House Judiciary puts EB-5 reform up for discussion in new bill
On September 9, 2016, a draft EB-5 reform bill was released by U.S. Representative Bob Goodlatte (R-Va), chair of the House Judiciary Committee. The bill has not been formally introduced yet, but in its draft form, the nine-section, 123-page bill is largely a reprisal of S. 1501, the main Senate EB-5 bill enacted in late 2015, with a few key changes.
The draft bill follows on the heels of a September 8 letter from Senators Chuck Grassley and Patrick Leahy, chair and ranking member of the Senate Judiciary Committee, respectively. Both oppose a straight reauthorization of the EB-5 regional center program, citing observations of fraud, failed projects and money laundering. In light of this letter, industry unity on regional center oversight measures will be essential to avoid program lapse after September 30.
My colleague Carolyn S. Lee (Miller Mayer LLP) and I performed an initial review and analysis of the draft bill. Here’s what we learned. Highlights are included below; see the full-length summary and analysis for complete coverage.
Highlights of the Goodlatte bill
- Five-year reauthorization of the EB-5 regional center program, until September 30, 2021
- Regional center oversight measures are in Section 3. It mostly reproduces S.1501’s oversight provisions, plus a new section on account transparency and a new $2,000 petition fee. Most provisions in Section 3 would take effect no later than 90 days after enactment.
- Section 2 puts revocations, denials, and debarments for national security threats and fraud front and center, along with restrictions on the investor’s source of funds.
- Section 4 of the Goodlatte bill contains many provisions, including:
- $1.2 million new threshold investment level for non-TEAs; $800,000 for TEAs as well as infrastructure and manufacturing projects
- 4,000 non-rolling visa set-asides for rural and “priority urban investment” areas to take effect October 1, 2016
- DHS will determine TEAs as well as designate infrastructure and manufacturing projects
- TEAs comprise of rural, priority urban investment, closed military bases, and high poverty areas
- Redesignation permitted to new TEA (may intend to include redesignation into set-asides)
- Effective upon enactment, with exception for pre-6/1/15 petitions. TEA rulemaking required within 180 days of enactment
- Retroactive application of the new law is generally contemplated for petitions filed after June 1, 2015. There is limited grandfathering of petitions associated with exemplars filed before June 1, 2015 or approved before enactment.
- Direct jobs minimum of 10% remains with modifications in Section 3 and should be reviewed along with the definition of “full-time employment” in Section 4. Notably, though drafting is unclear, construction jobs appear to be deemed direct jobs.
- Investor fraud protections remain largely the same and are in the proposed new subparagraph (O) in Section 3. Investors would have 180 days after a regional center is terminated or debarred to associate the new commercial enterprise (NCE) with a new regional center or to invest in a new NCE. There is no tolling in the event a regional center seeks appeals termination and no priority date retention. The Goodlatte bill may contain inadvertent omissions in drafting that may have contemplated additional amelioration.
- Site visit references appear in disparate provisions and are required under Section 3. The bill adds a new requirement to review evidence of direct jobs. The effective date requires closer review but appears to be no later than two years after enactment per Section 5.
Beneficial provisions in the draft Goodlatte bill include:
- Premium processing regulations within 180 days and “timely processing” goals at Section 7
- Mandatory preapprovals but I-526 petitions may be filed upon preapproval filing (as opposed to after approval) at Section 3
- Concurrent adjustment applications with visa availability at Section 4
New and notably, investors must be at least 18 under the new law, effective prospectively after enactment per Section 6.
A section-by-section summary is included in our complete response to the draft bill. View the complete article on the Miller Mayer website or click here for a PDF version.