US Congress Proposes Changes to EB-5 Program

How the bill would change the landscape for foreign investors

The EB-5 has long been a target of government scrutiny due to the fear of fraudulent petitioners and the wide berth it gives them. We’ve seen this most often in congressional proposals. Most recently, Senators Patrick Leahy (D-VT) and Chuck Grassley (R-Iowa) introduced legislation to bring sweeping changes to the Regional Center program that has overseen an influx of millions of foreign investor dollars.

The bill, titled The American Job Creation and Investment Promotion Reform Act, hopes to shore up the integrity of the program in a number of ways: increasing the ability to audit funds, checks and balances on regional centers and specificity on how targeted employment areas (TEA) are defined by census data. However, a side effect of these changes, and other proposals in the Leahy-Grassley bill, is essentially putting a damper over what has been a useful program that has succeeded in spite of its existing difficulty. Most notably, the Leahy-Grassley bill would look to raise the minimum EB-5 investments from $500,000 & $1 million to $800,000 & $1.2 million respectively. They would also restrict what counts as job creation, suspending the notion that tenant occupancy jobs count toward the 10 job requirement. The program as it exists right now is already facing a wave of skepticism from foreign investors due to the risk of the investment. It is hard to imagine these regulations doing much more than furthering the impression that the EB-5 is an unappealing route to America.

Despite the overall restrictive nature of the bill, there are a few provisions that would serve to strengthen the regional center program. The program itself is scheduled to be phased out in September, but the bill would allow it to continue until 2020 where it would be re-evaluated once again. Although the lack of permanence doesn’t inspire confidence, the continued existence allows the United States to continue collecting data about the programs efficacy in boosting the local economy of depressed regions. Another interesting aspect is the introduction of premium processing, which is a staple of many other immigration classifications. Premium processing attaches an . The EB-5 in all of its forms is a notoriously long process, and any chance to whittle away at the wait times is sorely needed.

The concept of America as a nation of immigrants is one of its defining characteristics. The country draws strength from its diversity. We know what it looks like when countries tighten the reigns on immigrant investor programs. We’ve seen it in Australia and Canada, where only 50 out of thousands of applicants were admitted into their new Immigrant Investor Venture Capital Program. These are not desirable paths to take in the United States, where the program has demonstrably transformed economically depressed areas. It’s a tenuous balance to strike, and every adjustment congress makes can potentially upset that balance.

Read the Senators’ press release on the bill, as well as the bill itself, here.

Photo source: Wikimedia Commons

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