EB-5 Reform, Immigration Reform

Today, IIUSA and others published a letter to the Senate and House Judiciary Committees laying out “consensus reform concepts” recommended for new EB-5 legislation. I’m heartened to see effort toward reform and reauthorization, and saddened by the letter’s content. Ideally, a consensus will appear to balance the interests of a variety of groups. I don’t see that here. Two recommendations particularly deserve input from a broader base of stakeholders:

  • Recommended investment amounts. The letter proposes $800,000 minimum for investment in a TEA, and $900,000 for investment outside a TEA – replacing the current 50% discount with a 12% discount. Competitive advantage requires that a feature be both rare and valuable. The letter offers a concession that TEAs can be more strictly defined so as to make them more rare than now, but then redefines the incentive to make TEA designation less valuable. The net result is clear for projects located in genuinely distressed areas that struggle to complete against prosperous urban areas. (I don’t see expedited processing being an effective additional incentive, considering USCIS’s likely inability to deliver such benefit, or visa set asides for reasons discussed below.) The recommended investment amounts don’t look like an attempt to compromise with interests outside big cities, and also don’t look like a compromise with reform advocates. How likely is Congress to accept a proposal that not only hardly increases but would actually lower the standard EB-5 investment amount set back in 1990? The recommended investment amounts have the advantage that they’re feasible and wouldn’t destroy the market, but are too-obviously the status quo.  Where’s the attempt to sell the recommendations to people who want to be seen voting for modernization and reform?
  • Recommended visa set-asides. This is framed as an additional TEA incentive, but I am doubtful. The letter recommends setting aside 30% of visas annually for TEA investments, with the set-asides applying immediately to new I-526 filed after enactment, and not allowed to apply to petitions pending on the date of enactment. I foresee that this will act as a TEA incentive only for a short time, until the set-aside categories build up backlogs of their own. However, set-asides would allow raising new capital by taking visas from backlogged investors and offering them to new investors. The tens of thousands of people already in line for a visa would see the pool of visas available to them reduced by 30%, for the sake of having 30% of visas set aside in a special category only open to future investors. Thanks to the additional action of per-country caps, the set-asides could theoretically reduce visas available to past investors from India and Vietnam to zero (if promoters exploit the opportunity to offer all 700 annual visas available to India/Vietnam to new investors under the set-asides).  I want the EB-5 program to remain viable as much as anyone, but I don’t see how this visa set-aside proposal can possibly be an honorable option, considering the size and nature of the EB-5 backlog. To be fair, the letter also recommends visa relief. It suggests eliminating derivatives from the visa allocation, and suggests giving pending applicants the opportunity to pay $50,000 each to “re-set the program,” whatever that may mean. But since Congress has entertained the visa set-aside idea in recent years, and hasn’t expressed remote willingness to increase visa numbers in any way, one struggles to see good faith to past investors in the recommendations. Impossible benefits do little to counterbalance possible harm. And there ought to be obvious good faith to past investors, considering that the associations signing the letter represent members that benefited from over $10 billion in past EB-5 investment. (My post TEA set-aside proposal gives additional analysis.)

It may be pointless to get upset, considering the low likelihood that Congress will heed these recommendations or act on EB-5 any time soon. But why can’t we, as an industry, do better than this letter? If you’re represented by an organization that signed this letter, and you do not agree with the so-called consensus, make your voice heard in the on-going discussion.

Speaking of immigration proposals likely to be ignored, President Trump gave a speech yesterday to outline an immigration plan. In 2016, I wrote about candidate Trump’s vision “to choose immigrants based on merit, skill and proficiency,” and cribbed a chart from the New York Times that pictures visa allocation under our current system.

Yesterday’s speech enlarged on a “big, bold, beautiful” plan to reorient our immigration system so that it issues fewer visas based on “random” characteristics such as family relationship and humanitarian concerns, and more based on personal qualities, particularly economic position and potential. The plan sounds similar to the points-based system promoted by Senator Tom Cotton in the RAISE Act, though details have yet to be released.

One sentence from the President’s speech struck me particularly: “America’s immigration system should bring in people who will expand opportunity for striving, low-income Americans, not to compete with those low-income Americans.”

This sentiment could get some bi-partisan support, if anything received bi-partisan support anymore. And certainly, the EB-5 program deserves credit for already realizing this value. EB-5 can use the immigration incentive to expand opportunity in two ways: by creating jobs that are within reach of striving low-income Americans, and by providing capital for striving Americans who might otherwise not have been able to implement their business ideas.  How many small towns across the US now have their first flagged hotels thanks to local entrepreneurs matching with EB-5 investors to make the dream happen? How many local restaurant chains were able to expand their portfolios thanks to partnership with EB-5 investors? Such ventures don’t make the news, but I see them as a business plan writer working with small EB-5 projects.  They highlight an important feature of the EB-5 program: that it doesn’t only reward immigrants establishing their own businesses, but immigrants who support US citizen-owned businesses. I hope that any immigration reform debate will keep that EB-5 value in mind. Tom Cotton’s proposal, for example, though intending to reward economic contribution, would only have granted points for an immigrant’s investment in his or her own business.

Apparently the the administration’s plan has few friends and unlikely to go anywhere. But I’m interested as a citizen. What kind of immigration system would really accomplish a “Build America” goal? Here in Ogden Utah we just celebrated the sesquicentennial of a major nation-building milestone: the completion of the first transcontinental railroad. In his speech at the centennial celebration, then-transportation secretary John Volpe proudly asked “Who else but Americans could drill 10 tunnels in mountains 30 feet deep in snow? Who else but Americans could drill through miles of solid granite? Who else but Americans could have laid 10 miles of track in 12 hours?” As it happens, Americans did none of those things. There’s a railroad through the Sierra Nevadas thanks to Chinese workers.  What would have happened to America’s economic development without the incredible stamina and skill of those migrants from China, few of whom would’ve scored points in Tom Cotton’s system? Would Leland Stanford just have become less rich, having had to pay a naturalized workforce at least 30% more? Or is there a broader lesson about what builds America?




About Suzanne (www.lucidtext.com)
Suzanne Lazicki is a business plan writer, EB-5 expert, and founder of Lucid Professional Writing. Contact me at suzanne@lucidtext.com (626) 660-4030.

9 Responses to EB-5 Reform, Immigration Reform

  1. kishore says:

    Basically these Feinsteins, Grahams are useless. This one achieves nothing but sucking up to chinese backlog. EB5 should not be allowed to used in big cities like NYC, San Francisco, Miami, LA or Chicago. It should be truly reserved for rural areas where capital is hard to find ( some where in the middle of the country). Rich cities like New york should never receive any EB5 money at all.

    These idiot senators are just bulling with useless suggestion that are beneficial to no one. Again why do visas need to be setup aside for new investors. i dont know but i expect congress to do nothing. So iam not worried. Also the 50k seems to me like pay for play kind of visa. Oh boy we have become truly crony capitalism

  2. Eric Yao says:

    Their goal is to make noise so the government has an excuse to permanently postpone the pending regulation. “Oh there would be a new legislation anyway. So why bother the regulations?”

  3. tpk129 says:

    Geez…they really went out of their way to correct the mess they made! Everybody else pays for our misdeeds. They want to move forward with new rules that are more beneficial to the EB-5 industry so they can misdirect more foreign money from unsuspecting individuals.

    I don’t understand the $50K reset fee. What does this accomplish? Does this get green cards to the 30K waiting currently? So you can buy your way to the front of the line?

    The investment levels are a joke. They want a one year period to use $650K and then go to a two tier system of $800K and $900K. This is just to give the industry the time rip-off more foreigners who shouldn’t even be in the program. The lower the investment level, the more people invest who don’t have the expertise, or suitable advisers, that can properly counsel them.

    I missed any discussion regarding redeployment and helping the thousands of people that have been defrauded.

  4. happy says:

    howmany percentage consular interview for EB5 receive 221 (g)? Too many applicants now receiving 221 (G) at time of consular interview without any issues in interview? And they get stuck in to black hole for months to years without receiving green card. Consular officer asks for documents only through 221 (G). How to solve this quickly?

  5. Putting aside 30% visas for TEA new investors, that means Chinese investors will have no leftover visas at all?(as Charlie estimated several days ago, next year, Chinese projected visa number is 3000). 50K for “resetting the program”, what does it mean, for making another line? where do the visas for this line come from?

  6. NX says:

    Your closing statement about few of the Sierra Nevadas railroad builders will score the merit based immigation system is a decent argument. But this statement reminds me with a classic Chinese proverbs (carve on gunwale of a moving boat, hoping to mark where a sword was dropped), I hope you also agree the current immigration system is broken and need an overhaul, right?

    • A classic proverb, indeed. There seems to be general agreement that our current immigration system is broken, but different people have different reasons for thinking so. Some object in one way or another to the total volume of immigrants, others to the categories and how they are weighted, others to inefficiencies and unfairness in how the system is implemented and administered. And behind that lies different perceptions of where we are in our moving boat — of what the country needs and how it’s defined and where it’s going. I’m afraid I’m not enough of a nationalist to be able to visualize an optimal immigration policy.

      • NX says:

        Thank you Suzanne for your further illustration. The immigration reform will remain to be a big subject towards 2020, I am interested to observe how it evolves afterwards. As one of the EB5 investors stuck in the queue, we are fighting the same battle and digging the exact same tunnel as our ancestors who built the Sierra Nevadas Railroad, except our feet are not on American soil, this forced EB5 investors fighting for a more difficult battle than our ancestors had fought for.

Leave a Reply to kishore Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.