The Impact And Evolution Of The EB-5 Program Over The Years

The Impact And Evolution Of The EB-5 Program Over The Years

The EB-5 program has become one of the most popular residency-driven programs in the world, serving as a vehicle for investment to benefit the U.S. economy by attracting investments from qualified foreign investors serving as the source of billions of dollars that have been invested in the domestic economy.

Although the EB-5 program has served as an alternative source of capital to support the U.S. economy and growth and development of all types of projects across the nation, since its enactment, it has suffered from many setbacks and criticisms. This is true, despite its significant contributions to the U.S. job market and to the economy on many levels.

Initially established in 1990 by Congress as a means to stimulate the economy while creating jobs, the EB-5 visa program provides a path for foreign investors to obtain permanent residency through investment and eventually to become U.S. citizens provided certain conditions are met. However, in order to qualify, each investor must demonstrate that at least 10 new jobs will be created as a result of the investment, and the investment threshold must be a minimum of $1MM USD, or $500,000 if the funds are invested in certain high-unemployment or rural areas, known as TEA’s. [1] Most industry stakeholders expect both the minimum investment amounts (to $925,000 and $1,025,000, respectively) and TEA definitions (more limited in scope) to change once new legislation is finally implemented which may well happen before the end of 2017.

Although the EB-5 program has been in place for over 27 years and although it has proven to be an important source of funds for our economy, it has faced ongoing uncertainty. As a program run through the United States Citizenship and Immigration Services (USCIS), the program has faced doubts, several long- and short-term extensions over the years and even some scandals and fraud situations but despite everything, it has remained in far…

As a matter of fact, the importance of the EB-5 program was recognized early, when two years after its enactment, the EB-5 Regional Center Pilot Program was introduced to further enhance the economic impact of the program. This program allows Regional Centers (an organization designated by United States Citizenship and Immigration Services (USCIS) that sponsors capital investment projects for investment by EB-5 investors)[2] to pool EB-5 capital from multiple foreign investors for investment in economic development projects within a defined geographic region. Today, 95% of all EB-5 capital is raised and invested by and through Regional Centers and their underlying projects.[3]

As much as Regional Centers enhanced the economic impact of the EB-5 program, throughout the next years uncertainty has continued to be a big part of the picture. In 1997, 2000 and 2002, the program was extended for three, two and two years respectively. Then, in 2003, when the program was extended for five years, stakeholders held out what ended up being false hope for a more permanent solution. Then, in 2005, USCIS established an Investor and Regional Center Unit to oversee policies and regulation development, field guidance, case auditing, form design and training regarding Regional Center adjudications in an attempt to deal with growing concerns in the program. [4]

The next few years were of pivotal importance in terms of the impact of the EB-5 program on the U.S. economy. When the Regional Center Program was renewed in 2008 for three more years, EB-5 became increasingly popular in the wake of the financial crisis when developers and businesses faced a tough time raising money and turned to EB-5 as a means to find new sources of capital. EB-5 investments filled the funding gap, providing a vital source of capital for local economic development projects and reinvigorating communities, creating jobs, and infrastructure. For instance, “in Pennsylvania, the Pennsylvania Turnpike Commission recently secured a $200 million loan in EB-5 funds to complement $220 million in federal funding for the construction of the Pennsylvania Turnpike/I-95 Interchange project, because EB-5 loans typically have lower interest rates and more favorable financial terms, the state is projected to save about $35 million over the course of the five-year loan.”[5] Additionally, this project is expected to create 5,300 jobs, this example reinforces the facts as of why EB-5 works, how important it is in our economy and the impact it has in creating jobs and infrastructure.

More changes occurred over the next few years, in 2010, when Regional Centers were permitted to include indirect jobs created outside the Center’s approved geographic boundaries in certain conditions. And again, in 2012, when the program was extended for three more years and the word “pilot” was removed from its title.[6] Since then, the program has faced many more extensions in the face of similar pressure to become a permanent program. However, these extensions have been shorter than the previous ones, on September 30, 2015, the program was extended for a year, the next extension was for two more months. On December 6, 2016, the program was extended through April 28, 2017, and then it was extended to September 30, 2017. All of these short, last minute, extensions bring us to today, the last extension from September 30 to December 8th, still hoping for a reform that will make the EB-5 program a permanent one.

Its popularity and proven track record have made the EB-5 program stronger over the years and ever attractive to foreign investors. Additionally, its impact on our economy is something that even skeptics have to recognize. According to IIUSA, the EB-5 program is responsible for raising more than $20 billion dollars in investments, creating more than 176,000 jobs, and supporting more than 560 projects across the country. If the EB-5 Regional Program is allowed to lapse more than $13.7 billion dollars in the EB-5 investment already committed would no longer be available for supporting $573,000 U.S. jobs, contributing $48.5 billion to U.S. GDP and generating $11.9 billion in tax revenue. [7] These amazing numbers cannot be ignored!

Despite the many starts and stops that the program has experienced over the years, and particularly since 2015, the EB-5 Program remains as one of the most famous residency programs globally and is highly valued among U.S. projects and foreign investors alike. Despite doubts, it has continued to rise to the challenges, proving its strong value to our economy and hopefully in the not too distant future it will become a permanent program that will continue to have a positive economic impact over both the short- and long-term.


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