The EB-5 immigrant investor visa program allows non-U.S. persons to obtain United States permanent residency (green card) if they invest $1,000,000 in a new commercial enterprise that creates at least 10 new, permanent, full-time jobs per investor. If the new commercial enterprise is located within a TEA, the required investment is reduced to the $500,000 level (while still creating 10 full-time jobs). If a project in not located within a TEA, then the project is for practical purposes shut out of the competitive market for EB-5 financing in China, because EB-5 investors will not want to invest at the $1,000,000 level when other projects are available at the reduced $500,000 threshold.

The prior TEA certification process limited the ability of California businesses to raise EB-5 financing.

Since April 2012, California would issue TEA designations only to individual census tracts, cities, towns, counties, census designated places (CDP), metropolitan statistical areas (MSA) and rural areas that met the requisite unemployment threshold. If the EB-5 project was located within one of these approved areas, then the project location qualified for TEA designation. However, if the project was not located in one of the pre-approved areas, California would not consider issuance of a TEA even if the area surrounding the project location would meet the criteria for designation as a TEA.

Prior to April 2012, California had a different policy that permitted designation of TEAs in other geographic areas such as enterprise zones, but GoBiz found that the process was cumbersome and time-consuming.

We had previously suggested that the Governor's Office consider and adopt a broader TEA designation policy that was similar to that used in many other states, permitting combinations of contiguous census tracts with an average unemployment rate in excess of 150% of the national average. However, because of various considerations at the time, including workload and a desire to streamline the TEA certification process, the Governor's Office elected not to permit census tract combinations at that time.

The new Special TEA designation policy will have a positive impact on EB-5 investments in California.

The new Special TEA designation policy, effective as of May 1, 2013, supplements the existing designation of cities, counties, individual census tracts and rural areas, and is a welcome addition to EB-5 stakeholders in California. If the project location does not qualify under California's published TEA list, then an applicant may apply for Special TEA designation under the new policy. Under the new Special TEA designation process, a project location can receive TEA certification if it is located within an area of twelve or fewer contiguous census tracts with a total average unemployment rate of 150% of the national average.

The request for Special TEA designation must include a table listing each census tract with its corresponding unemployment rate and a map showing the project address. Interestingly, the Special TEA designation process requires a letter of support from the local Economic Development Corporation (EDC), County or City in which the project is to be located. The letter, a template of which is provided by the Governor's Office, must concur that the proposed TEA census tracts will reasonably be a source of workforce for the project. The rationale from the Governor's Office is to provide local input from the communities most affected by the project. The letter will also likely to serve as a deterrent on arbitrary Special TEA designation requests because of the requirement for an additional level of agency approval.

The Governor's Office changed its TEA designation policy because of input from EB-5 stakeholders.

The conference call evidenced a refreshing commitment by the Governor's Office to the EB-5 Program . . .In discussing the rationale for the new policy, the Governor's Office noted that over the past year, it received input from EB-5 stakeholders, studied the TEA policies of other states, and evaluated the potential benefit of special TEA designation against the additional workload and potential delays in completing TEA certifications. The new Special TEA policy recognizes the reality that job creation occurs not only when a project is located in an area of high unemployment, but also when a project is located in an area of lower unemployment but which creates jobs from the surrounding communities that have higher unemployment. The new policy is a welcome addition and we commend the Governor's Office for leveling the playing field against other states in the quest for foreign investment and job creation in a time of economic distress.

The Governor's Office also presented the 2012 employment data to be used for TEA designations.

In addition to presenting the Special TEA designation procedure, the Governor's Office also presented the new TEA list to be used for TEA certifications between May 1, 2013 and April 30, 2014. The list is based on unemployment rates calculated by the California Employment Development Department using federal Bureau of Labor Statistics data. Of note is that the qualifying 2012 unemployment rates for TEA designation has been reduced to 12.1% (from 13.4% in 2011). Also, because of the reduced unemployment rate, certain areas such as San Bernardino County and the cities of Los Angeles and Long Beach no longer qualify as automatic TEAs.

However, there are still opportunities for EB-5 projects located within these areas to qualify as TEAs either through smaller subdivisions located within these counties or cities (i.e. 19 cities, towns and CDPs in San Bernardino county qualify as TEAs) or through the Special TEA designation process which can qualify areas that are marginally below the unemployment rate threshold.

We are encouraged by the commitment of GoBiz to the EB-5 Program.

The Governor's Office has asked all California regional centers and stakeholders to provide them with their contact information at EBinfo@gov.ca.gov so that the Governor's Office can work with stakeholders to improve access to the EB-5 Program. Interestingly, the Governor's Office noted that the USCIS declined to provide them with the contact information for California regional centers.