EB-5 Reform and Integrity Act


The EB-5 Reform and Integrity Act is a bipartisan bill introduced in 2019 in the U.S. 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 and Democratic Senator Patrick Leahy.

Issue background

In the U.S., the EB-5 Immigrant Investor Program is a method that foreign nationals can use to obtain a “green card”. The program allows these nationals to get a green card in exchange for making an investment into a qualified U.S. domestic investment project. Under government criteria, only certain types of projects can qualify for the program. For example, projects must be done in areas known as “high-unemployment targeted employment areas”, which the U.S. Department of Homeland Security determines.

Regional Centers

There were over 792 United States Citizenship and Immigration Services -approved EB-5 Regional Centers as of Jan. 15, 2020. “Regional Centers” are entities that exist to facilitate investment money and investment projects. USCIS has the authority to give out the “Regional Center” designation to entities.
The Delaware Valley Regional Center is an example of a “Regional Center” under the EB-5 Immigrant Investor Program. The DVRC focuses on infrastructure development rather than commercial real estate projects.
In recent years, the DVRC used EB-5 investor funds to build an interchange at the intersection of the Pennsylvania Turnpike and Interstate I-95. The new interchange eliminated decades-old congestion and reduced car travel time by 20 minutes between New York City and Philadelphia. To make the project happen, the DVRC raised $200 million from EB-5 visa applicants among from several countries. Those applicants’ investments, as a pool, funded the project. And in return, the applicants were granted a permanent legal residence in the United States. One argument on behalf of EB-5 investments is that, in some cases, they can offer better returns for investors. For example, when Regional Centers work with municipalities, such as the DVRC working with local transportation authorities on the Pennsylvania project, the municipalities were able to get a lower interest rate – 2% rather than 3-4% typical interest with regular municipal bonds.

Issues

The congressional intent of the EB-5 program has not always matched its operational reality. A key problem is that the program often invests in projects that fall outside the limited scope of the intention of the program.
Fraud is another concern. According to USCIS, common EB-5 fraud schemes may involve anybody, including the petitioner and the applicant, along with anyone or anything associated with the applicant, like the Regional Center principal, the sponsor, the developer of the new commercial enterprise, and the job-creating entity president, owner or manager, among others.
Some complaints go even further. Michael Gibson, managing director at USAdvisors.org, has said, “The USCIS is incompetent.” and “They release no information on the capital raised, who is raising it, and where it is going to the public. This leads to misinformation and fraud.” Gibson added that USCIS is “…not able to manage this program and should be replaced with another agency that is capable of providing information on the effectiveness of this program to create U.S. jobs. And when it comes to fraud, it appears that certain RCs are heavily involved.”
Another common problem with the program is that in some cases, after money is invested, the investors do not always get their promised green card. In one example, through the Golden California Regional Center, 90 Chinese citizens invested $555,000 each. They were all promised green cards, which never came.

Current regulatory framework

Like most federal programs, although laws create the parameters of the program, regulations govern how decisions are made and how the program is operated.  
The most current regulations overseeing the EB-5 Immigrant Visa Program were published in their final form on July 24, 2019, under “84 FR 35750 - EB-5 Immigrant Investor Program Modernization.” It was the first major overhaul of the program since its inception in 1993, and the final rule went into effect November 21, 2019.
Fraud and abuse were cited as the main reasons for the new rules. The new 2019 regulations:
With the new rules in place, Grassley said the interest groups won't be able to draw the maps to benefit themselves anymore and rural America will finally begin to see the benefits of a nearly 30-year-old program. He has been concerned about the program moving away from its congressional intent, which is: to spur investment and development in economically distressed areas and rural communities. His main concern is that the program has taken investment away from rural America, where it was supposed to be going all along. He has said, “Such big-money interests have drawn maps to define the TEAs to conveniently cover wherever they wanted to build another skyscraper.”
The EB-5 visa class was first created by the Immigration Act of 1990. In 1993, Congress created the “Immigrant Investor Pilot Program” to attract applicants to the EB-5 visa program. The pilot program created the program's structure such as the creation of EB-5 Regional Centers.
In January 2019, President Trump extended the program again.

How it works

Participation in the program starts when a foreign citizen commits to make an investment into a qualified U.S. development project. To start, foreign citizens petition for a visa through the EB-5 program. Their petition is based on an investment they have made through a DHS-certified “Regional Center” – an investment into new commercial enterprises. EB-5 petitions filed through Regional Center programs are given priority over those that do not invest through Regional Centers.

Legislative details

In September 24, 2019, Grassley and Leahy introduced a bill to address fraud and abuse in the EB-5 Investor Visa Program. The bill is bipartisan. Over the years, DHS has expressed concerns about certain aspects of the EB-5 program. The purpose of the bill is to address those concerns and to reauthorize the program, with changes, through 2024.
If signed into law, the EB-5 Reform and Integrity Act would:
To make these reforms and changes, S. 2540 repeals the original authority that created the program in 1993, Section 610 of a 1993 congressional appropriations act. S. 2540 would then add a new section to the Immigration and Nationality Act.
Although the Trump Administration passed new regulations governing the EB-5 visa program in the summer of 2019, Grassley felt it was still necessary to introduce a bill. He said, “I still have concerns about fraud and abuse in the program that can only be fixed by Congress.”
One of the real changes that the bill is expected to make right away is by better targeting impoverished areas in the U.S. for investment dollars. An internationally recognized scholar on immigration policy, David North of the Center for Immigration Studies, commented that the bill “…makes it harder to put money into prosperous downtown areas.”

Support and opposition

As of April 1, 2020, the bill has two sponsors:  Senators Grassley and Leahy.
The National Association of Realtors, which represents real estate brokers, supports the bill.
The Real Estate Roundtable, however, which represents large capital real estate developers, opposes the Grassley bill and instead supports a rival bill sponsored by Senator Mike Rounds.

Alternative legislation

Alternative legislation was introduced – the Rounds-Graham bill. Senators Rounds, Graham and Cornyn introduced the Immigrant Investor Program Relief Act on November 5, 2019.
The Rounds-Graham bill would include set-asides for rural and targeted unemployment areas but overall would “decrease the monetary incentive to invest in TEAs, which would bring much relief for projects in major cities.” It would also grandfather all petitions filed before the date of enactment of the law.
One EB-5 expert, Suzanne Lazicki, said of the bill: “Grassley wants to see EB-5 used as a catalyst for development in rural and urban distressed areas. The Rounds bill represents the faction that wants to allow EB-5 to continue to flow freely to good projects without undue location prejudice.”
David North of the Center for Immigration Studies described the Rounds-Graham bill as “disastrous” and  “…covered with attractive cake frosting.” He also expressed surprise at Senator Rounds’ willingness to wade into the issue, because of his controversial political history with the subject. “If I were Rounds I wouldn't get within a country mile of any EB-5 matter, but he chose differently,” North said.