With the EB-5 regional center program pending expiration on Sept. 30, Congressional lawmakers are pushing for changes that could redirect investments to poor and rural communities, and increase the minimum investment amounts required of foreign nationals seeking an immigrant visa.
Developers in Greater Orlando counting on the program for project financing should get their ducks in a row between now and Sept. 15, EB-5 advisors tell GrowthSpotter, to ensure applications are made by Sept. 30 and potentially grandfather projects and investors under the current rules.
Developers who have lined up foreign investors for their project should have that investor-applicant ready, with their immigration attorney, to file an initial I-526 petition by Sept. 15, which proves the foreigner is in the process of investing $500,000 or $1 million in a USCIS-approved real estate project.
EB-5 advisors don't know if I-526 petitions filed before Sept. 30 will grandfather those investors in under the current $500,000 minimum, among other current rules. But it can't hurt, and could offer real advantages if the program standards become stricter, said Marty Cummins Jr., president of Florida EB-5 Investments, one of 28 firms in the state certified to raise EB-5 funds for public and private development projects.
"There are a lot of moving parts here, and none of us know what the answer is yet," Cummins said. "I'm advising clients to be ready to file something by Sept. 15, whatever we are finally told is acceptable."
Developers should also have ready by mid-September any amendments to their I-924 application, which is what they or their regional center advisor files to get USCIS pre-approval for a new project.
"If (a developer) wants to let future investors be grandfathered in at the $500,000 level, it's the opinion of the EB-5 industry that the only way we can protect that is by filing the formal I-924 and exemplar I-526 petition before the end of September," said Edward Beshara, managing partner at Orlando-based Beshara Professional Association, whose team of immigration attorneys represent clients setting up new regional centers.
The I-924 includes documentation that shows a project is "shovel ready," with proof of financing, local permits, and plans for how the regional center will market the project to foreign investors. There's a $6,200 filing fee for the I-924 application, and it can take six months or more for the USCIS to judge I-924 applications for regional center designation.
EB-5 advisors around the country expect to hear by mid-September on what steps new applicants must take to be grandfathered in with the current regional center rules.
Three key issues that will affect EB-5 foreign investors, project developers and regional centers are:
-- Current minimum investment amounts are $500,000 for a commercial enterprise in a Targeted Employment Area (TEA) and $1 million for a non-TEA. Those are expected by most EB-5 advisors to increase, to a proposed $800,000 and $1.2 million. However, those increases aren't expected to deter wealthy foreign investors.
-- Targeted Employment Areas (TEAs) could be more restricted. Under current law, TEAs are determined at the state or local level by using various data. Proposed changes by lawmakers would require TEAs to be calculated using a single national census tract on unemployment rates. Some cities like Orlando with low unemployment rates could lose a competitive edge in EB-5 investments if they lose the ability to designate TEA zones.
-- Job credits may be reduced, but Cummins said this will be balanced out by increased investment amounts, which would result in higher job credits.
For developers considering EB-5 foreign loans to help finance their projects' construction, if they haven't started working with a regional center already to organize their documents it's too late, Cummins said.
"I don't think there's any way on Earth someone can get all their documents done in what is now 40 days or less for a developer who is just starting the process now," he said. "It takes a good 60 days to get these initial documents done from a standing start."
However, Beshara said his developer clients are currently putting together compliant and marketable projects for I-924 exemplar preapproval. The EB-5 Direct Investment program can't grandfather EB-5 projects because there's no I-924 pre-approval application, so if new regulations raise the EB-5 investment requirements, then investors in the direct EB-5 projects will be affected, he said.
The EB-5 Direct Investment program faces no risk of ending in September. That's where a foreign national chooses to invest $500,000 or $1 million in a new U.S. business they're directly involved in managing.
What's at risk by Sept. 30 is the EB-5 Regional Center designation, where a newly-formed enterprise pools one or more foreign investors to create a loan that is invested in a job-creating entity, often a real estate development project. In this, the foreign investor doesn't have to actively manage the business they're vested in.
Chances are good the EB-5 regional center program will be extended for anywhere from a few months to a year or more by Sept. 30, Beshara said.
Senate Bill 1501 and a bill to be introduced in the House of Representatives will present different changes to the EB-5 regional center program, and likely require months of revision to ensure one bill can earn unanimous approval from both sides of Congress.
A key point in the future House bill will be the issue of effective dates and grandfathering for both projects and investors. Senate Bill 1501 grandfathers projects based on their filing of exemplar petitions, which would allow future investors to invest in a grandfathered project at the current investment amount ($500,000 or $1 million).