September 20, 2018

September 20, 2018

Subscribe to Latest Legal News and Analysis

September 19, 2018

Subscribe to Latest Legal News and Analysis

September 18, 2018

Subscribe to Latest Legal News and Analysis

September 17, 2018

Subscribe to Latest Legal News and Analysis

Chilling Effect of Proposed EB-5 Investment Amounts on EB-5 Regional Centers in Rural States

Lawmakers are again considering changes to the EB-5 Program. In fact, before the end of this month, we may see provisions from the “Immigrant Investor Visa and Regional Center Program Comprehensive Reform Act” or “EB-5 Reform Act,” which is still circulating in draft form, packaged into an omnibus appropriations bill. This is consistent with what we thought may happen last October, when we predicted that changes to the EB-5 Program could come through an omnibus bill.

The EB-5 Reform Act is troubling. The proposed legislation contains draft language that would change minimum investment amounts. Specifically, the proposed minimum investment thresholds would be $925,000 for projects in areas of high unemployment or targeted employment areas (TEA), and $1,025,000 for projects in areas of regular or high employment.

This is a substantial departure from the status quo. The current investment amount for EB-5 is $1,000,000, but investors in projects in TEAs (including rural areas) qualify for a downward adjustment of that amount to $500,000. These investment amounts currently in effect are consistent with the intent of lawmakers, who sought to create a program that gave economically challenged and rural areas an advantage in competing for foreign capital. In other words, the EB-5 Program should benefit areas of the country that have a tougher time incentivizing foreign investment.

But the EB-5 Program may be undergoing change that would severely limit rural states from access to this capital. The framework for changing the minimum investment amounts to $925,000 and $1,025,000 favors developers in major urban areas. The purpose of reducing the differential in investment amounts is to erase the relevance of targeted employment areas altogether.

Proponents of this framework claim that proposed annual EB-5 visa number set-asides for investments in rural and urban distressed areas balance out any concerns that rural regional centers should have about these proposed new investment amounts. But this new $100,000 investment differential will more likely than not have a chilling effect on any regional centers seeking to raise EB-5 capital for projects in rural states.

This re-setting of investment amounts to favor urban developers is bad policy for the EB-5 Program. The law should not give large developers a systemic upper-hand in attracting investment to the most prosperous areas of large cities, at the expense of this investment flowing into rural states.

If the new investment amounts in the framework become law, developers in major urban areas will use the EB-5 Program to enjoy the low costs of EB-5 debt or equity being deployed for large-scale refinancing of more expensive debt. This is not how Congress intended the EB-5 Program to work. It makes good sense for lawmakers to consider EB-5 investment amounts more carefully. Otherwise, the EB-5 Program will have a limited future in rural and distressed areas.

©1994-2018 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

TRENDING LEGAL ANALYSIS


About this Author

Douglas Hauer, Corporate Immigration Attorney, Government Investigations, Mintz Levin Law
Member

Doug is a Member in the firm's Corporate & Securities Practice and Immigration Practice. On the corporate side, he focuses on private offerings and related securities work. Doug serves as counsel to developers and businesses seeking capital through the EB-5 investor visa program. He also counsels lenders, private equity firms, and EB-5 Regional Centers on all aspects of EB-5 financing. In the immigration law space, Doug represents corporate, institutional, and individual clients in routine and complex immigration matters. He has in-depth...

617-348-3044
Alexander Hecht, Vice President of Government Relations, Mintz Levin law Firm
Vice President of Government Relations

Alex is Deputy Director of the Mintz Levin Center for Health Law & Policy. He is an attorney with more than 10 years of senior-level experience in Congress and trade associations.

Alex assists clients with their legislative and regulatory needs on a wide range of issues. Prior to joining ML Strategies, Alex served for over six years as chief counsel for Senator Olympia J. Snowe (R-ME) on the US Senate Committee on Small Business & Entrepreneurship. He was the lead policy counsel for Senator Snowe on health insurance market reform, individual and employer-based insurance, ERISA, COBRA, HIPAA, and health care tax incentives. He worked on numerous bills, including the Patient Protection and Affordable Care Act of 2009, Health Care and Education Reconciliation Act of 2010, Small Business Health Fairness Act, and Small Business Health Options Program (SHOP) Act. He advocated for health care legislative and regulatory issues before Senate Finance, HELP, Commerce, and Homeland Security Committees, as well as the US Department of Health and Human Services and Department of Labor. Along with health care policy, he advised Senator Snowe on energy, financial services,  innovation, and technology matters.

Alex is also an adjunct assistant professor of Health Policy at the George Washington University School of Public Health & Health Services, and teaches courses on Basics of Legislation and Regulation and the Data Quality Act and Public Health.

Alex is regarded as one of the leading congressional staff specialists on the regulatory process and how federal agencies promulgate rules and regulations. He has developed numerous bills and amendments reducing the regulatory compliance burden of business.

202-434-7333
R. Neal Martin, Government Relations, Mintz Levin, Law firm
Senior Manager of Government Relations

With more than 10 years experience in government and government relations, Neal focuses on issues related to transportation and infrastructure, clean energy, trade, and federal appropriations. Working with a client portfolio made up of non-profits, clean energy start-ups, and large companies, Neal’s efforts have focused on increasing client visibility and influence with decision makers at the congressional and federal agency level, and providing strategic advice on public policy and federal funding opportunities. 

202-434-7458