Due Diligence for EB5 Projects Following the EB-5 Reform and Integrity Act of 2022

February 26, 2023

Max Sanchez

EB-5 is a program for employment development with immigration benefits. The principal immigration advantage comes after job creation. Immigrant investors must do their homework on the market's EB-5 projects before committing any money or time to them. There has been a resurgence of enthusiasm for the EB-5 program after the RIA of 2022 was passed, guaranteeing the program's continuation and improving its transparency and integrity. However, the RIA provides some new factors for EB-5 investors to consider, even as some old ones remain the same. Here are a few examples:

Priority Processing

The RIA specifies that USCIS must prioritize the processing and adjudication of petitions for rural regions but does not give any information, and to date, USCIS has not clarified this topic. In contrast, "expedited processing" may be granted for exceptional circumstances unrelated to any EB-5 project.

Reserved Visas

The RIA "reserves" a portion of available EB-5 visas each year for new investments in qualified rural or high unemployment regions or infrastructure projects to give an incentive for a faster green card for nationals from China, Vietnam, and India, who would otherwise be locked in a visa backlog. These formerly "reserved" visa categories are now "current," permitting adjustment of status submissions from anybody legally present in the United States. But just because an investor's priority date is current at the time the I-526E is filed does not indicate that they will never be subject to a visa backlog or the formation of a final action date.

Employment Creation

Economists will need to make changes to job creation statistics in economic reports since the RIA limits the number of indirect and induced employment anticipated to be produced by a new commercial company or job-producing organization at 90% and 75% if construction lasts less than two years. It becomes more relevant if the construction period is less than 24 months since a few sectors in the United States have an (indirect + induced) employment threshold as high as 90% relative to the size of the overall multiplier (direct + indirect + induced).

Fund Administration

One of the most important "integrity" measures in the RIA is the Fund Administration portion. Each new commercial business must hire an independent fund administrator to oversee, manage, authorize, and verify transfers of EB5 cash unless USCIS grants a waiver. Potential immigrant investors want to verify that the fund administrator is autonomous and has full access to all relevant data and accounts.

Regional Center Closures

The RIA does give some protection for immigrant investors who invested in a Regional Center project that was terminated for different reasons, including the inability to promote economic development, produce yearly reports and certifications, or comply with the RIA's integrity criteria. The Regional Center must continue to fulfill its duties to USCIS and the sponsored new commercial venture, and the sponsored business must be prepared to take over in the case of the Regional Center's termination.