2015 was quite a year for the EB-5 Visa Program and a roller coaster for EB-5 stakeholders. Change seemed inevitable at the beginning of 2015 as the Regional Center Program was set to expire on September 30, 2015. The year kicked off with legislation introduced by Representatives Jared Polis and Mark Amodei that largely kept the main components of the Regional Center Program intact, while making the Program permanent. This early proposal would have effectively increased the number of visas available to investors (by stipulating that spouses and children don’t count towards the limit) while also providing key reforms to address security concerns within Regional Centers. Then, in June, Senators Grassley and Leahy introduced Senate Bill 1501, which sought to significantly reform many of the fundamental components of the Regional Center Program as a condition of its re-authorization, changing the minimum investment and TEA rules of the EB-5 Program as a whole. A full synopsis of the bill is the topic of a previous post of mine, which can be found here, but in summary, the bill represented a major shift from the current law and included a sharp increase of the minimum investment (to $800,000 in a TEA and $1.2 million in a TEA) as well as two changes that were to become sticking points for negotiations on reform in the ensuring months: a drastic change in what qualifies as a TEA, and a cap on indirect job creation for projects sponsored by Regional Centers.
In the run-up to the original September 30th deadline, lawmakers’ negotiations intensified. But as the deadline came and went, no new legislation was passed; rather, the Program earned a temporary reprieve as part of the Continuing Resolution passed by Congress. A new deadline (December 11, 2015) was established, and debates between Congress and EB-5 stakeholders raged on. As the 11th drew near, word came that a draft legislation from Leahy, Grassley, and Representative Bob Goodlatte was being fine-tuned and would likely pass with the omnibus spending bill. The new draft legislation retained many of the security reforms of the original Leahy-Grassley bill as well as the increase to the minimum investment. Notable modifications and additions to the legislation included an expanded definition of a TEA compared to the original Grassley-Leahy bill (though still more restrictive than the current law) and a provision that would earmark 2,000 of the available 10,000 visas for rural projects, urban/poverty areas, and non-TEAs, each. Despite attempts to find middle ground, there was no agreement in Congress (even with a second Continuing Resolution that bought another five days of debate!). On December 16, to the surprise of most observers, Congress reauthorized the Program through September 30, 2016 with no changes at all.
The most recent bill to emerge from the rubble promises to pave a path for reform and begin the negotiations anew. Introduced on December 17th by Senators Flake, Cornyn, and Schumer, S. 2415, the “EB-5 Integrity Bill” includes many of the oversight and integrity reforms at the Regional Center level that have long been supported by both sides of the debate, but does not address or seek to reform the current law related to TEA designation, indirect job creation, or minimum investments.
So here we stand at the beginning of the new year, exactly where we were at the dawn of last year… the sunset of the Regional Center Program is off in the distance in Q3 and there remains a resolve to reform the Program. What’s changed is that the blueprint for new legislation is in place, the debates have already been raging and now, ostensibly, it is only a matter of time before the middle ground – that sweet spot that protects the integrity of the Program without strangling the life out of it – is found and we have the new rules that will shape both the Regional Center Program and the EB-5 Program as a whole moving forward. Will 2016 be the year? Given the events of the past year, there is no guarantee. But, I’m betting it is.
Here at MasterPlans, we’ll be keeping an eye on how everything unfolds, and we stand at the ready to produce Matter of Ho compliant plans for both EB-5 direct and Regional Center projects looking to file before the law changes, or preparing a project for a filing post reform.
This month is a busy (and nail-biting) one for the EB-5 world. With the EB-5 Regional Center program set to expire at the end of September, Congress in recess until after Labor Day, and a whole host of issues that need to be addressed once Congress is back in session (Iran nuclear deal, anyone?), there is concern and a lot of speculation about what will happen to the EB-5 program, especially given the recent push to reform it. I wrote about the bill introduced in June by Senators Grassley and Leahy in a recent blog post, and in the months since, another bill has been introduced in the House by Representatives Gutiérrez and Lofgren. Whether these bills will be adopted, amended, or Congress will kick the reform can down the road a little longer and simply reauthorize the program are the unanswered questions that every stakeholder has in mind this month. I will leave speculation about what route Congress will take to those experts in the industry who have their finger on the legislative pulse. In the midst of this uncertainty, though, what is clear is that those with projects that can be filed before September 30th are clamoring to do so.
We here at MasterPlans have definitely seen a surge of new EB-5 projects come our way, many of them on a tight time frame. We’re seeing new projects for direct EB-5 investments as well as large-scale projects sponsored by Regional Centers. Both types of projects require a Matter of Ho compliant business plan, but the development, content, and information relayed in EB-5 direct plans versus EB-5 Regional Center plans is quite different. Earlier this summer, I had the opportunity to submit an article to EB-5 Investors Magazine, one of the leading publications in the industry, about this very topic. The article addresses the differences between EB-5 direct and EB-5 Regional Center business plans, and outlines how each type should be developed to ensure it is Ho compliant. The article was published in the magazine’s July issue, alongside some other very interesting articles about the pending legislation as well as some updates on the impact of the EB-5 program with vignettes of real people whose jobs were created as a result of EB-5 projects. It’s a good read, and I encourage stakeholders to check out the site, magazine, and of course, my article.
For those who are planning on filing before September 30th but still don’t have a Matter of Ho compliant business plan ready, give us a call. Even if you’ve made a business plan draft already but need to have it reviewed to ensure compliance, we can check it over. Whether your case is for an EB-5 direct investment or a bigger project sponsored by a Regional Center, MasterPlans has got you covered.
We here at MasterPlans are not immigration lawyers, but we do specialize in writing business plans for L-1, E-2, and EB-5 immigration visa petitions. As such, we try to stay abreast of any new developments related to visa programs, as changes to legislation and policy sometimes affect how we approach plan development. This is especially true in the ever-evolving landscape of the EB-5 Visa Program for immigrant investors.
My news feed was abuzz at the beginning of June with updates about the American Job Creation and Investment Promotion Reform Act. Introduced by Senators Grassley (R-Iowa) and Leahy (D-Vermont) earlier this month, the bill is intended to strengthen and reform the EB-5 Regional Center Program.
Much controversy has surrounded the EB-5 program recently, as allegations of fraud, misconduct, and national security issues related to a few projects approved through the Program have been publicized through national media outlets. In response to calls for reform and in the face of the Regional Center Program’s pending expiration in September of this year, Senators Leahy (an avid supporter of EB-5) and Grassley (a critic of the program) co-authored the bill, which has bipartisan support in the Senate.
The changes proposed in the bill are extensive, and many represent significant departures from the EB-5 program as it functions today. The bill extends the Regional Center Program and introduces a host of regulatory requirements for Regional Centers while at the same time redefining and modifying some of the fundamental components of the EB-5 program as a whole.
The table below provides an at-a-glance summary of some (but certainly not all) of the key changes proposed:
Notable are the changes to indirect job creation, a more restrictive definition of TEAs (Target Employment Areas), and an increase in the minimum investment amount. Currently, the ability to count indirect jobs is a major advantage of the Regional Center Program and makes the program a perfect source of capital for large-scale construction projects. The requirement that 10% of the total be direct jobs could make some funding models obsolete and automatically exclude many potential projects from the Program. It is unclear whether the 10% of direct jobs must be backed by a W-2 or can be considered direct from an economic modeling standpoint. The former will have a much greater impact on the Program than the latter.
Similarly, the revised definition of a TEA is much more restrictive than current guidelines. This severely limits where a project can be located. Many urban centers that have heretofore had many projects supported by EB-5 investment will no longer be eligible for the lower investment amount. This not only limits the number of potential projects that can be supported by EB-5, but one could argue that it significantly impacts the potential for job creation. Projects in urban centers have been historically successful and easily marketed to foreign investors, resulting in the creation of thousands of jobs in census tracts that suffer from high unemployment. On the other hand, promoting rural development and development in economically distressed areas was the original intended purpose of the reduced investment amount and – in this sense – the proposed bill strengthens the program’s intent to meet that objective.
Not as controversial is the increase in the minimum investment amount, as it has been largely expected as an item of reform for the EB-5 Program.
Heralded as a major boon to the Program by EB-5 stakeholders is the mandated processing times. Extensively long processing times (12 months or longer) have hampered the program in recent years.
The new legislation proposes significant reforms and sweeping changes to much of the EB-5 Program as it currently stands. The bill is still to be debated and amended before (and if) it is passed in time for the looming September expiration of the Regional Center. If passed, the impact of these changes on the EB-5 program, the types and number of projects funded by EB-5 investment, and the implications from a marketing perspective to potential EB-5 investors will only be known as they play out.
Perhaps the most definitive point of the bill is that exemplar projects that are filed and pending NOW will be grandfathered in if the new legislation takes effect. All the more reason for projects that are ready to go to market (or investors who are ready to directly invest) to prepare the necessary paperwork – including a Matter of Ho-compliant business plan – and file sooner rather than later.