No-change February
March 1, 2018 15 Comments
My Washington Updates page started the month of February full of anticipation.
I thought we’d see final action for EB-5 regulations, because the Fall 2017 Unified Agenda said we would (having advanced the anticipated action date from April to February), Congressmen who might’ve been behind alternative legislative action (Grassley, Goodlatte) instead sent a letter in April 2017 urging DHS to finalize the regulations, USCIS Director Cissna committed in his confirmation hearings in May 2017 to finalize the regulations, and the few White House statements on EB-5 sounded warm to the proposed changes. So I was willing to bet that the February Final Action date would be met. But nothing happened in February, and now I wonder whether we’ll ever see action on these regulations. I’ll keep my eye out for an update in the Spring 2018 Unified Agenda just in case, but now that the initial impetus for action was quelled, I don’t know what’s left to counteract the overwhelming power of administrative inertia. The person responsible for drafting the regulations has left IPO (and Lori Mackenzie’s Policy Chief position was still vacant as of November 2017), the EB-5 industry has many problems with the regs as proposed, DHS would surely prefer to avoid policy-revising headaches associated implementing new regs, Chairmen Grassley and Goodlatte have bigger fish to fry, and who has incentive and energy left to push EB-5 program modernization? The proposed regulations could’ve had a devastating effect on my client base, particularly for direct EB-5, so I’m selfishly glad they weren’t finalized. But the process is still frustrating.
I also started February with hope that Congress might manage immigration legislation, and that EB-5 could benefit from the expressed intent to redistribute some visa numbers in a way that privileges immigration by economically-successful people. But now here we are in March with no immigration legislation and no indication that there will ever be any. The last word I heard is that Congress may handle DACA – the primary impetus for new legislation — with its favorite cop-out: a short term extension attached to the next omnibus funding bill. Negotiations over immigration legislation apparently failed because Democrats really wanted DACA while Republicans didn’t want a border wall or to redefine the nuclear family as much as they wanted Democrats to fail with DACA. Now I see no prospect on the horizon for the two things EB-5 needs from legislation: more visa numbers to relieve the backlog and keep up with on-going demand, and a long-term extension of the regional center program. Would public relations allow Congress to achieve a long-term extension to the little-considered EB-5 regional center program benefiting wealthy foreigners if they simultaneously manage only a short-term extension for the high-profile DACA program benefiting US-raised kids? With DACA and border security having failed to sustain bipartisan immigration negotiations, what remains to bring people back to the table for a successful negotiation involving visa numbers? How likely is it that Grassley & co. will stop demanding genuine TEA reform as a condition for stabilizing the RC program, or that industry lobbyists will suddenly agree to make painful-to-their-backers TEA concessions? Who is there even to seriously advocate for the overall health and long-term stability of the EB-5 program, when most major users just need it a few more months unchanged to finish their own capital raises?
I’m just sitting in my armchair in Utah reading the news, not on the ground in Washington D.C., but at any rate it’s tough to theorize change at this point. Here’s what I currently expect for 2018/2019: several more last-minute months-long content-free extensions to the regional center program, no visa backlog relief, and no change to the EB-5 investment amount or TEA definitions or other targets for EB-5 reform. But I’ll keep updating my Washington Updates page as I hear anything, and maybe I’ll be surprised by action.
EB-5 Updates 
In terms of self-interest, Chinese investors would much prefer a series of short extensions with no reform, than a so-called long term extension with “visa set asides”, which may cause the waitlist to jump to 20+ years. Everyone wants long-term extension, but “set-aside” visas for future investors while forgetting about past investors is fundamentally immoral, and it really doesn’t help anyone but make EB-5 reputation really, really bad.
I agree with you about set-aside visas, which I think is ineffective as TEA reform besides being faithless to past investors.
Would you mind explaining what a set-aside means and the implications? (I am a novice investor.)
Thank you for the post. I happen to work with Chinese investors and I have to tell how disappointed they were when the final regulation wasn’t able to publish at Midnight of that day.
The reality is, lack of EB-5 reform has killed (not killing) the China market, at least to honest people like you and me. It’s no surprise that Chinese investors are still signing up because they are being told they only need to wait for 5 years.
According to IIUSA research, non-Chinese investors submitted 2,325 I-526 in 2016. IIUSA assumed 77% I-526 approval rate for non-Chinese petitions. So the number of successful I-526 petitions of non-Chinese investors was about 1,800. If one submission has three family members, with a 90% successful visa approval rate, there would be roughly 5,000 visas taken by non-Chinese investors who submitted their I-526 in 2016 and will likely to receive their visa in 2018/2019. The IIUSA research is an estimate, but it is consistent to what I heard from the industry.
The total available number of EB-5 visa is 10,000 a year (it could be a little less due to the Chinese Student Act, but let’s assume it’s 10,000.). This means that each year Chinese investors can claim only 5,000 visa. Because other immigration program is becoming more restrictive, it is possible that demand for EB-5 visa from non-Chinese countries will grow over 5,000 per year. However, for simplicity, let’s assume it’s 5,000 unchanged.
In the pipeline, there are roughly 44,000 I-526 petitions since the visa cut-off date (July 2014) for Chinese investors. Let’s assume 85% of them are Chinese. So the number of Chinese petitions in the waiting line is about 37,000. Assuming a 75% successful rate and 3 person per petition (85% I-526 approval and 90% visa approval rate), there are about 84,000 Chinese investors in the line who will claim their visa.
Because the annual absorption is 5,000 for Chinese investors, an 84,000 backlog will need 16.8 years to process.
Based on my experience, majority of Chinese investors can’t handle such a long wait time, because their children will age out. The primary objective of Chinese investors is to send their kids to the United States so their kids can receive better education and have a better life. Now, the most important investment goal becomes questionable. Their investment is facing a complete failure.
From the Chinese investors’ perspective, the 30% set-aside is a no-go from the start. If it happened, annual available visa left to the existing backlog would be reduced to only 2,000 visa. Based on our analysis above, it would take 42 years for clean up the backlog.
On the other hand, the “set-aside” line would become so crowded that it would be much slower than the regular line. Within the first 12-24 months, almost all the first 10 years’ set-aside visa would be taken by Chinese investors. So, market reality would defect genuine policy purpose.
I am still hopeful, that the regulation would come out soon. Indeed, everybody has expected a reform for three years and it makes a lot of sense to the public and industry’s long-term interest. The Chinese investors are likely to become a member of our country. They deserve our honesty and respect. It’s true that the price increase would lower demand. However, much of the backlog is because we failed to increase price over the last three years. Price increase is badly needed to manage the backlog.
Nice detailed post. But any price increase can moderate only the future demand, and will have no effect on the existing waiting list. Thus the already-horrible situation is bound to continue the same way. I hope no US politician takes it upon himself to clear the backlog by a retrospective application of rule changes. That would be worst outcome for Chinese and non-Chinese investors alike.
Actually price increase would make a huge impact to Chinese investors in the existing waiting list. A price increase from 500K to 1MM is likely to reduce the number of non-Chinese investors from 5,000 to 2,000 a year. Thus, leave 3,000 more visa to the existing investors each year. Time to process backlog may decrease from 16.8 years to 10.5 years. A 60% improvement! I believe over 75% of them will no longer have an age-out issue once price is increased to 1MM.
I am waiting to hear from NVC about my interview date. Will any potential changes from the final action date affect me ? Obv got an approved I-526 petition and NVC has acknowledged all my docs
The TEA and investment amount changes in the proposed regs would only affect I-526 filed after a future effective date, not yours. You’d benefit from the priority date protection and I-829 process improvements in the proposed regs.
Hi Suzanne – my priority day is February 6, 2018. My RC project had been approved before I filed my I-526 petition so obviously I’m in Queue 3 waiting for I-526 to be approved. Will the TEA and investment amount changes affect me retroactively?
The investment amount and TEA changes would not change your required investment amount for sure under new regulations. New legislation could be retroactive, but that’s unlikely. If you’re from China, the changes will reduce your visa wait if they discourage new petitioners from outside China.
“I’ve just seen some draft EB-5 legislation that’s so shameless I believe it might get passed, if quietly tucked into the omnibus spending bill.” — Can you elaborate on this? Is the Congress gonna terminate the Regional Center Program? Thanks!
Not terminate, but changes to the program.
I added the basic outline of the so-called EB-5 reform bill to my comp chart. (https://docs.google.com/document/d/1G8vSMk7U2us74Tj_JuUBYgFcEJsCC-S7l_yqqVXQ7jY/edit) The bill doesn’t propose to terminate the program, only to change it in a way that benefits the few at the expense of harming many.
Suzanne,
Thanks for the comparative chart. These questions are about the 3/2018 bill.
A. In the existing queue of I-526 petitions, some people may choose to move to the new “set-aside” queues by paying an additional 400k (but I heard that not many of the existing projects may qualify for the “set-aside”), but most may not be able to move. That means that the waiting times for people in the general queue would get even longer. This would make the wait particularly longer for the waiting Chinese investors, but also for the non-Chinese ones. Is this interpretation correct?
B. Will the I-526 petitions filed before 3/23/2018 be grandfathered with exactly the same old requirements ($500k, 10 jobs, etc.)?
Thank you again your excellent work in demystifying this jungle.
Suzanne, Thanks again for the scoop on the draft John Cornyn EB-5 Reform Act. I went through it. What does a 4 month moratorium on filing of new I-526s from date of enactment mean? Secondly, does 9940 visas (including 3100 set-asides) mean 9940 primary applicant visas? Wouldn’t that increase the per year quota from current 3500 odd primary applicant visas?