EB-5 Immigrant Investor Financing:  New Rules May Lead to Run on Investments

09.10.2019

EB-5 Immigrant Investor Financing:  New Rules May Lead to Run on Investments

The U.S. Citizenship and Immigration Service (USCIS) has finalized new rules for the EB-5 Immigrant Investor Program that may lead to a short term rush to invest prior to the new rules becoming effective on November 21, 2019, and a cooling off in the long term after the amount will nearly double for the funds foreign investors will need to invest in U.S. projects in order to get green cards, and require TEAs to radiate outward from the development site.

The EB-5 Regional Center Program and Two New Rules Impacting Developers

• Administered through the U.S. Citizenship & Immigration Service (USCIS).
• Foreign investors invest funds in an economic unit known as a “Regional Center”.
• The Regional Center entity permits a pooling of individual investments that can then be made available to fund large job-creating developments.
• USCIS sets aside visas each year for qualified individuals seeking permanent resident status who invest in a designated Regional Center.
• Each foreign investor must make a minimum investment of $500,000 into an approved Regional Center. The new rules increase the minimum investment amount to $900,000, almost twice as much as currently required.
• The Regional Center must direct the funds to a project located within a targeted employment area or “TEA” (an area that has experienced unemployment of at least 150% of the U.S. national average rate) or a rural area. The new rules take the authority to designate TEAs away from state and local governmental agencies and vests it with the Department of Homeland Security.  This rule change is directed at gerrymandering of high-unemployment areas by combining a series of census tracts to connect a prosperous project site to a distressed community to achieve the qualifying average unemployment rate.
• For each capital investment, ten (10) or more permanent direct or indirect jobs must be created within the TEA area within 24 months.
• The investment allows a foreign national and their immediate families (spouse and unmarried children under 21) to obtain lawful permanent residence (aka a “green card”) in the United States.
• The requirement that the investor must “direct and control” his or her investment is satisfied by his or her status as a limited partner in the investment.
• The great advantage to the developer using this financing is that it is provided at low interest rates since the investors are primarily seeking their green cards and are not seeking large returns. The funds may be used as equity or debt for the project.