As the US tumbles towards the December 9 deadline for the extension of its EB-5 investment visa, experts say the most likely next move is another temporary extension of the program.
While there are many ideas flying around about what to do to improve the program, it seems unlikely a consensus will be reached in time for the latest deadline.
The most obvious and therefore headline change being considered is raising the investment threshold, from $500,000 to $800,000 for targeted employment areas (TEAs) and from $1 million to $1.2 million for the general investment class.
However, many are calling for more fundamental changes to be made in the detail of the program.
One of three key arguments against the EB-5 is that savvy companies are able to manipulate the rules to allow them to attract investment for major projects through the TEA class.
Major companies have been able to fund projects worth billions in some of America’s richest areas by using a wider combined area to set unemployment rates.
US EB-5: Areas for Change
- Definition of targeted investment areas (TEAs).
- Fraud prevention.
- Waiting times for certain nationalities (mainly Chinese).
Provided they can prove a certain level of unemployment, they can open themselves up to TEA investment.
Rural areas who say they are desperate for such funding have been overlooked as a result. It seems sensible than an investor would opt for a safer major company investment rather than a riskier one in a smaller city or town.
To fix this, the US government is understood to be working on how it can redefine what constitutes a TEA.
The second argument is that there are not enough fraud protection controls in place, resulting in many examples where EB-5 investment dollars have been apparently misused. There are several ongoing court cases along these lines.
US 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.
- See Tax Implications of Gaining Permanent Residence Through US EB-5 Visa
There are calls for a body to be formed to oversee these transactions, to ensure transparency.
A third argument centres around waiting lists, particularly for Chinese investors, who make up 85 per cent of the candidates for the program, and must now wait up to eight years for their applications to be processed.
The lack of consensus around these three points means a further temporary extension is the most likely outcome on December 9.
Because the visa has been successful in creating jobs with zero government expenditure, it seems unlikely the program will be terminated altogether.
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