On February 26, 2014, a wave rolled across the tightly knit EB-5 visa program community as recently appointed program director Nicholas Colucci held a conference call with EB-5 stakeholders, bringing a new level of commitment and energy to a program that has received its share of criticism. For the benefit of the EB-5 program and the nation as a whole, Congress needs to follow suit with a wave of its own.
But First, What Is EB-5?
For those of you who may be unfamiliar with EB-5, the program allows foreign investors the opportunity to obtain a green card in exchange for investing $500,000 to $1 million in a U.S. business venture with the condition that the investment creates at least 10 full-time jobs per investor--jobs created for hardworking Americans. The investors themselves (and their family members who often immigrate with them) do not count towards this number.
What Are EB-5's Benefits?
The EB-5 program has the potential to provide significant economic benefits to this country, especially to areas that are desperate for economic stimulus. In a case study by economist Dr. Scott Barnhart published in EB5 Investors Magazine, Barnhart examined the total economic impact of a single EB 5 investor, considering the investor's capital contribution as well as his or her household expenditures. Barnhart used a hypothetical economic model to project that if 6,000 visas were issued through the EB-5 program, 46,124 jobs would be created, $3.8 billion would be contributed to GDP, $532 million would be paid in federal taxes, and $371 million would be paid in state and local taxes. These are projections that are certainly hard to ignore.
So Who Is Nicholas Colucci and What Is He Doing?
Colucci, a no-nonsense type who comes to U.S. Citizenship and Immigration Services (USCIS) from the U.S. Department of Treasury, where he led the financial crimes division, pledged to bring more transparency and resources to the EB-5 program. Colucci is also in the process of hiring more qualified staff to help improve processing times for various EB-5 forms. Currently, the USCIS website reports I-526 petition processing times at nearly 10 months. The I-526 is the investor's initial application with USCIS that determines whether the investor qualifies for EB-5--it looks at the EB-5 project's supporting documents and traces the investor's source of funds to demonstrate that the investment came from a legal source. As of September 2013, there were 7,131 I-526 petitions pending, so the need for increased efficiency is self-evident.
But take note: improving efficiency is not the only goal for processing. Most of the new hires, per Colucci, are economists and securities and immigration attorneys. Not only will USCIS attempt to process forms more efficiently, but it also aims to increase its competency in the due diligence department. After all, it makes no sense and is of little help to anyone in EB-5 to approve a project or investment that is not likely to succeed. Conversely, green-lighting projects that are well planned and likely to succeed will continue to strengthen the program's image as well as provide much needed benefits to the U.S. economy.
What Can Congress Do?
The answer to this question is simple: Congress can pass legislation that will enable the EB-5 program to grow and become even more transparent, providing support and mechanisms for Colucci's EB-5 goals to become a reality. The good news is that there are already three pieces of proposed legislation that have numerous overlapping themes and concepts that would help improve how EB-5 operates. The proposals are:
- Senator Patrick Leahy (D VT), S 744 "Border Security, Economic Opportunity, and Immigration Mobilization Act"
- Rep. Jared Polis (D CO) and co-sponsors Rep. Matt Salmon (R AZ), Rep. Joe Garcia (D FL), and Rep. Mark E. Amodei (R NV), HR 4178, "American Entrepreneurship and Investment Act of 2014"
- Rep. Darrell Issa (R CA), HR 2131, "Supplying Knowledge-Based Immigrants and Lifting Levels of STEM Visas Act" (also known as the "Skills Visa Act)
Quotas. In addition to making the EB-5 program permanent, these three pieces of legislation address several key components of the EB-5 program in their own unique ways. First, they address the program's numerical limits on visas allotted per year. This is extremely important, as the program is on the verge of experiencing a bit of a "log jam." Presently, the program allows for 10,000 EB-5 visas to be granted each fiscal year. However, that number translates into roughly 3,000 visas granted to the investors themselves--each EB-5 investor is allowed to include his or her spouse and any unmarried children under the age of 21 on all visa applications given to USCIS, and each additional family member is granted a visa from the 10,000 allotted for the entire EB-5 program. Thus, there are often three or four visas issued per investor. With approximately 7,000 applications pending for investors' spouses and children, the present quota (10,000 visas) could easily be met for the next two years without any additional applications being submitted. However, if legislation is passed so that the immediate family of an EB-5 immigrant investor is not subject to the numerical cap, the program could see several billion dollars in additional foreign investment capital flowing into the United States and similarly create tens of thousands of new full-time jobs for American workers.
Compliance Standards. Moreover, the proposed pieces of legislation also tighten compliance standards and contain more stringent anti-fraud provisions. Making sure that EB-5 Regional Centers (the entities that serve as conduits for most EB-5 projects) are competently run and operated by reputable people is paramount to the program's present and future success. Even one or two bad actors can cast a dark cloud over a program that has the potential to provide so many benefits to Americans and the U.S. economy. Additionally, all three pieces of legislation contemplate raising the minimum investment requirement of $1 million, or $500,000 for investments made in a targeted employment area (TEA), which has remained stagnant since 1992. Each proposal includes reform to increase the minimum investment amount in correlation to the Consumer Price Index, resulting in a greater economic impact per each investment made by an EB-5 visa applicant in the future.
During a time when Washington, D.C., is almost completely overcome by gridlock and when comprehensive immigration reform inches from debate to debate with an indefinite timeline, EB-5 is the outlier, garnishing the endangered species known as bipartisan support. And it is not hard to see why the program generally appeals to both parties: EB-5 supports job creation--in fact, 28,000 jobs have been created between 2010 and 2011--and this appeals to any politician who desires re-election. Logically speaking, there is no valid reason why EB-5 legislation should not pass this year. Unfortunately, logic and Congress do not always go hand-n-hand, and the time has come to make our concerns heard in Congress.
What improvements to the EB-5 visa program would you like to see?