For nearly 30 years, the EB-5 Immigrant Investment Program has offered foreign investors the opportunity to achieve permanent resident status in the U.S. in exchange for investing in a commercial enterprise. Most EB-5 investors receive their permanent resident status within two years. The program has created employment for thousands of U.S. residents, helped to revitalize distressed communities and boosted the economy. After three decades, however, modernization is needed, and the Federal Register released the upcoming changes to the EB-5 program.
Higher Capital Requirements
Significant EB-5 law changes cover several aspects of the program, but the change most likely to determine the winners and losers concerns the sharp increase in the amount of capital necessary for investment. Currently, the minimum amount required under the EB-5 program is $500,000 in Targeted Employment Areas (TEA). Under the rule, changes becoming effective November 21, 2019, the minimum investment amount increases to $900,000. The increase is the first since the EB-5 investment visa program began back in 1990. Under the EB-5 law changes, the minimum investment amounts automatically adjust for inflation every five years.
The new law does not change the terms under which an EB-5 investor qualifies for permanent resident status; the creation of at least 10 full-time U.S. jobs remains a requirement.
EB-5 Law Change Winners
The biggest winner is the EB-5 program itself. Although the minimum EB-5 investment increased substantially, it could have been worse. Previous drafts of the legislation recommended raising the minimum EB-5 visa investment amount to $1.35 million.
Sometimes, circumstances beyond the control of the EB-5 investor may mean they must change their qualifying investment. The new regulations provide priority date retention. If investors have to file a new EB-5 petition, they retain their “place in line” in the application process, rather than starting all over again.
EB-5 Law Change Losers
Of course, the most obvious losers under the new rules are those who cannot afford the increased minimum and must look for other ways of fulfilling their dreams of U.S. citizenship. They are not the only ones affected for the worse.
TEA designations underwent notable changes, among them is how areas deemed eligible for TEAs are determined. Currently, states are in charge of designating areas as high unemployment. After the new rules go into effect, the Department of Homeland Security will oversee the TEA designations, basing them on revised requirements and directing EB-5 investments to the neediest areas.
For developers, this may change the type of project designed for the TEA, and change their focus to struggling rural, rather than urban, locations. That may mean concentrating on strip malls, warehouses and similar projects rather than hotels or high-rise buildings. Some proposed projects may no longer qualify under the new TEA regulations.
EB-5 investors choosing the less popular standard minimum investment, in which they operate their own businesses rather than invest in regional projects, will see their minimum investment amounts rise from $1 million to $1.8 million.
How Lightstone Can Help
As long as the investors file the initial step in the EB-5 process, the I-526 petition, before November 21, 2019, the minimum investment remains $500,000. Anyone considering making an EB-5 investment should do as soon as possible. If you would like to obtain permanent residence status for yourself, your spouse, and minor children under the age of 21 under the current financial regulations, time is of the essence.
As one of the largest privately-held real estate companies in the country, Lightstone has more than $6 billion in assets under management and development. If you would like more information about the EB-5 investment program and how Lightstone can help, please contact us.