EB-5 Program Expires, Throwing Industry Into Uncertainty

The EB-5 regional center program, which has existed almost continuously for about 30 years, has been plunged into high uncertainty as the deadline for its renewal — the end of June — has passed, with the prospect of movement on its revival at least two weeks away.

"The uncertainty is really the most worrisome thing," Invest in the USA Executive Director Aaron Grau said. "As to what's going to happen next, I don't know. No one does. It's worth pointing out that in the past, the program has lapsed only because it was tied to the appropriation bill whose later passage was almost certainly assured. This time around, that isn't the case." 

In other words, Grau said, EB-5 is entering uncharted territory. 

"It's very much a different animal than the lapses that we'd experienced before," he said. "And so there's a lot of worry among investors about what happens to their place in line or in seeking their green card application."

After a measure to renew the program didn't advance in the Senate in late June, Grau called the outcome disappointing but said it wasn't the end of the line since identical reauthorization bills are pending in both chambers of Congress. He said that his organization, which is the trade association for EB-5 regional centers, would continue its efforts to revive the program, pointing out its economic benefits.

The expiration of regional centers, which facilitate the award of permanent residency status in the United States — known as an "EB-5 visa" in federal jargon — to overseas investors who meet specific criteria, and which has been a source of capital for real estate development, is the latest chapter in the program's bumpy history.

EB-5 has long been a bone of contention between those who want to see it reformed and those who don't. It has expired before, though only for short periods, and has periodically been marred by scandal, as some investors have been cheated out of their money. 

The EB-5 program has had a notable impact on the U.S. economy and has been a stream of capital for real estate projects. About $11B in capital investment was made through EB-5 regional centers in federal fiscal years 2014 and 2015, with $7B of that going to the construction sector, according to a 2019 report studying the impact of the program.

There is also worry among regional centers that may have already invested money provided by applicants but may be asked to return that money, Grau said, adding that might be the grist of lawsuits, especially if Congress doesn't act in the near future.

The industry is feeling uncertainty but not pessimism about renewal just yet, EB5 Capital CEO Angelique Brunner said.

"I'm cautiously optimistic about the program being renewed," Brunner said. "We hope that enough attention will be available in Congress to work diligently to get it back on track. And we hope [United States Citizenship and Immigration Services] will hold all the applications the way they've done in the past."

EB5 Capital owns and operates USCIS-authorized regional centers that serve 14 states. Since its founding in 2008, when there were only a handful of regional centers nationwide, the company has completed or is operating about 30 EB-5 projects.

Late Wednesday, USCIS issued guidance for the impending lapse in the regional center program. Among other things, the agency said that the lapse doesn't affect EB-5 petitions filed by investors who aren't seeking a visa under the regional center program.

Starting on July 1, USCIS will no longer designate new regional centers and it won't process visa applications from investors whose projects are associated with regional centers. Other form processing will stop for now as well.

"If you were issued written correspondence regarding your petition or application on or before June 30, 2021, you should review the written correspondence and respond," the agency said. "Although we cannot review your response at this time, we will receive and maintain the response for review if circumstances change."

There is only a narrow window for the program's renewal this summer. The earliest that EB-5 can be taken up again is when the Senate comes back from its Independence Day holiday recess, which will be July 12. After returning for four weeks, the Senate will then take its August recess, scheduled to begin Aug.  6. The House of Representatives will be in session for only nine days between July 5 and Sept. 19.

Complicating matters further is the fact that late in June, a federal district judge struck down EB-5 regulations issued in 2019 because they were enacted by Department of Homeland Security officials appointed to their positions in violation of the 1998 Federal Vacancies Reform Act, thus they had no authority to promulgate new regulations. 

As a practical matter, that means that if the program is restored, the minimum investment amount in a Targeted Employment Area is once again $500K rather than the $900K under the now-discarded rules.

The renewal bill is in the form of the EB-5 Reform and Integrity Act of 2021, which was introduced in March by Sen. Chuck Grassley, a Republican from Iowa. An identical bill was introduced in the House. 

Besides renewing the regional center program for five years, the bill imposes various oversight measures, such as requiring each center to notify the DHS of any changes to the center's structure, maintaining certain records and making them available to DHS, and obtaining approval for each investment offering.

These reforms might have been the sticking point in the Senate, at least for Sen. Lindsey Graham, a Republican from South Carolina who blocked an attempt to pass the bill by unanimous consent. Graham's office didn't respond to a query about the matter.

Grassley and Sen. Patrick Leahy, a Vermont Democrat, backed the extension package as two of the Senate's most senior members. Grassley, the ranking member of the Senate Judiciary Committee, characterized the move to block the bill as one by a "small group of wealthy and unscrupulous real estate developers who blindly oppose any efforts to improve accountability and transparency in the EB-5 visa program."

“A narrow subset of big-moneyed and corrupt interests has now shown that they would rather kill the program altogether than have to accept integrity reforms designed to clamp down on their bad behavior,” Grassley said on the Senate floor.

Grassley's communications director, Taylor Foy, told Bisnow that the bill Grassley and Leahy drafted has the support of the EB-5 industry. 

"The bill is probably the greatest chance of reauthorizing the program and addressing some of the concerns about it," Foy said. "Lawmakers looking to reform the program are at a point where if we don't reform it, then there's no point in continuing, because we've seen the status quo continue for so long. It's time to actually fix the program's problems."