Around 10,000 immigrants per year are eligible for the program, and there has been a waiting list during many years. This program was never made permanent and is now set to expire on June 30, 2021, unless it is given another extension. It has been extended over and over for the last several years, but it may finally be reaching the end of the line.
What EB-5 does and why it's in jeopardy
EB-5 funding has been part of the money raised for massive projects like the Hudson Yards development in New York City. In fact, it's projects like that one that have made EB-5 so controversial. Like opportunity zones, the EB-5 program has faced criticism for not doing what it was designed to do -- namely, creating jobs in areas where more employment is needed.
Proponents of the program such as Marina Shepelsky, CEO & Founder of Shepelsky Law Group and an immigration attorney based in New York and New Jersey, point out the good that the billions of dollars brought to the U.S. have created. "A lot of Regional Center investments end up in hotel chains, restaurants, delis, and smaller businesses, and the EB-5 program is credited with growing the Las Vegas economy and even helping the building of major roads and turnpikes in the U.S. with local municipalities entering into contracts with EB-5 regional centers to raise funds to develop infrastructure in certain areas," she said.
The EB-5 Regional Center program was originally part of the overall budget bill, but it was moved out of that bill in 2020. It's only the regional center program that's expiring; the direct program will still be operational, but the regional center program managed the bulk of the projects. Now for the program to continue, Congress must approve its extension through the creation and passage of a separate law. If it expires it can be reinstated, but any applications that come in during the lapsed period may not be honored. As Aaron Grau of Invest in the USA, the trade program for the EB-5 program, pointed out in a recent article, EB-5 has already been extended 19 times.
The program is expiring at a time when large-scale foreign investment in the U.S. has slowed a bit due to the pandemic, and before that, because China had begun encouraging its deep-pocketed citizens to spend their funds closer to home. However, it's expected that with the easing of travel restrictions around the world, foreign investment may begin to increase.
The move to reform EB-5
In March 2021, Senators Chuck Grassley and Patrick Leahy announced the EB-5 Reform and Integrity Act of 2021. Representatives Greg Stanton and Brian Fitzpatrick sponsored a similar bill in the House of Representatives. The reform bills call for greater communication with the Department of Homeland Security (DHS), including annual reporting. They would also give the DHS and U.S. Citizenship and Immigration Services greater authority to block individuals from participating.
There would also need to be a process of approval for each investment offering and disclosures of conflict of interest. It would also ban people who had committed fraud in the past decade from participation in these types of plans. Foreign government officials would not be allowed to participate. The creation of an EB-5 Integrity Fund would support the program's enforcement activities.
Although the bills are bipartisan, they have faced criticism from all sides and so far no additional action has been taken to push them through ahead of the looming deadline. Despite this, many supporters of the EB-5 program are cautiously optimistic.
"I believe the EB-5 Regional Center program will be renewed as it brings so much funding and foreign capital and has stimulated the growth of many states and municipalities, from roads and infrastructure to business growth and major job creation in the regional center areas," said Shepelsky. "Although the investments come from abroad, American citizens are the ones who benefit from the availability of new jobs."
One piece of potential good news is that a federal judge has ruled against new rules created by the DHS in 2019 that raised the minimum investment for EB-5 projects to $900,000 from $500,000. This ruling will likely encourage more interest in the program. However, with Congress leaving for the July 4 break and currently unable to reach terms on how to extend EB-5, it's likely that it may expire, at least temporarily.