Category Archives: News

May 22, 2018
New EB-5 Regulation Raising Investment Amount And Making TEA Changes Set For August 2018 In OMB Spring 2018 Unified Agenda

In January 2017, the Department of Homeland Security (DHS) proposed to amend its regulations governing the employment-based, fifth preference (EB-5) immigrant investor classification. In general, under the EB-5 program, individuals are eligible to apply for lawful permanent residence in the United States if they make the necessary investment in a commercial enterprise in the United States and create or, in certain circumstances, preserve 10 permanent full-time jobs for qualified U.S. workers. This rule sought public comment on a number of proposed changes to the EB-5 program regulations. Such proposed changes included: raising the minimum investment amount; allowing certain EB-5 petitioners to retain their original priority date; changing the designation process for targeted employment areas; and other miscellaneous changes to filing and interview processes.

Originally posted at ILW.COM

Mar 26, 2018
The EB-5 Bill Failed: So now What?

With President Trump’s signing of the Omnibus bill, the most current attempt at EB-5 reform officially goes into the dustbin of history. There is a saying that goes something like, ‘when god convened a committee to create a horse, they came up with the camel’ (no disrespect intended to camels, of course). And so it went with the now aborted EB-5 legislation. It went from bad to worse to a point where there was enough in it for absolutely everyone to hate it. It’s at times like these when it is worth to take a step back so maybe we can take step forward.

Firstly, where are we now? With the passage of the Omnibus spending bill, the Regional Center program has secured yet another short-term extension through September 30, 2018. That victory, if it can even be called one, may be extremely short lived. The entire push for the legislation was to thwart the DHS proposed rule on EB-5 from becoming final. In fact, the publication date had been accelerated from April to February, due to reported heavy lobbying by the large Regional Centers who urged delay precisely so the legislative process could have a chance. Now that the process has run its course, and failed (again), there may be nothing left to stop DHS from promulgating the final rule. When that happens, most notably, the minimum investment amount will likely increase to $1.3 million. There is a real possibility that the lack clear TEA rules and standards (as USCIS will administer instead of the states) will force all but the most risk-prone (or desperate investors) to invest at the higher, non-TEA, amount of $1.8 million.

For investors currently contemplating an EB-5 investment, you have just gotten a second chance at the $500,000 investment level, and that window of opportunity may not last for too long. As little as four or five days ago, most in the industry believed the legislation would pass and with it the increase to $925,000. What seems certain, is that at some point and perhaps soon, the $500,000 investment level will be gone forever.

Next, what should we be doing as an industry? It seems pretty clear that a repeat of this current legislative exercise is not going to be productive. More importantly, the outcome highlighted an important takeaway, namely, this bill, in any of its incarnations would not have been what the industry really needed. The policy premise of the EB-5 program is to create jobs, within that, the TEA policy is to direct some of the job creating dollars to areas that need it the most, namely distressed urban areas and rural areas.

For any EB-5 reform to be meaningful, it has to deal with the white elephant in the room, and that is the backlog and retrogression of mainland Chinese born investors (and perhaps soon Vietnamese and others). That backlog has already significantly reduced the capital flows coming from China from several billion dollars a year to a small fraction of it. As other countries enter a retrogression status, they too will see declines. Even if new rules or a new bill allows rural/distressed urban investors to claim priority visas, the EB-5 program as a whole will quickly top out at a billion per year or less in deployed capital. That simply isn’t big enough to warrant the attention of a critical mass of serious project sponsors or the amount of time and effort on the part of the government it takes to administrate the system.

The first fix of any meaningful reform will be to ‘go big’ (or go home). In 2015, according to DHS’s yearbook of immigration statistics (https://www.dhs.gov/immigration-statistics/yearbook/2015/table6), there were 1,051,031 green cards issued. EB-5 is capped at 10,000; that’s 0.951%. So as a policy, we’re allocating less than 1% of all green cards to people who are generally highly educated, have significant wealth and are investing in businesses and projects that directly support the US economy and American jobs. The simple fix is to allocate another 30,000 or 40,000 visas to the program. The difference is pretty much rounding error and an extra several billion dollars a year of job creating capital is meaningful and important. The US currently has negative population growth rate without immigration. So without an influx of immigrants, our nation will shirk. Regardless of where a person falls on the highly charged questions of US immigration policy, the question cannot be whether or not we need immigrants, but which are the best for America. Without getting into the entire debate here, it’s pretty safe to say, allocating 3-4% of the pool to educated, wealthy, job/investment oriented people should be at the top of everyone’s list.

With this, other fixes to the program would make a lot of sense. Foremost is the TEA regime. It’s a boldfaced lie to claim that the TEA policy works as intended. The vast majority of all capital flows into projects that qualify in TEAs irrespective of where they are located. You can see my testimony on this point in front of the House of Representatives Judiciary Committee here: https://judiciary.house.gov/hearing/is-the-investor-visa-program-an-underperforming-asset/. We should all ask ourselves a question: At this point do we even care about TEAs? Some money does flow to non-rich urban areas currently, so maybe we should just get rid of TEAs and stop pretending like we’re meeting the lofty policy goal of helping distressed areas. If we really do want to help them, then we need the policy implementation to be meaningful. Firstly, the investment amount between TEA and non-TEA areas must be enough to change some investors’ project selection from non-TEA projects to TEA based projects. In the final bill, the difference was $100,000. So the discount to motivate people for an important policy objective was a grand total of 9.7%, down from what is now 50%. That was laughable. If that will be the difference, then the policy will fail. Based on my personal experience, I would say that the difference would need to be at least $250,000.
Another area for improvement would be to give TEA-based petitions an adjudication preference. The current two-year processing time is virtually at a point of killing the EB-5 market generally. For TEA based investors, guarantee six-month processing. On the same topic, there should be a premium processing option for all investors. It’s a fee funded program. Investors would easily pay an extra $5,000, $10,000 or more to get their petitions processed in months instead of years. USCIS cannot claim it’s a resource issue as the funds would come from the investors. There is no reason why this can’t be done (unless USCIS has its own agenda).

There are many other needed changes with respect to ensuring investor protection and true national security interests. Many were in the bill and most were not contentious. The point of this article was not to create an all encompassing checklist but rather to focus the big picture topics that were absent from the recent process and can hopefully become a part of the solution in the near future. Otherwise, none of it will matter if and when reform finally does happen.

Sep 11, 2017
A New Status Quo in the EB-5 Program By Matt Gordon

DHS has published a date of final action of April 2018 on its proposed amendments to existing EB-5 rules (see https://www.reginfo.gov/public/do/eA…&RIN=1615-AC07 ). The most notable change is increasing minimum investment amounts to $1.3 million for TEA based projects and $1.8 million for non-TEA based projects. The second significant change would be removing the power from the states to determine the contours of a TEA, which would presumably limit the gerrymandering that has plagued the program to date.

This may be just another line in the sand, but it may be one that sticks. The Regional Center program authorization is due to expire on September 30 th. President Trump seems to have crafted a cross-party deal to extend the budget (which includes the Regional Center Program) until December 8th. From November 1st until December 7 th there is a real window of opportunity to get EB-5 reform done. Most of the industry seems in agreement that minimum investment amounts will go up to around $800,000 for TEA based investments and $950,000 to $1 million for non-TEA investments. There is also agreement on having allocations of visas for certain types of investments, such as infrastructure, rural and distressed urban (true TEA). The last sticking point may be how much wiggle room to allow in the number of census tracts allowed to create a TEA.

What’s different this time about the pending negotiations is the shifted status quo. For the last few years, the predominant industry players have had no incentive to compromise as the never ending short-term extensions were simply a perpetuation of the status quo of existing rules that favored them greatly. With the new rules coming, and nothing they can do to stop it, the entire negotiating posture must change. If not, most large Regional Center based project will find that new investors are all but priced out of the market, with more than a 300% increase in cost. That, plus the retrogression issues in China, will surely take away the life’s blood of investor volumes feeding these projects. So maybe, this time, common sense will replace the brinksmanship and the long needed reform measures will pass.

Until then, it may be a very good time for investors sitting on the sidelines to pick their projects and get their source of funds documents ready for filing by the first week of December as this time, change may finally be coming.

Originally posted at ILW.COM

Jul 31, 2013
E3 Investment Group Secures First Scalable-Direct™ EB-5 Investor

(New York, NY) July 31, 2013 – E3 Investment Group, headquartered in New York, announced today that it signed its first investor in its Scalable-Direct™ EB-5 investment business model.  The Scalable-Direct™ model may be the first of its kind to allow foreign nationals who invest their capital as part of the United States government’s EB-5 immigrant investor visa program to receive the benefits of an enterprise class organization, while each remaining independent from all other investors by being the only investor in its entity. This is designed to allow the investor to receive permanent residency in the United States, while using their capital to create jobs in high unemployment areas for US citizens and permanent residents.

According to Matt Gordon, Managing Director of E3 Investment Group, “The Scalable-Direct™ business model is simple. Each investor invests the required $500,000 in its own entity. The money buys the operating assets and hires ten or more employees.  That satisfies the U.S. Government EB-5 program requirements.  We manage all the entities together to provide economies of scale and high quality management to reduce the risk.  Unlike other models, different investors’ assets and employment creation are never mixed.”

“Now that we have completed this critical milestone, we look forward to continuing to build out our program and help many of the world’s best, brightest and most entrepreneurial citizens accomplish their goal of helping build America and living the American dream.”