On Friday, February 22, 2019, the United States Citizenship and Immigration Services (USCIS) sent over to the U.S. federal Office of Management and Budget (OMB) their final regulations concerning its “EB-5 Immigrant Investor Program Modernization”. This is in follow up to USCIS’ proposed rules submitted on January 13, 2017.
In said regulations USCIS proposed changes to the EB-5 Program which included the proposed increase of the minimum investment from $500,000 to $1.35 million for capital contributions made within Targeted Employment Areas (TEAs), and from $1 million to $1.8 million.
1. Why is USCIS raising the minimum investment threshold?
There has been no increase since the inception of EB-5 in 1990 and USCIS initially anticipated that only 30% of investors will apply under $500,000 threshold, however over 95% of investors apply under the $500,000 threshold.
2. What happens if I have an EB-5 case pending. Will I need to pay in the difference?
3. What happens if I file BEFORE the final rules comes into effect? Will I need to pay in the difference once the final rule becomes effective?
4. Someone else told me this EB-5 program/law was extended till September 2019
This is correct. However, it is important to understand how both the US legislative and US regulatory processes work. When a new program is created in the US it is enacted by specific legislation that is passed by Congress (like the EB-5 Regional Center program) who, in creating the program sets up the general framework of the program, but then assigns oversight of the program to some regulatory agency of the government (in the case of EB-5 — to USCIS). Congress then relies upon the regulatory agency to adopt a set of regulations that determine, for example, procedures for its implementation, rules for participation, the process of adjudicating applications and, sometimes, the amount of fees for participation in the program. Sometimes (and this is the case with the EB-5 Regional Center program) the fees for participation are initially set by Congress in establishing the program, but allowance is made for the regulatory agency to change those fees over time. The agency is free to raise the fees, provided:
1) they follow a detailed process (9 separate steps) for doing so (i.e., publishing of the proposed rule change, public comment, revision after public comment, adoption of final proposed rules, publication of final rules, etc..,), and provided that
2) Congress doesn’t intervene itself to set a new fee structure. If, however, Congress steps in again during this 9-step regulatory adoption process and passes a new law that changes the fee structure, the work done by the regulatory agency goes out the window and the new Congressional legislation controls the new fees.
In other words (and in the case of EB-5), USCIS is free to raise the price of participation in the program internally, through agency regulation, and without the necessity of the change being approved by a vote in Congress, unless and until Congress passes a law raising the price on it’s own. Currently there have been numerous bills (at least 6 that I have been tracking) that have been introduced into Congress (since about 2015) proposing sweeping changes to the EB-5 program, changes that include raising the minimum investment amount from $500,000 to anywhere between $8,000 and $2,000,000. That legislation has gone nowhere really (never making it into even a final form bill capable of being presented for a vote in Congress). At the same time, and over the last couple of years, USCIS itself has been proposing sweeping changes to the EB-5 program, changes which include raising the price. Those USCIS regulations have now made it through 8 of the 9 necessary steps. The regulations themselves would raise the price of EB-5, without the need for any further input or approval from Congress.
5. Will USCIS raise the minimum threshold investment again in the future?
YES – USCIS also proposed to make regular inflation-based adjustments in the standard minimum investment amount “every 5 years, beginning 5 years from the effective date” of the regulations.
6. How did USCIS arrive the proposed increased amount?
USCIS calculated the inflation-adjusted amount of $1 million in today’s dollars and calculated $1.8 million. Rather than applying a 50 percent reduction to its proposed new amount (i.e. making the minimum investment $900,000), USCIS has decided to apply a 25 percent reduction. Thus, it has arrived at $1.35 million, which will be the minimum investment amount unless USCIS revises its approach.
7. What happens next?
The uncertainty lies in how quick the final step will take before this all come into effect. We will continue to monitor the progress and when the final regulations are published in the Federal Register. Upon their publishing, it is our opinion that under the Congressional Review Act (CRA), the USCIS should be required to have the regulations be delayed by a minimum of 60 days before becoming final and effective. This is the norm for many past immigration regulations.
So what is the bottom line? It will be important that prospective EB-5 investors file their I-526 petitions before an effective date is revealed that could increase the minimum investment amount