On Wednesday, July 24th 2019, the U.S. Department of Homeland Security published a new EB-5 regulation which will go into effect November 21, 2019. The new EB-5 regulations will effectuate a number of changes, including increasing the minimum investment amounts, revising the standards for TEA determination, allowing investors to maintain their priority dates, and clarifying procedures for investors removing conditions on permanent residence.
- Increasing the Minimum Investment Amounts:
The new regulations increase the minimum investment amounts for TEA investments from $500,000 to $900,000 and for non-TEA investments from $1 million to $1.8 million. This change maintains the 50% ratio as before with the minimum investment distinction between TEA and non-TEA investments. Additionally, moving forward, the government will adjust the minimum investment amounts every 5 years to account for inflation.
Investors who have been considering making an EB-5 investment should move so immediately to avoid paying an additional $400,000 for a TEA investment. There is sufficient time to file an investor’s I-526 petition before November 21, 2019. The next 120 days provides investors with ample time to select a project, work on their source of funds documentation with immigration counsel, complete the subscription agreement, wire the funds, and authorize immigration counsel to file their I-526 immigrant investor petition.
- Revising the Standards for TEA Determination:
The new regulation addresses one of the most hotly contested items surrounding the EB-5 program: TEA designation. The regulation changes the manner by which TEAs are determined and removes State authority for TEA designation. TEAs will now be managed by the Department of Homeland Security. Specifically, TEAs may be issued for projects that can meet the 150% the national average unemployment through use of a single census tract, where the project is located, plus directly adjacent tracts that touch the tract where the project is located.
This revised standard will likely minimize the number of projects that qualify for TEA designation. Likewise, we expect to see a change in the types of EB-5 projects in the market with a shift out of major metropolitan areas and into smaller or rural areas, or areas of high unemployment. The new regulations expressly address the contentious ‘gerrymandering.’
- Allowing Investors to Maintain Priority Dates:
One of the positive changes in the new regulations offers investors with approved I-526 petitions the flexibility to maintain their priority dates and file a new petition. This is tremendous for investors who invested in a project that failed or a regional center that was terminated.
- Clarifying Removal of Conditions:
The regulation also provides clarity for investors filing the I-829, Petition to Remove Conditions on Permanent Residence. Specifically, the rule indicates that family members who are lawful permanent residents must file their own application to remove conditions on their permanent residence. This would not apply to relatives who were included in the principal EB-5 investor’s petition to remove conditions.
- Explaining Application of Grandfathering:
Moving forward, there will be no grandfathering of projects, only filed I-526 petitions. As a result, it is likely we will see some projects currently in the marketplace cease fundraising efforts.
Barring legislative action, we expect the new rule will go into effect on November 21, 2019 and become the new standard for the EB-5 program. Developers, Regional Center Owners/Operators, and Investors should act within the next 4 months in order to benefit from the program under the current regulation. There is sufficient time to file EB-5 investor petitions before the new rules become effective. Please reach out to me immediately and directly should you wish to file an investor petition or establish a new EB-5 project.