EB-5 Investor Immigrant Program

Under the employment-based, fifth preference (EB-5) immigrant investor classification , individuals are eligible to apply for lawful permanent residence in the United States if they make the necessary investment in a commercial enterprise in the United States and create or, in certain circumstances, preserve 10 full-time jobs for qualified United States workers. This rule provides priority date retention to certain EB-5 investors, increases the required minimum investment amounts, reforms targeted employment area designations, and clarifies USCIS procedures for the removal of conditions on permanent residence.

Summary of the EB-5 final new rules

This rule makes the following changes:

  • The rule clarifies that the priority date of a petition for classification as an investor is the date the petition is properly filed.
  • The rule clarifies that a petitioner with multiple approved immigrant petitions for classification as an investor is entitled to the earliest qualifying priority date;
  • The rule retains the 50 percent minimum investment differential between a targeted employment area (TEA) and a non-TEA instead of changing the differential to 25 percent as proposed, thereby increasing the minimum investment amount in a TEA from $500,000 to $900,000 (rather than $1.35 million, as DHS initially proposed);
  • The rule makes a technical correction to the inflation adjustment formula for the standard minimum investment amount and the high employment area investment amount, such that future inflation adjustments will be based on the initial investment amount set by Congress in 1990, rather than on the most recent inflation adjustment. Thus, for instance, the next inflation adjustment will be based on the initial minimum investment amount of $1,000,000 in 1990, rather than this rule’s minimum investment amount of $1,800,000, which is a rounded figure. This change better implements the intent of the proposed rule; it ensures that future inflation adjustments more accurately track inflation since 1990, rather than being based on rounded figures.
  • The rule modifies the original proposal that any city or town with a population of 20,000 or more may qualify as a TEA, to provide that only cities and towns with a population of 20,000 or more outside of metropolitan statistical areas (MSAs) may qualify as a TEA.
  • The rule modifies the application of the rule, such that amendments or supplements to any offering necessary to maintain compliance with applicable securities laws based upon the changes in this rule making will not independently result in denial or revocation of a petition, provided the petition meets certain criteria.
  • The rule also makes other minor non-substantive and clarifying changes.

This final rule makes the following major revisions to the EB-5 program regulations:

1. PRIORITY DATE RETENTION

The final rule authorizes certain EB-5 petitioners to retain the priority date of an approved EB-5 immigrant petition for use in connection with any subsequent EB-5 immigrant petition. Petitioners with approved immigrant petitions might need to file new petitions due to circumstances beyond their control (for instance, DHS might have terminated a regional center associated with the original petition), or might choose to do so for other reasons (for instance, due to business conditions a petitioner may seek to materially change aspects of his or her qualifying investment). This rule generally allows EB-5 petitioners to retain the priority date of a previously approved petition to avoid delays on immigrant visa processing associated with loss of a priority date. DHS believes that priority date retention may become increasingly important due to the strong possibility that the EB-5 category will remain oversubscribed for the foreseeable future.

In the final rule, DHS amends the originally proposed regulatory text by defining the term “priority date” to mean the date that the petition is properly filed. DHS inadvertently left this definition out of the NPRM’s proposed regulatory text, even though this definition is in the current regulation (“An EB-5 immigrant petition’s priority date is normally the date on which the petition was properly filed. In general, when demand exceeds supply for a particular visa category, an earlier priority date is more advantageous than a later one.”). This change is for clarity.

DHS also amends the originally proposed regulatory text by changing “approved EB-5 immigrant petition” to “immigrant petition approved for classification as an investor, including immigrant petitions whose approval was revoked on grounds other than those set forth below,” and also “approved petition” to “immigrant petition approved for classification as an investor.” The purpose of these revisions is to clarify that an investor may retain a priority date from petitions that had been approved but have since been revoked on grounds not specifically excepted in the provision. DHS further amends the originally proposed regulatory text by changing “based upon that approved petition” to “using the priority date of the earlier-approved petition.” This revision makes it clear that once a petitioner uses that approved petition’s priority date to obtain conditional permanent residence, that priority date is no longer available for use on any later-filed petition.

Last, DHS amends the originally proposed regulatory text by adding the sentence: “In the event that the alien is the petitioner of multiple immigrant petitions approved for classification as an investor, the alien shall be entitled to the earliest qualifying priority date.” This sentence was added to mirror a similar sentence pertaining to other employment-based categories, and clarifies which date applies should an investor have multiple approved petitions.

2. INCREASES TO THE INVESTMENT AMOUNTS

DHS consulted with the Departments of State and Labor to increase the minimum investment amounts for all new EB-5 petitioners in this final rule. The increase will ensure that program requirements reflect the present-day dollar value of the investment amounts established by Congress in 1990. Specifically, the rule increases the standard minimum investment amount, which also applies to high employment areas, from $1 to $1.8 million. This change represents an adjustment for inflation from 1990 to 2015 as measured by the unadjusted Consumer Price Index for All Urban Consumers (CPI-U), an economic indicator that tracks the prices of goods and services in the United States. This rule also makes a technical correction to the inflation adjustment formula, so that future inflation adjustments will be based on the initial investment amount set by Congress in 1990, rather than on the most recent inflation adjustment.

For investors seeking to invest in a new commercial enterprise that will be principally doing business in a TEA, the proposed rule would have decreased the differential between TEA and non-TEA minimum investment amounts to 25 percent, thereby increasing the TEA minimum investment amount to $1.35 million, which is 75 percent of the increased standard minimum investment amount. However, based on a review of the comments, the final rule will retain the 50 percent differential, and only increase the minimum investment amount from $500,000 to $900,000.

In addition, the final rule sets the schedule for regular CPI-U-based adjustments in the standard minimum investment amount, and conforming adjustments to the TEA minimum investment amount, every 5 years, beginning 5 years from the effective date of these regulations.

3. TEA DESIGNATIONS

Congress authorized DHS to set a different minimum investment amount for investments made in TEAs, or “targeted employment areas” (i.e., rural areas and areas of high unemployment). The final rule reforms the TEA designation process to ensure consistency in TEA adjudications and better ensure that TEA designations more closely adhere to congressional intent. Specifically, the final rule eliminates the ability of a state to designate certain geographic and political subdivisions as high unemployment areas; instead, DHS will make such designations directly, using standards described in more detail elsewhere in this final rule. DHS believes these changes will help address inconsistencies between and within states in designating high unemployment areas, and better ensure that the reduced investment threshold is reserved for areas experiencing sufficiently high levels of unemployment, as Congress intended.

DHS is making three changes from the NPRM, with respect to TEA designations. First, DHS is modifying its proposal on high unemployment areas to include only cities and towns with a population of 20,000 or more outside of MSAs as a specific and separate area that may qualify as a TEA.  By contrast, the NPRM proposed to allow any city or town with high unemployment and a population of 20,000 or more to qualify as a TEA, regardless of whether located within an MSA. Under the current regulatory scheme, TEA designations are not available at the city or town level, unless a state designates the city or town as a high unemployment area and provides evidence of such designation to a prospective EB-5 investor for submission with the Form I-526. DHS recognizes the proposal was inadvertently over-inclusive because DHS intended the proposal to provide non-rural cities and towns located outside of MSAs additional methods to qualify as a TEA, but the proposal would have allowed cities and towns with high unemployment and a population of 20,000 or more located within MSAs to qualify. DHS did not necessarily intend to permit cities and towns within MSAs to qualify or to create any new distinctions between cities and towns of various populations within MSAs. The final rule modifies the proposal to include only cities and towns with a population of 20,000 or more outside of MSAs as a specific and separate area that may qualify as a TEA based on high unemployment. 

Second, DHS is finalizing a technical change to removing the mention of “geographic and political subdivisions” for special designations. Because DHS proposed and is finalizing the census tract process for special designations, references to other subdivisions are no longer required.

Third, DHS is making an additional technical change to the description of special designation TEAs proposed in the NPRM, replacing “contiguous” as it is used to describe additional census tracts that can be added to the census tract(s) in which the NCE is principally doing business, with “directly adjacent.” This technical change was made to mirror the description of special designation TEAs elsewhere in the rule and to minimize confusion to the public, as the term “contiguous” could be read to include census tracts beyond those directly adjacent to the census tract(s) in which the NCE is principally doing business.

4. REMOVAL OF CONDITIONS

The final rule revises the regulations to clarify that derivative family members must file their own petitions to remove conditions on their permanent residence when they are not included in a petition to remove conditions filed by the principal investor. In addition, the rule improves the adjudication process for removing conditions by providing flexibility in interview locations and updates the regulation to conform to the current process for issuing permanent resident cards. 

EB-5 GREEN CARD CHART
EB5 INVESTOR GREEN CARD CHART

The forecast values are listed in Table 3:

FYInvestorsNCEs
201715,2411,481
201815,6851,524
201915,9251,547
202016,0521,560
202116,1191,566
202216,1531,570
202316,1711,571
202416,1811,572
202516,1851,573
202616,1881,573
10-year total159,90015,538
Annual Average15,9901,554

The last column of Table 3 provides estimates of the total number of NCEs. An assumption of the NCE forecasts is that there is no change in the relationship between the number of NCEs and the number of Form I-526 filings over time.The impact of these provisions on the forecasts will be described in the relevant sections of this analysis.

ECONOMIC IMPACTS OF THE MAJOR RULE PROVISIONS

A. RETENTION OF PRIORITY DATE

This rule will generally allow an EB-5 immigrant petitioner to use the priority date of an approved EB-5 petition for any subsequently filed EB-5 petition for which the petitioner qualifies. Provided that petitioners have not yet obtained lawful permanent residence pursuant to their approved petition and that such petition has not been revoked on certain grounds, petitioners will be able to retain their priority date and therefore retain their place in the visa queue. DHS is allowing priority date retention to: Address situations in which petitioners may become ineligible through circumstances beyond their control (e.g., the termination of a regional center) as they wait for their EB-5 visa priority date to become current; and provide investors with greater flexibility to deal with changes to business conditions. For example, investors with an approved petition involved with an underperforming or failing investment project will be able to move their investment funds to a new, more promising investment project without losing their place in the visa queue.

There will be an operational benefit to the investor cohort because priority date retention will make visa allocation more predictable with less possibility for massive fluctuations due to regional center termination that could, in the case of some large regional centers, negatively affect investors who are in the line at a given time. This change will provide greater certainty and stability for investors in their pursuit of permanent residence in the United States, helping lessen the burden of situations unforeseen by the investor related to their investment. In addition, Start Printed Page 35797by allowing priority date retention, investors obtain greater flexibility in moving their investment funds out of potentially risky projects, thereby potentially reducing fraud and improving the potential for job creation in the United States. DHS cannot quantify or monetize the net benefits of the priority date retention provision or assess how many past or future investors might be affected.

B. INVESTMENT AMOUNT INCREASE

DHS will raise the standard minimum investment amount from the current $1 million to $1.8 million to account for the rate of inflation from the program’s inception in 1990 until the time of the proposed rule. DHS will also raise the reduced investment amount for TEA projects to $900,000, which is 50 percent of the general investment amount. DHS will further adjust the minimum investment amounts every 5 years. The standard level will be adjusted for inflation based on the 1990 level and the reduced amount will be adjusted to maintain 50 percent of the standard minimum investment amount. These increases are needed because the investment amounts have never been adjusted to keep pace with inflation, thereby eroding the real value of the investments.

DHS believes it is reasonable to assume that some prospective investors under the current rule may be unable or unwilling to invest at either of the higher levels of investment under the new rule. However, DHS is unable to estimate the potential reduction in investments either in terms of past activity or forecasted activity, and cannot therefore estimate any impacts concerning job creation, losses or other downstream economic impacts driven by the investment amount increases. DHS evaluates the source of investor funds for legitimacy but not for information on investor income, wealth, or investment preferences. DHS therefore cannot estimate how many past investors would have been unable or unwilling to have invested at the new amounts, and hence cannot make extrapolations to potential future investors and projects. However, as noted earlier, it would take a substantial reduction in investors to actually reduce total investment below current levels. If the 80 percent higher levels of required investment do not lead to a reduction in the number of EB-5 investments, the absolute amount of investment would increase by 80 percent. There is currently about $4.43 billion in annual TEA investment under the program. At the TEA investment amount of $900,000 in this final rule, this same level of total TEA investment would be achieved with 44 percent fewer investors. Furthermore, small and even moderate reductions in investors actually stand to generate growth in total investment. It is entirely possible that total investment will actually increase, even if the number of investors were to decrease.

In addition to the effect on investors, it is reasonable to assume that the changes to the investment amounts will also affect regional centers. If the higher amounts reduce the number of investors in the global pool, competition for fewer investors may make it more costly for regional centers to identify and match with investors. However, the net effect on regional center costs is not something DHS can forecast with accuracy.

DHS also believes that for both regional center and non-regional center investments, the projects and the businesses involved could be affected. A reduced number of EB-5 investors could preclude some projects from going forward due to outright lack of requisite capital. Other projects will likely see an increase in the share of non-EB-5 capital, such as capital sourced to domestic or other foreign sources. As alluded to in Section Two of this analysis, analysis of the 2016 NCE sample reveals that 80 percent of NCEs blend EB-5 capital with other sources of capital. DHS believes that the costs of capital and return to capital could be different depending on the source of the capital. As a result, a change in the composition of capital could change the overall profitability for one or more of the parties involved; however, if the project on the whole promises net profitability, taking into account risk and potential returns from other investments, it may proceed as planned. The specific impact on each party for each project will vary on a case-by-case basis, and will be dependent on, among other things, the particular financial structures and agreements between the regional center, investors, NCE, and project developer. It will also be determined by local and regional investment supply and demand, lending conditions, and general business and economic factors.

DHS also considers that an increase in the investment amount could make other countries’ foreign investor visa programs more attractive and therefore there could be some substitution into such programs. The decision to invest in another country’s program will depend in part on the investment and country-specific risk preferences of each investor. While DHS has no means of ascertaining such preferences, it is possible that some substitution into non-U.S. investor visa programs could occur as a result of the higher required investment amounts. However, according to DHS research, substitution into another country’s immigrant investor program will likely be more costly for investors than investing in the EB-5 program even with increases in the EB-5 investment amounts. DHS has laid out some of the comparisons to other countries’ immigrant investor programs earlier in the preamble.

There are numerous ancillary services and activities linked to both regional center and direct investments, such as, but not limited to, business consulting and advising, finance, legal services, and immigration services. However, DHS is not certain how the rule will affect these services. Similarly, DHS does not have information on how the revenues collected from these types of activities contribute to the overall revenue of the regional centers or direct investments.Start Printed Page 35798

In summary, DHS believes that the increase in the minimum investment amount will bring the investment amounts in line with real values. DHS recognizes that some of the investment increase benefits could be offset if some investors are deterred from investing at the higher amounts. DHS does not have the data or information necessary to attempt to estimate such mitigating effects. It is possible that the higher investment amounts could deter some investors from EB-5 activity and therefore negatively affect regional center revenue in some cases, although the magnitudes and net effects of these impacts cannot be estimated. It is also possible that the higher investment amounts could attract additional capital overall and stimulate projects to get off the ground that otherwise might not. Due to the complexity of EB-5 financial arrangements and unpredictability of market conditions, DHS cannot forecast with confidence how many projects would be affected by the increased investment amounts through a change in the number of individuals investing through the EB-5 program. Some projects could be forgone while others will proceed with a higher composition of non-EB-5 capital, with resultant changes in profitability and rates of return to the parties involved. An overall decrease in investments and projects will potentially reduce some job creation and result in other downstream effects.

C. PERIODIC ADJUSTMENTS TO THE INVESTMENT AMOUNTS

In addition to initially raising the investment thresholds to account for inflation, DHS will adjust the standard investment threshold every 5 years (as compared to $1,000,000 in January 1990 at the program’s inception) to account for future inflation, and to adjust the reduced investment threshold for TEAs to keep pace with the standard amount. DHS projected the effects of this methodology using a relatively low, recent inflation index (1.5 percent) and a more moderate inflation index (3.2 percent). DHS made two separate projections based on two different indexes because DHS cannot predict with certainty what the future inflation index will be. The 1.5 percent estimate is based on the average rate of inflation for the period 2009-2017, which economists generally consider to be relatively low compared to earlier periods. The 3.2 percent estimate used for the higher-end projection is based on the 3.2 percent inflation rate in 2011, which was the highest annual inflation rate observed from the 2009 to 2017 period. DHS believes it is appropriate to characterize the 3.2 percent rate as a “moderate” inflation baseline, because although it is higher than the average annual rate since 2009, it is not considered by economists to be high as compared to other historical periods.

Table 4 lists the general minimum investment amounts and reduced investment amounts after 5 and 10 years if the amounts are raised initially as finalized in this rule. The figures are in millions of U.S. dollars and are rounded to the nearest fifty-thousandth. DHS notes that estimates are slightly different than those provided in the proposed rule due to the modification to the inflation adjustment.

Provision: Initial increaseRevision (year)Projected investment amount
Based on average inflation scenario, 1.5 percentBased on moderate inflation scenario, 3.2 percent
Standard Investment Amount = $1.8 Million in 201851.952.12
102.102.48
Minimum Investment Amount = $900,000 in 20185.981.06
101.051.24

DHS attempted to assess the costs of these changes. As described earlier, the potential cost of the higher amounts may result in a reduction in the number of investors and projects and a lower share of EB-5 capital for some projects, which could result in capital losses, fewer jobs created, and other reductions in economic activity. Or, there could be an increase in overall EB-5 capital flowing into the economy, which could result in more jobs created and increases in economic activity. DHS is not able to predict how many investors and projects will be affected, nor can we predict the impact to the capital available for projects.

D. TARGETED EMPLOYMENT AREAS

Under the current regulations, a state may designate an area in which the enterprise is principally doing business as a high unemployment TEA if that area is a geographic or political subdivision of a metropolitan statistical area (MSA) or of a city or town with a population of 20,000 or more. As is the current practice, state determinations for TEAs define the appropriate boundaries of a geographic or political subdivision that constitutes the TEA, although it is the responsibility of the petitioner to provide the supporting data and methodology involved in the state TEA determination. DHS ensures state designations comply with the statutory requirement that the proposed area designated by the state has an unemployment rate of at least 150 percent above the national average by reviewing state determinations of the unemployment rate and assessing the method or methods by which the state authority obtained the unemployment statistics. Currently DHS does not limit the number of census tracts that a state can aggregate as part of a high unemployment TEA designation. TEA configurations that DHS has evaluated from state designations have included the census tract or tracts where the NCE is principally doing business (“project tract(s)”), one or more directly adjacent tracts, and others that are further removed, resulting in configurations resembling a chain-shape or other contorted shape. This final rule will remove states from the high unemployment area designation process; instead, investors will be required to provide sufficient evidence to DHS in order to qualify for the reduced investment threshold. Under this final rule, DHS will generally limit the number of census tracts that could be combined for this purpose.127 Specifically, DHS will allow for a high unemployment area to consist of an area comprised of the census tract(s) in which the new commercial enterprise is principally doing business, including any and all adjacent tracts, if the weighted average of the unemployment rate for all included tracts is at least 150 percent of the national average. Additionally, DHS will allow cities and towns with a population of 20,000 or more outside of MSAs to qualify as a TEA based on high unemployment.

In order to assess the impacts of the changes to the TEA designation requirements, DHS performed further analysis on the 2016 NCE sample. First, DHS determined, based on the sample, that 98 percent of regional center investments and 68 percent of non-regional center investments are made into TEAs. Because the 2016 sample significantly over-represents non-regional center investments, DHS also determined the percentage of investments overall that were applied to TEAs. DHS found that 96 percent of investments and 83 percent of NCEs were applied to TEAs.About 9 percent of investments that were made into TEAs were made into rural TEAs. The non-regional center share of rural TEA investments was slightly higher than that of regional centers, at 9 and 11 percent, in order.

DHS then parsed the TEA filings comprising the 2016 NCE sample into specific cohorts. Specifically, DHS is interested in the number and share of projects and NCEs that would likely be affected by the rule. DHS thus split the sample of NCEs into regional center and non-regional center groups, and then broke these into two subgroups each. The first subgroup is the number of filings that comprised rural, and then high unemployment TEA filings that did not rely on state designations to qualify. The TEAs in this cohort did not require state designations because the project was located in a specific geographical unit that met the unemployment threshold. These TEAs would be unaffected by the changes being finalized in this rule as they pertain to TEA reform. This first subgroup also adds the filings that relied on one or two census tracts, respectively. These too will be unaffected by the specific TEA changes proposed in this rule. Hence the first subgroup represents filings that would not be affected by the rule. The second subgroup is the remainder—those filings into high unemployment TEAs that relied on three or more census tracts. This final rule will potentially affect some of the designations in this second subgroup.

Having broken out the filings to identify the segment that would potentially be affected, DHS proceeded to estimate the shares of investments and NCEs potentially impacted, as well as the actual numbers, on an annual basis. There are two caveats to our analysis. Foremost, we emphasize that the figures presented represent potential and likely maximum impacts for the following reason. Some of the group that relied on three or more tracts may have been configured in a manner that could meet the new provision. The data that DHS analyzed only contained the number of tracts, not the raw data to evaluate the actual geographical configuration and to determine if it would meet the provision in the final rule. Second, the figures for investments and NCEs apply to petitions filed and thus not to actual approvals or investments actually made. The weighted percentages and figures applicable are summarized in the Table 5 below, noting that the amounts are based on the average of filings for FY 2014-2016; potential changes in future filing patterns are discussed later.

TEA cohortInvestmentsNCEs
AmountShare (percent)AmountShare (percent)
Not affected by the rule6,2074683257
Potentially affected by the rule7,0755462843

Removal of Conditions Interview. In addition to the separate filing requirement discussed earlier, DHS is improving the adjudication process relevant to the investor’s Form I-829 interview process by providing flexibility in interview scheduling and location.generally requires Form I-829 petitioners to be interviewed prior to final adjudication of the petition, although DHS may waive the interview requirement at its discretion. Under this rule, DHS is giving USCIS greater flexibility to require Form I-829 interviews and determine the appropriate location for such an interview. Additionally, current DHS regulations allow for Form I-829 petitioners to be interviewed prior to final adjudication of a Form I-829 petition, but require the interview to be conducted at the USCIS District Office holding jurisdiction over the immigrant investor’s new commercial enterprise. However, there is no requirement that the immigrant investor reside in the same location as the new commercial enterprise, and DHS has determined through some preliminary surveys conducted by IPO that many immigrant investors are located a considerable distance from the new commercial enterprise. Therefore, DHS clarifies that USCIS has authority to schedule an interview at the USCIS office holding jurisdiction over either the immigrant investor’s commercial enterprise, the immigrant investor’s residence, or the location in which the Form I-829 petition is being adjudicated. DHS cannot currently determine how many petitioners will potentially be affected by these changes. From fiscal years 2012 to 2016, DHS received an average of 2,137 Form I-829 petitions. While not all of these petitioners will require an interview or face hardship to travel for an interview, some of this maximum population may be affected.Some petitioners will benefit by traveling shorter distances for interviews and thus see a cost savings in travel costs and opportunity costs of time for travel and interview time.

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