Comment: TEA Differential

In their paper, EB-5 Reform on the Horizon by Gary Friedland and Jeanne Calderon , the professors present a table on Summary Comparison: Minimum Investment Amount and TEA Spread. We congratulate the authors for drawing our attention and that of the EB5 industry to the pattern of how the various proposals for investment amounts for TEA and non-TEA have varied with time and across various proposals.

Please find a version of their original table with a row added for the "non-TEA Premium %" added.

Table: Summary Comparison: Minimum Investment Amount and TEA Spread with "non-TEA Premium %" added

Existing

Statute

(Unchanged

since

enactment in

1990)

S.1501 (introduced June 2015); H.R. 5992 (introduced Sept. 2016)

March 2017 Staff drafts of S.1501 and H.R. 5992

Proposed USCIS Regulations January 13, 2017

Senator Cornyn Draft Bill April 2017

Senators Grassley and Cornyn March 2018 Draft Bill

Non-TEA (standard)

1,000,000

1,200,000

1,000,000

1,800,000

925,000

1,025,000

TEA

500,000

800,000

800,000

1,350,000

800,000

925,000

TEA Discount

500,000

400,000

200,000

450,000

125,000

100,000

non-TEA Premium %

100%

50%

25%

33%

16%

11%

The crucial point is that the percentage differential between TEA and non-TEA investments shapes the distribution of investment within the EB5 market. At current investment levels of $500K and $1Million, the percentage differential is 100%. All the proposals involve dramatic reduction of the non-TEA premium from the current 100% to as little as 11%.

We await the publication of the new EB5 regulation. While the amount of TEA amount is important, so is the non-TEA premium percentage which will shape the distribution of EB5 investments between wealthy urban areas on the one hand, and distressed urban and rural areas on the other--especially when the designation of TEAs is centralized.

Let us know your thoughts by writing to us at editor@ilw.com.

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