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In June 2021, a district court overturned the EB-5 Modernization Rule, finding that it had not been instituted properly when it came into effect in November 2019. The Modernization Rule had not been popular with members of the EB-5 investment industry, as the changes it made to the EB-5 regulations rendered the program less accessible to many foreign nationals.
United States Citizenship and Immigration Services (USCIS) filed an appeal against this court ruling in August 2021; however, on January 5, 2022, the agency unexpectedly withdrew its appeal. Industry analysts are speculating that this could mean the reduced investment amounts, which came into effect as a result of the June 2021 court decision, could be here to stay.
Impact on New EB-5 Investors
As of February 2022, the minimum investment thresholds are at their pre-November 2019 levels, representing a significant reduction compared to the Modernization Rule era. For projects in targeted employment areas (TEAs), the minimum investment amount is $500,000, while for projects in non-TEA areas, the minimum is $900,000.
Another advantage for EB-5 investors is that TEA designation has returned to the hands of individual states rather than being coordinated by the Department of Homeland Security (DHS). Under state authority, the criteria for designating TEAs might be more lenient, meaning that more EB-5 projects could benefit from TEA status. However, foreign nationals can no longer retain the priority dates from previously EB-5 investment petitions.
Impact on Existing EB-5 Investors and Business Owners
For foreign nationals who have already filed their Form I-526 at the lower investment amounts, the withdrawal of the agency’s appeal is particularly welcome. It provides reassurance that USCIS will not deny petitions based on these investment amounts.
Business owners will also benefit from this news. As prospective investors are able to join the program with an EB-5 investment of just $500,000, more foreign nationals may be able to participate. This is likely to result in an increased interest in the EB-5 industry and more funding available for EB-5 projects.
However, the future of the regional center program remains ambiguous. Despite this previously being the most popular investment model, there is no certainty when—or even if—Congress will renew the program. Regional center investors who had filed their Form I-526 before the regional center program was suspended are in a state of uncertainty: USCIS has not been processing these petitions since the regional centers closed.
Industry specialists suggest that the regional center model could be reauthorized as part of EB-5 reform in an appropriations bill set for February or March 2022; however, this is only conjecture. It is also likely that reform to the EB-5 regulations would involve raising the minimum investment thresholds once more.
Prospective investors are advised to move quickly to start the EB-5 process before further changes come into place. EB5 investment consultants can help foreign nationals identify reliable direct EB-5 projects.
