The new proposed regulations that will come into effect on November 21st of this year, will essentially kill the EB-5 visa category and the regional center program.
But why will they die? The new USCIS regulations and the existing backlog make it impossible for regional centers to survive.
WHY? What are the problems that will cause the EB-5 visa program and regional centers to die?
First and foremost, the TEA amount goes up to $900,000. That in itself prices even the lower priced EB-5 visas out of the reach of more than 95% of investors who can easily get EU citizenship through Bulgaria for approximately that amount in less than the time it takes to get an EB-5 visa petition processed, and EU citizenship through Bulgaria offers investors the right to live, work, study, and do business throughout the EEA (EU, Switzerland, Norway, and Liechtenstein), AND also allows the investor to live and do business in the US under the E2 visa program.
Moreover, more than 95% of the current regional center projects will not fall within the new targeted employment area (TEA) rules that are changing with the new EB-5 visa regulations, due to which, the investment amount will be $1.8 million for most EB-5 visa investments in regional centers. Even if investors chose the safer Direct Investment route, they'd still be unable to qualify for most of the safer locations under the lower investment amount, and would need to invest $1,800,000 in a safer location in order to get a TEMPORARY green card in 30-45 months without risking a loss of capital, because investing in a genuine TEA area carries a significant risk of capital losses and operating losses.
If an investor were to consider only the safe, non-TEA locations, with a price tag of $1,800,000 for an EB-5 visa, more than 99% of investors would be unable to afford it, and will simply choose to invest $1,170,000 to get EU citizenship through Bulgaria in 2 years, instead of waiting 2.5 years to 4 years to get a TEMPORARY green card in the US through the EB-5 visa program.
Third, targeted employment areas (TEA's). New Regulations state that the USCIS will oversee the designation of targeted employment area projects, not the state the project is in. Currently if we look at the way they plan to establish the new TEA rules, more than 95% of the current projects that are selling under TEA rules will no longer be able to do so. This has to do with the word “contiguous”, as it relates to the TEA rules. With just one word change, the entire TEA system changes. Most will not qualify, and that means a few important things. To start with, Regional centers will have to redo all of their offering documents and provide an amended document to all of their prospective and current investors. Then, if an investor does not qualify under the new TEA rules, regional centers will have to resort to selling investments in their projects at $1.8 million instead of $900,000, and that WILL anyway kill their capital raise. And the change in a project’s status affect current investors if future EB-5 visa investment sourced funding dies.
Fourth, Congress has done nothing to clear up the current EB-5 visa backlog. There's no realistic possibility that Congress will address this problem and it's likely that the Regional Center program will anyway die on September 30th 2018. Nothing can be done to clear up the 17 year waiting period for Chinese investors or the 9 year waiting period for Indian investors.
EB-5 visa investors should remember that if a project falls outside of the guidelines of any of the aforementioned criteria, regional centers have to provide new documents to current and prospective investors as it is a material change that requires including a whole new section on risk factors, like the project may fall out of a TEA, and what that means to the project. Also, in offering documents, regional centers must include information that relates to the fact that a project may not fall within a targeted employment area at all, even under the new rules.
How can EB-5 visa investors know if a project falls in a TEA? The answer to this question is actually quite simple. Less than 5% of existing projects are located in what would be a TEA under the new rules, so it may be a good idea to get a notarized affidavit from a Regional Center's CEO, CFO, and marketing agents to certify that a project will continue to qualify for the lower investment of USD 900,000 by virtue of being in a TEA, under the new EB-5 visa regulations.
With the massive backlog, coupled with the processing delays, higher investment amounts under the new EB5 visa regulations, EB-5 visa investors have to ask themselves, is it worth it to do EB-5? The answer is NO.
As it's really not worth it for investors to choose EB-5 visas, what's the alternative? If an investor has been operating a business outside the US for at least ONE year in the past 3 years, we can co-invest with them in a new business and help them get permanent green cards under the EB-1 visa category, in less than HALF the time it takes to get TEMPORARY green cards under the EB-5 visa category. Unlike the EB-5 visa investment amount of $900,000, investors can invest as little as $450,000 to get their green cards under the EB-1c visa category, and investors have a significantly lower risk of capital loss, as we anyway offer our investors a full right to audit the books of accounts. Unlike Regional centers, we offer a full fee refund guarantee if a client is denied due to our fault, and offer investors a guarantee of freedom from fraud.
For more details, please call +1-407-413-9156 or +91-90821-17462.
Mohammed Shaikh, MBA, CFE
Mohammed Shaikh is the CEO of Smart Business Broker Inc, and has been actively involved in the investment based immigration business, having helped investors migrate to the US since 2002.
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