EB-5 Reform And Integrity Act | Bi-Partisan EB5 Bill Introduced by Senators Grassley and Leahy
A Possible New Era for EB-5 Reform and Immigration Investments in the New Administration.
The EB-5 Reform and Integrity Act is a bipartisan bill introduced in 2019 in the US Senate that would codify and reauthorize a certain type of investment-based U.S. immigrant visa program. It was introduced by both Republican Senator Chuck Grassley (R-IA) and Democratic Senator Patrick Leahy (D-VT).
The Bill was created:
“To reauthorize the EB–5 Regional Center Program in order to prevent fraud and promote and reform foreign capital investment and job creation in American communities.”
If signed into law, the EB-5 Reform and Integrity Act would:
- Extend the EB-5 Regional Center program through September 2024.
- Allow DHS more authority to deny applications based on fraud or other offenses.
- Make Regional Centers and investors pay into a fund that DHS would use to investigate fraud and conduct audits.
- Require background checks for Regional Center principals and project principals.
- Give the applicants (investors) more disclosure information about risks and conflicts of interest.
- Change how “expected jobs created” is calculated to be more accurate.
- Decrease the processing times for petitions.
- Prohibit foreign ownership of regional centers.
Let’s do a quick review of the EB-5 Immigrant Investment Visa Program
The EB-5 immigrant visa category was created by Congress in 1990. Targeted at qualified foreign nationals, seeking to obtain lawful permanent residency. Green Cards are bestowed in exchange for investing in a new American commercial enterprise, creating at least 10 new full time jobs. Administered by the United States Citizenship & Immigration Services (USCIS), investment amounts are $900,000 in a Target Employment Area (TEA)project, and $1.8 mil in other areas.
EB-5 investors have 2 avenues for pursuing their US Green Cards: The Direct EB5 Program, or via a EB5 Regional Center. A Regional Center is a private or public entity designated by USCIS, and authorized to coordinate with multiple immigrant investors.
“The Regional Center Program allows for the use of economic modeling to calculate the indirect and induced job creation related to all spending for each project. This means that in the Regional Center Program, the EB-5 investor can rely upon direct, indirect, and induced jobs to meet the job creation requirement of the EB-5 program.”
Now, let’s read this comparison between the EB-5 Reform Proposal by Senators Grassley and Leahy with the Current EB5 Direct Program/ Regional Center Setup.
Up to 90% of job creation may be indirect
Records for each regional center must be maintained for five years
Audits for each regional center must occur every five years
Business plans for regional center investments (aka “exemplar” applications on a Form I-924) must be filed and include the following: material investment risks associated with the new commercial enterprise or job creating entity; conflicts of interest; any material litigation or bankruptcy for the last 10 years; any fees paid to agents, finders, or broker-dealers.
Business plans for regional centers do not necessarily have to be filed before investor petitions are filed
Annual statements must be filed by each regional center
Exclusion of persons if they have been involved with fraud, have been imprisoned for more than one year, were subject to an adverse final order by a financial regulator
Foreign involvement in the regional center program: a person involved in the program must be a national or permanent resident of the U.S.
Reasonableness standard require a regional center to use commercially reasonable efforts to monitor and supervise securities transactions
Integrity fund of $20,000 per regional center or $10,000 for a regional center with 20 or fewer investors the previous fiscal year
The fund shall be used to detect and investigate fraud; determine if regional centres, new commercial enterprise, and job creating entities, and investors are in compliance with immigration laws and program rules; and conduct audits and site visits.
Direct and third-party promoters (including migration agents) follow standards that may include compliance with federal and state securities laws, registration with the U.S. Citizenship and Immigration Services (USCIS), bona fide rules, guidelines for accurately representing the visa process to foreign investors, and permissible fee arrangements under applicable securities and immigration laws
Source of funds include:
any business and/or tax records of any kind from the past seven years to be filed with the I-526 petition; also must include any other evidence identifying the source of capital or administrative fees
This includes the identify of all persons who transfer the investor’s funds into the U.S.
Gifts and loans must be gifted or loaned in good faith and not come from any illegal activity; the donors records must be included
In the event of a terminated regional center or debarred new commercial enterprise or job-creating entity the investor has 180 days to file with a new and approved entity and make any additional capital investment (if any is required) to fulfil remaining job-creation requirements
In such cases, investors will still retain their priority dates and children will be protected from “ageing out”
Threats to national interest the Department of Homeland Security shall deny or revoke any petition, application, or benefit if it is deemed a threat to public safety or national security
Permanent barring from the EB-5 program of any person — including EB-5 investors — involved with a regional center, new commercial enterprise, or job-creating entity that was terminated for being a national interest threat if that person was a knowing participant in the behavior that led to the termination
Fraud, misrepresentation, and criminal misuse will result in a the denial or revocation of any petitions, applications, or benefits
Fund administration is required by a new commercial enterprise and investor capital must be maintained in a separate account
The job-creating entity shall maintain these funds in a separate account until deployed into the EB-5 investment project
With exceptions, a new commercial enterprise shall retain an independent fund administrator to monitor, track, and approve transfers, as well as provide investors with periodic updates regarding the activity of the account
Exceptions may apply if the new commercial enterprise or job-creating entity is under the common control of a registered investment advisor or broker dealer; or an exception may apply if there is an annual independent financial audit
Effective Date of Section 2 would be 90 days after the Act is enacted
Conditional permanent resident status for EB-5 investors, spouses, and children 2020
This amends Section 216A of the Immigration and Nationality Act which relates to the removal of conditions on permanent residency
Discretionary provision of a one-year extension to conditional permanent residency status for job creation
Such an extension requires the investor’s EB-5 capital to be invested for that period
This can apply to EB-5 investors who have been the victims of fraud
EB-5 Visa Reforms
Additional ageing-out protection for children of investors who have had their conditional permanent residency terminated under section 216A or the new subparagraph (M) and in the event the principal investor has filed a new petition
Such ageing-out protection depends on the child remaining unmarried and the investor filing a new I-526 within one year of the termination of their conditional permanent residency.
procedure for granting immigrant status
An EB-5 investors must be eligible according to the current laws at the time of filing his or her petition
Petitions filed in the regional center program as amended by the new subparagraph “(E) Reauthorization and reform of the regional center program,” will be subject to the approval of an exemplar approved under new subparagraph “(F) Business plans for regional center investments”
DHS must continue to adjudicate petitions during the implementation of this Act.
Within a year of the enactment of this Act, USCIS must complete a fee study
Within 60 days of the completion of the study, the Director of USCIS must set fees for full recovery of costs of services including the cost of completing adjudications that average no more than…
180 days for regional center designation
180 days for approval of an investment in a new commercial enterprise
90 days for approval of an investment in a new commercial enterprise within a Targeted Employment Area
240 day for an EB-5 investor petition
120 days for an EB-5 investor petition in a Targeted Employment Area
240 days for an EB-5 investor petition to remove conditions.
Impartiality Employees of the Department of Homeland Security shall act impartially and may not give preferential treatment to any entity, organization or individual
All case-specific written communication, including emails, with non-Department persons or entities must be recorded
Substantive oral communication shall be recorded or documented in detailed minutes.
In summary, let’s contrast the Grassley EB-5 Reform with the Current Program:
- Re-authorization of the Regional Center Program through to end 2024
- Stricter Regional Center Integrity Measures
- A Second Chance at Job Creation
- Faster Processing
- More accountability and transparency
“For many years, I’ve expressed concerns about the rampant abuse and fraud in the EB-5 program. Both the Trump and Obama administrations understood the need to take decisive action through regulations to modernize EB-5 and restore its central purpose of promoting investment in rural and economically challenged regions. I’m pleased that the Trump administration published those regulations earlier this year. However, some of the most frightening weaknesses in the program, including national security vulnerabilities, require congressional action. This bill builds upon our previous efforts to restore integrity and security in EB-5, and it includes the reforms sought by DHS since the Obama administration. Given what we learned about the vulnerabilities in this program, we cannot afford to continue this program without addressing these critical issues.”
Senator Grassley (R-Iowa)
“I have partnered with Senator Grassley for years to clean up the EB-5 program. We successfully worked with both the Obama and Trump administrations to take important administrative steps to promote integrity and end the abuse of investment incentives that have plagued the program. But the Department of Homeland Security cannot fix all of the EB-5 program’s flaws on its own. We are hopeful that Congress will finally take decisive action to address the fraud and other vulnerabilities that have come to define this program. Our bill would do just that.”
Senator Leahy (D- Vt.)
Pros and Cons of Current EB-5 Program
- Can invest in a range of TEA areas, rural and urban.
- Possibility for significant return on investment.
- Has had irregular Regional Center Program protocol enforcement; resulting in fraud cases and missing funds.
- Processing times have, at times, and for some country nationals, been unreasonably long.
- Regional Center Program has never been permanent, instead relying on continual extensions rather than a set term.
Pros and Cons of EB-5 Reform And Integrity Act
- Will focus on rural and impoverished areas in the USA
- Will offer more security for all players.
- Will reduce availability of TEA projects in thriving economic areas, possibly lowering the potential projects returns for the investor.
With the change in power in Congress, we could finally see this Bill pass in early 2021, considering the Biden’s administration immigrant friendly stance.
Become American Investor LLC is an EB5 Managing Entity operating out of Miami Florida.
3101 Archer Road LLC is the developer for a preferred equity development fund and the TEA project entitled Archer Place. Foreign national investors have the limited opportunity to invest in and create 10+ jobs in the exclusive construction of the development, in exchange for the opportunity to receive a US Permanent Residency.
In anticipation of the passing in Congress of the EB-5 Reform And Integrity Act Of 2020, Become American Investor LLC is managing this development fund and EB5 NCE in accordance with these updated regulations. Regarding investor source of funds; business plan documentation and transparency; project analysis; returns on investment, and internal auditing.
Click the link below to book a meeting today to receive your confidential immigration and investment information.