In September, Republican Bob Goodlatte, the Chairmen of the House Judiciary Committee, introduced H.R. 5992. This bill, which also has cross-party support, proposes some important reforms to the EB-5 program. The EB-5 program is an immigrant investor program that gives investors and their immediate family members an opportunity to obtain green cards if a qualifying investment is made to support job creation and general economic development in the United States. Key reforms are being proposed to the law out of worries that the spirit of the program is being abused by certain investors and middle-men. While discussion of H.R. 5992 was temporarily put on hold, it is likely to be introduced again following this congressional recess. It is possible that the bill will be passed in December 2016 or early January 2017.
An Overview of EB-5 Regional Investment Centers
To get a green card under this program, investors must make an investment that meets all of the minimum requirements. There are actual two types of EB-5 visas: direct investment and investing through a regional center. Most people choose the regional center because it is more passive and the requirements are generally much less challenging. To qualify for a green card by making this type of investment, an investor must invest either $1,000,000 or $500,000 depending on the location of their investment. More specifically, you can qualify by making the $500,000 investment if you put the money into a project in region of America that has a struggling economy. These qualifying regions are known as ‘targeted employment area’ (TEA). A TEA is defined as an area with an unemployment rate that is at least 150 percent of the national average or an area that is sufficiently rural. For obvious reasons, these regions struggle to get new investment. As such, Congress wishes to use the EB-5 program to encourage additional investment into these areas. This is certainly a laudable goal, although there is reason to believe that the current law has failed to achieve this overall goal because of economic gerrymandering.
Understanding the Proposed Reforms in the EB-5 Bill
Congress has become extremely concerned about economic gerrymandering and the fact that it may be undermining the purpose of the EB-5 program. In simple terms, economic gerrymandering is the process of cobbling together different economic areas that do not actually make sense together as one unit. This is done to ensure that proposed projects qualify under the $500,000 EB-5 requirements. Earlier this year, the Committee on the Judiciary held a hearing on this issue. Some of the testimony included informative examples of the type of economic distortions that congress believes are being used to take advantage of the system. For example, in testimony before the committee, Timothy Whipple of the Iowa Development Authority explained that rural and impoverished areas were not receiving investment because developers were able to put multicensus tracts together and keep investing in the most wealthy areas. To support the claims of Mr. Whipple, Professor Gary Friedland of New York University testified that his comprehensive research found that some seemingly bizarre projects qualified for TEA status. For example. Mr. Friedland found that the development of a luxury Waldorf Astoria Hotel qualified for as a TEA project. The hotel was located in Beverly Hills, California. Beverly Hills in one of the 20th richest zip codes in the entire country. Considering that example, it is easy to see why congress believes that reform might be needed on this issue.
What Do the Potential EB-5 Reforms Mean for Investors?
Due to the fact that the H.R. 5992 is currently being held up, it is difficult to say for sure. However, there does seem to be bipartisan support for reforming the way in which TEAs are designated. More than anything else, this highlights the importance of choosing the right regional center. If you are prospective EB-5 investor, you will need to show that you made a successful investment that met all of the necessary criteria under the law. Beyond making a large enough investment that creates enough jobs, if you are investing $500,000, your investment will need to be in the appropriate economic zone. Remember, risk-free investments simply do not exist in the real world. If you are making an EB-5 investment you need to do everything you can to increase the likelihood of success. That includes consulting with a qualified investment adviser and it also includes hiring an experienced EB-5 immigration attorney.
Do You Need Immigration Help from a Los Angeles Immigration Lawyer?
The EB-5 immigrant investor program is notoriously complex. At the Law Offices of Joshua L. Goldstein, we have extensive experience handling EB-5 cases and have helped many people obtain their EB-5 visas with a wide array of immigration solutions. To learn more about what we can do for you, please do not hesitate to contact our Los Angeles office today at (213) 514-8870.