Congress Reauthorizes EB-5 Regional Center Program
The program allows federally authorized “regional hubs” to pool investments from foreign EB-5 visa applicants to exponentially power local and regional U.S. economies with projects that create and save thousands of jobs Americans.
On March 10, 2022, as part of the Fiscal Year 2022 Consolidated Appropriations Bill, the Senate approved a reauthorization of the EB-5 Regional Center Program – the EB-5 Reform and Integrity Act of 2022 (“Integrity Act”). The House passed the same bill the night before. The pilot program of the EB-5 regional center had expired on June 30, 2021. The measure has been sent to President Biden, and he is expected to sign it no later than March 15, 2022.
The Integrity Act reauthorizes the EB-5 Regional Center Program through September 2027. This is the first long-term reauthorization the EB-5 Regional Center Program has received since 2015. The Act brings various changes to the program, such as the imposition of various monitoring requirements. .
Monitoring provisions include a requirement for each center to (1) notify the Department of Homeland Security (DHS) of proposed changes to the center’s structure, (2) retain certain records and make those records available to the provision of DHS for audits, (3) obtaining approval for each particular investment offer, and (4) an annual report to DHS. More importantly, the law grants various enforcement powers to DHS and U.S. Citizenship and Immigration Services, including the ability to permanently bar an individual from participating in the regional center program. It also establishes the EB-5 Integrity Fund to fund program enforcement activities.
The EB-5 Regional Centers Program allows federally authorized “Regional Centers” to pool investments from EB-5 visa applicants to exponentially power local and regional U.S. economies with projects that create and save thousands of American jobs. EB-5 visas grant permanent resident status to qualified foreign investors. Among other beneficial changes, the Integrity Act contains integrity measures to increase transparency and protect foreign investors.
The Integrity Act includes the following significant reforms from the EB-5 program:
A five-year reauthorization of the EB-5 Regional Center program until September 30, 2027.
A new section allowing grandfathering of all petitions on file in the event the program were to expire again in the future.
The new minimum investment amount will be $1,050,000, which is reduced to $800,000 if the EB-5 project is located in a Targeted Employment Area (TEA) or if it is a infrastructure. A TEA includes a high unemployment or rural area and must meet the same requirements as previous EB-5 regulations introduced in 2019. An infrastructure project is a public works project in which a government entity is the labor-entity creator who receives EB-5 capital from the new business venture.
Specific visas reserved for rural, high unemployment and infrastructure projects.
Language to prioritize the processing and adjudication of rural petitions.
Wording eliminating geographical limitations on the redeployment of investors’ capital.
Language for investors to count indirect and direct positions for job creation purposes.
The law includes many strict new requirements for regional centers regarding securities compliance, record keeping, ownership and administration.
All regional centers will be subject to a USCIS audit at least once every 5 years.
Additionally, a new Integrity Fund has been created in which Regional Centers must contribute $10,000 to $20,000 per year (depending on the size of the Regional Center) to enable USCIS to investigate and monitor all parties within the EB-5 industry to ensure compliance.
Although the Integrity Act reauthorized the EB-5 Regional Center program that lapsed last year, the act also puts the Direct EB-5 and Regional Center programs on the same footing, and therefore Regional centers and Direct EB-5 companies will have to reorganize and rethink their business plans to cope with the new stringent monitoring and auditing requirements of the new law.
The Integrity Act included in the Consolidated Appropriations Act has major implications for existing and future foreign investors, regional hubs, developers and promoters of the EB-5 program.
Copyright © 2022 Womble Bond Dickinson (US) LLP All rights reserved.National Law Review, Volume XII, Number 73