New EB-5 Visa Rules Require Investors to Tread Carefully

On October 11, the U.S. Citizenship and Immigration Services, (USCIS), the American federal agency that oversees immigration, issued long-awaited guidance about the investment period (known as the “sustainment period”) required for EB-5, America’s residency by investment program.

The guidance stated that investors may receive back their required $800,000 capital after just two years from investing. While many in the EB-5 world have been waiting for USCIS to clarify the sustainment period requirement, the October 11 USCIS policy leaves open many questions, including whether the guidance itself was issued in accordance with proper procedures required under US law.

The Official Statute

The official statute regarding EB-5 was updated with the passage of the “EB-5 Reform and Integrity Act of 2022” (the “RIA)” on March 15, 2022. As with the federal agency administering any official statute, USCIS must write formal regulations under a proscribed process. Only after a formal rulemaking process, which requires a public notice and comment process, do regulations become the rules under which the law is administered.

While EB-5 program participants have been asking USCIS to issue guidance and regulations, it is not clear that USCIS has the legal authority to change existing rules unless and until it follows the rulemaking process.  This is especially true in cases where existing regulations can be read as consistent with the new statute, as in the case of the sustainment period.

The Cause of Confusion

The cause for this confusion is statutory language in the new law itself.  The law requires that the would-be immigrant’s investment “is expected to remain invested for not less than 2 years.”  The section of the EB-5 law regarding “removal of conditions”, or when the investor has a permanent green card, was edited to eliminate specific wording that the investor “sustain” the investment.  The removal of conditions section, however, allows for an investor to have an extra year, beyond the initial two-year period of conditional residency, to prove job-creation only if they keep their capital invested.

USCIS Interpretation

It seems that USCIS interpreted these two provisions to require just two years of active investing.  USCIS went further to require that the initial investment remain in the initial project until sufficient jobs have been created.  However, the new law also provides for “redeployment” if an initial investment is repaid before an investor is qualified to be repaid. 

Remain Invested or Redeployment

A requirement to redeploy capital is illogical if the initial investment must satisfy the minimum sustainment period and job-creation requirements.  The ability to withdraw capital after just two years seems illogical if the law allows an extra year to prove job-creation only if that capital remains invested for longer.  When the RIA is read in its entirety, the new USCIS guidance does not seem to hold up.

EB-5 Visa Investment Timeline Defined

The question of when the two-year investing timeline starts is also unanswered.  The USCIS guidance indicates that the start date is when the full amount of the investment is “made available to the job-creating entity.”  Is this when the EB-5 money is spent?  When the loan is closed, but not yet funded?  Can the EB-5 funds be deposited and not used by the job-creating entity?  How does bridge financing affect this calculation? These are all unanswered questions.

Structuring EB-5

In conclusion, EB-5 project sponsors must structure the EB-5 instrument responsibly, and EB-5 investors should not just rush into a deal that promises money back in two years. For now, it seems safest to maintain the EB-5 investment in the initial project for at least two years after the full and final expenditures are made with EB-5 funds. More importantly, no matter what may or may not have changed in the rules, EB-5 investors must evaluate the financial and immigration risks of potential investments thoroughly.

By: Adam Greene, EVP Peachtree Group

Adam has more than a decade in EB-5 experience and currently serves as one of the senior officers of IIUSA, the trade association for EB-5 in the United States.

Before joining Peachtree, Adam worked with EB-5 regional centers in the roles of chief financial officer and president, managing more than $600 million of EB-5 investments across over 20 different EB-5 projects.

Prior to EB-5, he established the hospitality financing program at Textron Financial providing over $250 million in senior debt for hospitality development projects.

Adam began his career in the finance industry in New York, working for JP Morgan Chase and Arthur Anderson.

Adam is Peachtree’s liaison for the latest in legislative and regulatory developments in EB-5 in the United States.