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Who benefits from the new EB-5 regulations, and who doesn’t

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Immigration Law Firm Greenberg Traurig has broken down the winners and losers of the new rule. Winners include rural areas and projects; some investors with approved I-526’s, who are not yet conditional permanent residents, and who are invested in failed projects; dependents looking to file their own I-829 petition. Losers include less-affluent applicants because of increased investment amounts, individual states, and conditional permanent residents invested in failed projects.

WHO BENEFITS FROM THE NEW REGULATIONS

Rural areas & projects

Under current regulations the vast majority of EB-5 investment projects were given Targeted Employment Area (TEA) status. The new rule, with a much stricter definition of such status, will no longer allow most urban areas to be deemed as such. Rural projects — and by extension rural areas — will see more EB-5 capital come their way.

Applicants invested in failed projects

An investor with an approved I-526 petition and who has not yet received his or her conditional permanent residency can file a new I-526 and keep their older priority date. This can assist investors who are either involved with a failed project, a held-up project, or a EB-5 regional center that has been terminated. This will be positive for investors from backlogged countries who need to file a new petition.

I-829 dependents

Under existing regulations, dependents are included in in the principal applicant’s I-829. But if the principal applicant’s I-829 is not approved or has not filed, dependents cannot be approved to have conditions approved. New regulations allow dependents to file I-829 petitions on their own. Greenberg Traurig points out that this can aid divorced spouses who are not in contact with their principal applicant spouse. The law firm also adds the DHS has made it clear that in the case where a principal applicant is deceased, the dependents can file I-829’s on their own, or together.

Economists

While economists are currently necessary in EB5, the new regs further increase their significance. Current TEA rules make it possible for people without such a background to ascertain if the special designation can be applied. No more when the new rules kick in. The factor of weighted averages of unemployment from all relevant census tracts will increase the complexity of making TEA determinations. Greenberg Traurig says that while the necessary information is made public, such calculations will be “extremely burdensome for an average layperson to make.”

Another important point to observe is the impact the this will have on regional centers who seek TEA designation through filing an exemplar I-924 application. The problem is that processing times for I-924 applications usually take longer than the window of time the unemployment data is considered current and valid — one year. So TEA designation by exemplar approval will only apply for a very short period.

WHO DOESN’T BENEFIT FROM THE NEW REGULATIONS

Individual states

With Department of Homeland Security (DHS) officially transferring TEA designation to the federal level, individual American states will lose their influence in making such a decision. Greenberg Traurig reminds us that as the EB-5 program was meant to stimulate economic development, such a move is contrary to the original intent of the program. The law firm cites prior language that says such determination “should not be conducted exclusively at the Federal level without… participation from state or local government.”

This should, however, come as no shock to anyone following EB-5 process, as critics felt that numerous examples of upscale urban developments, like Hudson Yards, were taking advantage of TEA status.

Investors without deeper pockets

Considering the vast majority of current and past EB-5 investments had TEA designation and many projects in the future will not have that status, it’s clear to everyone that raising investment amounts will have a limiting effect on the market. $900,000 represents an 80% increase from $500,000. $1.8 million is also an 80% increase from the current standard amount of $1 million. But given that many more investors will have to choose non-TEA projects in the future, the $1.8 million number is actually a 260% increase from $500,000 almost every applicant invested before the change.

ll not make the program viable for many who are currently considering it.

Applicants who have invested in failed projects — and are conditional permanent residents

These investors cannot take advantage of priority date retention. So if a conditional permanent resident investor cannot remove their conditions (for example, their project did not meet job creation requirements) that investor must file a new I-526.

The DHS reasoning for this clear division between investors without and with such conditional permanent residency is something that Greenberg Traurig says fails to “hold up under scrutiny.”

If a conditional permanent resident investor has to file a new I-526, they will likely have to leave the U.S. And if they come from a country that is backlogged, like India, they have to go to the back of the line and wait many more years.

Department of Homeland Security

Greenberg Traurig also includes DHS as a “loser” of the new regulations. The law firm acknowledges that while an increase in investment amounts made sense, competitive programs from other countries were not properly discussed and considered. The implication is that the increases are too steep and could lose competitive footing to other cheaper or more attractive immigration by investment programs.

DHS also emphasizes that they cannot determine if there will be fewer applications because of the investment increases. Greenberg Traurig says what we are all thinking here: “This belies common sense.”

DHS also makes another head-scratching declaration that other areas will be able to qualify for TEA designation, despite the fact that the new rule imposes much stricter criteria.

Act of qualifying as a TEA

Another important point is the impact the new regulations will have on regional centers who seek TEA designation through filing an exemplar I-924 application. The problem is that processing times for I-924 applications can often take longer than the window of time the unemployment data is considered current and valid — one year. So TEA designation by exemplar approval will only apply for a very short period.

Read the Greenberg Traurig article in The National Law Review