U.S. Citizenship and Immigration Services (“USCIS”), on July 24, 2019, published the “EB-5 Immigrant Investor Program Modernization.” The new regulation rules will take effect for all I-526 investors and I-924 petitioners as of November 21, 2019.
Increased investment amounts
The most significant change to the EB-5 Program will be the raising of the minimum investment requirement from $500,000 to $900,000 (for Targeted Employment Area investments, aka, TEA’s) and the increase of $1 million to $1.8 million for non-TEA investments.
The majority of the EB-5 investments in the market today would not qualify for the $900,000 investment amount since they would not qualify under the new TEA rules. Therefore, many petitioners who would under today’s rules invest in a $500,000 TEA project would have to invest $1.8 million in the same project, with non-TEA designation, as of November 21, 2019. (See the TEA section below for more on this.)
Additionally, USCIS will now review every five years whether their should be an increase, with the first review occurring October 2, 2024.
New & more limiting TEA rules
Other changes include a major shift in how a TEA is determined. USCIS — and not individual states — will determine whether a high unemployment zone qualifies as a TEA. This change was in response to the widespread criticism of using TEA designations for sometimes affluent urban areas — as opposed to rural areas in distress, as per the program’s original intent. DHS declared that state designation of TEA status “resulted in the application of inconsistent rules by different states.” DHS also said that state designation had “resulted in the acceptance of some TEAs that consist of areas of relative economic prosperity linked to areas with lower employment.”
The following is a more detailed breakdown of the TEA requirements under the new Final Rule:
New TEA methodology
Department of Homeland Security (DHS) is not giving petitioners one set of data to determine TEA eligibility. On the positive side, this would seem to indicate some flexibility for petitioners. The negative aspect of this would be a lack of precise direction.
TEA designation will no longer be a separate process
Under current rules, a petitioner can just give a letter from the state to show TEA designation. Going forward, it won’t be that simple and the TEA approval process will no longer be a separate one; it will be processed and evaluated along with each I-526 petition. Each applicant will have to submit their own evidence that their investment project merits TEA designation. The impact of this is very important to bear in mind:
It is critical to an applicant’s petition that a proper TEA methodology was used and that the evidence stands up to the requirements of the new — and more complex — rules.
New census tract limitations
The new regulation will maintain the current EB5 requirement that a TEA have at least 150 percent of the national average unemployment rate. However, the new rule will have a couple significant changes. First, the new rule will limit tracts to be geographically within one census tract of the project tract. There will no longer be allowed an unlimited aggregation of census tracts, but can only include those census tracts that directly touch the project tract.
This differs significantly from the current rules in a couple ways. Current rules do not require adjacent tracks to directly touch the project tract. And current rules allow TEAs to have an aggregation of census tracts or block groups. A block group is a smaller sub-area than a tract and one or block groups make up a tract. Right now, many states use block groups in their TEA evaluations and this allows greater flexibility. As of November 21, block groups will not be allowed, only census tracts.
The new rule does not demand a project tract qualifies for TEA status on its own. However, if it does not, it can only qualify if the area that consist of the project tract and all directly touching tracts has a weighted average of at least 150% of the national average.
The effect of this starkly contrasts with current TEA designation: it is easy today for states to give TEA status to a project tract even if it doesn’t directly touch high-unemployment tracts. Many projects that would receive TEA designation under current rules will not qualify for that special status in the future.
What does this mean for EB5 investors?
With future TEA designation being much more limiting, many projects throughout the U.S. will no longer qualify. That means that many EB5 projects that today only require a $500,000 investment will require $1.8 million as of November 21, 2019. Put another way, as of November 21, 2019, such projects will require 360% of today’s required amount.
Futhermore, with TEA designation being adjudicated separately with each petition, if a future investor wants to invest at the new $900,000 TEA amount, they should be very certain that their TEA analysis is sound and will be approved — or else their petition will be denied. More than capital will be at stake for EB-5 investors going forward: if they do not proceed with the utmost care and diligence, they could risk losing a lot of time.
For more details and analysis about new TEA rules, see this article by EB-5 economic consulting firm Impact DataSource
New priority date retention
The new modernization rule allows priority date retention for certain investors. This may be a positive factor for investors whose EB5 regional center is terminated or changed. Current rules do not allow those investors to move forward with redeployment. But after November 21, priority date retention may allow those investors to invest in a new project, with their original place in line if they choose to file a new I-526 petition.
In such a case, such an investor must fulfil these requirements:
- an approved I-526 petition
- they have not attained conditional permanent resident status
- if their I-526 approval was revoked after approval, it was not because of fraud or wilful misrepresentation of a material fact by the petitioner, or because approval of the petition was based on a material error
Helping applicants from retrogressed countries
Current estimates suggest 24,000 investors have I-526 approval and could be eligible for priority date retention. The new policy will be of greatest benefit to an applicant from a backlogged country, with an older priority date, and who is likely to lose their I-526 approval — provided they have the money to invest in a new project.
Other priority date retention details
- no timeline restrictions on when the original I-526 was filed
- only applies for the same petitioner
- priority dates cannot transfer to other visa categories
- while the earlier date may be kept, the new I-526 petition must meet the conditions of the new rules (for example, new investment amounts and TEA requirements)
- if fraud happened during the first I-526 filing, it can only have been committed by the regional center or project — not by the investor
- the rule does not assist in moving capital from the first investment to the one tied to the new I-526 petition
For more information on priority date retention (as well as redeployment and material change) read Suzanne Lazicki’s thorough article (with a very helpful flow chart that clearly defines an investor’s options in multiple scenarios).