EB-5 TEA Investment Likely to Leap from $500K to $1.35M in early 2018
The U.S. Office of Management and Budget (OMB), the agency responsible for administering regulatory changes in the federal government, has updated its projected timeline for new EB-5 regulations from April 2018 to February 2018. While I mentioned this already to readers, a lot more discussion has been going on online and I am writing this update to prepare you for what MAY be happening (with the caveat that, as always, we can never be certain of the specifics until the final regulations are published.)
To give you a little background, it is important to explain that for the last few years, there have been two camps on the issue of EB-5 reform: on the one hand, Big EB-5 with its massive lobbying budget, would like nothing more to continue calling Manhattan high-rises “targeted employment areas” to avoid competing with TRUE TEAs in urban and rural locations (like our own American Venture Solutions EB-5 projects.) On the other hand, outraged congressional leaders who have witnessed the utter perversion of what Congress intended when it created the EB-5 category have demanded an end to the TEA falsification, to flagrant violation of U.S. securities laws via the use of paid foreign agents, and to funneling of EB-5 investor funds to the most affluent and over-employed parts of the country. (As the General Accounting Office’s audit last year proved, the bulk of EB-5 dollars which make it to the U.S. go to the country’s richest neighborhoods with the lowest unemployment rates.)
Over time, the two sides have bitterly squabbled for and against reform and, time and again, Big EB-5 has succeeded in kicking the can down the road yet, pushing for short term extensions with no limitation on their abuse of the rules. At long last, a semi-truce was reached wherein the EB-5 industry acknowledged the problems they had long denied and agreed to a series of reforms. The question remaining has been: “Will these reforms happen via Congressional legislation (which Big EB-5 is well capitalized to powerfully influence) or via regulatory reform (which is, in large part, not subject to lobbying abuses.)” By pushing up the date for regulatory reform, the OMB has made it clear: reform is imminent, and it WILL be via regulatory change.
The final language of the proposed rule is 31 pages long and it contains a lot of stuff, but here are the key points prospective and current EB-5 investors need to know:
- Portability provisions. This means that investors who are stuck in failed or dead-end EB-5 projects can LEAVE the bad project and find a solid new one without losing their existing priority date. For now, this could be a huge boost to Chinese investors facing a long backlog and an “iffy” EB-5 project.
- Investment amounts are projected to increase dramatically from $500,000 to $1.35 Million for TRUE TEA projects (i.e., those in actual high-unemployment/disadvantaged areas) and from the current (and totally ignored by the entire industry) Non-TEA figure of $1M to $1.8M.
- Deciding what is and what is not a “TEA” has until now been in the hands of individual states. Since states ALWAYS want to attract foreign investment, you can see how so many of the huge EB-5 projects in wealthy parts of the country have been able to get approved as TEA projects by eager state officials. No more. The new rule will firmly remove the TEA determination process from the hands of state officials (and the well-oiled lobbyists of megaprojects) and put it in the hands of the USCIS.
According to my good friend Sam Udani at www.ilw.com, when the new EB5 regulation is published in February, there will be some sort of 60-day grace period during which the new rule will NOT go into effect. I’m not clear on this but if Sam reported it, you can bet on it. My take-away from all this:
If you want to immigrate to the U.S. for $500K and not for $1.35M, it’s time to move NOW! Before all of this, we at AVS Vietnam were already expecting an extremely busy January before the Tet Holiday. If Sam is right and that 60 day “pause” is implemented, things are going to get crazy… so please contact our office ASAP if you intend to invest before the Tet!
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