EB-5 reform: ‘We’re actually heading toward legislation’

The US’s controversially popular EB-5 visa program will come to a vote in the next six to eight weeks, the chief executive of NES Financial told PERE.

Michael Halloran, who runs the San Jose, California-based financial technology company that handles about 65 percent of incoming EB-5 capital, said he expects the program to reach a Congressional vote shortly after more than two years of uncertainty through multiple extensions.

“I think we’re actually heading toward legislation one way or another,” he said.

The EB-5 program grants foreign investors, as well as their immediate families, a green card in exchange for a $500,000-plus investment in high-unemployment locations designated as a targeted employment area (TEA). Congress has extended the scheme several times, unable to settle disagreements over minimum investments and what should constitute a TEA. In December, lawmakers again rescheduled discussions about the future of the program to the end of April, and then again to the end of September as part of a larger government funding bill.

However, Halloran said US Citizenship and Immigration Services (USCIS), the government body that administers the program, will likely force changes ahead of September. The agency closed a comment period about EB-5 on April 11 after proposing changes to the program, including increasing the minimum investment, in January.

Last week, a White House spokesman told The Washington Post that the administration is considering changes to the program. President Donald Trump has not spoken publicly about EB-5, but both he and his son-in-law, Jared Kushner, have used it to fund past real estate projects.

“There are serious concerns held by the administration regarding the EB-5 visa program, in part because it is not being used as it was primarily intended,” said Michael Short, a White House spokesman. “The administration is continuing to evaluate reforms to the program, which we believe is in need of substantial repair.”

About a dozen projects have been investigated for fraud, and various senators’ proposed changes include integrity measures supported by the industry, Halloran said. In a change with more effect on the industry, USCIS proposed raising the minimum investment in a TEA to $1.35 million, while other investment minimums would jump from $1 million to $1.8 million.

“The investment differentials and how they calculate what’s a TEA and what’s not are the most contentious issues,” Halloran said. “That type of jump and increase would create an absolute paralysis, certainly in the Chinese investment market, and that would stop the flow of funds into EB-5 projects for an uncertain period of time.”

Trump’s goals to create jobs and implement merit-based immigration would dovetail well with continuing EB-5, Halloran said, citing a Department of Commerce report in January that estimated about 170,000 jobs were created in 2012-2013 through the program.

“Although it has been unpleasant in the process and frustrating along the way, we’ve gotten to a point where there’s a narrow band between what the industry says it can take and what lawmakers say they can take,” Halloran said. “The reality is, everyone’s interested in getting this settled. Uncertainty is not productive for this marketplace.”