension, and debarment.

The proposal commentary also confirms that DHS has a practice of permitting digital assets as a valid source of funding as long as the assets meet the statutory definition of capital and that DHS currently applies the same evidentiary considerations for source of funds review as it applies to other capital investment funding. However, the proposed rule specifically invites the public to submit comments on whether the final EB-5 regulation should separately address evidentiary considerations related to digital assets, due to their unique nature.

The proposed regulation would also codify current DHS policy and practice related to other aspects of the EB-5 program, including but not limited to source of funds review; information and forms required of all persons involved with a Regional Center investment; and requirements for Regional Center project applications and certifications. DHS also provides additional guidance on identifying rural and high unemployment areas as well as what may qualify as an infrastructure project for eligibility under the EB-5 “set-aside” categories.

DHS will accept public feedback on the regulation for 60 days after the proposal is published in the Federal Register. Once the comment period closes, DHS must consider the feedback. Though there is no deadline for this review, the agency usually considers feedback for at least a period equal or similar to the public comment period, though a shorter period is possible. Once the review is completed, the regulation would be finalized and published in the Federal Register with an effective date that is typically 30 to 60 days after publication.

Feedback from the EB-5 community will be crucial to inform the government of the rule’s impact. If your organization is interested in submitting a comment, please contact your Fragomen professional or the firm’s Government Strategies and Compliance Group.

Fragomen is closely following implementation of the proposed regulation and will provide updates as developments occur.