The report also included a brief synopsis of the 290 comments received by USCIS in response to the January 2017 Notice of Proposed Rulemaking (NPRM), which could provide some insight into how the final set of EB-5 regulations will look. Initially anticipated in August, the latest news is they may only be released near the end of 2018 calendar year:
1. No Retroactive Application of Regulations. The report indicates that increasing the minimum EB-5 capital investment has generally accepted by the public, though it notes that such acceptance appears “to hinge on USCIS’ agreement to grandfather in all I-526 petitions that were filed based on the rules that were in effect at the time the investor made his or her capital contribution.” We certainly hope USCIS sticks by this agreement. The report also notes the possibility of “project failures” in the event the proposed rules regarding Targeted Employment Areas (TEAs) do not grandfather in partially-completed or funded EB-5 projects. Retroactively increasing the minimum investment amounts without grandfathering the current rules on those stuck in the increasingly long waiting lines would be devastating to the EB-5 industry.
2. Increased Investment Differential for TEAs. With regards to the investment level amount, the report keys in on public comments suggesting that “the differential should be greater if the agency wants to encourage more EB-5 money to flow to more rural and economically distressed areas.” This is directly in conflict with the draft legislation the EB-5 industry saw in March 2018 that would have created a mere $100,000 differential with $925,000 for TEA and $1,025,000 for non-TEA in a key bill. The regulations provided a larger “delta” of $1,350,000 versus $1,800,000.
3. Leveling the Playing Field. A key part of the proposed regulations was reform to the designation and use of TEAs. The report indicates that public comments to TEA changes “were generally favorable” and that a “methodology that limits TEA configurations to one that permits the census tract where the project is located, with each of the immediately surrounding and adjoining census tracks will accomplish [USCIS’] goal.” Interestingly, in challenge to those “moneyed interests” that Senator Grassley has railed against, the report claims (without any support) that such reforms will “level the playing field for other EB-5 developers and projects competing for the same foreign investment monies.”
Whether and how investors will respond to the imminent regulatory changes remains unknown, but according to information provided by DOS, heavy demand for EB-5 visas around the globe will require the imposition of Visa Bulletin cut-off dates for several countries in the near future. Joining China and Vietnam (which are currently oversubscribed and are subject to an EB-5 cut-off date), DOS expects to impose cut-off dates for India, Brazil, and South Korea in FY 2019, with EB-5 visas remaining “current” for nationals of all other countries during this same time frame. As the level of interest in the EB-5 program appears to be only increasing, administration of the program will likely continue to receive significant scrutiny.
The EB-5 Program is at a critical fork in the road, and USCIS must work with the EB-5 industry, so that the updated regulations meets the statutory framework of creating jobs for Americans and attracting direct foreign investment, both areas where the EB-5 Program has been a resounding success. Moreover, providing protection to those who have already invested, including relief for families stuck in the increasing waiting lines, and relief for those who invested in good faith in failed or distressed projects, is critical. Most important, the program needs to ensure that 10,000 investors, not 2,500 investors and their families, are able to participate and obtain conditional green card status, annually. Wolfsdorf Rosenthal LLP will continue to advocate improvements to the EB-5 Program to improve consistency in adjudications and to ensure USCIS follows the law.