Investments made under the RIA no longer have to remain at risk during the entire period of conditional residence. How will this change affect the industry?
While the EB-5 Reform and Integrity Act of 2022 (RIA) reauthorized the Regional Center program for five more years and added many new rules and integrity measures, a lot was left unknown after its passage. US Citizenship and Immigration Services has been slow in offering clarity on many points, and after more than 18 months, information is still slowly coming out.
On October 11th, 2023, USCIS finally released updated guidance on how certain portions of the RIA would be interpreted, specifically how long post-RIA EB-5 investments need to be sustained and rules for pre-RIA investments made through terminated Regional Centers. Here’s what we know about this new guidance and what it means for the EB-5 industry.
Changes to the EB-5 investment sustainment period
Before the passage of the RIA, EB-5 investors were required to sustain their investments throughout the entire period of conditional residence. If the project concluded and funds were returned prior to adjudication of the investor’s visa application, funds would have to be redeployed to a new project in order to keep the investment at risk.
Per the new release, “the RIA removed the requirement that the investor must sustain their investment throughout their conditional residence” and added language that investments “must be expected to remain invested for at least two years.”
While this language was in the RIA upon its passage, no one really knew how it would be interpreted. Did Congress really intend to eliminate the need for redeployment? When would this two-year period be said to have begun? Would this provision apply to pre-RIA investments? Thanks to the new clarification from USCIS, we have some answers:
According to the USCIS website, “investors filing petitions for classification after enactment of the RIA no longer need to sustain their investment throughout their conditional residence.” Instead, investments must “remain invested for at least two years, provided job creation requirements have been met,” with the two-year period beginning on “the date the investment was contributed to the new commercial enterprise and placed at risk.”
We now have confirmation that for investments made under the RIA, redeployment will no longer be required so long as the investment is sustained for two years and the job creation requirements are met. This may be a great relief for investors who previously had to worry about redeployment, as they often had to rely on others to find new projects in which to invest and had little or no say as to what the new investment would ultimately be.
As far as how the two-year period will be calculated, the release even offered these specifics and exceptions:
We will use the date the investment was contributed to the new commercial enterprise and placed at risk in accordance with applicable requirements, including being made available to the job-creating entity. If invested more than two years before filing the I-526 or I-526E petition, the investment should generally still be maintained at the time the I-526 or I-526E is properly filed so we can appropriately evaluate eligibility.
Unfortunately, petitions filed before the passage of the RIA will still be bound by the old rules. USCIS has updated its Q&A with an explanation of this decision and further clarification on specific situations.
How will this affect the EB-5 industry?
Since redeployment will no longer be necessary in many instances, investors won’t have to worry about being placed into projects they never intended to be a part of, and issuers won’t have to worry about offering them or making them compliant with the EB-5 program. However, long-term projects may no longer be as attractive as they once were.
Under the old rules, a long-term project that wouldn’t return funds for several years could be advantageous, as it might ensure investor funds were kept at risk in the same project until their period of conditional residence was over. But since two years is now the minimum, we may see a shift in the market as investors seek shorter-term investments that will return their capital as soon as the minimum requirements are met.
Short-term projects are not without their own risks, as job creation requirements still need to be met, and investors still want to find quality deals where their invested capital will not only be returned, but returned with a growth factor. It will be important for issuers to fully understand the new rules in order to structure their offerings properly, just as it will be important for investors to understand the requirements so their expectations remain in line with the capital needs and milestones of the underlying project.
Investments with terminated Regional Centers
The other major development from the USCIS release concerns investments in terminated Regional Centers. The termination of a Regional Center was a major issue of the RIA, as it was listed as a key penalty for violation of the law’s new integrity measures.
As USCIS explained, “Before enactment of the RIA, the termination of a regional center would have been considered a material change to eligibility for investors who had not yet obtained conditional permanent resident status and, consequently, would likely have resulted in denial or revocation of associated investor petitions.”
The RIA added a new provision that “permits good faith investors associated with terminated regional centers to retain eligibility in certain circumstances,” meaning they can invest with another Regional Center without losing their priority date or having their petitions denied due to the original Regional Center’s termination.
At the time of enactment, the RIA did not state whether this provision applied only to post-RIA investors. USCIS now confirms that it will interpret this provision “to apply to pre-RIA investors associated with a terminated regional center.” Pre-RIA investors will have until their I-526 petitions are adjudicated to respond to a termination notification.
The Q&A offers several examples of situations in which innocent investors may preserve their immigration progress, but the most important thing is that we now have clarity on whether or not this particular provision will apply to pre-RIA investors. Since fraud and malfeasance can happen in EB-5, this guidance is welcome news for investors who will now have a chance to remain eligible, even if something goes wrong.
Remember that this is just guidance from USCIS: “This website guidance helps our officers in rendering decisions, and should generally be followed by officers in the performance of their duties but it does not remove their discretion in making adjudicatory decisions.”
Every situation is unique, and both investors and issuers need to be prepared for unexpected challenges. Getting the right help is important so you can plan ahead for what to do in the event something like a Regional Center termination occurs. JTC is staying on top of the latest guidance from USCIS so we can provide our clients with the most up-to-date solutions for compliance with the RIA.
To help EB-5 stakeholders better understand this news from USCIS, JTC and CanAm Enterprises are hosting a free webinar on October 25th where a panel of industry experts will discuss the new guidance and what the change in the sustainment period might mean for the industry. They’ll also be answering questions from those attending virtually from around the world, so don’t miss this opportunity to learn about this major shift in EB-5.
EB-5 is Changing: What the New USCIS Guidance Could Mean for Investors and Regional Centers
Thursday, October 26th
2:00 PM – 3:00 PM ET
Online (hosted on Zoom)
To learn more and RSVP for the webinar,