On December 20, 2019, President Trump signed a spending bill, H.R. 1865 – the “Further Consolidated Appropriations Act, 2020,” which included reauthorizations to both the EB-5 Regional Center Program (“EB-5 Program”) and the Terrorism Risk Insurance Act (TRIA). On December 26, 2019, a New York appellate court reinstated regulations stringently restricting title companies and agents in their marketing efforts. More on these developments below.
H.R. 1865 extends the EB-5 Program through September 30, 2020 (the end of the current fiscal year). The Program will continue with the new regulations that took effect in November 2019 (the “New EB-5 Regulations”).
Notwithstanding the extension, the changes to the EB-5 Program resulting from the New EB-5 Regulations remain in flux as a complaint was filed in the U.S. District Court for the District of Columbia on November 26, 2019 by Florida EB5 Investments, LLC, a Florida-based regional center, against the Department of Homeland Security (DHS) and the U.S. Citizenship & Immigration Services (USCIS). The complaint challenges the validity of the New EB-5 Regulations on the grounds that DHS overstepped its administrative authority and did not take into account the negative impact on the economy and on small businesses (like the plaintiff) as a result of the changes to the EB-5 Program. The complaint also seeks a temporary restraining order and preliminary injunction to halt the implementation of the New EB-5 Regulations (Case 1:19-cv-03573). While DHS has 60 days from the date of the complaint challenging the New EB-5 Regulations to file an answer, many in the industry believe that since the New EB-5 Regulations have already come into effect, the likelihood of the complaint succeeding in reversing the changes to the EB-5 Program is not very high.
There are also two bills circulating in Congress to more extensively revamp the entire EB-5 Program and provide, in connection with the overhaul, a longer term extension (e.g., five years): the “Immigrant Investor Program Reform Act,” S. 2778 (introduced by Senators Lindsey Graham (R-SC), Mike Rounds (R-SD) and John Cornyn (R-TX)) and the “EB-5 Reform and Integrity Act of 2019,” S. 2540 (introduced by Senators Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vt.)). Understandably, the two bills seem to be taking a backseat to other pressing issues currently facing Congress.
Terrorism Risk Insurance Act
H.R. 1865 also extends TRIA through December 2027. The House and Senate passed the Terrorism Risk Insurance Program Reauthorization Act of 2019 weeks earlier with strong bipartisan support in H.R. 4634 and S. 2877.
TRIA was first passed in November 2002 as a counter to the failure of the insurance industry to cover the extensive losses following the September 11 attacks by providing federal support to private insurance. It did this by providing the federal government with a means to assist private insurance in paying out insured losses of a certain amount created by acts of terrorism.
The new law leaves the program’s structure almost entirely identical to the structure it had following the Terrorism Risk Insurance Program Reauthorization Act of 2015. The only changes not related to extension of the date were to create evaluations of the availability and affordability of terrorism risk insurance, with particular emphasis on places of worship and the creation of a study and report on how the bill should address cyber terrorism.
New York Title Industry Regulations
In October 2017, the New York State Department of Financial Services (DFS) announced sweeping new regulations aimed at curtailing marketing expenses, such as meals and sporting events, that title companies ultimately pass on to their customers. Since then, the regulations have been challenged in court by the New York State Land Title Association, annulled, reinstated in part by an appellate court, remanded back to the lower court and, in August 2019, were struck down yet again (for more detail, read our previous alert). The DFS appealed again after the August ruling and, on December 26, 2019, the appellate court again sided with the DFS and reinstated the regulations. The DFS has called this “a victory for New York consumers” and the New York State Land Title Association has said they are reviewing the decision and “determining next steps.”