• 13 October 2017

No one can rightly say how fast news travels. One thing is for sure, however. That is that “fake news” travels faster than the truth. The digital age has dramatically disrupted the reporting of news. Nearly anyone on the planet can post comments on the internet and appear to have factual information. “News” of the demise of the EB-5 Investment Visa program is a prime example. People from Indianapolis to India and from Beijing to Birmingham have been misled into believing that the EB-5 program is about to end.

The EB-5 program is not over nor will it end soon.

As is typical with programs that broaden their scope over time, the definition of the EB-5 program has expanded with it. Both the original EB-5 Direct Investment program and the later EB-5 Indirect Investment program have become collectively known as EB-5, with little differentiation between the two aspects of the program.

Any current mention of the potential end of the EB-5 program should refer exclusively to the Indirect Investment component otherwise known as the Regional Center program. It is additionally essential to understand that the major issue with the Regional Center program is the continuing uncertainty of its existence.

The original EB-5 program

EB-5 entrepreneurial visa was introduced in 1990 for the express purpose of stimulating the U.S. economy by using private foreign investments as capital expenditures to create jobs. Interested investors needed to:

  • Invest USD 1 million that was proven to be lawfully sourced.
    • Or, alternatively, invest USD 500,000 in a lawfully designated Target Employment Area (TEA). A TEA was defined primarily as a rural area or an existing area where the jobless rate was 50% higher than the national average.
  • Create 10 full-time jobs in a new commercial enterprise.
  • Have their funds entirely at risk (just as any business owner would).
  • Be involved in the management of the enterprise.

Note: We shall explain some of the preceding terms in more detail in a future article.

The 1993 “EB-5 Regional Center” program

The EB-5 program was expanded by Congress in 1993 in an attempt to make it more attractive to potential investors. What is now known as the Regional Center program was introduced as the “Pilot Immigration Program.” This new part of the program allowed for the creation of a new commercial enterprise to fund the building of a USCIS-approved project. Although the investment amounts and risked remained the same, entities functioning as Regional Centers could aggregate investments to fund major, multi-million-dollar investments and the investors did not have to participate directly in the management of the project. That responsibility was now on the Regional Center.

It is the Regional Center program that has been and is, in jeopardy. It is the Regional Center program that some people consider as “flawed” primarily because of proven cases of fraud and gerrymandering of areas to create new TEAs. Multiple efforts to revise the program have met with failure in Congress, typically dying in committee in the draconian process of legislation.

The actual status of the Regional Center program

The EB-5 Regional Center program is currently funded under a Continuing Resolution (CR) that temporarily extends 2017 spending programs through December 8, 2017. At or before that date both houses of Congress will have to pass a permanent spending measure to fund the government for 2018.

The Regional Center program is not alone. All other non-essential government-supported programs, such as the National Institutes for Health (NIH), are at stake.

No one knows to a certainty what the Congress will do. We have to wait and see. In the meantime, those who wish to utilize the EB-5 Investment Visa program – and not worry – may want to consider doing so as a Direct Investor.

If you have questions, we have answers. Contact us. We are here to help you.