FAQ for potential regulatory changes and visa bulletin updates

Nothing is changing at the moment. The EB-5 modernization regulation is still pending review at OMB, the Visa Bulletin is still current for India and moving forward for China and India, IPO remains silent, and there are no hints of EB-5 legislation.

But for the sake of being prepared, this post considers “what if” questions related to possible forthcoming changes.

To start with the Visa Bulletin, here are the most recent predictions I’ve heard (from the February 2019 Visa Bulletin and Charles Oppenheim’s presentation at IIUSA in October 2018):

• China: Final action date was expected to move about one week per month between January and May 2019. When the new fiscal year starts in October 2019, the final action date is expected to be October 22, 2014 (best case) or October 8, 2014 (worst case)
• Vietnam: Final action date was expected to move about three weeks per month between January and May 2019, and progress at least to September 2016 this fiscal year.
• India: Will get a final action date when visas available to India for the year have been used up, likely “no later than July 2019.” The final action date will initially be the same as for China, to effectively stop visa issuance to India-born for the fiscal year. When FY2020 starts in October 2019, the final action date for India will move forward enough to release enough Indian applicants to claim the new year’s visas. The final action date will likely be in 2017 at that time.

IIUSA recently announced that Charles Oppenheim of Department of State will speak at the Advocacy Conference on May 6. We look forward to hearing his updated projections.

Regarding regulations, the final rule for the EB-5 Modernization Regulation RIN: 1615-AC07 could be published as early as tomorrow or as late as never, and take effect 30 or so days after publication. We don’t yet know the content of the final rule, but there’s a fair chance that it will be similar to the proposed rule (NPRM) from January 2017 (full text here). If the regulation gets finalized with content that mirrors the NPRM, then here are some issues and considerations to keep in mind.

Investment Amount and TEA Changes:

• Proposed change: The minimum EB-5 investment will increase significantly for TEA and non-TEA investments (the NPRM proposed $1.8M and $1.35M). The incentive to invest in a TEA will likely be reduced (the NPRM proposed 25% discount instead of 50% discount from the standard investment amount). Many fewer urban areas will qualify as TEAs, due to limits on TEAs that combine census tracts. USCIS, rather than states, will become responsible for TEA designation.
• Effect: The NPRM says that “unless otherwise specified,” the investment amount and TEA changes will apply to “EB-5 immigrant petitions filed on or after [INSERT EFFECTIVE DATE OF FINAL RULE.]” i.e. changes will apply to all I-526 filed after the rule becomes effective. The NPRM mentions no exceptions, not even for capital raises in progress, or for projects that have filed or approved I-924 exemplars or other approved I-526. On the other hand, the NPRM specifically applies the investment amount and TEA changes to new I-526 filings – i.e., not to people at other stages in the process (not to I-526 pending, I-526 approved and waiting for a visa, conditional permanent residence, or I-829)
• Practical consequences: Considering the chance that we might need to deal soon with a Final Rule that looks like the NPRM,
  • Prospective investors: If I were planning an EB-5 investment, I’d make every effort to get I-526 filed soon under the current lower investment threshold. In vetting potential projects, I’d consider how much EB-5 money the project still needs to raise (the larger the EB-5 raise, the more exposure to risk from rules changing for future investors).
  • People past I-526 filing: I’d congratulate myself on being already in the system, so the investment amount and TEA changes do not affect my eligibility. If my project still hasn’t completed its EB-5 raise, I’d consider its ability to adapt to the changes for incoming investors. (If the project can still attract the investment, past investors will benefit from changes that mean fewer investors to claim the available job creation.)
  • Project companies and regional centers: If I were promoting an EB-5 investment, I’d try to complete the raise asap, before new rules constrict the market. Meanwhile, I’d strategize about what can work under the new rules. It seems likely that a dramatic investment amount increase, combined with reduced and restricted TEA incentive, will create an environment that privileges high-end projects with attractive ROI.  Some people can afford to write off $500,000, but an investor committing $1-$2 million of equity will likely care about it as an investment, not just an immigration opportunity.  The ideal project will offer security, a solid return, and be located in a distressed or rural area. Since economic reality makes such opportunities very rare, security and profitability will probably carry the day. Sadly, the NPRM proposed to make TEA status both more difficult to obtain and less valuable – not a recipe for competitive advantage for distressed and rural areas. But for what the revised TEA incentive is worth, it’s possible check whether a given project would qualify. The revised TEA designation rules in the NPRM are basically the same as the current rules, except when it comes to making a TEA from census tracts. Look at a mapping tool that shows unemployment rates by census tract (this one for example). A project can qualify under new rules if the census tract where it’s located (combined, if needed, in a weighted average with one or more of the immediately contiguous census tracts) has high unemployment. The difference from current practice is that a special TEA as defined in the NPRM can only include census tracts that touch the tract where the project is located, not larger and more extended groupings.

Priority Date Retention Change:

• Proposed change: An EB–5 immigrant petitioner may to use the priority date of an approved EB–5 immigrant petition for any subsequently filed EB–5 immigrant petition. This provision would provide some protection from material change, allowing the investor to keep her priority date even if changed circumstances require filing a new I-526 petition.
• Effect: The NPRM proposed that priority date retention would specifically apply to anyone in the stage between I-526 approval and conditional green card. The NPRM does not offer the protection to people with pending I-526, people whose I-526 was denied or revoked, or people who already have conditional permanent residence.
• Practical consequences:
  • Prospective investors: This change is promising – an additional future protection that’s particularly important to anyone from oversubscribed countries (China, Vietnam, India) who faces a long wait between I-526 approval and green card.
  • People with pending I-526: The change is no help yet, but a nice promise for the future
  • People with approved I-526 and still waiting for a green card: The priority date retention could be a game-changer. It means that so far as USCIS is concerned, you’re free and welcome to withdraw from one project and invest or reinvest in another. At this stage you’d still have to file a new I-526 for changed circumstances (and deal with the rules that apply to new I-526 filings), but could keep the original I-526 priority date, and original place in the visa wait line. Priority date retention removes some of the sting from material change, and opens the door for investor-lead redeployment.  USCIS can’t force terminated regional centers or under-performing projects give investor money back. But at least the regulation removes barriers on the immigration side to change and voluntary reinvestment.
  • People with conditional permanent residence: The priority date retention does not apply to them, in the NPRM. However, note that EB-5 policy already allows significant leeway for change during the CPR period without need to refile I-526.
  • Project companies and regional centers: For underperforming projects, priority date retention could lead to a rush of investors pushing to withdraw so that they can reinvest somewhere else. For attractive projects, priority date retention could open a new market: people with approved I-526 who need a new investment after the original one didn’t satisfy. Priority date protection could effectively create a secondary market in EB-5 investment, and entirely change the redeployment issue by giving investors power to reinvest their own funds. But there’s an important limiting factor: priority date is all that investors could retain from the original I-526 filing. The NPRM does not offer to let people reinvest under the same rules for minimum investment and TEAs that applied to the original I-526 filing. People who could invest $500,000 in Project A last year may be practically unable to invest $1.35 million in Project B this year, even if USCIS allows and facilitates withdrawing from Project A and reinvesting in Project B. But still, priority date protection could have significant implications for the EB-5 landscape.

I-829 Changes:

• So far as I can tell, the proposed I-829 changes are an unmixed good. The NPRM would make people more free to grow up, marry, divorce, and die, knowing that family members will still be able to file I-829 to remove conditions. CPR status would be automatically extended between I-829 receipt and adjudication, blunting the pain of long processing times. Interviews would be conducted within reason as to time, place, and content.

And now the waiting game, to see whether EB-5 regulations ever get finalized, and if so which provisions get included in the final rule. Congress, if only you would act instead, and provide the modernization that EB-5 really needs to protect integrity and incentivize economic development!

UPDATE: Frieldland & Calderon have published an article that explains the process behind the regulations and why they don’t believe that the EB-5 regs will ever be finalized. They also reiterate why EB-5 needs Congress to act, though Congressional action is also unlikely.  “EB-5 Reform on the Horizon – If the Palm House Hotel Debacle Does Not Precipitate Congressional Action, What Will?” (March 22, 2019)