The EB-5 Reform and Integrity Act of 2022 brought many changes to the EB-5 program. For the latest information, please click here.
The EB-5 industry is rightly focused on the legislative process for reauthorization and reform of the EB-5 program. However, no matter how positive the legislative reform might be, the future of the program is in jeopardy unless the problem of quota backlogs can be successfully addressed.
Others have opined that the likely wait for a Chinese investor who files an I-526 petition today is at least six years. Some have speculated that it might be longer, and some shorter. The purpose of this blog is not to add to the speculation. Whatever the wait actually ends up being, it is clearly long enough that it will dissuade demand and make the EB-5 alternative a very unattractive one.
The facts are not in dispute:
Over 20,000 immigrants with approved EB-5 petitions are pending at the National Visa Center or USCIS. Over 20,000 investor I-526 petitions are pending, which likely represents over 60,000 immigrants. Only 10,000 immigrants can be admitted per year in the EB-5 category.
In light of this reality, the EB-5 industry needs to prioritize achieving a solution that will ensure the longevity of the EB-5 program. Let’s explore the options.
We need to convince our allies in Congress that the numbers – roughly 3,000 investors per year with 7% per country limit and one country accounting for 85% to 90% of all investors – simply don’t add up. The issue must be presented in dollars and cents. If, for example, Congress agreed that it really intended to authorize 10,000 investors (rather than the present interpretation of 10,000 people, including family members), the number of investors would triple. The net effect would be over $5 billion of additional foreign direct investment per year (assuming the proposed $800,000 minimum investment amount). If the $10,000 per investor fee that was part of the draft Senate bill is included in new legislation, it would add approximately $70 million annually to the U.S. treasury.
So it is critical that our 2016 lobbying efforts focus on convincing our allies that addressing the program-debilitating backlogs is a top priority. With that said, what are the options? Although I defer to our legislators on what is the most politically palatable, the following are among the options:
- Adding language to make clear that Congress intends that the 10,000 visas are for 10,000 investors, not 10,000 people, including family members. If it is more politically palatable, Congress could apply this provision only to EB-5 rather than to all employment-based categories. This will be a hard sell because, in the end, it means more immigrants; and the accepted dogma has been that Congress will not agree to increase the number of immigrants. That is the reason why I did not even mention as one of the options simply increasing the 10,000 numbers for EB-5.
- Recapturing unused EB-5 numbers. It is certainly true that many EB-5 numbers have gone unused by investors in past years. However, they have been used by other categories of immigrants. That fact will make this a hard sell.
“Borrowing” numbers from other categories. The most likely category is the diversity lottery. Although it is not at all inconceivable that a majority of the House and Senate could agree to this, at least one or two influential legislators would be strongly opposed, which could make this a non-viable option. Also, although the EB-5 industry would presumably give this full support, the immigration advocacy groups would likely be divided.
Another possibility is EB-1 (extraordinary ability, outstanding professors and researchers, multinational managers and executives). Of the 40,000 numbers per year allocated to this category, many go unused and fall to other categories – but not to EB-5.
Eliminate the per country quota for EB-5. This option has been floated for other employment-based categories and has proven to be very divisive. Basically, the result would have been speeding up the EB-2 and EB-3 process for Indians and Chinese and slowing it down for all other nationalities. There is a possibility that this proposal would be less divisive if it were limited to EB-5 since such a large percentage of the EB-5 category is Chinese nationals. However, that is the same reason that this “solution” would still likely leave a significant backlog for Chinese investors. However, it would be better than the present conundrum.
I should note that it would not be unprecedented to have provisions limited to EB-5. As examples, the statute limits Section 245(k) to employment-based categories other than EB-5. Also, USCIS applies concurrent adjustment filing to other employment-based categories but excludes EB-5.
Providing a statutory option for investors with filed (or approved) EB-5 petitions to enter the U.S. and stay in the U.S. pending immigrant visa availability. Let’s discuss a couple of options. One option is to provide specific parole authority to USCIS for approved EB‑5 petitions. This parole authority would enable such investors and their families to enter the U.S. as parolees with the possibility of obtaining extensions of parole status during the waiting period until they can become conditional permanent residents.
Another possibility would be creating a nonimmigrant category for investors who have invested at least $500,000 in the U.S. This could be similar to the E-2 treaty investor category which presently exists only for countries with treaties of friendship, commerce and navigation or bilateral investment treaties with the U.S.
I have previously blogged about the possibility of litigation to challenge the Department of State and USCIS interpretation of existing law that includes family members in the 10,000 visa numbers provided for EB-5 investors. Without again going into legal detail, in my opinion the existing law requires counting family members in the per country quota but not in the worldwide quota. If I am correct, and if family members should not be included in the worldwide quota for EB-5, the 10,000 investor limit per year should be sufficient to accommodate demand, meaning that the per country limit should never be reached.
That does not mean that litigation has a good chance of success. Because of a legal doctrine called “Chevron deference” (which means that the courts would tend to defer to a consistent interpretation by the government unless the law is clear), the litigation would realistically be difficult. Perhaps it would have no better than a 25% chance of success. However, a 25% chance of solving a mammoth problem that may have no other solution sounds like a good option to me. Because it would be difficult to imagine that any single investor would be prepared to fund such major litigation, this may be an opportunity for major developers with a large stake in EB-5 and with a lot to lose if the quota problem is not solved to fund such litigation.
I can tell you from personal knowledge that we were very close to convincing the Administration to adopt by executive action the interpretation that the 10,000 number means 10,000 investors. However, at this time, the chances of success are extremely small. The effort was derailed by a combination of the Administration’s fear of being sued and the active opposition of at least one other government agency.
The more viable option for executive action is exercising parole authority for approved EB-5 investors. This is the same concept as mentioned above under the legislation category; however, the executive branch already has parole authority; so that no legislation would be necessary.
Why should the executive parole investors subject to a quota backlog when it doesn’t parole other employment-based immigrants with quota backlogs? The answer is that the ability of such other immigrants to both enter the U.S., work in the U.S. and extend their stay in the U.S. while awaiting the quota backlog is already addressed both by legislation and regulation. Specifically, immigrants in the EB-2 and EB-3 quota waiting lists can enter the U.S. with H-1B visas, which can be extended indefinitely until their quota number is reached and they are able to complete the permanent residence process. Executive action to exercise parole authority would simply be a way of putting EB-5 investors on the same footing.
Another possibility for executive action relates to the Visa Bulletin. Effective October 1, 2015, the Visa Bulletin contains a separate category for “Dates for Filing Visa Applications.” USCIS could allow EB-5 applicants in the U.S. to apply for adjustment of status to conditional permanent residence if they have a priority date preceding the DFF date and interpret the Child Status Protection Act to freeze a child’s age as of the date of such filing.
The bottom line is that there is no easy winner in the numbers game. However, we are all losers if the issue is not addressed promptly and successfully.
The question should not be which option is best. All options should be pursued concurrently. If we succeed with one option and fail with all others, we have succeeded. The bottom line is that everyone involved in advocacy on EB-5 matters in 2016 should include this issue at the top of their lists of 2016 priorities.
An Alternative Unless or Until any of the Above Options is Implemented
There is an already-existing visa category that is, in effect, a pre-immigrant category for investors – the E-2 treaty investor category. Unfortunately, the U.S. does not have an investment treaty with China, which is the only EB-5-backlogged country. That, however, does not mean that Chinese nationals cannot qualify for E-2 visas. There are many countries in which Chinese nationals, for a comparatively modest sum, can purchase citizenship within a relatively short period of time and without incurring any residence requirement. The U.S. Government recognizes such purchased citizenship as legal citizenship for E-2 purposes. Some of these countries do have bilateral investment treaties with the U.S.
Our law firm is the North American Regional Office of the Investment Migration Council, an international organization that deals with investment migration and specifically with citizens of one country who wish to obtain citizenship of another country through investment. Any reader of this blog who is interested in this alternative should contact my office.