The Unknown Future of the EB-5 Visa Program

Becoming a United States resident is highly sought after by people all around the world. Obtaining a visa to become a U.S. resident has become more difficult in recent years. One possible avenue for an individual to obtain a visa was the EB-5 program. However, the EB-5 program was permitted to sunset on June 30, 2021. Presently, the future of the program is unclear, as it must be reauthorized by Congress to restart.

The EB-5 Immigrant Investor Program

One possibility for a foreign national with substantial economic means to seek residency in the U.S. was via the EB-5 program. “EB-5” refers to the Employment-Based Fifth Preference category of visas. The EB-5 program was an immigrant investor program setup by the Unites States government to allow investors in the U.S. economy to become a permanent U.S. resident. The program provided an opportunity for applicants and their immediate family to apply for a Green Card by participating in investment opportunities that may boost the U.S. economy, thereby creating a benefit for both the investor and the United States. It was administered by the U.S Citizenship and Immigrations Services (USCIS).

The EB-5 program was initiated in 1990 with an act of Congress with the goal of stimulating the U.S. economy through job creation and capital investment from foreign investors. Subsequently, Congress enacted the Immigrant Investor Program, also known as the Regional Center Program, in 1992. This program set aside EB-5 visas for individuals who invest in commercial enterprises associated with regional centers that were approved by the USCIS.

Eligibility for the Program

Investors were eligible to apply for a Green Card if they made an investment that met the requisite criteria under the program. There were a number of requirements that must be met to qualify.

First, the participant in the program must be an “accredited investor,” which permits the person to invest in securities not registered with the Securities and Exchange Commission (SEC). To become an accredited investor, the individual must either have a net worth of $1 million (excluding the primary residence), earned an annual income for the prior two years (or $300,000 combined with the spouse), or hold certain professional certifications or other credentials.

In order for the proposed investment to qualify, the amount invested must be at least $500,000 in an area designated by USCIS as a Targeted Employment Area (TEA) or $1 million in any non-TEA area. The required investment amount had been raised in 2019 to $900,000/$1.8 million by the EB-5 Immigrant Investor Program Modernization Final Rule. However, that rule was vacated by a June 22, 2021 decision from the U.S. District Court for the Northern District of California, thus reducing the minimum investment to the earlier $500,000/$1,000,000 threshold. The investment must be in a commercial enterprise that either was created after November 29, 1990, or was a pre-existing enterprise that was restructured to create new commercial results or expanded through investment to increase the net worth or number of employees by at least 40%. Additionally, the enterprise must have created or preserved at least ten permanent full-time jobs for U.S. workers. Finally, the applicant must actively engage in the management of the enterprise, either through day-to-day control or through policy formation.

Types of EB-5 Investments

There were two options for those seeking to earn a Green Card via the EB-5 program: 1. Direct or 2. Regional Center Investment. The “direct” option is for an individual who wants to own and be directly involved with the day-to-day operation of a commercial enterprise. This involves creating a business model for every facet of the business, including how the business will create at least ten jobs for qualifying U.S. workers. The jobs created must be created directly through the business, and established via payroll records. Thus, applicants who chose this option should have a solid background in business management.

The alternative option, Regional Center Investment, was better suited for someone who does not intend to be involved with the day-to-day management of the business, and instead preferred passive equity investment. In addition to a more hands-off approach, this option permitted the applicant to meet the requisite ten jobs created through both direct and indirect job creation. This means that jobs created indirectly as a result of the project, but not necessarily directly within the business, can count towards the requirement. The requirement was met through an analysis report from a credentialed economist.

EB-5 Investment Fraud

Unfortunately, the general structure of the program was one that invited a significant amount of fraud. Under the structure of the program, individuals with large amounts of capital were seeking an investment that fits the criteria of the EB-5 program with the hopes of attaining a Green Card, which is both extremely desirable and hard to come by. Such a setup is rife with the potential for bad actors.

Chinese nationals account for a large number of visas sought under the EB-5 program. While the foreign investments created economic opportunity, fraud, money laundering, and related financial crimes also became synonymous with the program. In one recent example, the U.S. Attorney’s Office in the Northern District of California obtained a guilty plea from two individuals related to their improper use of funds solicited from investors who were hoping to participate in the EB-5 program. The two individuals raised more than $100 million from foreign investors over the course of seven years. Due to the emergence of a significant fraud issues, both the SEC and FINRA have made examining the EB-5 program and related enforcement a priority.

EB-5 Program Sunset

Due in part to the prevalence of fraud related to the program, Congress did not renew the EB-5 program when the statutory period expired on June 30, 2021. Once Congress failed to reauthorize the program, the USCIS ceased to take new applications for the program. Presently, the future of the program is unknown. There had been talk that the EB-5 would be reauthorized as part of the Continuing Resolution adopted on December 3, 2021 to keep the U.S. Government open, but that was not part of the final bill. Thus, the future still remains unclear. Should the program not be reauthorized, foreign investors are likely to pursue litigation to seek the recovery of funds invested as part of the EB-5 program prior to its termination.