It’s Official… New EB-5 Regulations Finally Published – Episode 80
It has finally happened…
…and here is our reaction less than a day after the new changes were announced.
Changes to EB-5 have been on the radar for years, and on July 24, 2019, the DHS finally issued new regulations for the program. On this episode, Mona, Mark, and Rebecca discuss how the rules affect minimum investment amounts and change the definition of TEA. Listen in for insight around when the regulations go into effect and what investors and developers need to consider before rushing to be grandfathered in under the current guidelines.
New regulations for EB-5 dropped on July 24, 2019. What do the changes mean for foreign investors considering projects? How about developers in the middle of a raise? How do the rules impact the definition of Targeted Employment Area (TEA)? What about minimum investment amounts? When do the changes take effect? And most importantly, what do investors need to consider before they rush to file in advance of the effective date?
On this episode of EB-5 Investment Voice, Mona, Mark and Rebecca sit down to discuss the new Department of Homeland Security (DHS) regulations for EB-5, explaining when the rules go into effect and why the department is giving the industry the full 120 days to prepare. Mona addresses the timing of the changes and questions the rationale behind releasing new regulations just weeks before draft legislation that would supersede these changes.
Mona, Mark and Rebecca go on to explain how the regulations impact EB-5 investment minimums and the definition of TEA, clarifying how the changes will affect projects in the middle of a raise on the effective date. Finally, they share the new rules around priority dates and the removal of conditions on permanent residence. Listen in for advice on whether prospective investors should rush to file before November 21 and learn the potential consequences of filing poorly drafted or incomplete EB-5 petitions.
The Timeline for New EB-5 Regulations
- New EB-5 regulations posted to the Federal Register on July 24, 2019. The rules increase the minimum investment in EB-5 projects and change what qualifies as a TEA.
- The new regulations take effect on November 21, 2019, presumably to give the industry 120 days to complete project documents and finish raises. According to USCIS, 54% of the current projects would be affected by the new regulations.
- To be clear, the new rules are DHS regulations, not draft legislation. It seems strange that they are being published just weeks before the possibility of draft legislation coming out that would supersede these changes to the EB-5 program.
- Litigation to fight the regulations is a possibility, as Regional Centers may want to contest the changes to TEA. But Mona is skeptical that a suit would be successful.
How the Regulations Change EB-5
- For projects that qualify under TEA, the minimum investment amount is rising from $500K to $900K, and non-TEA project minimums are increasing from $1M to $1.8M. The regulations also allow for ongoing adjustments to the minimum every five years, based on inflation, starting in 2025.
- TEA will no longer be defined by the states. Beginning on November 21, TEA will be designated by DHS. (If a project is in the middle of a raise at that time, investors who come on after the effective date will be obligated to follow the new definition of TEA.)
- The rules also clarify what happens when an investor passes away during the two-year period of conditional permanent residence: The spouse and the children are eligible for the removal of conditions.
- Finally, the DHS regulations allow some EB-5 petitioners to retain their priority date, but only when the denial is through no fault of their own. For example, if a petition is revoked due to a material change, the priority date is retained. If the denial is based on source of funds or misrepresentation, the priority date is not retained.
- These regulations do not address visa numbers. Mona suggests that once integrity measures are in place, Congress and USCIS may be more amenable to increasing visa numbers. In addition, the increase in minimum investment may bring the numbers down naturally.
Should Investors Rush to File Now?
- Mona cautions investors against rushing into investments without doing their due diligence. It is just as important to choose an appropriate project with a strong team as it is to get in before the November 21 deadline.
- During the 2015 rush, a surge in poorly drafted petitions caused significant processing delays. This time around, USICS is not obligated to issue a Request for Evidence (RFE) or Notice of Intent to Deny (NOID) in such cases but can deny these skeletal filings outright.