EB-5’s Status Quo Extension:
A Regional
Center Perspective
by Angel Brunner
For the past several months, the EB-5 industry has been filled with
a great deal of discussion and speculation surrounding the pending
legislation expected to alter the Program post-September 30th.
Industry insiders were hoping for positive reforms that would strengthen
and improve the program. The five-year extension through 2020 would
have put an end to the uncertainty that we have become familiar with over
the years. The 12-census tract, California-based Targeted Employment
Area (“TEA”) methodology seemed to be the fairest compromise on
the TEA issue to date. Additionally, the suggested integrity measures,
including the annual $20,000 regional center fee, would have created an
additional deterrent to fraudulent conduct in the industry. These are just
a few of the many positive program changes that the EB-5 community
expected to see addressed in this year’s new legislation.
There were also aspects of the proposed legislation that could
perhaps have caused irreparable harm to the program. The
seven-year tax return requirements would likely have prevented a great
number of potential investors from investing, as many high-net-worth
individuals from developing nations are not able to easily produce seven
years’ worth of tax documentation. Investors who were contemplating
EB-5 may now have the impetus to proceed, having been granted an additional year under the less restrictive current regulations. Furthermore,
the proposed increase in the investment amount in a TEA project
to $800,000, while maintaining the non-TEA project amount at $1
million, would have reduced the discrepancy between the two tiers by
60 percent – a change that may have resulted in an increase in non-TEA
investment. This result would be contrary to what many representatives
in Congress, and many stakeholders in the industry, were seeking to
accomplish with the proposed legislative changes. The proposed bill did
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EB5 INVESTORS MAGAZINE