by Robert Divine; Shareholder; Global Immigration Group; Baker, Donelson, Bearman, Caldwell, & Berkowitz, P.C.,
USCIS has sent its final EB-5 regulation to the Federal Register for publication tomorrow. Effective for I-526 filings arriving at USCIS on or after November 21, 2019, new EB-5 investments must be at least $900,000 in a “targeted employment area” (TEAs) and otherwise $1,800,000, and the areas that can qualify as TEAs for the lower investment amount are more limited. Absent legislation to provide additional visa numbers, the next four months may be the last great days for entering and subscribing investments under the EB-5 Program for the foreseeable future.
Before the Rule Takes Effect
The new regulation is as important for what it will cause pre-effective date as after.
The Surge: The rule allows investors to remain under the current investment amounts and TEA areas if they file the first step in the EB-5 process (I-526 petition) before the November 21, 2019 effective date. This means that during the next four months anyone who is contemplating making an EB-5 investment should consider investing and filing before November 21, 2019, securing the lower investment level of $500,000. According to the regulation’s preamble, EB-5 investments already made appear likely to use up at least seven years’ worth of the 10,000 visa numbers available to investors and family members each year. In fact, the nationalities of the heaviest usage face even longer waits due to a 7% per-country limit, and those born in lower volume countries face much shorter or zero waits. The new rush of filings in the next four months will extend the existing waits for high volume countries by many years. (Oft-proposed but yet unpassed legislation could eliminate the per-country cap and make all new investors wait the same regardless of nationality.) The combination of nearly doubled minimum investment amounts and expanded wait time for visa numbers will pose huge disincentives for investors filing under the new rule. Thus, now begins the last great four-month EB-5 investment rush unless Congress allocates additional visa numbers to the program.
The Scramble: In the scramble to invest and file, some investors will ask to invest with less than the full $500,000 amount, using the law’s allowance for those “actively in the process of investing.” Some sellers of investments may be tempted to accept such investors. If such investors can qualify under present law, their I-526 filing with less than the full amount might preserve their ability to invest only $500,000 under current regulations. The new regulation itself only acknowledges placing the full funds in escrow. USCIS case law requires that if an investor invests part of the required capital plus “indebtedness” (owing to the remainder not in escrow), the investor’s debt to the investment enterprise must be adequately secured by his or her personal assets under arrangements that are legally perfected in their location. Full investment up front is strongly advised to avoid risk of denial.
This information contained in this article should in no way be construed as legal advice. Please consult with your legal counsel