[Update, 3/11/22: Both the the Senate (yesterday) and The House of Representatives (on March 9 ) passed a continuing resolution on appropriations including the EB-5 revival and reform provisions. The CR is expected to be signed by the President momentarily.]
[Update, 3/10/22: The House of Representatives on March 9 passed a continuing resolution on appropriations including the EB-5 revival and reform provisions. That CR is now before the Senate.]
Congress is on the cusp of passing a re-authorization — and a reform — of the main part of the EB-5 (immigrant investor) program after a lapse of more than eight months.
This is the segment of the program that allows regional centers (usually controlled by residents of the U.S.) to manage pools of investments from wealthy aliens (usually from China) who secure a family-sized set of green cards thereby. The investments are almost always in big-city real estate deals. There has been massive corruption in the program for years as many fast-talking Stateside developers have taken advantage of gullible aliens.
Last June, the Senate allowed these arrangements to expire, as this part of the program has always been temporary legislation. This happened when the advocates of EB-5 reform tangled with those who wanted to leave the program, flaws and all, to continue as it was.
The re-authorization will change the program in many ways, mostly for the better, but it will still allow wealthy aliens with no other qualifications than cash to come to the U.S. with their families.
In recent months, the EB-5 program has been running at about 4 percent to 5 percent of capacity, as a continuing part of the program allows only direct investments, as opposed to pooled ones. These direct investments — at the moment — require $500,000 minimum investments; when, and if, the new provisions are signed into law, the least expensive of the ventures will be at the $800,000 level.
The EB-5 program (the fifth employment-based category under the immigration law) sets aside nearly 10,000 visas a year for investors and their families; since the family size averages 2.5 people, this means that about 4,000 new investments a year come through this route, which provides a tiny fraction of the new annual alien investment in the U.S.
As this is written, on Tuesday, March 9, the House of Representatives is about to pass a continuing appropriations bill, which will accomplish many things and consumes more than 2,700 pages of text. Its main purpose is to keep the government funded, but it includes many other items, one of which is the re-authorization of the regional center program. If there are disagreements between the Senate and House on some issues they are expected to be resolved and the threat of no government spending after March 11, the current deadline, will go away.
The text of the legislation just released by the Rules Committee includes 115 pages on EB-5, at just about the end of the bill. Since EB-5's problems are numerous and detailed a lot of ink is needed to try to cope with them.
Among the reforms (to be described in more detail in a subsequent posting) are these:
- Lifting the minimum size of the individual investments from $500,000 to $800,000;
- Making it much more difficult to gerrymander the location of the investments; too many in the past included, for example, combining a building on Wall Street with a chunk of the East River and then strips of territory to reach a public housing project deep in Brooklyn — all of which provided the number of unemployed people needed to make the Wall St. building part of a “depressed” area;
- Creating a detailed “integrity package” to tackle the problems of corruption; and
- Requiring a more sensible package of fees to be paid by the investors and the developers, which will provide the funding needed to support the integrity package.
Sens. Chuck Grassley (R- Iowa), and Patrick Leahy (D-Vt.), two of the most senior senators, have pushed through the EB-5 reform.