obtain an adequate number of visas for the program so
it can reach its economic and job-generating potential.
The parts of the EB-5 program that are ripe for reform
include: a near certain increase in the minimum EB-5
investment amount; revamping Targeted Employment
Area (TE A) definitions; and a number of changes to
the way that EB -5 regional centers and EB -5 project
sponsors-managers must operate. The EB-5 regional
centers’ proposed reforms have been initially designed
to bring more structure to the way all regional centers
and project developers and capital raisers must operate,
administer, and report under the program.
MINIMUM INVESTMENT
AMOUNTS AND TEAS
The range of proposals from various stakeholders to
reform the minimum investment amount include those in
the Department of Homeland Security (DHS) proposed
regulations released back in
January of 2017 and the increases
proposed by the so-called Cornyn
legislative proposal provided back
in the Spring of 2017. As proposed
by the DHS, the minimum
investment amount for projects in
a TEA would rise sharply to $1.35
million—an increase of $850,000
from the current minimum
investment amount of $500,000
for TE A projects. The proposed
DHS regulations also would
increase the minimum investment
amount for all projects not
located in a TEA to $1.8 million—
an increase of $800,000 from
th e c u r re n t $1 millio n a m o u n t .
EB-5 stakeholders have not been
receptive to the rather severe DHS
proposal. It is widely hoped that
this DHS proposal would not be
implemented without a significant
reduction. The more workable numbers to the industry
in the Cornyn legislative proposal would increase the
minimum inves tme nt amount to $ 8 0 0, 0 0 0 for T E A
projects and $850,000 for all other projects.
post-reform project mix where only about 15 percent
of the projects would qualif y as a TE A project (and
about 85 percent non-qualifying). Nearly all proposals
would therefore result in a large increase in a typical
project’s minimum investment amount. Because no one
really knows how these minimum investment amount
increases will impact program activity, the industry has
been advocating for increases in the lower end of the
proposed ranges.
PROPOSED CAPITAL RAISING,
REGIONAL CENTER
OPERATIONS CHANGES
T h e thir d a rea of c o n c e r n fo r E B - 5 refo r m re la tes
to the proposed new requirements for the way that
re gional c e n te r s , p roje c t sp onsor s - manage r s , and
marketing agents conduct themselves when planning,
developing-operating, raising capital, and administering
EB -5 projects. These proposed changes have been
comprehensively reviewed by a
number of parties—including two
major EB-5 industr y stakeholder
groups and a distinguished group
of securities at torneys - regional
center operators—who are looking
to advance a workable set of
reforms. A number of suggestions
were provided to counter the
proposed changes made through
the DHS ’ regulator y proposal
and in response to the most
problematic aspects of the various
legislative proposals. To date ,
the parties have not yet been able
to come together in a consensus
a g r e e m e n t to r e f o r m t h e E B - 5
program.
"finding some solution
on a set of essential
EB-5 program reforms
remains crucial for all
involved. It is critical
because it is the only
avenue to solving the
real problem—which
is finding a reasonable
path to obtaining more
visas to meet demand"
A nother area ripe for regulator y reform is how the
program defines TEAs. Again, the range of TEA revision
proposals have been largely defined by those proposed
in the draft DHS regulations and the proposals included
in the so - called Cornyn legislation. In both cases,
projects that would qualify as a TE A project and for
the lower minimum investment amount would be much
more restricted. One independent analysis of the impact
of the DHS’ TEA reform proposal indicates that the mix
of TEA-qualifying projects would flip almost entirely—
from a current mix of more than 95 percent of the
projects qualifying for the TE A minimum investment
amount (and less than 5 percent non-qualifying) to a
118 EB5 INVESTORS M AGAZINE
Even so, finding some solution on
a set of essential EB -5 program
refo r ms re mains c r u c ial fo r all
involved. It is critical because
i t is the only ave nue to solving the real proble m—
which is finding a reasonable path to obtaining more
visas to meet demand. Without the implementation of
meaningful EB-5 reforms, there are few viable paths to
an adequate supply of visas for the EB-5 program. The
negative effects of an inadequate supply of visas have
become painfully evident over the past several years
as several EB-5 investor sourcing countries that have
run up against their visa limits. The harsh reality that
a potential mainland Chinese investor will have to wait
more than 10 years to obtain legal entry into the U.S.
through the EB -5 program has had a chilling impact
on investor interest in that country. The EB-5 industry
is also rightfully concerned that visa wait times have
also significantly expanded for additional, critical EB-5
investor-sourcing countries such as Vietnam and India.
It is only a matter of time before that also occurs for
Brazil and South Korea.