Comment: Six Major Impacts of New EB5 Law

Table of Contents:

  1. Pooled Directs are dead
  2. Concurrent filing for Adjustments brings EB5 to USA
  3. Restrictive TEAs remove half the urban RCs
  4. Far East Agents are subject to US jurisdiction
  5. A changed EB5 landscape: 5 Year extension is historic, All projects need 10% direct jobs, $800k means a different kind of investor 
  6. Other EB5 issues: Grandfathering, Age-outs, Source of funds tweaks, Ban on foreign ownership


1) Pooled Directs are Dead: 

Congress wants everyone except individuals doing a single solo Direct EB5 just for their own business, to go through a RC. Even 2 friends both of whom manage a business will need to go through a RC. Even a solo investor relying on indirect jobs would need to go through a RC. Given that solo EB5s are less than 1% of the EB5 market, this effectively converts the EB5 program into a RC program. The golden era of pooled directs is over, and the era of pooled directs is also over.

2) Concurrent filing for Adjustments brings EB5 to USA: 

Concurrent filing of adjustment of status along with a I-526 will have a significant impact on the EB5 market. Adjustment of status will be available ONLY for those already in the US and for all countries whose EB5 numbers are current (i.e. all countries EXCEPT China and Vietnam). This has three consequences:

  • There will be a move towards adjustment of status as opposed to consular processing–making the EB5 market more USA-centric.
  • By providing EADs and advance parole–the lion’s share of benefits of having a Green Card-without a long wait to have I-526 processed– expands the countries whose nationals in the US will be using EB5 to secure green cards.
  • Market of Indians on H1B in the USA will expand to become nearly one third of the total EB5 global market, in other words the single largest source of EB5 investors in the world will be right here in good ‘ole USA.

3) Restrictive TEAs remove half the urban RCs 

With strict TEA definitions identical to the November 2019 regulation–but now built into the statute itself, more than 50% of urban RC projects will no longer qualify for TEA–and will be effectively out of the EB5 market (smaller investment differential notwithstanding, see below). Priority processing for rural RCs gives rural projects an additional advantage. USCIS is notorious for slow processing–but now that the priority processing for rural applications is in the statute itself–rural RCs will likely use litigation to ensure that USCIS allots disproportionate resources and demonstrates resulting faster processing times for rural applications. Asking for relief using declarative judgements from courts in addition to mandamus actions may be among the strategies used by rural projects to prod USCIS along. With half the RCs exiting the EB5 market, the entire EB5 ecosystem will undergo a major upheaval - this includes all the interconnections between immigration attorneys, securities counsel, business plan writers, economists and rent-a-center RCs — welcome to a new EB5 world!

4) Far East Agents are subject to US jurisdiction: 

Dramatic changes are in  the integrity measures–many of which are in securities compliance: 

  • Both SEC and USCIS are now tasked with maintaining Securities laws compliance, the agencies have overlapping jurisdiction, a result, no doubt, of Congress’s view that immigrant investors need special protections. We encourage USCIS and SEC to form an interagency task force to identify patterns of securities violations, and periodically publish their findings. This will go a long way to weed out bad actors. 
  • The new integrity measures include full disclosure of agent fees to investors. Many agents do provide valuable service and deserve significant compensation –which should be done transparently. We encourage USCIS and DOS to build such disclosures into the immigration forms themselves, and not rely on PPMs alone, which immigrant investors frequently find hard to understand.
  • ILW has long argued that foreign agents cannot operate outside US jurisdiction, and now the US Congress has stepped up to verify that this assertion is correct. East Asian agents will have a difficult time meeting the new requirements in this statute. Agents from Korea, Vietnam, Taiwan and China will need to give up many of their common practices such as lack of disclosures to investors, kickbacks, side agreements, etc - 2022 will be an interesting period for Far East agents. We encourage US consulates in the Far East to educate agents about the requirements of this new EB5 law. 

5) A changed EB5 landscape: 5 Year extension is historic, All projects need 10% direct jobs, $800k means a different kind of investor

  • 5 Year extension is historic: From 1992 to 2007, RCs were extended many years at a time. But from 2007 to 2022, there was just one period of long term extension–October 2009 to September 2015. That was the golden era of EB5 in which the entire Chinese market was developed. A 5 year extension will enable serious players to make serious long term efforts to develop new markets. We congratulate Senators Grassley and Leahy for creating a stable new environment for EB5.
  • All projects need 10% direct jobs: There is a cap of 90% for indirect jobs and a cap of 75% for construction jobs. This means that 10% of jobs must be Direct non-construction jobs. Many real estate projects will fail to meet this requirement - a whole new EB5 world is on the way.
  • $800k means a different kind of investor: It remains to be seen how much raising from $500k to $800k will impact the EB5 market. Further,if the history of the $1million non-TEA market is any guide, then the market share of $1.05million non-TEA projects will be vanishingly small.

6) Other EB5 issues: Grandfathering, Age-outs, Source of funds tweaks, Ban on foreign ownership

  • Grandfathering: Kudos to AIIA which was instrumental in championing the "Grandfathering" provision that protects past and future EB5 investors from future lapses in RC program.
  • Age-outs: The new age out provisions are more liberal than the CSPA used for other kinds of immigration. We hope similar liberalization of aging children will be enacted in the future for all family and employment based categories.
  • Source of funds tweaks: Source of Funds now includes admin fees and other investment related expenses.
  • Ban on foreign ownership: There is a ban on foreign and foreign government ownership of RCs.
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