EB-5 legislation and the question of options

The EB-5 Regional Center Program sunsets on June 30, 2021, unless Congress passes legislation to extend it. (I’ve been updating my Reauthorization Page with resources and suggested action items for this effort.) But still, even many people who want reauthorization hesitate to strongly support the legislative option on the table: Senator Grassley and Leahy’s S.831, and its House companion bill H.R.2901, sponsored by Rep. Stanton and with 13 co-sponsors so far. Why the hesitation?

There’s hesitation based on hope for X: X meaning an alternative to S.831/HR.2901. If you are a regional center, investor, or Congressperson who understands the economic, public policy, and personal stakes and wants the regional center program reauthorized, what’s in your best interest: (a) go all in to push now for S.831/HR.2901 (as IIUSA suggests), or (b) wait for X (as EB5IC suggests)?

Besides the risk of holding out for an alternative not yet available, let’s consider an important question: What is X? If there will be a future alternative to the Grassley bill, provided I wait long enough, what will it be, exactly? Whose interests will it represent? Will it avoid my problems with the Grassley bill, not create worse problems for me or my clients, have better politics to pass, and reward me for holding out for it?

Those wondering about options can and should pursue these questions. Although Alternative X is not on the table at the moment, it has existed and can be scrutinized. The great Grassley vs. Not-Grassley EB-5 debate has been actively on-going since before 2015, leaving an extensive paper trail at Congress.gov. We have the “good government” faction and the “holistic” faction. Both sides call what they want “reform,” but mean different things by that word. To Grassley, “reform” means regulating and directing EB-5. To the other side, “reform” means making EB-5 more accessible and usable. IIUSA currently supports the Grassley “good government” effort as the best and likely only path to long-term regional center program authorization. The “holistic” side has been associated with EB-5 Investment Coalition, Greenberg Traurig, U.S. Chamber of Commerce, and Senators such as Schumer and Cornyn whose constituents include the kind of big-city developers whose prolific EB-5 usage looks like abuse to Senator Grassley.

In 2019/2020, we had a Grassley/Leahy “good government” bill (S.2540), and also an alternative “holistic” bill (S.2778, introduced by Senator Rounds, co-sponsored by Senators Graham, Cornyn, and Schumer).  For those holding out hope for a future alternative to Grassley, and looking for Schumer’s support, let’s scrutinize what the Holistic Faction previously negotiated in S.2778.  You can pull up the text of S.2778 and S.831 at Congress.gov, and do a side-by-side comparison. (Keeping in mind that S.831 is current this Congress, and S.2778 is a bill from last Congress that might or might not be eventually updated and brought forward again.) A bill-to-bill comparison helps to look beyond the rhetoric, and think specifically about what has been offered by each side in the EB-5 debate. I highlight below a few key issues.

Comparison of the 2021 Grassley-backed legislation (S.831/HR.2901) with the most recent alternative legislation (the Schumer-backed S.2778 from 2019) across key areas

Limits on Judicial Review

The most broadly unpopular provisions in Grassley’s current S.831 are the limits on judicial review, and the requirement that petitioners exhaust administrative remedies (i.e. spend forever in the internal appeals process that almost always sides with USCIS) before suing USCIS over a denial or termination. EB-5 investors and service providers join in disliking these provisions. However, note that S.2778 included identical language on judicial review.

I suppose that the judicial review limit has come from both sides because it’s probably the number one demand from USCIS to Congress. (USCIS has spent a lot of money recently being found wrong in court on EB-5 issues.). Also, there are mixed interests when it comes to battling a provision that serves to lengthen the time that EB-5 funds stay deployed.  History does not give reason to hope for an alternative when it comes to a judicial review restriction historically backed both by Senator Grassley and by Senator Schumer.

Additional Fees

Another unpopular aspect of Grassley’s S.831:  new fees that would further depress the market and particularly burden small regional centers. However, S.2778 proposed the same fees for regional centers and heavier fees for investors.

Fees in both S.2778 and S.831

  • Regional centers pay an annual fee of $20,000 (or $10,000 if the RC is non-profit or had under 21 investors)
  • Investors pay a $1,000 fee with each I-526 (called a Petition Fee or Integrity Fund Fee)
  • Monetary sanctions/fines up to 10% of total investor capital are authorized for non-compliant regional centers

Fees in S.2778 only

  • Investors pay a required $50,000 Program Improvement Fee with each I-526
  • I-924 applicants have the option to pay an additional $50,000 for premium processing (I-526 petitions with TEA investment are offered premium processing without fee)

I suppose that fees appear on all sides because fees are probably near the top of cash-strapped USCIS’s EB-5 legislation demand list for Congress. Also, the proposed regional center fees are not really a burden for any RCs prosperous enough to be lobbying, and could help eliminate their competitors.  There’s no clear hope for an alternative when it comes to fees historically backed by all sides.

Reauthorization

Like S.831, S.2778 offered a 5-year extension to the Regional Center program. 5 years means people will need to stay at the negotiating table, because 5 years is not long enough to create program stability. Current EB-5 investor distress has informed the market that EB-5 immigration depends on regional center program authorization continuing on to the visa stage. New investors will hesitate to start a program that is at risk of expiring before it can deliver the promised return. If legislation says “Visas made available under subparagraph (A) shall be made available through September 30, 2025,” then the legislation will stay potent only so long as new regional center investors can expect to get visas before 9/30/2025 — i.e. not long, considering processing times. The market will soon be demanding a longer-term authorization.

Investment Amounts and TEAs

 S.831 is silent on investment amounts and TEAs. The Holistic Faction is holding out for change in this area.

Senators Grassley and Leahy want to incentivize investment in rural and distressed areas, and they think that the November 2019 EB-5 Modernization Regulation already accomplishes this, with its $900,000 difference between TEA and non-TEA investment and TEA definitions. Therefore, they did not propose any investment amount or TEA changes in S.831.  (They do not like the idea of EB-5 as a program for the very wealthy, but haven’t realized that it was not so, until the Regulation forced it to be so by doubling the EB-5 investment amount.)

The Holistic Faction wants to make EB-5 accessible, and seeks to vacate or legislate a replacement to the EB-5 Modernization Regulation. S.2778 proposed to reduce the TEA incentive to only $100,000 ($1.0M TEA; $1.1M non-TEA), and to redefine what can qualify as a TEA – including by incentivizing Opportunity Zone investments instead of high unemployment area investments. In 2019, Senator Schumer supported this proposal, which would have been good for New York. However, it happens that the S.2778 proposal would be bad for Schumer’s constituents in 2021, because COVID-battered New York City actually has significantly more high-unemployment area than Opportunity Zone area, and benefits under the existing TEA rules. IIUSA encourages New York constituents to point this out to their representatives. So I’m not sure what would be in the Holistic Faction’s future legislation with respect to investments/TEAs, if they introduced something. (Presumably they are not sure yet either, pending the outcome of regulations litigation.) But in any case, the investment amount and TEA incentives are moot if the regional center program lacks authorization to carry RC investors to the visa stage. From an investor perspective, $500,000 is just as much too high as $1.1 or $1.8 million, if for a low-interest equity investment with no reliable path to a visa. So Holistic Reform must prioritize long-term regional center authorization via legislation, before TEA or investment amount changes from any source or side can do regional centers any good.)

A spokesman for Senator Schumer told ABC in 2015, when the legislative battle we see today was already well underway: “Sen. Schumer supports reforms that will bring transparency and accountability to the EB-5 program, but strongly believes that the EB-5 program should continue to act as a catalyst for thousands upon thousands of jobs throughout New York.” A Schumer spokesman explained to the Wall Street Journal in 2017 that Schumer believes good projects in EB-5 “should rise to the top based on how many jobs they’ll create,” and that the government should not be trying to direct development to specific areas. What do you think? What will Congress and the Administration think, when it comes to having to pass bills? What message will Schumer want to send in 2021 about EB-5 reform, considering his donors and his image? Can we and he afford the optics of holding out for legislation that reduces TEA incentives very dramatically?

On the Grassley side, although S.831 does not change incentives to invest in certain areas, it does try to constrain the types of projects and investments that can use EB-5. Specifically, by restricting EB-5 investment in publicly-available bonds, and by requiring projects to have at least some economically-direct job creation impacts. Consider the rationale and impact of those restrictions, and the optics of resisting them.

Visa Backlog Provisions

High on the industry wish list for EB-5 legislation: visa relief. To regain viability and make additional economic contributions, EB-5 must have more visas. Today, over 80,000 people are already in line for EB-5 visas that can only be issued at a rate of about 10,000 a year. Country caps concentrate that backlog burden on the few countries that would normally drive EB-5 demand. That’s clearly a damper on program potential.

Grassley does not claim to offer visa relief. The Holistic Faction does hold out for visa relief. At least, that’s the rhetoric. The details are more ambiguous, if we look at what’s specifically in S.831 and S.2778.

  • Neither S.831 nor S.2778 offers additional visas to EB-5. (Additional visas seem to be a political impossibility, despite the need and potential reward. Even Biden’s generous U.S. Citizenship Act proposal was not generous to EB-5, proposing to reduce the EB-5 percent quota so that EB-5 would not benefit from a proposed increase to total EB visas.)
  • Both S.831 and S.2778 offer some provisions that would ease the visa backlog pain. Both offer “concurrent filing” of I-526 and I-485. S.831 offers most flexibility for petitioners to change course in the event of project and RC changes or problems that occur over the course of long wait times. S.2778 offered the best child status protection, providing that a child at the time of I-526 filing shall continue to be considered a child until removal of conditions.
  • Only S.2778 offered visa set-asides and a parole option. This is what the Holistic Faction calls visa relief. The offer also risks being called bait-and-switch.

The set-aside proposal is clever, if it’s effective. Let’s say I’m a regional center deploying EB-5 investment, and hoping to stay active in economic development. The longer my past investors wait for visas, the longer I can and must deploy their funds. In that sense limited visas benefit my efforts, since they create visa wait times that expand my time to use the EB-5 investment. However, limited visas are a problem for raising new capital, because I have nothing but wait times to offer my best prospects from high-demand countries. What I need is ideally to free up some visas to incentivize new EB-5 investment, while at the same time not reducing time under management for my existing EB-5 investment. Plus avoid the problem that politics do not allow adding additional visas for EB-5.

So what can be done? Why not go for the classic “rob Peter to pay Paul” strategy, removing visas from the pool available to past investors to offer them to new investors.  This becomes possible with legislation for “set-asides,” proposing to take 30% of visas from the EB-5 quota, and reserve them for applicants making investments in newly-defined TEA areas. This could create a fast track around the backlog for new investors and incentivizes new EB-5 usage, with the profitable (for some) tradeoff of increasing time under management for redeployment funds, since past investors would progress more slowly with fewer annual visas available to the backlog.

Before past investors cry about their deferred immigrant visa dreams, they can be comforted with the offer of a non-immigrant option during their newly-extended wait: parole. “Parole” is a provision that can allow certain noncitizens to enter or remain in the U.S. for specific reasons, while not yet formally “admitted” to the U.S. (This CRS report goes into detail of what parole involves, why it’s been controversial, and how existing parole programs for special populations have worked.)  Why should investors care about the receding EB-5 visa opportunity, if parole may allow them to still enter and stay temporarily in the U.S. without EB-5 visas, and possibly get work authorization? True, parole means an option given to DHS, not a right necessarily granted to noncitizens, even when they qualify as part of a special population. (S.2778: DHS “may temporarily parole, in its discretion, under such conditions as the secretary may prescribe, on a case-by-case basis” and “may authorize” parolees to engage in employment, with “may” being the operative word. For reference, the CRS report linked above gives parole approval/denial statistics and DHS’s track record in actually implementing parole programs approved by Congress.) But even a possible option for some EB-5 investors to enter the U.S. through parole before getting EB-5 visas is better than the status quo, which has no EB-5 parole option for anyone to ease wait times. Assuming that Congress could be convinced to give parole to EB-5 (it’s controversial even for Dreamers) and DHS agreed to grant it to many investors, why would the investors care about set-asides creating a longer wait for green cards and more distant EB-5 investment exit? They’re living in the U.S. — what more did they want? Maybe I can look my past investors in the eye and say “I support set-asides with parole; this is visa relief” and maybe the investors will look back and agree “Yes, that’s how it looks to us too. Thank you for being a good fiduciary. Supporting visa set-asides makes you and the industry look great. We’ll tell our friends and media how happy we are with the EB-5 deal.”

Speaking as Suzanne and not a hypothetical regional center, I see the visa set-aside proposal as the single greatest fault in Holistic Faction advocacy. I believe the best of people, and keep expecting advocates to say “Oh, I didn’t realize how bad this proposal is and looks in light of impact on backlogged applicants, but now I see and will not pursue set-asides anymore.” But that has not happened. I still hear set-asides mentioned by smart people as a top priority for holistic reform, and a prime reason to hold out for potential future legislation that includes set-asides. (Aside: it’s possible that set-aside language would actually neither hurt nor help anyone, if it were interpreted to not apply to new TEA investment but to simply duplicate the TEA set-aside that already exists in statute. The existing TEA set-aside makes no difference because it’s available to the backlog dominated by old TEA investment. If a mere duplication, then the Holistic Reform visa set-aside suggestion is not problematic, except as a meaningless red herring with no effect for or against visa relief or TEA incentive. But if it’s effective for new investment, then it’s paid for by backlog harm. If it offers a fast track to new investors, that means line-cutting around existing investors.)

Integrity Measures

Both the Grassley side and the Holistic Faction support integrity measures. S.831 and S.2778 differ in what they specifically offer, considering that Grassley prioritizes security and the Holistic Faction prioritizes usability. I’m not going to line everything up in this already overlong post, but you can make the comparison yourself. If there’s a restriction or requirement that you don’t like in S.831, check whether that language was also in S.2778. If you do like a protection offered in S.831, see whether S.2778 also offered that protection.

For example, Aaron Grau of IIUSA mentions that S.831 opposition is coming in part from interests who do not like required disclosure of broker fees and conflicts of interest, and who do not want the S.831 prohibition on foreign government participation. However, note that S.2778 had similar language restricting involvement in EB-5 by foreign individuals and governments.

One significant difference is the account transparency/fund administration provision, which S.831 has and S.2778 did not. Fund administration and account transparency are powerful integrity measures from an investor and public policy perspective (directly addressing a common denominator in past problem deals), and also a significant hassle and expense for regional centers. Would an alternative bill with no fund admin/account transparency requirement be better, more likely to gain support, and worth holding out for? What about the requirement for regional center to make annual statements filed with USCIS also available to investors (a provision in S.831 and not S.2778)? That makes sense, right? How serious would integrity measures look, if they only involve making records available to opaque and sluggish USCIS?

Investor Benefits

Both the Grassley side and the Holistic Faction are primarily concerned with regional centers, and not necessarily going out of their way for immigrants. But each side has negotiated a few benefits. Both offer processing time improvements (S.831 by asking USCIS to adjust fees for efficient processing generally; S.2778 by asking for a premium processing option available for a fee and to TEA investments.) The best investor benefit in S.831 involves “treatment of good faith investors following program non-compliance” (with new flexibility to affiliate with different regional centers and NCEs if things go wrong, and not only in case of RC termination, as in S.2778). The best investor benefits exclusive to S.2778 were protection for children against age-out, and the possibility of parole. At the end of the day, no investor benefit is more important than regional center authorization, which determines whether or not regional center investors will be able to qualify for visas at all.

Conclusion

I aim to help with information, but cannot do much more than that. As one side or another suggests advocacy actions and opportunities, I include them on my Reauthorization Page. You can visit that page for ideas. If you know of relevant resources not mentioned on that page, please email me links and I will update. I want to be fair to all sides. The bottom line that must unite all efforts to some extent: no one benefits if we wake up on July 1, 2021 with a lapsed program, and uncertainty hanging over billions of dollars in deployed EB-5 investment. I believe that all sides are working to avoid that outcome. I hope that these efforts can be as thoughtful and informed as possible.

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.

24 Responses to EB-5 legislation and the question of options

  1. Roberto Virga says:

    I think it takes a special kind of cruelty, in the middle of a pandemic, with USCIS left in shambles by the Trump administration, with consulates all around the world closed or operating at reduced capacity, with huge, unprecedented backlogs at both USCIS and NVC, to choose this precise moment to have this re-authorization fight in Congress and inflict even more pain and distress to EB-5 applicants.

    • Me Usa says:

      I think you forgot to add the reinvestment rule and slow down in the speed of processing cases. That literally feels like stealing.

  2. Cecilia says:

    Susan , thank you once again for everything that you do, for eb5 and us, forgotten and undervalued investors. Roberto, couldn’t have said it better myself.

  3. Kim says:

    I watched the webinar held by EB-5IC and I wasn’t convinced by their argument that we need to “seize the moment” and enact holistic reform now that the Democrats hold both the Congress and Presidency. The Democrats might be more amenable to immigration in general but they’re much more concerned with issues like refugees and DACA, and I’d bet they have little interest in making the lives of “rich foreign investors” easier. EB-5IC has the ear of Schumer and while he might be able to block any policy he opposes, he certainly cannot unilaterally ram through policies over the objections of other Senators. If EB-5IC believes that Schumer can hand them whatever they want just because he is the Senate majority leader, I think they are deeply misguided.

    My general sense is that both sides would rather see the EB-5 RC program terminated than have the other side’s preferred policies passed. Grassley has stated on multiple occasions that the program should be killed if it can’t be reformed, and I can’t imagine he or Leahy would easily allow the program to be “re-coupled” in next year’s omnibus bill (Aaron Grau has stated as much). Meanwhile, EB-5IC states that the program is already dead in the water and that S386 would be the final nail in the coffin, so they don’t have anything to lose by holding out for their agenda. It’s basically like a game of “chicken” where neither side is afraid of crashing. None of this bodes well for the current situation, in my opinion.

  4. Ketul says:

    Thank you Susan for all valuable information. I am an Indian. I filled I-526 in April 2017. NOID was raised in Oct 2020 but I could receive notice by December 2020 after senator’s assistance. NOID was all about delayed project schedule and project’s progress. NOID was replied by Jan 2021. Upon senator’s inquiry in first week of May 2021, I received reply that it is under review.
    Should I consider NOID means rejection or opportunity to convert it into positive decision? Do you have any historical data or experiences that say how much % of NOID getting change to approval? Does writ of mandamus is right option for NOID ?
    Appreciate your guidance in this matter.

    • Chandra Prakash Ojha says:

      I think its best not to do anything till EB5 is reauthorized. Depending upon your contract with RC, if you don’t have I-526 approval as of yet, you can at least have capital redemption. Not sure what’s going to happen for people who have already filed for I-485 or have approved I-526. Most of the contracts I know have a capital redemption clause if I-526 is denied or I-829 is removed/processed/filed.

    • I have worked on a couple NOID over delayed project schedule and project progress. Those cases were approved, because we were able to give good evidence and explanation that the project was moving forward now, despite previous delays, and could create jobs in time. So it’s not impossible. But you and your lawyer know what was in your NOID response, and how compelling the evidence looked. Did the developer help support a case that the project is moving forward now, or will be very shortly? If you were the adjudicator at USCIS, would you conclude from the paperwork that this project will create jobs in the next couple years? (Don’t need to answer here, but ask yourself this question. And might ask for the lawyer’s opinion of % chance of approval, not for NOID generally but specifically for your case, considering what’s in your paperwork.) Also ask yourself, is delay helping you? Maybe the adjudicator is actually on your side, and holding off on a decision as a favor. Delay gives more time for the project to accomplish milestones to prove that it’s going forward, and thus able to support your eligibility. Or maybe your file just got mislaid, as seems to happen. The lawyer should also be able to advise whether delay is helping or hurting you at this point, and thus whether or not you’d benefit from pushing for a decision ASAP. If a denial did look likely, and if your investment documents offer protection in case of denial, you might want the denial ASAP before a possible regional center sunset put a freeze on adjudications. But all this would be good to discuss with the lawyer.

  5. lokesh says:

    I am in Indian investor of direct EB-5, will it affect the direct EB5 program if the regional center program expires? will visas be issued for direct EB-5

    • Direct EB-5 visas will continue to be issued if the regional center program expires. If anything direct EB-5 could benefit, thanks to loss of competition for visa numbers.

      • RM Lokesh says:

        hi suzanne, With Direct EB-5 application, Pending I-526 application ? can the eb-5 applicants apply for International Entrepreneur Parole?

        How long will it take for NOV 2019 i526 processing time for people from India?

        Will there be retrogression for Indian Eb-5 when Nov 2019 applications are processed?

        • EB-5 applicants can apply for other immigration options if they want to. Just note that the International Entrepreneur program has entirely different requirements from EB-5.
          Processing time for Nov. 2019 I-526 will depend on whether or not incoming new leadership at USCIS manages to improve processing productivity. I don’t know the answer to that question yet.
          There are estimated to be over 5,000 Indians with priority dates of November 2019 and earlier who have yet to get visas. With an average around 700 EB-5 visas per year available to India, many of those 5,000 people will have to wait for visas. The total time to clear that line is estimated at 5,000/700. It’s only a question of how long waiting at the I-526 stage (stopped only by slow USCIS processing) and how long at the visa application stage (where the Visa Bulletin will provide crowd control once enough people are the visa stage).

  6. Amy says:

    Hi Suzanne – do we know why the EB5 bill was decoupled from the quarterly budget bill?

    • The people who would know personally give conflicting answers to this question. Just tackling the question as a matter of theory, the only plausible “why” I can think of is “to force regional center program authorization to be accomplished by separate legislation,” in which case the driving force behind the de-coupling must have been Senator Grassley & allies, since Grassley was the only party with legislation ready to present.

      • Amy says:

        Thanks. I have read some lawyers state on EB5 forums that the EB5 RC program may get re added to the September omnibus bill if the Grassley bill does not pass. Is that a possibility?

        • It’s a possibility in theory. It’s the obvious possibility from the perspective of wishful speculation. I don’t know about probability. After someone went out of the way to get the RC program separated from the omnibus bill in December, will there be someone else to go out the way to get it re-attached? Will the motivation behind the de-coupling have disappeared or lost power by September 2021? I do not know.

          • Amy says:

            Thanks! Do we know which fraction is opposing the Grassley bill? Is it the RCs themselves ?

  7. Ahmad Ba says:

    Hello Suzanne, there is currently less than a month for the EB-5 regional center expiry. Do you think there is enough time for the bill to pass and reauthorize it before it expires? Or is there hope they could temporarily reauthorize it while waiting for the bill?

    We should have our interview in the end of July and we are so lost at the moment.

    Thanks in advance!

    • I really don’t know what will happen. There’s a faction that opposes current legislation, and is saying that we can look forward to an alternative: one or more short-term extensions. That message could very well be true. Or it could be false hope presented as a strategy by people for whom, personally, the Grassley bill is worse than nothing. I’m so sorry to hear about your tense situation! So close and possibly so far! Best of luck to you!

      • Ahmad Ba says:

        Thank you! This is indeed very puzzling, seems like we just have to wait and hope for the best.

        Would you know when,roughly, we will be able to know what will happen? Is there a recurring pattern of reauthorization from date of expiry?

        Again, thank you for your helpful information. I hope stay safe, happy and healthy!

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