Originally Published by Impact DataSource
As unemployment claims rise and uncertainty about the near-term and long-term impacts abound, we are getting a lot of questions about how the novel coronavirus (COVID-19) will impact high unemployment EB-5 TEAs (COVID-19 will not have any significant impact on rural TEAs). As COVID-19 continues to spread, certain parts of the country will be hit harder than others, potentially having big impacts on the TEA-eligibility of certain project locations. As there are many moving pieces to consider, in general, if the local area is hit harder than the nation as a whole, then there is higher chance for more TEA-eligible areas to eventually emerge. Conversely, if a local area is only impacted minimally from COVID-19, then it may show fewer TEA-eligible areas over time, as it will not keep pace with the increasing national rate threshold that needs to be hit. However, these impacts will not be immediately seen in high-unemployment TEA calculations, due to data lag. Please see below for our responses to FAQ regarding the COVID-19 and EB-5 TEAs.
Q: How will the drastic changes in the local and national unemployment rates caused by the COVID-19 pandemic effect TEAs in the short-term?
A: Under the typical methods of TEA calculation (some potential non-typical approaches are discussed later), the changes in the local and national unemployment rates caused by COVID-19 will not be immediately captured in TEA data. There is a lag in the release of data used in TEA calculations, and so the impacts from COVID-19 will not be immediate for TEA purposes.
As an illustration, if we pretended that states were still providing TEA letters in their typical manner, impacts from COVID-19 would not have shown up in state TEA letters until April 2021.
The two main data sources used in TEA calculations at the census tract level, and their release dates, are discussed below:
Source 1: American Survey Data (ACS) – ACS is the only source of census tract-level data specifically mentioned as “reliable and verifiable” by USCIS, and it is based on data collected over a five- year period. The most recent ACS data available is from the five-year period of 2014 to 2018 (ACS 14-18).
- ACS 15-19 data is set to be released in December 2020 (impacts from COVID-19 will not be captured, as it will only go through 2019)
- ACS 16-20 data is set to be released in December 2021 (impacts from COVID-19 will be captured, however, 2020 will only be one year out of five in the data collection period, so the impacts will be blunted a bit)
Source 2: BLS LAUS Data at the county level that is used to complete a census-share calculation. New data is released monthly (with a lag of 2 to 3 months or so: as of the date of this blog, November 2019 is the latest month that has been finalized, while December 2019 and January 2020 have been released with “Preliminary” status). Typical census-share calculations (that the states used to use) utilize a 12-month calendar year average. The most recent calendar year average that is finalized as of the date of this blog is 2018.
- Calendar Year 2019 BLS LAUS county-level data is set to be finalized soon in mid-April 2020. Impacts from COVID-19 will not be captured, as it only goes through 2019.
- Calendar Year 2020 BLS LAUS county-level data is set to be finalized mid-April 2021. Impacts from COVID-19 will be captured.
- Since data is released monthly, using a 12-month calendar average is not necessarily the only option for a 12-month period. We discuss other possibilities that would pick-up the impacts from COVID-19 quicker than using a calendar year later in this FAQ.
Q: Will the ACS-only method and census-share method be affected differently by the changes in unemployment caused by the coronavirus? As a refresher – using data from ACS and BLS, there are two methods that it appears USCIS will accept to determine the census tract unemployment rates: the ACS-only method and the census-share method. The ACS-only method relies only on the most recent data from the ACS 5-year estimates of labor statistics at the census tract level. The census-share method, used by most states under the old rules, consists of a few different calculation steps that first uses the ACS data and then takes an extra “trending” step utilizing more recent BLS LAUS annual average data at the county level before arriving at the final answer.
A: Yes, the two methods for determining TEA qualification will be affected differently by the changes in unemployment caused by COVID-19. As discussed in detail above, the census-share method will reflect unemployment data from 2020 (when COVID-19 started) sooner than the ACS-only method. So, depending on your TEA situation (whether you currently have a TEA that you are hoping will stay a TEA, or you have a project location that does not currently qualify but eventually might due to COVID-19), one method might be more beneficial. Under normal conditions, if a project location works under one method, then it usually works under the other as well. However, when thinking about the impacts from COVID-19 eventually being shown in the data, we could see some bigger differences between the two methods. In general:
- The ACS-only method will be more stable over time.
- The census-share method has more possibilities for big swings over time.
Q: With the data lag, how can I keep a preliminary eye on how my project location might be impacted by COVID-19?
A: For the census-share method, we can analyze the BLS county-level data as it is released monthly to see if it is helping or hurting the TEA status of a project location. March 2020 data should be released sometime in May/June. For the ACS-only method, while we aren’t able to take any direct preliminary looks at the ACS data before it is released, analyzing the same BLS LAUS data can at least give us an idea of how the county of the project is changing over time, which can help us make an educated guess on how new ACS data might change over time. Please e-mail email@example.com if you would like us to keep an eye on the monthly data for a specific location for you.
Q: You mention “typical” TEA methods. Are there any potential “creative” or “outside-the-box” methods we can look at?
A: Under the census-share method, one possibility is to utilize a different/rolling 12-month average to complete the calculation, instead of using a calendar year average. Under typical census-share (such as the states used to use), county-level data from a calendar year is used to complete the calculation, which is why impacts from COVID-19 would not show up until April 2021, when calendar year 2020 data is finalized. However, BLS releases county-level data on a monthly basis. So, we could theoretically look at different “rolling” 12-month periods, instead of the calendar year, as new data is released each month, to see how COVID-19 is impacting a TEA.
- For example, March 2020 unemployment data at the county level, which will show some impacts from COVID-19, should be released sometime in May/June. Once released we could analyze a 12-month period from April 2019 to March 2020 to complete the census-share calculation. Of course, with only one month of impact from COVID-19 in the 12-month calculation, this likely wouldn’t move the needle much. However, as additional months from 2020 are released, we can continue to “roll” the 12-month period and will start to see bigger impacts from COVID-19.
- As a reminder, we would need to compare apples-to-apples to the national rate, so we would need to compare the result in the scenario above to the national unemployment rate from April 2019 to March 2020. The national rate will also be increasing, which will actually eventually make it harder to find TEAs in some areas that aren’t hit as bad by COVID-19.
- USCIS has not provided specific guidance on what time-period must be used as a basis point for a census-share TEA calculation. As a 12-month period is still being used under this rolling method (and technically it would be more current than the typical calendar year approach), it seems that this approach would be reasonable to USCIS. Up until 2015/2016, the state of Massachusetts used a rolling 12-month average for their TEA certifications, so USCIS has seen this approach before. However, as it might “stick out” to a USCIS adjudicator, you should review this option closely with your attorney should you decide to move ahead with this approach.
Q: You mention possibly looking at rolling 12-month periods, instead of calendar year, to get an earlier look at COVID-19 impacts. What about looking at smaller periods (9-month, 6-month, 3-month, 1-month, etc.)?
A: The smaller the monthly group that is utilized, the higher chance there is for bigger swings to happen due to the impacts from COVID-19. However, it might be risky to file an I-526 with a TEA that uses less than 12 months to complete the census-share calculation, as USCIS might question if the TEA provides a full, accurate picture, especially if the impacts of COVID-19 are short-lived. We have never worked on a project that had a TEA calculation done using less than a 12-month data point to complete the census-share calculation. Please contact us if you would like to discuss this, or if you have any different experiences with any non-standard TEA calculations. We can certainly analyze these scenarios for you, but if you had a TEA that only worked with a smaller monthly grouping, you would certainly want to discuss the risk factors with an attorney, especially since you wouldn’t be hearing back from USCIS for a long time on if it was approved/denied. Perhaps the government would be a bit more lenient due to the drastic impacts of COVID-19 throughout the country, but it is of course difficult to predict what USCIS might do.
Q: Will the impacts from COVID-19 make it harder to know if my site will continue to qualify as a TEA?
A: While some TEAs are so significantly above the threshold that they are almost certain to stay a TEA from year to year, even with possible impacts from COVID-19, for many locations it is difficult to tell. Even under normal/stable conditions, we can only do so much to try to estimate the likelihood that a tract(s) will continue to qualify as a TEA as subsequent data is released. With COVID-19, estimating future qualification could be easier for some locations and harder for others. Given the relatively small labor force of most tracts and the difficulty in estimating how a single tract’s unemployment rate is likely to change compared to the national unemployment rate due to the possible dramatic changes due to COVID-19, for some TEAs, it will be even more difficult to say with confidence that a tract(s) that qualifies as a TEA at any single point in time will continue to qualify as a TEA as new data reflecting the impacts of COVID-19 is released. However, as discussed above, we can analyze the new monthly data as it is released to help us analyze how a location might be impacted from COVID-19.
With a city like Las Vegas, which looks like it will be hit extremely hard by COVID-19 impacts compared to the nation as a whole, we can probably say with some confidence that an area that qualifies as a TEA now will probably remain a TEA as new unemployment data reflecting COVID-19 is released. However, for many parts of the country, the answer will not be so clear. Also, as the impacts of COVID-19 should be temporary, we could see some pretty big fluctuations from year to year.
Additionally, some counties with unemployment rates that skyrocket due to COVID-19 might eventually qualify in their entirety, which will remove the need for census aggregation. At least for a time anyway, as those counties could then eventually fall back below the threshold once things return to normal.
Q: What other data besides ACS and BLS could possibly be used?
A: In the final rule, DHS notes that “the final rule does not provide one specific set of data from which petitioners can draw to demonstrate their investment is being made in a TEA”. So, in theory, USCIS might accept other data besides ACS and BLS, but it is unclear what those sources might be. For example, perhaps some local cities or counties will be releasing their own unemployment statistics, however the biggest issue would be convincing USCIS that any other data besides ACS or BLS are “reliable” and verifiable”. Have any thoughts on what additional datasets might be able to be utilized besides ACS and BLS? Please contact us.
The information and opinions provided here are for informational purposes only and do not constitute legal advice. The information and opinions here are intended to guide your conversations with experienced EB-5 attorneys and other professionals. You should not act or rely on any information without first seeking the advice of an attorney.