The U.S. EB-5 program could see investment thresholds rise after new legislation was introduced in the House of Representatives on Tuesday.
The American Job Creation and Investment Promotion Reform Act calls for a raft of changes, including raising the threshold to $800,000 or $1.2 million depending on the class of investment.
Currently, the thresholds are $500,000 for investment in targeted employment areas (or regional centres) and $1 million for a general area of business.
The program grants conditional permanent residence in return for the investment, provided at least 10 jobs are created.
Current U.S. EB-5 Investment Requirements
- An EB-5 investor must invest in a new commercial enterprise.
- The investor must invest at least $1 million when investing in a general area of business or at least $500,000 when investing in a targeted employment area (`Regional Centres`).
- Within two years of admission as a conditional permanent resident, the investor must create or preserve at least 10 full-time, direct or indirect jobs belonging to qualified US workers.
The EB-5 is controversial in the U.S. because of a number of cases of fraud linked to investments made under the program.
The new legislation, as well as increasing the threshold, also calls for a number of new powers aimed at combatting fraud.
New powers would include giving the U.S. Department of Homeland Security (DHS) more power to deny applications linked to fraud and other crime.
The DHS would also be empowered to conduct audits and investigate fraud using fees paid by the regional centres, and conduct background checks on those involved in projects.
Further powers would also include the vetting of projects before money changed hands and for risks and conflicts of interests to be disclosed to investors before any deal was struck.
There are also calls for a stricter definition of targeted employment areas, a class designed to boost struggling economies in the U.S.
The popular visa generated close to $5 billion in investment in 2015, with the regeneration of some of the biggest cities in the U.S. completed with the help of the funds.
Recently it was highlighted that Chinese immigrants are asking to put children as primary candidates on their applications over fears they may exceed the dependent age of 21 by the time approval comes around.
Meanwhile, Indian nationals with aspirations of living in the US are being told the EB-5 visa is the most realistic way of achieving their goal.
Downtown Dallas has been rebuilt and regenerated using EB-5 funds.
Mayor Mike Rawlings wants to see the program extended and expanded come September, believing America’s urban areas are now reliant on the billions of dollars invested.
In Dallas, the $500 million raised by Civitas EB-5 Capital has been spent on new offices, hotels and apartment buildings both downtown and in the nearby area.
There has also been a number of fraud cases linked to the investment program.
Fraud Cases Linked to EB-5
- The developer behind a biomedical research facility in Vermont, which benefitted from EB-5 funding, is currently being investigated for misusing the money. The project had attracted $83 million of investment from 166 foreigners, many of them Chinese, who now risk losing their money. Developer Ariel Quiros, and several of his associates, stand accused of using the funding to buy a ski resort, a luxury New York condo and to pay tax bills.
- Developer Lobsang Dargey was accused of defrauding Chinese investors out of money for a tower in Belltown. Dargey no longer has control of the project and denies any wrongdoing.
- American Life, a recipient of more than $1 billion in EB-5 investment money, was fined $1.2 million for facilitating payments to unlicensed intermediaries in the U.S.
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