What’s Trending in EB-5 in 2020? – Episode 95
What’s trending in EB-5 in the new year? On this episode, Mona, Mark and Rebecca revisit the changes imposed by the new EB-5 regulations and the pending litigation and legislation that might lead to further changes in the program. Listen in for insight on current trends in EB-5, including an increase in the number of RFEs, the growing popularity of the E-2 program, and the emerging EB-5 investor markets.
There are 70,000+ investors currently in the EB-5 wheel, wondering when they might receive their visa or green card. What developments in the program do they need to know about? And what’s trending in the program as a whole in 2020?
On this episode of EB-5 Investment Voice, Mona, Mark, and Rebecca sit down to discuss what’s trending in EB-5 in 2020. They revisit the changes in minimum investments and Targeted Employment Area (TEA) designations imposed by the regulations that took effect last November as well as the litigation filed by Florida EB-5 Investments in response to the new rules and the Immigrant Investor Program Relief Act making its way through Congress at present.
The MSA team weighs in on how to handle TEA now that the burden of proof lies with the investor and shares the significant increase in RFEs they have noticed as more and more investors sue the government over lengthy adjudication timelines. Listen in to understand what’s behind the surge in E-2 visa applications, how the increase in the number of EB-5 visas might (or might not) impact how quickly investors get their green card, and where to find the hottest markets for EB-5 investing.
Regulations Recap
- The EB-5 modernization regulations took effect on November 21, 2019. The few simple changes made to the program in the regulations will have significant consequences.
- Under the new regulations, the price tag for EB-5 has gone up. The minimum investment in a TEA area is now $900K and $1.8M in a non-TEA area.
- What constitutes a TEA has also changed. It is no longer possible to order a TEA designation letter from the state and expect USCIS to defer that letter.
- On a more positive note, you can file a new I-526 while maintaining the priority date from a previously filed I-526 petition. In addition, there have been improvements in removing conditions, e.g.: family members who cannot file together may submit separate applications.
Pending Litigation
- In November of 2019, Florida EB-5 Investments filed a complaint for Injunctive Relief and a Temporary Restraining Order (TRO) against DHS in response to the new regulations. A judge has ordered further documentation from both parties.
- Mona doesn’t think a TRO will be issued. However, the litigation may lead to clarity around TEAs. We can expect a ruling at the end of February or March 2020.
Pending Legislation
- If passed by Congress, the Immigrant Investor Program Relief Act would override the new regulations. In the bill, minimum investments are $1M for TEA and $1.1M for non-TEA projects.
- Mona predicts that the Relief Act will pass at some point, though it may not happen in an election year. She sees the bill passing in 2021.
TEA Methodology
- Prior to November 2019, 90% of all EB-5 investments qualified as TEA. The US State Department estimates that 54% of current projects would be impacted by the new TEA guidelines, while IIUSA research found that 67% of current projects would be impacted by the new rules, increasing the minimum investment from $500K to $1.8M in a majority of cases.
- Under the new regulations, the burden of proof lies with the investor. In the past, we knew whether a project qualified as TEA prior to filing. Now, EB-5 investors must wait until their case is adjudicated (which can take years) before they know the required minimum investment amount with any certainty.
- DHS has yet to provide a specific methodology for determining what qualifies as a TEA. As such, Mona recommends mitigating the risk by hiring a third-party expert to do a formal analysis to prove TEA eligibility.
The Rise in RFEs
- Mona and Rebecca have noticed a significant rise in the number of RFEs issued by USCIS in 2020. They attribute this to a rise in the number of investors filing lawsuits and mandamus petitions around the unreasonable two- to four-year adjudication timelines.
- Whether these RFEs are genuine or bad faith RFEs due to litigation is up for debate. Either way, investors seem to be stuck waiting several years for adjudication unless they file for mandamus (and risk getting stuck with an RFE or NOID).
The Popular E-2 Option
- The rise in minimum investment puts EB-5 out of reach for many immigrant investors. As a result, the E-2 option is gaining popularity.
- Keep in mind, though, that E-2 is not available to everyone. Young students or housewives without business experience are unlikely to qualify, for example.
- The increase in E-2 visa applications is directly related to the increase in the number of applications for Grenada citizenship. This is because investors from countries without an E-2 treaty (like India and China) can acquire a passport through the Grenada program.
Green Card Timelines
- The US State Department recently raised the number of visas for EB-5 from 10K to 11,111 for fiscal year 2020, affording each country an additional 778 visas. For those countries that don’t use their full allocation, the extras will go to China.
- This increase in the number of visas significantly shifted the cutoff dates between the December and January visa bulletins. For example, for Indian investors, the cutoff date was listed as 12/18 in December and then jumped to 5/18 in January.
New Investor Markets
- China, Vietnam, India, Taiwan and the Latin American countries have historically been the most active EB-5 investor markets. But South Africa, Argentina, Nigeria, Colombia and Japan are rising in the ranks.
- Despite Japan’s status as the third largest economy, immigration from Japan to the US rose 78% between 2017 and 2018. This is due in large part to a high inheritance tax that has high-net-worth-individuals bringing their wealth the US (where inheritance taxes are among the lowest in the world).