Several recent developments regarding legal options for those seeking lawful permanent residency through the EB-5 Regional Center program have resulted in the temporary suspension of the program and a possible short-term opportunity to invest at the $500,000 level rather than the minimum investment of $900,000 required under the “Modernization” regulations that became effective November 21, 2019.

In 1992, Congress amended the EB-5 program to create a pilot program that allowed third parties to create Regional Centers through which multiple foreign investors could invest funds in projects that could be fully vetted to meet pertinent statutory requirements in terms of their location in Targeted Economic Areas and sufficient job creation. The sunset provision meant that Congress has been periodically required to extend the program for a specified number of years, frequently as short as one year. Given the fact that the EB-5 Regional Center program has been popular with both Democratic and Republican elected representatives, the program has always been extended, although at times it has temporarily expired before its reauthorization by Congress. Congress has again failed to timely extend the EB-5 Regional Center program beyond its June 30th expiration date given an unusual number of other legislative priorities, vacation days, and seeming lack of priority given to this issue.

While the program has expired on several previous occasions, a particularly unusual aspect of this expiration is that the November 21, 2019 Modernization regulations issued by the Trump administration were vacated by the U.S. District Court for the Northern District of California on June 22, 2021, thereby creating a very short window in which foreign investors could qualify by timely selecting investments and filing EB-5 petitions at the $500,000 investment level, all of which were complicated by both initial uncertainties and  
the time needed on the part of EB-5 project developers to restructure their projects and documentation to comply with the reinstated EB-5 regulations.

CURRENT GUIDANCE FOR EB-5 INVESTORS AND REGIONAL CENTER PROJECT DEVELOPERS

At some point, the EB-5 Regional Center program will be reinstated, and the investment levels will be determined by the Biden administration and its diligence in the likely reissuance of new EB-5 regulations, which may be substantially along the lines of the November 21, 2019 Modernization regulations. To do so, the Secretary of Homeland Security must comply with the Administrative Procedures Act, which means that any new regulation will take a number of months to become effective. Meanwhile, the EB-5 Regional Center program cannot continue without Congress’ reauthorization. Congress might accomplish this as it has in prior years through legislation reauthorizing a short-term extension of six months to one year that is attached to a must-pass continuing resolution and authorization legislation. Congress is typically pressured to pass such legislation by or around October 1st so that the United States can continue to pay its employees and obligations, allowing the U.S. government to fully function. It may even be possible for Congress to pass more comprehensive EB-5 reform legislation along the lines proposed by Senators Chuck Grassley and Patrick Leahy with broad industry support. Such bipartisan legislation could be the vehicle through which a five-year extension and other program reforms can be effectuated.

While it is difficult to predict, it is very possible that Congress will act before new EB-5 Regional Center regulations are reauthorized, thereby creating another short window during which qualifying investors can timely file their EB-5 petitions at the $500,000 level. We are therefore advising our clients not to wait until all of these issues are finally determined, but to start now the lengthy process of being prepared to file the petition once these issues are resolved. As a practical matter, it takes time to obtain the necessary information and documentation to establish a lawful source of funds, do the necessary tracing, and obtain all other required documentation. It also takes time for the prospective investor to do the necessary due diligence to evaluate EB-5 projects that are currently available and that are properly structured and documented to accept funds at the $500,000 level.

Regional Centers and potential project developers should start now on developing new projects or amending existing projects to take advantage of what will likely be
 
an unprecedented level of demand by new EB-5 investors at the $500,000 level during this expected likely-brief window of time.

CONCLUSION

Foster’s team of EB-5 experts will be pleased to discuss these issues and advise prospective investors and both current and new Regional Center project developers to take advantage of the unique circumstances.