On July 24, 2019, the Department of Homeland Security (“DHS”) published its final rule (hereinafter referred to as the “Final Rule”) to amend the regulations governing the employment-based, fifth preference immigrant investor classification, more commonly referred to as the EB-5. Upon its effective date, U.S. Citizenship and Immigration Services (“USCIS”), the agency tasked by DHS to administer the U.S.’s naturalization and immigration system, will implement the changes the Final Rule presents to existing regulations. July 24th marks the end of a nearly two-and-a-half-year push to bring changes to the EB-5 regulations that started with USCIS’s Notice of Proposed Rule Making published on January 13, 2017.
The Final Rule issued by DHS institutes three major changes to the EB-5 regulations and two technical changes to the EB-5 regulations. The major changes deal with priority dates, minimum investment amounts and targeted employment area (“TEA”) designations. The technical changes deal with removal of conditions and other miscellaneous changes to the regulations.
Before explaining the changes in the EB-5 regulations related to priority dates, it is important to quickly review what a priority date is and what is its purpose in immigration law. A priority date is the date that an immigrant seeking a green card lets the U.S. government know of his or her intention to immigrate to the U.S. For EB-5s, the priority date is the day that USCIS receives and processes the immigrant’s Form I-526, Immigrant Petition by Alien Entrepreneur (“the EB-5 petition”). The purpose of priority dates in immigration law is to establish a virtual line due to the statutory limit of green cards that can be issued each year.
Under the Final Rule, certain EB-5 petitioners will be able to keep the priority date of an approved EB-5 petition for subsequent EB-5 petitions filed with USCIS. Reasons for filing a subsequent EB-5 petition include a regional center being terminated by USCIS or a substantive change in the qualifying aspects of the approved EB-5 petition. In these cases, and similar cases, the priority date of the first approved EB-5 petition will carry over, except in cases of fraud or willful misrepresentation of a material fact or a determination by USCIS that the prior approval was based on a material error. Under the old regulations, the carrying over of the priority date of an approved EB-5 petition to a subsequent one was never an option. However, under the Final Rule, if the immigrant files a new EB-5 petition after a removal of conditions petition is denied, the priority date from the approved EB-5 petition cannot be carried forward.
Minimum Investment Amounts
The most important change to the EB-5 regulations are changes to the minimum investment amounts. A major concern of DHS, the original regulation amounts have remained unchanged since the creation of the EB-5 program and have not been adjusted for inflation. The Final Rule makes the following changes to the minimum investment amounts:
|Original Regulations||New 2019 Regulations|
|Investment in a TEA:||Investment in a TEA:|
|Standard Investment (Non-TEA):||Standard Investment (Non-TEA):|
The new minimum investment amounts will shut out some investors due to the higher amounts now required and reduce the EB-5 investor pool available to project developers, particularly projects through regional centers. DHS states that the higher investment will result in project developers requiring less investors, potentially offsetting the effect of the reduction of available investors. As to what the real effect of this change will be and how much it will impact EB-5 investments in the future, only time will tell. The silver lining here is that it could have been worse for investors: DHS initially wanted to increase the TEA minimum investment amount from $500,000 to $1,350,000. Instead, DHS relented to keep the same proportions as the original regulations.
Finally, in an attempt to keep the minimum investment amounts in line with inflation, every 5 years, beginning on October 1, 2025, the minimum investment amounts will be adjusted for inflation based on the Department of Labor’s Consumer Price Index for All Urban Consumers for the U.S. City Average as compared to $1,000,000 in 1990.
Targeted Employment Area Designations
Through the Final Rule, DHS has made substantial changes to the high unemployment area definition and the way TEAs are designated. A TEA is an area, at the time of investment, that is a rural area or an area of high unemployment (with at least 150% of the national average). This definition has not changed, however, the definition of what constitutes an area of high unemployment and how some of these areas are designated have changed. First, an area of high unemployment will automatically qualify the business as being located in a TEA if the area has at least 150% unemployment compared to the national average and it is located in 1) a Metropolitan Statistical Area (“MSA”), 2) a specific county within the MSA, 3) a county of which a city or town with a population of 20,000 or more is located, or 4) a city or town with a population of 20,00 or more outside an MSA. For all other areas, a special designation is required.
Under the old regulations, this designation was given by the state in which the area was located. Under the Final Rule, DHS eliminates this authority and transfers it to USCIS. This change will have wide-reaching consequences to the EB-5 market. First, most regional centers and many regular EB-5 investors operate the principal place of business for the EB-5 in areas that require the designation of the state to qualify as a TEA area. States were very friendly to their businesses and routinely compiled census tracts in creative ways to qualify the area as a TEA, going beyond the census tract and its directly adjacent tracts. Under the Final Rule, only USCIS will be able to make this determination and will refrain from granting favorable designations by expanding the number of census tracts compiled (beyond the actual census tract that the business is located in and any directly adjacent census tracts) to make the area a high unemployment area. Second, as an unintended consequence, the change may stifle EB-5 investment as an investor used to be able to ask the state, prior to investment, whether a particular area qualified as a TEA. Under the Final Rule, this option will no longer be available, forcing the investor to risk USCIS not giving the special designation.
Removal of Conditions
The Final Rule makes two changes to petitions for removal of conditions placed on the green card. First, USCIS can require the investor and his or her family to appear for an interview and that interview can occur at the USCIS office closest to the investor’s commercial enterprise, U.S. residence or at the location where the petition is being reviewed. In the past, any interviews would take place at the USCIS office closest to where the investor lives. With regional centers located all over the country and investors routinely investing in EB-5s far away from their home, the investor might have the burden of having to bear the expense to appear at a distant interview. Second, if the investor and/or his or her family fails to timely file the petition for removal of conditions, fails to appear for the interview or the petition is ultimately denied, it will result in the automatic termination of permanent resident status and USCIS will send a Notice to Appear at in immigration court for deportation proceedings before an immigration judge.
The Final Rule does not go into effect immediately. Instead, the Final Rule will be effective as of November 21, 2019. DHS has explicitly stated that any EB-5 petitions filed before this date will be decided under the old regulations. This means these petitions can use the lower investment amounts and can use TEAs designated by a state.
EB-5 investments are a major decision and not to be rushed into, regardless of the regulatory climate surrounding it. Although time is of the essence to file under the old regulatory scheme, a mistake can wind up being a $400,000 or $1,300,000 mistake. It is important to have an experienced immigration attorney with specific experience in direct EB-5s and regional center EB-5s that can guide you through the EB-5 process.
Attorney Paul Messina focuses his practice on all aspects of employment-based, investor-based and family-based immigration law. He has extensive experience in proceedings before United States Citizenship and Immigration Services (USCIS) and the Consular Section of the United States Department of State. He has handled a variety of immigration cases, including employment-based green cards, EB-5 investment-based green cards (direct and through regional centers), and many of the non-immigrant visa/status categories as well as family-based green cards.
Author’s note: The Immigration Corner presents current and relevant topics in immigration law. The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.