Will EB-5 Renewal Be as Dramatic as for the Patriot Act?

By David North on May 27, 2015

The answer to the question in the headline is "probably not", but there are some similarities in the proposed extensions of the EB-5 program and that of the USA Patriot Act.

As this is written it is not clear whether all, or some part, of the Patriot Act will be extended by the June 1 deadline.

Meanwhile, the main part of the EB-5 (immigrant investor) program is also up for renewal on September 30.

In each instance it is a portion of the measure that causes more controversy than the general activity.

With the Patriot Act, it is NSA's bulk collection of data on phone calls; with EB-5 it is the half-a-million-for-a-bunch-of-green cards provision. In the EB-5 case, what used to be the principal part of the program — visas for million-dollar investments anywhere in the country — is permanent, only the half-million part is up for extension. (Aliens can buy a set of green cards at that lower price if their investment is in "targeted employment areas", i.e., rural areas or any area with high unemployment.) Few investors opt for the million-dollar provision with the half-million offer also on the table.

If the half-million part of the program is not extended, it would put out of business the hundreds of regional centers that play a central role in the program, linking alien investors with U.S. developers. So it is the political heft of the regional centers, not that of the rich aliens, that counts in the politics of this matter.

The EB-5 promoters not only want to make the program permanent, they want to add a series of sweeteners to the bill, such as removing some of the congressionally imposed numerical limits. (For an industry view of this, see here.)

To my knowledge, only one bill along these lines has been introduced, H.R. 616; the author of the misleadingly titled bill, the "American Entrepreneurship and Investment Act of 2015", is Jared Polis, a relatively junior Democrat from Colorado. There are also 18 co-sponsors: eight Republicans and eight Democrats from the mainland and two Democratic island delegates (who have no vote on the floor, but do in committee).

The only overlap between these 19 and the membership of the all-important House immigration subcommittee is the delegate from Puerto Rico, Pedro R. Pierluisi.

The bill's reception in the House committee may be warmer than in the Senate, where the chairman of the Judiciary Committee, Chuck Grassley (R-Iowa), has been a highly articulate critic of the program, and of its management when it was in the hands of Alejandro Mayorkas, now deputy secretary of DHS and formerly head of USCIS. The chairman of the subcommittee is Congress's leading immigration skeptic, Jeff Sessions (R–Ala.).

I say that the title of the bill is misleading because neither the alien investors (who simply have to write a check) nor the investments made have much to do with entrepreneurship; the money is usually used in slightly disguised bridge loans for real estate developments. These are usually hotels or shopping centers or residential developments. There may be some EB-5 money going into start-up software firms, but I have never heard of it.

Prediction: I think that H.R.616 per se, does not stand a chance; on the other hand I doubt if the regional center (i.e., half-million) part of the program will be allowed to die. I think that in late September a straight-out extension of the program will be tacked onto some other legislation and it will continue without any changes.