Set 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

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