On Wednesday, March 8, 2017, the Judiciary Committee of the United States House of Representatives held hearings on the Department of Homeland Security (DHS) in reforming the Investor Visa program.
For those not familiar with U.S. legislation, rule-making through regulation is often utilized by agencies that oversee particular programs to implement changes that would not necessarily require a bill to be passed by the House and Senate on to the President. With that in mind, several areas of interest to both market participants and investors were discussed.
Several members acknowledged the importance and appreciation of the recent “Notice of proposed rulemaking” put forth by Jeh Johnson and DHS.
Comments related to Department of Homeland Security and Jeh Johnson
The overall theme of the hearings was concern that the EB-5 program has “strayed further and further from Congress’ intent”, which is to attract high-net worth individuals to immigrate to the U.S., which has been determined by Congress to be in the national best interest, to attract entrepreneurial talent, and to create jobs especially in hard hit rural and depressed areas.
The nature and tone of the questioning strongly suggests that there will not be another reauthorization of the EB-5 program without significant reform.
As one member of the Committee stated “the days of last minute extensions and continuing resolutions are over.” This appears to also include the April 28, 2017 reauthorization that is soon approaching.
Comments related to the need for new legislation
The Judiciary Committee repeatedly expressed concerns about the importance of using the EB-5 program to attract investment into economically depressed and rural areas.
Comments related to the importance of helping smaller market and distressed areas
Various members expressed frustration with the abuse of the Regional Center (RC) program and the “gerrymandering” of Targeted Employment Areas (TEAs) that allow affluent areas such as Manhattan and Beverly Hills to offer EB-5 investments at the reduced investment amount.
Concerns revolved around the challenges of projects in rural and distressed areas to attract EB-5 investment in favor of projects in more affluent areas where the investment risk is perceived to be lower.
Comments related to Gerrymandering
The debate often focused on how to resolve this, including discussion of how to define a TEA or whether to adopt an entirely new standard or criteria to determine areas that qualify for the lower investment threshold, whether to maintain the current two-tier investment amount at all or whether the better system would be to eliminate the two-tier investment amount and instead set aside a specific number of visas for investment in rural and depressed economic areas such that investors in projects located in those areas would likely receive visas faster than investors in more affluent areas.
As Angel Brunner stated “the only variable that investors seem to care about right now is time.” She then suggested that the Committee “explore what they can do to manipulate the time factor for investors. If you manipulate that factor you can drive investment anywhere you want it to go.”
A constant theme of the questioning was that the United States was “selling itself short” by having lower investment amounts than other developed countries with investment immigration programs.
Comments related to increasing the minimum investment amount
However as noted by Angel Brunner at the hearing, the United States is the only country with an immigration investment visa program predicated on job creation and economic development.