EB-5 Visa Program is Alive and Well, But New Rules May Make it Harder to Use by Andrew Leonard, CPA

Posted on October 03, 2019 by Andrew Leonard

After 29 years, the U.S. government is making changes to its EB-5 visa program, which helps foreign citizens expedite U.S. residency in return for capital investment in commercial projects that create or preserve domestic jobs. Under new rules that go into effect on Nov. 21, 2019, it will become more expensive and more difficult for foreign investors and U.S. commercial real estate developers to qualify for the popular, yet often controversial, program.

The Immigrant Investor Program initially was signed into law in 1990 to stimulate economic development and job creation in targeted employment areas (TEAs) across the U.S. through foreign capital investment. According to the law’s original language, foreign investors can apply for and receive temporary visas that convert to permanent residency status for themselves and their family members when they make investments between $500,000 and $1 million to U.S. commercial projects that create or preserve a minimum of 10 full-time jobs. While the program has attracted a lot of scrutiny, it has also created hundreds of thousands of jobs and helped real estate developers across the country gain access to less restrictive loans and lower interest financing for new ventures than they could get with traditional lenders.

Yet, despite all of the program’s success, the requirements for obtaining an EB-5 visa have not changed since the program’s inception, which has reduced its value as an economic stimulator and job creator.  As a result, Congress has taken action to modernize this citizenship-by-investment program and make it more financially viable.

Following are some of the new updates that will go into effect on Nov. 21, 2019, under the final EB-5 Immigrant Investor Program Modernization Regulation.

Inflation adjustment to minimum investments.

The minimum capital contribution a foreign person must invest in a commercial project in a rural, TEA with higher than average unemployment nearly doubles to $900,000 from $500,000. In areas with low unemployment, such as major U.S. cities, the minimum investment increases to $1.8 million from $1 million. Capital is defined as cash, equipment, inventory, other tangible property, cash equivalents, and certain indebtedness secured by assets owned by immigrant investors appraised at fair-market value in U.S. dollars.

These increased thresholds, which will be adjusted for inflation every five years beginning in 2025, make it harder for prospective immigrants to qualify for EB-5 visas while also making it more difficult for developers to raise the capital they need to get new projects off the ground, especially in major metropolitan areas, such as New York City.

New restrictions to TEA designations.

Going forward, the U.S. Citizenship and Immigration Services (USCIS) will be responsible for determining designations of high-unemployment TEAs rather than individual states, which had previously received criticism for gerrymandering census tracts to direct foreign investment into large, wealthy cities rather than to areas in need of capital infusions.

Under the USCIS’s new standards, targeted employment areas with the lower investment threshold of $900,000 will be restricted to rural areas in which unemployment rates exceed 150 percent of the national average, including cities and towns with a population of 20,000 or more that are located outside of metropolitan statistical areas. In addition, TEAs may include “a combination of up to five adjacent census tracts that include the tract or contiguous tracts in which the new commercial enterprise is principally doing business, including any or all directly adjacent tracts.”

Priority date retention for approved applicants.

In the short-term, it is possible that foreign persons looking for a fast-track to a green card will expedite their planning and submit I-526 petitions before the November deadline. However, as a word of warning, it is critical that investors avoid cutting corners. Instead, they should take the time to plan appropriately and conduct all required due diligence under the guidance of financial and legal counsel to avoid processing problems that could result in a visa denial from U.S. Citizenship and Immigration Services (USCIS).

In addition, the rule clarifies that foreign investors who have already filed I-526 petitions and received USCIS approval will retain their places in line to receive one of the 10,000 green cards available each year. This priority date retention also applies to immigrants can maintain that priority date should they file new applications. Therefore, investors looking to expedite their application before the higher thresholds go into effect will need to exercise additional patience while waiting for approval, which could take an additional two to three years.

Chinese investors have provided the majority of EB-5 project financing over the past 10 years. However, that trend has been shifting as trade tensions increase between the U.S. and China. In 2018, the program received a substantial uptick in applications from investors in India, Pakistan, North Korea and Mexico.

Whether or not the modernization of the EB-5 visa program will tarnish its success remains to be seen. To be sure, the program has encountered a broad range of problems, including projects that fail to materialize or create the required number of or outright instances of fraud.

What is certain is that the higher investment thresholds combined with the new, narrower definition of TEAs will significantly alter the number of investors who can qualify for EB-5 visas while limiting the number and location of projects that qualify for financing. Immigrants should be prepared to face a more difficult and more costly process, while real estate developers who rely on EB-5 financing for a large portion of their business should be prepared for a general slowdown in 2020.

Foreign citizens planning immigration to the U.S. should meet with experienced tax and legal professionals far in advance of applying for a visa. This will allow future U.S. residents ample time to implement sound strategies for reducing compliance burdens and exposure to U.S. income and estate taxes on the future.


About the Author: Andrew Leonard, CPA, is a director with Berkowitz Pollack Brant’s International Tax Services practice, where he provides tax structuring, pre-immigration planning and a wide array of international tax and consulting services to international companies, entrepreneurs, families and foreign trusts. He can be reached at the CPA firm’s Boca Raton, Fla., office at (561) 361-2000 or

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.