BILL S.1501 INTRODUCED JUNE 3, 2015 FOR REAUTHORIZATION OF THE EB-5 REGIONAL CENTER PROGRAM
Senate Judiciary Committee Chairman Charles Grassley (R-Iowa) and Ranking Member Patrick Leahy (D-Vt.) have introduced S. 1501 (the “American Job Creation and Investment Promotion Reform Act of 2015”), which if passed, will reauthorize the EB-5 Regional Center program for another five (5) years, until September 30, 2020. It is important to understand that the bill is not actual law and therefore subject to change(s) prior to being enacted into law.
The good news right now is that the introduced bill has received bi-partisan and support at the highest levels and it is clear that both Democrats and Republicans recognize the importance of the EB-5 program to the U.S. economy and support its reauthorization.
Below is a summary of some of the keys provisions of proposed bill for the reauthorization of EB-5 Regional Center Program
1. Increase in Minimum Investment Amounts - EB-5 investors would be required to invest at least $800,000 in projects located in Targeted Employment Areas (TEAs) area, or at least $1.2 million for those located in non-TEA areas. The required minimum investment amount is currently $500,000 for projects located in TEA areas and $1milllion in non- TEA areas.
2. DHS Authority to Restrict TEA Definition - Unfortunately, the proposed does away with the authority of individual states to liberally designate census tracts as TEAs, which allow for the lower investment amount of $800,000. The Department of Homeland Security would be given the unfettered authority to determine the boundaries of TEAs based on its own interpretation.
3. Elimination of Derivatives from the Annual Quota - If spouses and children are no longer counted in the visa allocation quota, more Chinese EB-5 investors stand to benefit from the program each fiscal year and there would be no priority date retrogression issues due to per country limitations based on current visa usage figures.
4. Required Pre-Approval of Business Plans Prior to Filing I-526 Petition - Under the proposed bill, the business plan submitted with the I-924 Regional Center Applications and Amended Applications must be approved prior to the filing of EB-5 investor I-526 petitions.
5. Implementation of Premium Processing Option and Fee for Business Plans Approvals - RC business plans could be reviewed (and possibly approved) on an expedited basis for those RCs willing to pay for the service. The premium processing fee would include the opportunity for early site visits and curing deficiencies in the business plan and investment documents prior to an approval or denial.
6. Establishment of EB-5 Integrity Fund - the annual fee for each RC would be initially set at $20,000 and subject to incremental increases over time. The fund would be used to conduct audits and fraud investigations, for site visits, RC compliance with EB-5 related immigration laws and regulations, and other related uses.
7. At Least Ten Percent (10%) of Created Jobs Must be Direct - The proposed legislation states that a maximum of ninety percent (90%) of the created jobs may be counted as indirect jobs. The minimum ten percent (10%) direct job requirement appears to stem from concerns by some that indirect jobs are not real jobs that can be accounted for as is the case with direct jobs, which may be verified with W-2 forms, payroll documents, and the like.
8. Required Acceptance of Economist’s Job Creation Methodology by the Department of Commerce - this requirement is viewed as burdensome and the logic and rationale is currently unclear.
9. Thirty Percent (30%) Maximum Credit for Jobs Created by Non-Alien Investors -According to the bill, EB-5 investors may only receive credit for up to thirty percent (30%) of the jobs created as a result of investment capital invested by US citizens and lawful permanent residents. In addition, jobs created under the tenant occupancy methodology cannot be credited towards the required jobs for EB-5 investors. This provision essentially limits credit for job creation based on the percentage of an EB-5 investor’s investment in the capital stack.
10. At Least fifty percent (50%) of Jobs Must Occur in TEA locations - For EB-5 investors to receive credit for jobs created in a project, at least half of them would have to be created in TEA areas.
11. Expansion of SEC Jurisdiction Beyond U.S. – Under the bill, the purchase or sale of securities by any RC (or person associated with an RC) will be deemed to have occurred inside the US. The rationale behind expanding the reach of the SEC’s enforcement authority is to protect EB-5 investors and to ensure the integrity of the EB-5 program.
Reprinted with permission.
Peta-Gaye Ricketts, Esq. serves as Of Counsel to Mona Shah & Associates, PLLC. Peta-Gaye’s EB-5 experience encompasses preparing Regional Center (RC) applications, writing and critiquing business plans for EB-5 investment projects, and handling complex source of funds issues for foreign investors worldwide. Peta-Gaye also possesses substantial experience in employment-based and family-sponsored immigration cases.