Since the EB-5 visa and regional center program’s passage in the early 1990s, the EB-5 program has provided an important pathway to citizenship for foreign nationals while simultaneously benefitting those who are already citizens of the United States. In exchange for a qualifying investment that creates or preserves a certain number of jobs, an immigrant investor and his or her family can receive their green card granting legal permanent residency. While the green card is conditional until the conditions on it are satisfied and removed, the program remains an important pathway to citizenship and provides important benefits. The vast majority of EB-5 investors have come from China. According to USCIS data, 85 percent of the investors actively engaged in EB-5 programs, are from China. These investors have gravitated towards projects occurring in Targeted Employment Areas (TEAs) at least in part due to the reduced capital investment requirements. In light of the extensive use of the EB-5 TEA provisions and the bill’s current reauthorization debate, Congress must consider whether the uneven funneling of benefits through major developers to major cities like Miami, New York, and Los Angeles at the expense of rural, depressed areas is tenable for the program.
Why Are Projects in a TEA More Appealing to Investors from China?
Compared to a standard EB-5 project not developed within a qualifying TEA, the minimum levels of investment is reduced for an EB-5 project in a TEA. Whereas the minimum investment for EB-5 is normally $1 million, an investment into a TEA EB-5 project can qualify with as little as $500,000. Furthermore, many of the TEA projects are run through the same mega-developers that many investors perceive as “a safe bet.” The immigrant-investor also receives the same condition green card that he or she would have received under a non-TEA investment. These items plus the fact that return on EB-5 investment is often one percent or less per a year, provides substantial incentive to engage in TEA projects.
The Definition of a Targeted Employment Area
Under the EB-5’s definition of a targeted employment area, rural areas and areas of high unemployment are included. Rural areas are those areas that are not within a metropolitan statistical area or within any town, city or municipality with a population of 20,000 people or greater. High unemployment areas are defined as an area with unemployment at least 150 percent greater than the Bureau of Labor Statistics’ (BLS) national average rate. Under the EB-5 program the individual states are charged with and have the authority to define whether a certain project falls within a TEA. This delegation of authority coupled with a lack of substantive guidance or standards has resulted in unforeseen issues as states compete for EB-5 financing.
Why Does the Definition of TEAs Matter?
There are a number of concerns presented by the EB’s handling of TEA and non-TEA areas. However two of the most pressing are the, where they exist, the inconsistent standards used and the capture of most EB-5 benefits by major coastal cities at the expense of rural areas. The inconsistent standards in use has led to abuse of the system by developers. Many have essentially crafted their own TEAs through creative practices not altogether different from the political practice of gerrymandering. By arbitrarily including certain areas while excluding other arguably more associated tracts, developers can essential create a TEA that benefits the company rather than benefitting U.S. citizens and taxpayers. This tension is further exacerbated by the relatively few number of EB-5 visas available in any given year.
Also at issue is the fact that most of the EB-5 and regional center projects are located in large first-class, coastal cities like Miami and New York. Miami is home to the Skyrise Tower and Panorama Tower projects, New York is home to the Hudson Yards project. But where are all of the rural projects to help ease unemployment in less developed areas? The fact is the cities have captured much of the benefits of the program. If Congress wishes to change this current reality, it has the opportunity during the current battle over EB-5 reauthorization.
EB-5 investors Vista Questions?
If you have questions or concerns regarding achieving citizenship through an EB-5 visa, the experienced immigration and Miami investor visa lawyers of Colombo & Hurd can provide on-point guidance. To schedule an EB-5 immigrant-investor legal consultation call our firm at 800-659-7142 today or contact us online.