[Federal Register Volume 84, Number 142 (Wednesday, July 24, 2019)]
[Rules and Regulations]
[Pages 35750-35810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15000]
[[Page 35749]]
Vol. 84
Wednesday,
No. 142
July 24, 2019
Part III
Department of Homeland Security
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8 CFR Parts 204 and 216
EB-5 Immigrant Investor Program Modernization; Final Rule
Federal Register / Vol. 84 , No. 142 / Wednesday, July 24, 2019 /
Rules and Regulations
[[Page 35750]]
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DEPARTMENT OF HOMELAND SECURITY
8 CFR Parts 204 and 216
[CIS No. 2555-14; DHS Docket No. USCIS-2016-0006]
RIN 1615-AC07
EB-5 Immigrant Investor Program Modernization
AGENCY: U.S. Citizenship and Immigration Services, DHS.
ACTION: Final rule.
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SUMMARY: This final rule amends Department of Homeland Security (DHS)
regulations governing the employment-based, fifth preference (EB-5)
immigrant investor classification and associated regional centers to
reflect statutory changes and modernize the EB-5 program. In general,
under the EB-5 program, individuals are eligible to apply for lawful
permanent residence in the United States if they make the necessary
investment in a commercial enterprise in the United States and create
or, in certain circumstances, preserve 10 full-time jobs for qualified
United States workers. This rule provides priority date retention to
certain EB-5 investors, increases the required minimum investment
amounts, reforms targeted employment area designations, and clarifies
USCIS procedures for the removal of conditions on permanent residence.
DHS is issuing this rule to codify existing policies and change certain
aspects of the EB-5 program in need of reform.
DATES: This final rule is effective November 21, 2019.
FOR FURTHER INFORMATION CONTACT: Edie C. Pearson, Policy Branch Chief,
Immigrant Investor Program Office, U.S. Citizenship and Immigration
Services, Department of Homeland Security, 131 M Street NE, 3rd Floor,
Washington, DC 20529; Telephone (202) 357-9350.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive Summary
A. Purpose of the Regulatory Action
B. Legal Authority
C. Summary of the Final Rule Provisions
1. Priority Date Retention
2. Increases to the Investment Amounts
3. TEA Designations
4. Removal of Conditions
5. Miscellaneous Changes
D. Summary of Costs and Benefits
E. Effective Date
F. Implementation
II. Background
A. The EB-5 Program
B. The Regional Center Program
C. EB-5 Immigrant Visa Process
D. Final Rule
III. Response to Public Comments on the Proposed Rule
A. Need for Rulemaking and Regulatory Process
B. Priority Date Retention
1. Proposed Standards for Retaining a Priority Date
2. Other Comments on Priority Date Retention
C. Increases to the Investment Amounts
1. Increase to the Standard Minimum Investment Amount
2. Use of CPI-U
3. Adjustments Every Five Years Tied to CPI-U
4. Implementation of the Increase in Investment Amount
5. Increase to the TEA Minimum Investment Amount
6. Investment Level Differential Between Standard Investment
Amount and TEA Investment Amount
D. Revisions to the Targeted Employment Area (TEA) Designation
Process
1. Standards Applicable to the Designation of a TEA
2. Proposal To Eliminate State Designation of TEAs
4. Other Comments on Proposal To Change to Special Designation
of High Unemployment Area
5. Other Comments on the TEA Designation Process
E. Technical Changes
1. Separate Filings for Derivatives
2. Equity Holders
F. Other Comments on the Rule
1. Processing Times
2. Visa Backlogs
3. Timing of the Rule
4. Material Change
5. Comments Outside the Scope of This Rulemaking
G. Public Comments and Responses on Statutory and Regulatory
Requirements
1. Data, Estimates, and Assumptions Used (Executive Orders 12866
and 13563)
2. Costs (Executive Orders 12866 and 13563)
3. Other Impacts (Executive Orders 12866 and 13563)
4. Other Comments on the Regulatory Impact Analysis (Executive
Orders 12866 and 13563)
5. Comment on Unfunded Mandates Reform Act (UMRA)
IV. Statutory and Regulatory Requirements
A. Executive Orders 12866 (Regulatory Planning and Review),
13563 (Improving Regulation and Regulatory Review), and 13771
(Reducing Regulation and Controlling Regulatory Costs)
B. Small Business Regulatory Enforcement Fairness Act of 1996
C. Regulatory Flexibility Act
1. Industry Classifications/NAICS Codes To Classify Regional
Centers
2. Industry Classifications/NAICS Codes To Classify NCEs
3. Sources of Revenue for RCs and NCEs
4. Other Comments on the RFA
D. Unfunded Mandates Reform Act of 1995
E. Executive Order 13132
F. Executive Order 12988
G. National Environmental Policy Act
H. Paperwork Reduction Act
I. Executive Summary
A. Purpose of the Regulatory Action
DHS is updating its regulations governing EB-5 immigrant investors
and regional centers to reflect statutory changes and codify existing
policies. This final rule also changes areas of the EB-5 program in
need of reform.
B. Legal Authority
The Secretary of Homeland Security's authority for this final rule
can be found in various provisions of the Immigration and Nationality
Act (INA), 8 U.S.C. 1101 et seq., as well as the Departments of
Commerce, Justice, and State, the Judiciary, and Related Agencies
Appropriations Act, 1993, Public Law 102-395, 106 Stat. 1828; the 21st
Century Department of Justice Appropriations Authorization Act, Public
Law 107-273, 116 Stat. 1758; and the Homeland Security Act of 2002
(HSA), Public Law 107-296, 116 Stat. 2135, 6 U.S.C. 101 et seq. General
authority for issuing this final rule is found in section 103(a) of the
INA, 8 U.S.C. 1103(a), which authorizes the Secretary to administer and
enforce the immigration and nationality laws, including by establishing
such regulations as the Secretary deems necessary to carry out her
authority; section 101(b)(1)(F) of the HSA, 6 U.S.C. 111(b)(1)(F),
which establishes that a primary mission of DHS is to ensure that the
overall economic security of the United States is not diminished by the
Department's efforts, activities, and programs aimed at securing the
homeland; and section 102 of the HSA, 6 U.S.C. 112, which vests all of
the functions of DHS in the Secretary.
The aforementioned authorities for this final rule include:
Section 203(b)(5) of the INA, 8 U.S.C. 1153(b)(5), which
makes visas available to immigrants investing in new commercial
enterprises in the United States that will benefit the U.S. economy and
create full-time employment for not fewer than 10 United States
workers.
Section 204(a)(1)(H) of the INA, 8 U.S.C. 1154(a)(1)(H),
which requires individuals to file petitions with DHS when seeking
classification under section 203(b)(5).
Section 216A of the INA, 8 U.S.C. 1186b, which places
conditions on permanent residence obtained under section 203(b)(5) and
authorizes the Secretary to remove such conditions for immigrant
investors who have met the applicable investment requirements,
sustained such investment, and
[[Page 35751]]
otherwise conformed to the requirements of sections 203(b)(5) and 216A.
Section 610 of Public Law 102-395, 8 U.S.C. 1153 note, as
amended, which created the Immigrant Investor Pilot Program (the
``Regional Center Program''), authorizing the designation of regional
centers for the promotion of economic growth, and which authorizes the
Secretary to set aside visas authorized under section 203(b)(5) of the
INA for individuals who invest in regional centers.
C. Summary of the Final Rule Provisions
DHS carefully considered the public comments received and this
final rule adopts, with appropriate changes, the regulatory text
proposed in the Notice of Proposed Rulemaking (NPRM) published in the
Federal Register on January 13, 2017. See EB-5 Immigrant Investor
Program Modernization; Proposed Rule, 82 FR 4738. This final rule also
relies on all of the justifications articulated in the NPRM, except as
reflected below.
This rule makes the following changes as compared to the NPRM:
The rule clarifies that the priority date of a petition
for classification as an investor is the date the petition is properly
filed.
The rule clarifies that a petitioner with multiple
approved immigrant petitions for classification as an investor is
entitled to the earliest qualifying priority date;
The rule retains the 50 percent minimum investment
differential between a targeted employment area (TEA) and a non-TEA
instead of changing the differential to 25 percent as proposed, thereby
increasing the minimum investment amount in a TEA from $500,000 to
$900,000 (rather than $1.35 million, as DHS initially proposed);
The rule makes a technical correction to the inflation
adjustment formula for the standard minimum investment amount and the
high employment area investment amount, such that future inflation
adjustments will be based on the initial investment amount set by
Congress in 1990, rather than on the most recent inflation adjustment.
Thus, for instance, the next inflation adjustment will be based on the
initial minimum investment amount of $1,000,000 in 1990, rather than
this rule's minimum investment amount of $1,800,000, which is a rounded
figure. This change better implements the intent of the proposed rule;
it ensures that future inflation adjustments more accurately track
inflation since 1990, rather than being based on rounded figures.
The rule modifies the original proposal that any city or
town with a population of 20,000 or more may qualify as a TEA, to
provide that only cities and towns with a population of 20,000 or more
outside of metropolitan statistical areas (MSAs) may qualify as a TEA.
The rule modifies the application of the rule, such that
amendments or supplements to any offering necessary to maintain
compliance with applicable securities laws based upon the changes in
this rulemaking will not independently result in denial or revocation
of a petition, provided the petition meets certain criteria.
The rule also makes other minor non-substantive and
clarifying changes.
This final rule makes the following major revisions to the EB-5
program regulations:
1. Priority Date Retention
The final rule authorizes certain EB-5 petitioners to retain the
priority date \1\ of an approved EB-5 immigrant petition for use in
connection with any subsequent EB-5 immigrant petition.\2\ See final 8
CFR 204.6(d). Petitioners with approved immigrant petitions might need
to file new petitions due to circumstances beyond their control (for
instance, DHS might have terminated a regional center associated with
the original petition), or might choose to do so for other reasons (for
instance, due to business conditions a petitioner may seek to
materially change aspects of his or her qualifying investment). This
rule generally allows EB-5 petitioners to retain the priority date of a
previously approved petition to avoid delays on immigrant visa
processing associated with loss of a priority date. DHS believes that
priority date retention may become increasingly important due to the
strong possibility that the EB-5 category will remain oversubscribed
for the foreseeable future.
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\1\ An EB-5 immigrant petition's priority date is the date on
which the petition was properly filed. In general, when demand
exceeds supply for a particular visa category, an earlier priority
date is more advantageous than a later one.
\2\ This is subject to conditions and limitations described in
more detail elsewhere in this rule.
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In the final rule, DHS amends the originally proposed regulatory
text by defining the term ``priority date'' to mean the date that the
petition is properly filed. See final 8 CFR 204.6(d). DHS inadvertently
left this definition out of the NPRM's proposed regulatory text, see 82
FR 4738, even though this definition is in the current regulation, see
8 CFR 204.6(d) and acknowledged in the NPRM preamble, see 82 FR 4738,
4739 n. 1 (``An EB-5 immigrant petition's priority date is normally the
date on which the petition was properly filed. In general, when demand
exceeds supply for a particular visa category, an earlier priority date
is more advantageous than a later one.''). This change is for clarity.
DHS also amends the originally proposed regulatory text by changing
``approved EB-5 immigrant petition'' to ``immigrant petition approved
for classification as an investor, including immigrant petitions whose
approval was revoked on grounds other than those set forth below,'' and
also ``approved petition'' to ``immigrant petition approved for
classification as an investor.'' The purpose of these revisions is to
clarify that an investor may retain a priority date from petitions that
had been approved but have since been revoked on grounds not
specifically excepted in the provision. DHS further amends the
originally proposed regulatory text by changing ``based upon that
approved petition'' to ``using the priority date of the earlier-
approved petition.'' This revision makes it clear that once a
petitioner uses that approved petition's priority date to obtain
conditional permanent residence, that priority date is no longer
available for use on any later-filed petition.
Last, DHS amends the originally proposed regulatory text by adding
the sentence: ``In the event that the alien is the petitioner of
multiple immigrant petitions approved for classification as an
investor, the alien shall be entitled to the earliest qualifying
priority date.'' This sentence was added to mirror a similar sentence
at 8 CFR 204.5(e) pertaining to other employment-based categories, and
clarifies which date applies should an investor have multiple approved
petitions.
2. Increases to the Investment Amounts
Pursuant to 8 U.S.C. 1153(b)(5)(C), DHS consulted with the
Departments of State and Labor \3\ to increase the minimum investment
amounts for all new EB-5 petitioners in this final rule. See final 8
CFR 204.6(f). The increase will ensure that program requirements
reflect the present-day dollar value of the investment amounts
established by Congress in 1990. Specifically, consistent with the
NPRM, the rule increases the standard minimum investment amount, which
also applies to high employment areas, from $1
[[Page 35752]]
million to $1.8 million. Final 8 CFR 204.6(f)(1), (3). This change
represents an adjustment for inflation from 1990 to 2015 as measured by
the unadjusted Consumer Price Index for All Urban Consumers (CPI-U), an
economic indicator that tracks the prices of goods and services in the
United States.\4\ This rule also makes a technical correction to the
inflation adjustment formula, so that future inflation adjustments will
be based on the initial investment amount set by Congress in 1990,
rather than on the most recent inflation adjustment.
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\3\ DHS includes in the docket for this rulemaking a letter from
each department detailing the consultation.
\4\ See Bureau of Labor Statistics, CPI-U Inflation Calculator,
https://www.bls.gov/data/inflation_calculator.htm.
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For investors seeking to invest in a new commercial enterprise that
will be principally doing business in a TEA, the proposed rule would
have decreased the differential between TEA and non-TEA minimum
investment amounts to 25 percent, thereby increasing the TEA minimum
investment amount to $1.35 million, which is 75 percent of the
increased standard minimum investment amount. However, based on a
review of the comments, the final rule will retain the 50 percent
differential, and only increase the minimum investment amount from
$500,000 to $900,000. Final 8 CFR 204.6(f)(2).
In addition, the final rule sets the schedule for regular CPI-U-
based adjustments in the standard minimum investment amount, and
conforming adjustments to the TEA minimum investment amount, every 5
years, beginning 5 years from the effective date of these regulations.
3. TEA Designations
Congress authorized DHS to set a different minimum investment
amount for investments made in TEAs, or ``targeted employment areas''
(i.e., rural areas and areas of high unemployment). See INA section
203(b)(5)(C)(ii), 8 U.S.C. 1153(b)(5)(C)(ii). The final rule reforms
the TEA designation process to ensure consistency in TEA adjudications
and better ensure that TEA designations more closely adhere to
congressional intent. Specifically, the final rule eliminates the
ability of a state to designate certain geographic and political
subdivisions as high unemployment areas; instead, DHS will make such
designations directly, using standards described in more detail
elsewhere in this final rule. See final 8 CFR 204.6(i). DHS believes
these changes will help address inconsistencies between and within
states in designating high unemployment areas, and better ensure that
the reduced investment threshold is reserved for areas experiencing
sufficiently high levels of unemployment, as Congress intended.
DHS is making three changes from the NPRM, with respect to TEA
designations. First, DHS is modifying its proposal on high unemployment
areas to include only cities and towns with a population of 20,000 or
more outside of MSAs as a specific and separate area that may qualify
as a TEA. See final 8 CFR 204.6(j)(6)(ii)(A). By contrast, the NPRM
proposed to allow any city or town with high unemployment and a
population of 20,000 or more to qualify as a TEA, regardless of whether
located within an MSA. Under the current regulatory scheme, TEA
designations are not available at the city or town level, unless a
state designates the city or town as a high unemployment area and
provides evidence of such designation to a prospective EB-5 investor
for submission with the Form I-526. See proposed 8 CFR
204.6(j)(6)(ii)(A). DHS recognizes the proposal was inadvertently over-
inclusive because DHS intended the proposal to provide non-rural cities
and towns located outside of MSAs additional methods to qualify as a
TEA, but the proposal would have allowed cities and towns with high
unemployment and a population of 20,000 or more located within MSAs to
qualify. DHS did not necessarily intend to permit cities and towns
within MSAs to qualify or to create any new distinctions between cities
and towns of various populations within MSAs. The final rule modifies
the proposal to include only cities and towns with a population of
20,000 or more outside of MSAs as a specific and separate area that may
qualify as a TEA based on high unemployment. See final 8 CFR
204.6(j)(6)(ii)(A).
Second, DHS is finalizing a technical change to 8 CFR 204.6(i) and
(j)(6)(B) by removing the mention of ``geographic and political
subdivisions'' for special designations. Because DHS proposed and is
finalizing the census tract process for special designations,
references to other subdivisions are no longer required.
Third, DHS is making an additional technical change to the
description of special designation TEAs at 8 CFR 204.6(i) proposed in
the NPRM, replacing ``contiguous'' as it is used to describe additional
census tracts that can be added to the census tract(s) in which the NCE
is principally doing business, with ``directly adjacent.'' This
technical change was made to mirror the description of special
designation TEAs elsewhere in the rule and to minimize confusion to the
public, as the term ``contiguous'' could be read to include census
tracts beyond those directly adjacent to the census tract(s) in which
the NCE is principally doing business.
4. Removal of Conditions
The final rule revises the regulations to clarify that derivative
family members must file their own petitions to remove conditions on
their permanent residence when they are not included in a petition to
remove conditions filed by the principal investor. See final 8 CFR
216.6(a)(1)(ii). In addition, the rule improves the adjudication
process for removing conditions by providing flexibility in interview
locations and updates the regulation to conform to the current process
for issuing permanent resident cards. See generally final 8 CFR 216.6.
5. Miscellaneous Changes
The final rule updates the regulations to reflect miscellaneous
statutory changes made since DHS first published the regulation in 1991
and clarifies definitions of key terms for the program.\5\ By aligning
DHS regulations with statutory changes and defining key terms, the rule
provides greater certainty regarding the eligibility criteria for
investors and their family members.
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\5\ See final 8 CFR 216.6(a)(4)(i) and (c)(1)(i). DHS proposed
this specific change to remove references to the requirement that
immigrant entrepreneurs establish a new commercial enterprise,
because the requirement was removed by the 21st Century Department
of Justice Appropriations Authorization Act, Public Law 107-273, 116
Stat. 1758. 82 FR at 4751. However, this change was inadvertently
left out of the proposed regulatory text. This final rule reflects
the appropriate changes.
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This final rule will apply to petitioners who file on or after the
effective date. To respond to concerns regarding the potential effect
of this rule on existing petitioners, DHS has clarified in the final
regulatory text that DHS will not deny a petition filed prior to this
rule's effective date (or revoke an approved petition) based solely on
the fact that the underlying investment offerings have been amended or
supplemented as a result of this rulemaking to maintain compliance with
applicable securities laws. See final 8 CFR 204.6(n). This addresses
situations in which, for instance, an investor is actively in the
process of investing into an ongoing offering and filed a Form I-526
petition that is pending on the effective date of this final rule, but
the documents for the offering need to be modified to ensure compliance
with applicable securities laws because of the increase to the minimum
investment amounts resulting from this rulemaking DHS provides further
detail on this provision below.
[[Page 35753]]
D. Summary of Costs and Benefits
This final rule changes certain aspects of the EB-5 program that
are in need of reform and updates the regulations to reflect statutory
changes and codify existing policies. This final rule makes five major
categories of revisions to the existing EB-5 program regulations. Three
of these categories, which involve (i) Priority date retention; (ii)
increasing the investment amounts; and (iii) reforming the TEA
designations, are substantive. The two other major categories, focused
on (iv) the removal of conditions; and (v) miscellaneous changes,
involve generally technical adjustments to the EB-5 program. Details
concerning these three major substantive and two major technical
categories of changes are provided in above sections, and in Table 2 in
terms of benefit-cost considerations.
Within the five major categories of revisions to existing
regulations, this final rule also makes some changes from the NPRM.
Most importantly, the reduced investment amount for TEAs will be raised
to $900,000 instead of the proposed $1.35 million, in order that the 50
percent differential between investment tiers be maintained. The other
changes between this final rule and the NPRM are not expected to create
costs and are listed here:
Clarifies that the priority date of a petition for
classification as an investor is the date the petition is properly
filed;
Clarifies that a petitioner with multiple approved
immigrant petitions for classification as an investor is entitled to
the earliest qualifying priority date;
Modifies the original proposal that any city or town with
a population of 20,000 or more may qualify as a TEA, to provide that
only cities and towns with a population of 20,000 or more outside of
metropolitan statistical areas (MSAs) may qualify as a TEA;
Modifies the application of the rule, such that amendments
or supplements to any offering necessary to maintain compliance with
applicable securities laws based upon the changes in this rulemaking
will not independently result in denial or revocation of a petition,
provided the petition meets certain criteria;
Makes a technical correction to the inflation adjustment
formula for the standard minimum investment amount and the high
employment area investment amount, such that future inflation
adjustments will be based on the initial investment amount set by
Congress in 1990, rather than on the most recent inflation adjustment;
and
Makes minor non-substantive and clarifying changes.
DHS analyzed the five major categories of revisions carefully. EB-5
investment structures are complex, and typically involve multiple
layers of investment, finance, development, and legal business
entities. The interconnectedness and complexity of such relationships
make it very difficult to quantify and monetize the costs and benefits.
Furthermore, since demand for EB-5 investments incorporate many factors
related to international and U.S. specific immigration and business,
DHS cannot predict with accuracy changes in demand for the program
germane to the major categories of revisions that increase the
investment amounts and reform the TEA designation process. DHS has no
way to assess the potential reduction in investments either in terms of
past activity or forecasted activity, and cannot therefore
quantitatively estimate any impacts concerning job creation, losses or
other downstream economic impacts driven by these major provisions. DHS
provides a full qualitative analysis and discussion in the Executive
Orders 12866 and 13563 section of this final rule.
There are several costs involved in the final rule for which DHS
has conducted quantitative estimates. For the technical revision that
clarifies that derivative family members must file their own
petitioners to remove conditions on their permanent residence when they
are not included in the principal investor's petition, we estimate
costs to be approximately $91,023 annually for those derivatives.
Familiarization costs to review the rule are estimated to be $629,758
annually.
In addition, DHS has prepared a Final Regulatory Flexibility
Analysis (FRFA) under the Regulatory Flexibility Act (RFA) to discuss
any potential impacts to small entities. As discussed further in the
FRFA, DHS cannot estimate the exact impact to small entities. DHS,
however, does expect some impact to regional centers and non-regional
center projects. As it relates to the FRFA, each of 1,570 business
entities involved in familiarization of the rule would incur costs of
about $401.
Table 2--Summary of Changes and Impact of the Adopted Provisions
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Current policy Adopted change Impact
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Priority Date Retention
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Current DHS regulations do not permit DHS will allow an EB-5 immigrant Benefits:
investors to use the priority date of an petitioner to use the priority date of Makes visa
immigrant petition approved for an immigrant petition approved for allocation more
classification as an investor for a classification as an investor for a predictable for investors
subsequently filed immigrant petition subsequently filed immigrant petition with less possibility for
for the same classification. for the same classification for which large fluctuations in visa
the petitioner qualifies, unless DHS availability dates due to
revokes the petition's approval for regional center
fraud or willful misrepresentation by termination.
the petitioner, or revokes the petition Provides greater
for a material error. certainty and stability
regarding the timing of
eligibility for investors
pursuing permanent
residence in the U.S. and
thus lessens the burden of
unexpected changes in the
underlying investment.
Provides more
flexibility to
investors to contribute
to more viable
investments,
potentially reducing
fraud and improving
potential for job
creation.
Costs:
None anticipated.
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[[Page 35754]]
Increases to Investment Amounts
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The standard minimum investment amount DHS will account for inflation in the Benefits:
has been $1 million since 1990 and has investment amount since the inception Increases in
not kept pace with inflation--losing of the program. DHS will raise the investment amounts are
almost half its real value. minimum investment amount to $1.8 necessary to keep pace
Further, the statute authorizes a million to account for inflation with inflation and real
reduction in the minimum investment through 2015, and includes a mechanism value of investments;
amount when such investment is made in a to automatically adjust the minimum Raising the
TEA by up to 50 percent of the standard investment amount based on the investment amounts
minimum investment amount. Since 1991, unadjusted CPI-U every 5 years. increases the amount
DHS regulations have set the TEA DHS will retain the TEA minimum invested by each investor
investment threshold at 50 percent of investment amount at 50 percent of the and potentially increases
the minimum investment amount. standard amount. The minimum investment the total amount invested
Similarly, DHS has not increased the amount in a TEA will initially increase under this program.
minimum investment amount for to $900,000. For regional
investments made in a high employment DHS is not changing the equivalency centers, the higher
area beyond the standard amount. between the standard minimum investment investment amounts per
amount and those made in high investor will mean that
employment areas. As such, DHS will set fewer investors will have
the minimum investment amounts in high to be recruited to pool
employment areas to be $1.8 million, the requisite amount of
and follow the same mechanism for capital for the project,
future inflationary adjustments. so that searching and
matching of investors to
projects could be less
costly.
Costs:
Some investors may
be unable or unwilling to
invest at the higher
levels of investment.
There may be fewer
jobs created if
significantly fewer
investors invest at the
higher investment amounts.
For regional
centers, the higher
amounts could reduce
the number of investors
in the global pool and
result in fewer
investors, thus
potentially making the
search and matching of
investors to projects
more costly.
Potential reduced
numbers of EB-5 investors
could prevent certain
projects from moving
forward due to lack of
requisite capital.
An increase in the
investment amount could
make foreign investor visa
programs offered by other
countries more attractive.
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TEA Designations
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A TEA is defined by statute as a rural DHS will eliminate state designation of Benefits:
area or an area that has experienced high unemployment areas. DHS also Rules out TEA
high unemployment (of at least 150 amends the manner in which investors configurations that rely
percent of the national average rate). can demonstrate that their investments on a large number of
Currently, investors demonstrate that are in a high unemployment area. census tracts indirectly
their investments are in a high (1) DHS will add cities and towns with a linked to the actual
unemployment area in two ways: population of 20,000 or more outside of project tract by numerous
(1) Providing evidence that the MSAs as a specific and separate area degrees of separation.
Metropolitan Statistical Area (MSA), the that may qualify as a TEA based on high Potential to
specific county within the MSA, or the unemployment. better stimulate job
county in which a city or town with a (2) DHS will amend its regulations so growth in areas where
population of 20,000 or more is located, that a TEA may consist of a census unemployment rates are the
in which the new commercial enterprise tract or contiguous census tracts in highest, consistent with
is principally doing business, has which the new commercial enterprise is congressional intent.
experienced an average unemployment rate principally doing business if Costs:
of at least 150 percent of the national the new commercial enterprise This TEA provision
average rate; or is located in more than one census could cause some projects
(2) submitting a letter from an tract; and and investments to no
authorized body of the government of the the weighted average of the longer qualify as being in
state in which the new commercial unemployment rate for the tract or high unemployment areas.
enterprise is located, which certifies tracts is at least 150 percent of the DHS presents the potential
that the geographic or political national average. number of projects and
subdivision of the metropolitan (3) DHS will also amend its regulations investments that could be
statistical area or of the city or town so that a TEA may consist of an area affected in Table 5.
with a population of 20,000 or more in comprising the census tract(s) in which
which the enterprise is principally the new commercial enterprise is
doing business has been designated a principally doing business, including
high unemployment area. any and all adjacent tracts, if the
weighted average of the unemployment
rate for all included tracts is at
least 150 percent of the national
average.
Current technical issues: DHS will amend its regulations to Conditions of Filing:
The current regulation does not include the following technical Benefits:
clearly define the process by which changes: Adds clarity and
derivatives may file a Form I-829 Clarify the filing process for eliminates confusion for
petition when they are not included on derivatives who are filing a Form I-829 the process of derivatives
the principal's petition. petition separately from the immigrant who file separately from
Interviews for Form I-829 investor. the principal immigrant
petitions are generally scheduled at the Provide flexibility in investor.
location of the new commercial determining the interview location Costs:
enterprise. related to the Form I-829 petition. Total cost to
The current regulations require Amend the regulation by which applicants filing
an immigrant investor and his or her the immigrant investor obtains the new separately will be $91,023
derivatives to report to a district permanent resident card after the annually.
office for processing of their permanent approval of his or her Form I-829 Conditions of Interview:
resident cards. petition because DHS captures biometric Benefits:
data at the time the immigrant investor Interviews may be
and derivatives appear at an ASC for scheduled at the USCIS
fingerprinting. office having jurisdiction
Add 8 CFR 204.6(n) to allow over either the immigrant
certain investors to remain eligible investor's commercial
for the EB-5 classification if a enterprise, the immigrant
project's offering is amended or investor's residence, or
supplemented based upon the final the location where the
rule's effectiveness. Form I-829 petition is
being adjudicated, thus
making the interview
program more effective and
reducing burdens on the
immigrant investor.
[[Page 35755]]
Some
petitioners will
benefit by traveling
shorter distances for
interviews and thus
see a cost savings in
travel costs and
opportunity costs of
time for travel and
interview time.
Costs:
None anticipated.
Investors obtaining a
permanent resident card:
Benefits:
Cost and time
savings for applicants for
biometrics data.
Costs:
None anticipated.
Eligibility Following
Changes to Offering:
Benefits:
An amendment to a
project's offering based
on the final rule's
provisions might not
result in the denial or
revocation of a petition.
Costs:
None anticipated.
----------------------------------------------------------------------------------------------------------------
Miscellaneous Changes
----------------------------------------------------------------------------------------------------------------
Current miscellaneous items: DHS will amend its regulations to make These provisions are
8 CFR 204.6(j)(2)(iii) refers to the following miscellaneous changes: technical changes and will
the former U.S. Customs Service. DHS is updating references at 8 have no impact on
Public Law 107-273 eliminated CFR 204.6(j)(2)(iii) from U.S. Customs investors or the
the requirement that alien entrepreneurs Service to U.S. Customs and Border government.
establish a new commercial enterprise Protection.
from both INA section 203(b)(5) and INA Removing references to
section 216A. requirements that alien entrepreneurs
8 CFR 204.6(j)(5) introductory establish a new commercial enterprise
text and (j)(5)(iii) reference in 8 CFR 216.6.
``management''; Removing references to
Current regulation at 8 CFR ``management'' at 8 CFR 204.6(j)(5)
204.6(j)(5) has the phrase ``as opposed introductory text and (j)(5)(iii);
to maintain a purely passive role in Removing the phrase ``as
regard to the investment''; opposed to maintain a purely passive
Public Law 107-273 allows role in regard to the investment'' from
limited partnerships to serve as new 8 CFR 204.6(j)(5);
commercial enterprises; Clarifies that any type of
Current regulation references entity can serve as a new commercial
the former Associate Commissioner for enterprise;
Examinations. Replacing the reference to the
8 CFR 204.6(k) requires USCIS to former Associate Commission for
specify in its Form I-526 decision Examinations with a reference to the
whether the new commercial enterprise is USCIS AAO.
principally doing business in a targeted Amending 8 CFR 204.6(k) to
employment area. specify how USCIS will issue a
decision.
Sections 204.6 and 216.6 use Revising sections 8 CFR
the term ``entrepreneur'' and 204.6 and 216.6 to use the term
``deportation.'' These sections also ``investor'' instead of
refer to Forms I-526 and I-829. ``entrepreneur'' and to use the term
8 CFR 204.6(i) and (j)(6)(ii)(B) ``removal'' instead of
use the phrase ``geographic or political ``deportation.''
subdivision'' in describing state Removing references to
designations of high unemployment areas ``geographic or political subdivision''
for TEA purposes. in 8 CFR 204.6(i) and (j)(6)(ii)(B).
The priority date of a petition Providing clarification in 8
for classification as an investor is the CFR 204.6(d) that the petitioner of
date the petition is properly filed. multiple immigrant petitions approved
for classification as an investor
generally is entitled to the earliest
qualifying priority date.
----------------------------------------------------------------------------------------------------------------
In addition to the above, applicants will need to read and review the rule to become familiar with the final
rule provisions. Familiarization costs to read and review the rule are estimated at $629,758 annually.
E. Effective Date
This final rule will be effective on November 21, 2019, 120 days
from the date of publication in the Federal Register. DHS has
determined that this 120-day period is reasonable to ensure that EB-5
petitioners and the EB-5 market have time to adjust their plans to the
changes made under this rule. DHS believes it will be able to implement
this rule in a manner that will balance the equities of stakeholders
and avoid delays of processing these and other petitions.
F. Implementation
The changes in this rule will apply to all Immigrant Petition by
Alien Investor (Form I-526) petitions filed on or after the effective
date of the final rule. Form I-526 petitions filed prior to the
effective date of the rule will be allowed to demonstrate eligibility
based on the regulatory requirements in place at the time of filing of
the petition. DHS has determined that this manner of implementation
best balances operational considerations with fairness to the public.
II. Background
A. The EB-5 Program
As part of the Immigration Act of 1990, Public Law 101-649, 104
Stat. 4978, Congress established the EB-5 immigrant visa classification
to incentivize employment creation in the United States. As enacted by
Congress, the EB-5 program makes lawful permanent resident (LPR) status
available to foreign nationals who invest at least $1 million in a new
commercial enterprise (NCE) that will create at least 10 full-time jobs
in the United States. See INA section 203(b)(5), 8 U.S.C. 1153(b)(5).
The INA permits DHS to
[[Page 35756]]
specify a higher investment amount if the investment is in a high
employment area or a lesser investment amount if the investment is in a
TEA, defined to include certain rural areas and areas of high
unemployment. Id.; 8 CFR 204.6(f). The INA allots 9,940 immigrant visas
each fiscal year for foreign nationals seeking to enter the United
States under the EB-5 classification. See INA section 201(d), 8 U.S.C.
1151(d); INA section 203(b)(5), 8 U.S.C. 1153(b)(5). Not less than
3,000 of these visas must be reserved for foreign nationals investing
in TEAs. See INA section 203(b)(5)(B), 8 U.S.C. 1153(b)(5)(B).
B. The Regional Center Program
Enacted in 1992, section 610 of the Departments of Commerce,
Justice, and State, the Judiciary, and Related Agencies Appropriations
Act, 1993, Public Law 102-395, 106 Stat. 1828, established a pilot
program that requires the allocation of a limited number of EB-5
immigrant visas to individuals who invest through DHS-designated
regional centers. The Regional Center Program was initially designed as
a pilot program set to expire after 5 years, but Congress has continued
to extend the program to the present day. See, e.g., Public Law 115-
141, Div. M, Tit. II, sec. 204 (Mar. 23, 2018).
Under the Regional Center Program, foreign nationals base their EB-
5 petitions on investments in new commercial enterprises located within
``regional centers.'' DHS regulations define a regional center as an
economic unit, public or private, that promotes economic growth,
regional productivity, job creation, and increased domestic capital
investment. See 8 CFR 204.6(e). While all EB-5 petitioners go through
the same petition process, those petitioners participating in the
Regional Center Program may meet statutory job creation requirements
based on economic projections of either direct or indirect job
creation, rather than only on jobs directly created by the new
commercial enterprise. See 8 CFR 204.6(m)(3). In addition, Congress
authorized the Secretary to give priority to EB-5 petitions filed
through the Regional Center Program. See section 601(d) of Public Law
102-395, 106 Stat. 1828, as amended by Public Law 112-176, Sec. 1, 126
Stat. 1326 (Sept. 28, 2012).
Requests for regional center designation must be filed with USCIS
on the Application for Regional Center Designation Under the Immigrant
Investor Program (Form I-924). See 8 CFR 204.6(m)(3)-(4). Once
designated, regional centers must provide USCIS with updated
information to demonstrate continued eligibility for the designation by
submitting an Annual Certification of Regional Center (Form I-924A) on
an annual basis or as otherwise requested by USCIS. See 8 CFR
204.6(m)(6)(i)(B). USCIS may seek to terminate a regional center's
participation in the program if the regional center no longer qualifies
for the designation, the regional center fails to submit the required
information or pay the associated fee, or USCIS determines that the
regional center is no longer promoting economic growth. See 8 CFR
204.6(m)(6)(i). As of September 10, 2018, there were 886 designated
regional centers.
C. EB-5 Immigrant Visa Process
A foreign national seeking LPR status under the EB-5 immigrant visa
classification must go through a multi-step process during which the
investor must sustain the investment. The individual must first file an
Immigrant Petition by Alien Investor (Form I-526, or ``EB-5 petition'')
with USCIS. The petition must be supported by evidence that the foreign
national's lawfully obtained capital is invested (i.e., placed at
risk), or is actively in the process of being invested, in a new
commercial enterprise in the United States that will create full-time
positions for not fewer than 10 qualifying employees.\6\ See 8 CFR
204.6(j).
---------------------------------------------------------------------------
\6\ Under current USCIS policy, the investor must sustain these
actions through the end of the sustainment period (2 years from the
date the investor obtains conditional resident status). The total
amount of time will vary, however, depending on when the investor
firsts invests or becomes actively in the process of investing as
well as the amount of time the investor may wait to obtain status
due to oversubscription for the investor's nationality.
---------------------------------------------------------------------------
If USCIS approves the EB-5 petition, the petitioner must take
additional steps to obtain LPR status. In general, the petitioner may
either apply for an immigrant visa through a Department of State (DOS)
consular post abroad or, if the petitioner is already in the United
States and is otherwise eligible to adjust status, the petitioner may
seek adjustment of status by filing an Application to Register
Permanent Residence or Adjust Status (Form I-485, or ``application for
adjustment of status'') with USCIS. Congress has imposed limits on the
availability of such immigrant visas, including by capping the annual
number of visas available in the EB-5 category and by separately
limiting the percentage of immigrant visas that may be issued on an
annual basis to individuals born in any one country.
To request an immigrant visa while abroad, an EB-5 petitioner must
apply at a U.S. consular post. See INA sections 203(e) and (g), 221 and
222, 8 U.S.C. 1153(e) and (g), 1201 and 1202; see also 22 CFR part 42,
subparts F and G. The petitioner must generally wait to receive a visa
application packet from the DOS National Visa Center to commence the
visa application process. After receiving this packet, the petitioner
must collect required information and file the immigrant visa
application with DOS. As noted above, the wait for the visa depends on
the demand for immigrant visas in the EB-5 category and the
petitioner's country of birth.\7\ Generally, DOS authorizes the
issuance of a visa and schedules the petitioner for an immigrant visa
interview for the month in which the priority date will be current. If
the petitioner's immigrant visa application is ultimately approved, he
or she is issued an immigrant visa and, on the date of admission to the
United States, obtains LPR status on a conditional basis. See INA
sections 211, 216A, and 221, 8 U.S.C. 1181, 1186, and 1201.
---------------------------------------------------------------------------
\7\ When demand for a visa exceeds the number of visas available
for that category and country, the demand for that particular
preference category and country of birth is deemed oversubscribed.
The Department of State (DOS) publishes a Visa Bulletin that
determines when a visa may be authorized for issuance. See U.S.
Dep't of State, Bureau of Consular Aff., Visa Bulletin, available at
https://travel.state.gov/content/visas/en/law-and-policy/bulletin.html.
---------------------------------------------------------------------------
Alternatively, an EB-5 petitioner who is in the United States in
lawful nonimmigrant status generally may seek LPR status by filing with
USCIS an application for adjustment of status, Form I-485. See INA
section 245, 8 U.S.C. 1255; 8 CFR part 245. Before filing such an
application, however, the EB-5 petitioner must wait until an immigrant
visa is ``immediately available.'' See INA section 245(a), 8 U.S.C.
1255(a); 8 CFR 245.2(a)(2)(i)(A). Generally, an immigrant visa is
considered ``immediately available'' if the petitioner's priority date
under the EB-5 category is earlier than the relevant date indicated in
the monthly DOS Visa Bulletin. See 8 CFR 245.1(g)(1).
Whether obtained through the issuance of an immigrant visa or
adjustment of status, LPR status based on an EB-5 petition is granted
on a conditional basis. See INA section 216A(a)(1), 8 U.S.C.
1186b(a)(1). Within the 90-day period preceding the second anniversary
of the date the immigrant investor obtains conditional permanent
resident status, the immigrant investor must file with USCIS a Petition
by Investor to Remove Conditions on Permanent Resident Status (Form I-
829). See INA section 216A(c) and (d),
[[Page 35757]]
8 U.S.C. 1186b(c) and (d); 8 CFR 216.6(a)(1). Failure to timely file
Form I-829 results in automatic termination of the immigrant investor's
conditional permanent resident status and the initiation of removal
proceedings. See INA section 216A(c), 8 U.S.C. 1186b(c); 8 CFR
216.6(a)(5). In support of the petition to remove conditions, the
investor must show, among other things, that the commercial enterprise
was established, that he or she invested or was actively involved in
investing the requisite capital, that he or she sustained those actions
for the period of residence in the United States, and that job creation
requirements were met or will be met within a reasonable time. See 8
CFR 216.6(a)(4). If approved, the conditions on the investor's
permanent residence are removed as of the second anniversary of the
date the investor obtained conditional permanent resident status. See 8
CFR 216.6(d)(1).
D. Final Rule
In response to the proposed rule, DHS received 849 comments during
the 89-day public comment period. In addition, DHS reviewed 11 comments
submitted to the docket USCIS-2016-0008, EB-5 Immigrant Investor
Regional Center Program, an advance notice of proposed rulemaking
(ANPRM) published in the Federal Register two days prior to the
proposed rule,\8\ but which contained content relevant to the proposed
rule. As a result, DHS considered a total of 860 comment submissions in
response to the proposed rule. Approximately 560 of the comments were
letters submitted through mass mailing campaigns and 290 comments were
unique submissions. Commenters consisted primarily of individuals,
including some investors, but also included anonymous submissions, law
firms, advocacy groups, EB-5 job-creating entities, EB-5 new commercial
enterprises, regional centers, non EB-5 entity companies, industry
professional associations, industry trade/business associations,
community or social organizations, members of Congress, and
representatives from state and local governments.
---------------------------------------------------------------------------
\8\ The ANPRM is titled, ``EB-5 Immigrant Investor Regional
Center Program'' and was published on January 11, 2017 at 82 FR
3211. The eleven comments from the ANPRM docket considered were
0002, 0005, 0006, 0007, 0008, 0009, 0015, 0018, 0021, 0024, and
0025.
---------------------------------------------------------------------------
Following careful consideration of public comments received, DHS
made some modifications to the regulatory text proposed in the NPRM.
The rationale for the proposed rule and the reasoning provided in the
background section of that rule remain valid with respect to these
regulatory amendments, except where new or supplemental rationale is
reflected below. Section III of this final rule preamble includes a
summary and analysis of public comments that are pertinent to the
proposed rule. A brief summary of comments DHS deemed to be out of
scope or unrelated to this rulemaking, making a substantive response
unnecessary, is provided at the end of Section III. Comments may be
reviewed at http://www.regulations.gov, docket number USCIS-2016-0006.
III. Response to Public Comments on the Proposed Rule
DHS reviewed all of the public comments received in response to the
proposed rule and addresses relevant comments in this final rule,
grouped by subject area. DHS does not address comments seeking changes
in U.S. laws, regulations, or agency policies that are unrelated to the
changes to 8 CFR 204.6 and 216.6 proposed in the NPRM. This final rule
does not resolve issues outside the scope of this rulemaking.
A. Need for Rulemaking and Regulatory Process
Comments: Multiple commenters expressed support for general
integrity reforms and measures that deter fraud, but recommended the
legislative process to reform the program. A few commenters urged DHS
to withdraw the proposed rule because the proposed reforms should be
under the purview of Congress, as they stated that the reforms are
better addressed through the legislative process. The commenters stated
that the legislative process generally requires consensus building and
input from various stakeholders. One commenter stated that legislative
reform would be more comprehensive, address interconnected impacts, and
provide for needed reforms that go beyond the statutory authority for
regulatory reform. The commenter also expressed concern that pending
EB-5 legislation has conflicting changes that, if passed, would
supersede many or most of the proposed regulatory changes or render
them moot. Another commenter stated that collecting comments on this
rule prior to the reauthorization of the EB-5 Regional Center Program
was premature; the commenter asserted that a legislative solution could
address the issues in the proposed rule without the need for
rulemaking. These commenters called for the withdrawal of the proposed
rule and asserted that even if these changes were effected through
regulation, any regulatory changes should be drafted from scratch under
the new administration. Another commenter suggested that the proposed
regulation exceeds the scope of legislative changes recently discussed
by Congress.
Response: DHS disagrees with commenters that it was premature to
propose the rule prior to the reauthorization of the EB-5 Regional
Center Program and that the issues addressed in the final rule are best
resolved through the legislative process. The final rule addresses
overarching issues concerning the EB-5 program generally, not just the
Regional Center Program. Additionally, the Regional Center Program has
been reauthorized numerous times in recent years, without reform. See,
e.g., Public Law 115-123 (Feb. 9, 2018); Public Law 115-120 (Jan. 22,
2018); Public Law 115-96 (Dec. 22, 2017); Public Law 115-31 (May 5,
2017); Public Law 114-254 (Dec. 10, 2016); Public Law 114-223 (Sept.
29, 2016); Public Law 114-113 (Dec. 18, 2015). DHS has worked
diligently to provide technical assistance to Congress since 2014 to
reform the EB-5 program through legislation. To date, Congress has not
passed comprehensive EB-5 reform legislation.\9\ In fact, some members
of Congress have specifically requested that ``because Congress has
failed to reform or end this program, we call on the Department of
Homeland Security to expeditiously finalize regulations that would
reduce the widespread abuses of the EB-5 program.'' \10\ DHS would, of
course, faithfully implement any new legislation, if passed.
---------------------------------------------------------------------------
\9\ A number of pieces of legislation have been introduced. See
generally S.1501, the ``American Job Creation and Investment
Promotion Reform Act of 2015'', 114th Congress (2015-2016); S.2415,
the ``EB-5 Integrity Act'', 114th Congress (2015-2016); S.2122, the
``Invest in Our Communities Act'', 114th Congress (2015-2016); H.R.
5992, the ``American Job Creation and Investment Promotion Reform
Act of 2016'', 114th Congress (2015-2016); and S.727, the ``Invest
in Our Communities Act'', 115th Congress (2017-2018).
\10\ Website of U.S. Senator Charles Grassley, Grassley,
Goodlatte Call on DHS to Finalize EB-5 Regulations End Unacceptable
Status Quo, (Mar. 22, 2018), available at https://www.grassley.senate.gov/news/news-releases/grassley-goodlatte-call-dhs-finalize-eb-5-regulations-end-unacceptable-status-quo.
---------------------------------------------------------------------------
DHS agrees with the members of Congress who requested taking this
regulatory action because of the lack of legislative reforms. DHS is
finalizing this NPRM to implement needed regulatory reforms in a timely
manner. Although the legislative process has certain benefits, the
regulatory process is transparent and includes the solicitation of
input from the public. These regulatory reforms do not require new
legislation; the statutory authority underlying these regulatory
reforms is
[[Page 35758]]
set forth at length in the preamble to the proposed rule and elsewhere
in this preamble. For example, when creating the EB-5 program, Congress
clearly intended that the administering agency may periodically raise
the minimum investment amounts. The INA provides that the Secretary of
Homeland Security ``in consultation with the Secretary of Labor and the
Secretary of State, may from time to time prescribe regulations
increasing'' the $1,000,000 minimum investment amount.\11\ Yet, even
though the Immigration and Naturalization Service had recommended
before the creation of the EB-5 program that the minimum investment
amount in an investor visa program be ``adjusted periodically based on
some criteria such as the Consumer Price Index,'' \12\ this has never
been done in the quarter century since the program's creation. Nor do
the regulatory reforms require revision solely by virtue of a change in
administration. Finally, promulgation of these regulatory reforms does
not preclude legislative reform of the EB-5 program by Congress.
---------------------------------------------------------------------------
\11\ INA section 203(b)(5)(C)(i).
\12\ Legal Immigration Reforms: Hearing Before the Subcomm. on
Immigration and Refugee Affairs of the Senate Comm. on the
Judiciary, S. Hrg. 100-990 at 90 (1987) (INS responses to questions
by Senator Paul Simon) (1987).
---------------------------------------------------------------------------
Comments: Other commenters disagreed with the approach to bifurcate
EB-5 issues into an NPRM and an ANPRM, stating that the issues
contained in both were interconnected and must be addressed together.
The commenters asked DHS to withdraw the NPRM and amend the ANPRM to
include the issues addressed in the NPRM (namely the designation of
TEAs and minimum investment levels), as issues for an extended public
comment process prior to rulemaking. In doing so, the commenters said
DHS should also extend the comment period for the ANPRM for 60 days, in
order to solicit more meaningful and data-driven comments.
Response: DHS disagrees with the commenters. The NPRM focused on
issues common to all EB-5 petitioners, whether or not they are
associated with a regional center. The ANPRM focused exclusively on the
Regional Center Program. DHS believed bifurcating the proposals was
critical for two reasons: (1) The EB-5 program is in need of reform
related to the issues addressed in the NPRM and this final rule; and
(2) DHS believed the agency had sufficient data to support the changes
proposed in the NPRM for the entire EB-5 program at the time of
publication, whereas DHS desired to solicit additional data from
stakeholders regarding potential changes to the Regional Center
Program. DHS decided to publish an ANPRM to gather this additional
information. As DHS did not merge the two proposals, DHS believes an
extension to the almost 90-day comment period was not warranted.
B. Priority Date Retention
1. Proposed Standards for Retaining a Priority Date
Comments: Many commenters discussed the proposed standards for
retaining a priority date. Several commenters expressed general support
for the proposal to allow EB-5 investors to retain the original filing
date of their Form I-526 petition as logical and necessary, especially
with ``retrogression'' or oversubscription of the category (i.e.,
lengthening of the period of time before a priority date assigned to a
Form I-526 petition becomes current and an EB-5 visa becomes available
for issuance). They asserted that priority date retention would provide
flexibility to investors as conditions change and may encourage
investment in the United States by protecting EB-5 petitioners from
having to ``restart the clock'' on their petition due to circumstances
outside of their control. One commenter stated that this change will
mitigate otherwise catastrophic results that would occur to some
petitioners stuck in the visa queue. One commenter stated that
preserving the priority date can give the investor an incentive to
reinvest in a project. DHS agrees that priority date retention would
protect petitioners and encourage investment.
Several commenters stated that all EB-5 petitions should retain the
priority date, even if the EB-5 petition is not yet approved, but did
not provide any additional justification for this statement. Other
commenters proposed that the priority date also be retained for those
petitions that were denied due to no fault of the petitioner--for
instance, if an associated regional center is terminated before
adjudication of the petition due to its failure to meet program
requirements--because circumstances can change as a result of
potentially lengthy Form I-526 processing times. One commenter
suggested that DHS use the same standard as INA section 245(i) to
determine whether an EB-5 petitioner may retain a priority date from an
earlier filed EB-5 petition, where benefits attach if a petition was
approvable when filed, defined by the commenter as properly filed,
meritorious in fact, and non-frivolous. This commenter also recommended
DHS allow a supplemental Form I-526 filing and priority date retention
for petitioners if, under USCIS policy, a material change to an
investment project would require the filing of a new Form I-526
petition, as long as the petition was approvable when filed.
Response: The final rule requires that the Form I-526 petition be
approved for an EB-5 petitioner to retain the priority date associated
with that petition. DHS disagrees with commenters' proposals that a
priority date should attach when the petition is filed, rather than
when it is approved (including (1) where the pending petition is denied
through no fault of the petitioner, or (2) the petition was approvable
when filed but a new petition is required due to the USCIS material
change policy). Section 203(e) of the INA provides that immigrant visas
must be issued to eligible immigrants in the order in which a petition
on behalf of each such immigrant is filed. USCIS determines such
eligibility through its approval of petitions. See also, e.g., INA
section 203(b)(5) and (f), 8 U.S.C. 1153(b)(5) and (f); INA section
204(a)(1)(H) and (b), 8 U.S.C. 1154(a)(1)(H) and (b); 8 CFR
103.2(b)(8)(i). Requiring approval of the petition prior to
establishment of a priority date is consistent with DHS's historical
interpretation of eligibility with respect to order of consideration
for visa issuance under INA section 203(e), the Department of State's
regulation on priority dates for visa issuance, and DHS's priority date
retention regulation for other employment-based categories. See 8 CFR
103.2(b)(1) (mandating eligibility from time of filing through
adjudication); 22 CFR 42.53(a); 8 CFR 204.5(e) (priority date
retention). USCIS determines a petitioner's eligibility as part of
adjudication of the petition, and USCIS's approval of the petition
along with the filing date establishes the order of consideration for a
visa.
Additionally, the commenters' proposals to revise USCIS's material
change policy would have implications beyond priority date retention
and the scope of this rulemaking. DHS did not propose to revise its
material change policy as part of the proposed rule for this action.
Rather, DHS solicited public feedback on potential changes to the
policy in the EB-5 Immigrant Investor Regional Center Program ANPRM.
See 82 FR 3211 (Jan. 11, 2017).
Moreover, allowing petitioners to establish a priority date prior
to the adjudication of the petition has negative policy and operational
implications. DHS believes that assigning a priority date to a pending
Form I-526 petition would incentivize frivolous petition
[[Page 35759]]
filings solely to establish an earlier priority date. By assigning
priority dates only upon petition approval, DHS hopes to eliminate the
possibility that investors may file a petition that is unlikely to be
approved purely to lock-in an earlier priority date, which may lead to
further delays in adjudication. Additionally, allowing petitioners to
retain priority dates for unapproved petitions that may have been
approvable when filed would present an operational burden that would
complicate and prolong the adjudications process, as USCIS would need
to determine whether priority date retention is possible for these
petitions separate from its normal adjudications framework.
For these reasons, the final rule will only allow an EB-5
petitioner to retain the priority date from an approved Form I-526
petition. Priority date retention is not available in cases involving
fraud or willful misrepresentation of a material fact by the
petitioner, or when DHS determines that it approved the petition based
on a material error. See final 8 CFR 204.6(d). DHS believes this change
will address situations in which petitioners whom USCIS has already
determined meet eligibility requirements may become ineligible through
circumstances beyond their control (e.g., the termination of a regional
center) as they wait for their visa priority date to become current as
well as provide investors with greater flexibility to deal with changes
to business conditions.
In contrast to the proposed rule, this final rule also clarifies
that an investor may retain a priority date from a petition that had
been approved but has since been revoked on grounds not specifically
described in the provision. The final rule also clarifies that if an
investor has multiple approved petitions, the investor is entitled to
the earliest qualifying priority date. See final 8 CFR 204.6(d).
Comment: One commenter stated that some EB-5 investors with pending
Form I-526 petitions may have already invested their funds and created
jobs, but their petitions may no longer be approvable due to
circumstances outside of their control, such as regional center
termination. The commenter stated that the proposal would be unfair due
to processing times, as some investors awaiting approval may have
already achieved the goals of the program, but cannot retain the
priority date, while other similarly situated investors will retain
their priority dates simply because their petitions were approved.
Response: As explained above, DHS is only providing priority date
retention to EB-5 investors with approved Form I-526 petitions for a
range of reasons. DHS also notes that no law, regulation, or DHS policy
requires that the petitioner's capital be invested prior to petition
approval. On the contrary, INA section 203(b)(5)(A)(i) provides that an
investor can qualify for EB-5 status by showing that he or she is
``actively in the process of investing.'' See also 8 CFR 204.6(j)(2).
Nothing prevents a petitioner from holding his or her contribution of
capital in escrow until the petitioner has obtained conditional
permanent resident status.\13\
---------------------------------------------------------------------------
\13\ See USCIS Policy Manual, 6 USCIS-PM G (Jun. 14, 2017).
---------------------------------------------------------------------------
Comments: Several commenters stated the proposal does not protect
victims of EB-5 scams where investment capital was diverted,
misappropriated, or subjected to an asset freeze. Some commenters
suggested that such victims be allowed to choose another project for
re-investment and retain the filing date of the pending Form I-526
petition as the priority date. They suggested that, because currently
many investors who are victims of various EB-5 scams and other criminal
activities conducted by regional centers and project managers, the
victims cannot withdraw and reinvest their funding because they would
lose their original priority date. One commenter suggested that
allowing victims to reinvest and retain the priority date would provide
fairness to investors and prevent deliberate EB-5 scams in the future
since investors would not be forced to maintain their investment in a
fraudulent project just to preserve a priority date.
Response: For the reasons explained above, DHS is only providing
priority date retention to EB-5 investors with approved Form I-526
petitions. Although DHS is sympathetic to petitioners with pending
petitions who are victims of scams and other criminal activities
conducted by regional centers and project managers, a petitioner must
be eligible at the time of filing and remain eligible until the
petition is adjudicated. Retention of a priority date does not relieve
petitioners of their burden to meet the relevant eligibility
requirements, including their statutory burden of investing the
required minimum investment pursuant to INA 203(b)(5)(A)(i).
In addition, certain changes to a pending Form I-526 petition,
including a change in regional center and certain changes relating to
the new commercial enterprise or job-creating entity, may constitute a
material change to the petition.\14\ A change is material if the
changed circumstances would have a natural tendency to influence or are
predictably capable of affecting the decision.\15\ Material changes
prior to the approval of an EB-5 investor's Form I-526 petition would
render the petition ineligible for the benefit sought. Similarly,
material changes after the approval of the Form I-526 but before the
petitioner has obtained conditional permanent residence, would
constitute good and sufficient cause to issue a notice of intent to
revoke, which if not overcome would constitute good cause to revoke the
petition's approval.\16\ This rule provides petitioners faced with
revocation of an approved petition due to a material change the means
to retain the priority date of that approved petition when filing a new
petition, except in cases of fraud, misrepresentation, or material
error. See final 8 CFR 204.6(d). DHS did not propose to change its
current material change policy, either with respect to pending
petitions or its ability to revoke approved petitions, and does not
intend to do so in this final rule. Rather, the final rule provides
certain petitioners with the opportunity to retain the priority date of
their approved petitions if they submit another Form I-526 petition for
which they are qualified. See final 8 CFR 204.6(d). This additional
protection helps reduce the impact of material changes to EB-5
investors with approved petitions due to changed business conditions.
---------------------------------------------------------------------------
\14\ See USCIS Policy Manual, 6 USCIS-PM G (Jun. 14, 2017).
\15\ Id.
\16\ USCIS Policy Manual, 6 USCIS-PM G (Nov. 30, 2016).
---------------------------------------------------------------------------
Comments: Some commenters recommended that investors who may be
ineligible for EB-5 status due to circumstances outside their control,
specifically fraud or force majeure (established by showing any extreme
circumstance beyond anyone's control), should not lose the benefit of
any period for which the age of the investor's child has been frozen
under the Child Status Protection Act (CSPA) such that the child might
``age-out.'' Other commenters suggested ``freezing'' the child's age at
the time the EB-5 applicant files his or her Form I-526 without
specific reference to the CSPA. Several commenters expressed specific
concerns regarding the children of Chinese investors aging out of the
program due to the visa backlogs, which may ultimately cause potential
investors with young children to invest in other countries.
[[Page 35760]]
Response: While DHS appreciates the commenters' concerns regarding
minor beneficiaries who may age out during the process, DHS does not
intend to change its guidance regarding the applicability of the CSPA.
DHS notes that, by statute, once a person turns 21, he or she is no
longer a ``child'' for purposes of the INA, subject to certain
statutory exceptions by which individuals who surpass that age are or
may be considered to remain a ``child'' by operation of law. See INA
sections 101(b)(1) and 203(h), 8 U.S.C. 1101(b)(1) and 1153(h). The
CSPA was enacted on August 6, 2002, and provides continuing eligibility
for certain immigration benefits to the principal or derivative
beneficiaries of certain benefit requests after such beneficiaries
reach 21 years of age. See Public Law 107-208; INA sections 201(f),
203(h), 204(k), 207(c)(2), and 208(b)(3), 8 U.S.C. 1151(f), 1153(h),
1154(k), 1157(c)(2), and 1158(b)(3).\17\
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\17\ Guidance on the agency's application of the CSPA to visa
petitions can be found in the USCIS Policy Manual. See USCIS Policy
Manual, 7 USCIS-PM A (Nov. 30, 2016).
---------------------------------------------------------------------------
The CSPA, among other things, protects minor beneficiaries from
aging out of their beneficiary status due to the length of time that it
takes DHS to adjudicate petitions.\18\ By contrast, the priority date
retention provision in this rule is meant to protect investors with
approved petitions from losing a priority date while awaiting an
immigrant visa. Protection against fraud or force majeure is beyond the
scope of the CSPA. DHS has not been presented with any evidence of
reduced interest in the EB-5 program due to its application of the
CSPA, and has no way of determining in what manner application of the
CSPA will affect future investment levels under the EB-5 program. DHS
notes, however, that some children of principal beneficiaries of EB-5
petitions may benefit from priority date retention in that, if there is
a visa backlog, they may spend a shorter amount of time in the queue,
thus reducing the possibility they will reach an age that they no
longer qualify as derivative beneficiaries.
---------------------------------------------------------------------------
\18\ See INA section 203(h); USCIS, Child Status Protection Act,
https://www.uscis.gov/greencard/child-status-protection-act.
---------------------------------------------------------------------------
Comments: Some commenters suggested that DHS allow an EB-5 investor
to freely gift and transfer his or her priority date from an approved
petition to another family member (either by switching the principal
investor or having a family member file a new Form I-526), such as a
child, to prevent a child from aging out, or losing the ability to
immigrate if he or she turns 21 while waiting for an immigrant visa to
become available.\19\ A commenter also suggested DHS allow priority
dates to transfer to a petitioner's heir if the petitioner is deceased.
---------------------------------------------------------------------------
\19\ INA section 203(d) allows a spouse or child as defined in
INA section 101(b)(1)(A), (B), (C), (D), or (E), 8 U.S.C.
1101(b)(1)(A), (B), (C), (D), or (E), to accompany or follow to join
a spouse or parent as a family-preference, employment-based, or
diversity immigrant. INA section 101(b)(1) defines a child as an
unmarried person under 21 years of age. Consequently, if a primary
immigrant's child has turned 21 and has not yet immigrated, that
child is no longer eligible to accompany or follow to join the
primary immigrant.
---------------------------------------------------------------------------
Response: As stated previously, section 203(e) of the INA provides
that immigrant visas must be issued to eligible immigrants in the order
in which a petition on behalf of each such immigrant is filed. USCIS
determines such eligibility through its approval of petitions and
establishment of priority dates. Determination of eligibility for one
immigrant cannot be substituted for another; each petitioning immigrant
must qualify on his or her own merit. INA 203(e); see 8 CFR 103.2(b)(1)
(``An applicant or petitioner must establish that he or she is eligible
for the requested benefit at the time of filing the benefit request and
must continue to be eligible through adjudication.'' (emphasis
added)).\20\ For that reason, the final rule explicitly states that a
priority date is not transferable to another alien. See final 8 CFR
204.6(d).
---------------------------------------------------------------------------
\20\ In addition, INA 203(b)(5)(A) provides that visas shall be
made available to qualified immigrants seeking to enter the United
States ``for the purpose of engaging in an NCE . . . in which such
alien has invested or is actively in the process of investing . . .
.'' And INA 203(e) states that immigrant visas made available under
subsection (a) or (b) of this section shall be issued to ``eligible
immigrants in the order in which a petition in behalf of each such
immigrant is filed.'' DHS believes that these provisions, taken
together, are best read as contemplating eligibility by a single
petitioner whose visa is made available in the order in which such
individual petitioned and established eligibility.
---------------------------------------------------------------------------
Comment: One commenter suggested extending priority date retention
benefits to investors who have already obtained conditional LPR status
to alleviate the burden on investors who will otherwise be unable to
obtain permanent LPR status through no fault of their own. The
commenter also asserted that delays in adjudicating I-829 petitions
increase the risk to the investor that ``situations in which
petitioners may become ineligible through circumstances beyond their
control (e.g., the termination of a regional center) may occur.
Response: As explained in the NPRM, DHS proposed priority date
retention to provide flexibility to deal with changes to business
conditions in light of oversubscription of the program (i.e., demand
that outpaced the supply in visa numbers). 82 FR at 4756. Absent
priority date retention, petitioners who may have met all of the
requirements to participate in the EB-5 program may face harsh
consequences upon losing their place in the immigrant visa queue if a
material change occurs through no fault of the investor. Once a visa
becomes available and a petitioner becomes a conditional permanent
resident, oversubscription is no longer a concern. DHS believes there
are other protections already in place for individuals who are
conditional permanent residents and who seek to remove conditions. For
example, an immigrant investor may proceed with the petition to remove
conditions and present documentary evidence demonstrating that,
notwithstanding deviation from the business plan contained in the
initial Form I-526 petition, the requirements for the removal of
conditions have been satisfied.\21\ Further, a priority date cannot
generally be re-used in other employment-based or family-based
preference categories once the individual becomes a lawful permanent
resident. Thus, consistent with DHS's treatment of individuals who
obtain permanent residence under other immigrant classifications, DHS
declines to create an anomalous carve-out for one class of immigrants
allowing them to repeatedly jump to the beginning of the visa queue
ahead of others who may have endured a lengthy wait to obtain a visa.
Once a priority date is used by virtue of the petitioner becoming a
conditional permanent resident, he or she will have obtained the
benefit connected to the priority date, and DHS will not permit the
priority date to be retained for further use.
---------------------------------------------------------------------------
\21\ USCIS Policy Manual, 6 USCIS-PM G (Nov. 30, 2016).
---------------------------------------------------------------------------
2. Other Comments on Priority Date Retention
Comment: One commenter requested that USCIS clarify that priority
dates for EB-5 petitions are determined based on the date of filing the
initial petition.
Response: DHS agrees with the commenter and has added language that
was inadvertently left out of the NPRM to the final regulatory text.
See final 8 CFR 204.6(d) (``The priority date of a petition for
classification as an investor is the date the completed, signed
petition (including all initial evidence and the correct fee) is
properly filed.'').
Comment: One commenter expressed concern with DHS proposing
priority date retention along with changes to the investment amounts
and TEA
[[Page 35761]]
designation process. The commenter recommended that if DHS finalizes
the priority date retention provision, the following information will
also need to be clarified for investors during a transition period: (1)
The amount of money investors need to invest during the transition
period if they want to move their investment dollars to a different
qualifying project (i.e., must they reinvest the amounts required under
this rule or may they reinvest at the same investment level permitted
before the new regulatory requirements take effect); and (2) whether if
investors who are able to reinvest at the earlier levels and retain
their priority date would be able to reinvest that money into a project
that was located within a TEA in place before the new regulatory
requirements have taken effect at the amounts then authorized for
investment in TEAs. The commenter expressed a preference for allowing
investment consistent with the regulatory regime in existence prior to
this rule becoming effective, and allowing investment opportunities in
any type of project, regardless of the project's future TEA status once
a final rule takes effect.
Response: DHS appreciates the commenter's concerns and has
clarified the effective date and implementation process in this final
rule preamble in Sections I.E and I.F. The changes in this rule will
apply to any Form I-526 filed on or after the effective date of the
rule, including any Form I-526 filed on or after the effective date
where the petitioner is seeking to retain the priority date from a Form
I-526 petition filed and approved prior to the effective date of this
rule. A Form I-526 petitioner can retain the priority date from an
approved Form I-526 petition filed prior to the effective date of this
rule, so long as the petitioner is not lawfully admitted to the United
States as a conditional permanent resident based on that earlier-
approved petition, and USCIS did not revoke the approval based on the
petitioner's fraud or willful misrepresentation or because USCIS
determined that it approved the petition based on material error. This
rule becomes binding on petitioners on the effective date; beginning at
that time, any new petition, regardless of whether the petitioner had
previously filed a Form I-526, must meet the eligibility requirements
in place at the time of filing. See 8 CFR 103.2(b)(1). DHS believes it
would be operationally burdensome to set and adjudicate different
eligibility requirements for investors who want to move their
investment dollars to a different qualifying project and must file a
new petition. The regulatory requirements, including the minimum
investment amounts and TEA designation process, in place at the time of
filing the petition will govern the eligibility requirements for that
petition, regardless of the priority date. DHS believes this manner of
implementation best balances the needs of investors, parity of
treatment among investors, and operational concerns.
Comment: One commenter stated that the priority date proposal would
create unexpected delays to petitioners who had done their due
diligence and chosen a successful project. The commenter believes that
roughly 15 percent of projects are failing or have failed. The
commenter argued that, if priority dates can be retained, then most
petitioners in failed projects are likely to re-file through a
different project, thus causing petitioners already in the queue to
wait longer for a visa that otherwise would have become available due
to the failed projects. The commenter recommended that priority date
retention be restricted to projects where Form I-829 petitions would be
denied only because of fraud committed by the ``EB-5 sponsors,'' rather
than assisting investors whose projects fail for other reasons. Another
commenter stated that innocent investors should not be punished by
fraud and scams committed by the investment project.
Response: As contemplated by Congress, the immigrant investor visa
was a way to provide aliens an immigration incentive for investing and
creating jobs in the United States. For petitioners with approved
petitions who invest in projects that appear unlikely to succeed after
petition approval and while the investor is awaiting visa availability,
priority date retention provides further incentive for them to reinvest
in another project in the United States as opposed to withdrawing their
investment in the United States. In addition, providing for priority
date retention only where a Form I-526 petition has been approved is
consistent with Congress's goal of issuing visas to eligible immigrants
in the order petitions were filed, in that it allows investors to
remain in the queue only if the agency had deemed them eligible for EB-
5 classification. Although DHS acknowledges the commenter's point that
priority date retention could potentially result in a longer wait in
the visa queue for some petitioners, the final rule provides equitable
relief to those EB-5 petitioners described in the comment who find
that, through no fault of their own, their approved Form I-526 cannot
be used to seek admission to the United States as lawful permanent
residents. The final rule is also intended to produce parity in
priority date retention between EB-5 petitioners and beneficiaries of
petitions under other employment-based categories.
In response to commenter concerns that a fraudulent project or
sponsor could affect an innocent petitioner, DHS clarifies in the final
rule that the fraud or willful misrepresentation of a material fact
must be done by the petitioner. See final 8 CFR 204.6(d)(1).
Comment: One commenter suggested that because a petition must be
approvable both at the time it was filed and also on the date it is
adjudicated, the priority date retention proposal would create the
potential for the retroactive application of the regulations to pending
Form I-526 and Form I-829 petitions as well as to current conditional
permanent residents. Citing to Bowen v. Georgetown Univ. Hosp., 488
U.S. 204, 208, 109 S. Ct. 468, 471 (1998), the commenter argued that
there is no precedent for retroactive application of regulations.
Response: The final rule does not change the longstanding
requirement at 8 CFR 103.2(b)(1) that a petitioner demonstrate
eligibility at the time of filing and throughout adjudication, and thus
it does not result in a retroactive application of regulations. The
preamble to this final rule also clarifies the effective date of this
rule, as well as implementation procedures in Sections I.E and I.F. As
explained above, the changes in this rule will apply to all Form I-526
petitions filed on or after the effective date of the final rule.
Petitions filed before the effective date will be adjudicated under the
regulations in place at the time of filing. As the final rule will only
apply to petitions filed on or after the effective date, DHS does not
anticipate that the final rule will be applied retroactively.
C. Increases to the Investment Amounts
1. Increase to the Standard Minimum Investment Amount
Comments: Multiple commenters stated that the proposed standard
minimum investment amount is too high because it would greatly reduce
the number of investors in the EB-5 program, but did not suggest an
alternative. Similarly, many commenters agreed that the minimum
investment amount should increase, but stated that $1.8 million was too
high because, combined with the TEA designation changes, the increase
will result in many projects that could previously have been funded
with $500,000 individual investments now
[[Page 35762]]
needing $1.8 million individual investments. Several commenters noted
that the proposed amounts far exceed those proposed and under
consideration by Congress, and one commenter suggested reducing the
standard and TEA minimum investment amounts by half of the current
amount. Other commenters suggested DHS consider investment amounts
ranging from $500,000 to $1.5 million. One commenter stated that the
amount set in 1990 was too high as evidenced by the program not being
fully utilized before 2014 and suggested that setting the investment
amount too high will repeat the mistake. The commenter asserted that
job creation was the most important principle and the investment amount
was just a ``gate keeping mechanism,'' but did not provide additional
support for these assertions.
Several commenters expressed support for the proposal to increase
the standard investment amount to $1.8 million; some expressed support
for the proposed increase, but did not focus on a specific amount.
Commenters supporting the proposed minimum investment increases stated
that the market can handle an increase in the minimum investment
amounts and that leading investor visa programs in other countries
require investment amounts higher than those recommended by DHS.
Several commenters agreed with updating the minimum investment amount
to account for inflation. One commenter agreed with the proposal to
increase the minimum investment amount to account for inflation, and
stated the increase was necessary to realistically achieve the goal of
sustaining 10 full-time employees in light of the increases in national
average salaries from 1990 to 2015. Some members of Congress noted that
the increase is important in order for the program to recapture the
real 1990 investment value and infuse additional capital in to the
United States. They further stated that the failure to adjust the
minimum investment amount for inflation has cost the U.S. economy
billions of dollars each year in potential investment funds, ultimately
requiring developers to attract more foreign investors than needed in
order to raise the desired amount of capital.
Response: In 1990, Congress set the minimum investment amount for
the program at $1 million and authorized the Attorney General (now the
Secretary of Homeland Security) to increase the minimum investment
amount, in consultation with the Secretaries of State and Labor. INA
section 203(b)(5)(C)(i), 8 U.S.C. 1153(b)(5)(C)(i). Neither the former
INS nor DHS has exercised its authority to increase the minimum
investment amount. As a result, over time, inflation has eroded the
present-day value of the minimum investment required to participate in
the EB-5 program--leaving it at little more than half its real value
when the program was created. Thus, after consulting with the
Departments of State and Labor, DHS proposed in the NPRM to increase
the minimum investment amount consistent with increases in the CPI-U
during the intervening period, for a new minimum investment amount of
$1.8 million.
DHS disagrees with the commenter who suggested that lower
utilization of the program is evidence that the investment amount was
set too high prior to 2014, because DHS has reason to believe other
factors significantly contributed to lower utilization of the program.
For example, in 2009, a CIS Ombudsman's recommendation for the EB-5
program discussed various reasons for the program's lower utilization
related to administrative obstacles and uncertainties that undermined
stakeholder confidence, including uncertainty in the program, changes
in guidance, concerns of insider access, as well as suspicions of
abuse, misrepresentation, and fraud.\22\ The Ombudsman also cited to a
2005 Government Accountability Office (GAO) report which attributed
``low participation to a series of factors that led to uncertainty
among potential investors. These factors include an onerous application
process; lengthy adjudication periods; and the suspension of processing
of over 900 EB-5 cases--some of which date to 1995--precipitated by a
change in [USCIS'] interpretation of regulations regarding financial
[qualifications].'' \23\ Although neither the Ombudsman nor the GAO
expressly reviewed statutory requirements such as the Congressionally-
set minimum investment amount, and were instead focused on USCIS
implementation of the EB-5 program and how that may have contributed to
low participation, both reports give DHS reason to believe the
program's lower utilization in the past is due to a range of reasons.
---------------------------------------------------------------------------
\22\ CIS Ombudsman, Employment Creation Immigrant Visa (EB-5)
Program Recommendations, March 18, 2009, available at https://www.dhs.gov/xlibrary/assets/CIS_Ombudsman_EB-5_Recommendation_3_18_09.pdf.
\23\ GAO, Immigrant Investors: Small Number of Participants
Attributed to Pending Regulations and Other Factors, p.3 GAO-05-256
(Apr. 2005).
---------------------------------------------------------------------------
In addition, DHS notes that other trends led to higher utilization
of the program over the last 10 years. For example, the reduction of
available U.S.-based commercial lending funds due to the U.S. financial
crisis in 2008 led to interest in alternative funding sources, such as
the EB-5 program.\24\ The commenter who claimed that lower utilization
of the program in the past was due to the investment amount being too
high also acknowledged that the demand for EB-5 funds from eligible
projects is not dependent on the level of investment set by DHS. The
commenter claimed that demand was instead set by market factors totally
independent of EB-5, most notably risk tolerance of primary lenders and
the level of the premium charged by commercial lenders.
---------------------------------------------------------------------------
\24\ ``A Roadmap to the Use of EB-5 Capital: An Alternative
Financing Tool for Commercial Real Estate Projects,'' Professor
Jeanne Calderon and Guest Lecturer Gary Friedland of the NYU Stern
School of Business (May 22, 2015) (``Despite the Program's enactment
by Congress in 1990, for many years EB-5 was not a common path
followed by immigrants to seek a visa. However, when the traditional
capital markets evaporated during the Great Recession, developers'
demand for alternate capital sources rejuvenated the Program. Since
2008, the number of EB-5 visas sought, and hence the use of EB-5
capital, has skyrocketed. EB-5 capital has become a capital source
providing extraordinary flexibility and attractive terms, especially
to finance commercial real estate projects.'').
---------------------------------------------------------------------------
Regardless of what factors ultimately accounted for higher
utilization of the program, the reality is that the program has become
and remains hugely oversubscribed at current investment levels, DHS
disagrees with commenters who assert that raising the minimum
investment amount would necessarily cause the number of EB-5 investors
to return to the levels in the earliest days of the program, or even to
fall below the number necessary to ensure full utilization of the 9,940
visas available a year, as demand is related to a range of internal and
external factors.\25\
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\25\ To the extent that the changes made by this rule reduce the
number of investors, the INA provides that unused visas would be
allocated to different employment-based categories. See generally
INA section 203(b), 8 U.S.C. 1153(b).
---------------------------------------------------------------------------
The program makes available 9,940 immigrant visas a year, and as of
December 1, 2018, there are 40,017 beneficiaries (principals and
immediate family members) of approved EB-5 petitions \26\ waiting for
the availability of immigrant visas. According to the Department of
State's Visa Bulletin for December 2018, petitioners from mainland
China must have a priority date (the date of filing of the I-526
petition with USCIS) before August 22, 2014, in order for an immigrant
visa to be available.\27\ In addition, as of
[[Page 35763]]
December 1, 2018, USCIS had 13,125 pending I-526 petitions that had yet
to be adjudicated.\28\ Using the average of 1.81 derivative
beneficiaries for each EB-5 principal who received an immigrant visa
over fiscal years 2014-2016 \29\ and assuming that about 10% of
petitions filed will be denied, terminated, or withdrawn, this would
represent 33,193 potential beneficiaries. Thus, there are already in
the pipeline approximately 73,000 beneficiaries or potential
beneficiaries--representing over seven years' worth of EB-5 immigrant
visas as allocated by Congress.
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\26\ According to internal program office and adjudication
records.
\27\ U.S. Dep't of State, Bureau of Consular Aff., Visa Bulletin
for December 2018, available at https://travel.state.gov/content/travel/en/legal/visa-law0/visa-bulletin/2019/visa-bulletin-for-december-2018.html.
\28\ According to internal program office and adjudication
records.
\29\ See DHS, 2016 Yearbook of Immigration Statistics (table 7);
DHS, 2015 Yearbook of Immigration Statistics (table 7); DHS, 2014
Yearbook of Immigration Statistics (table 7).
---------------------------------------------------------------------------
The inevitable result has been ever growing wait times for
immigrant visas to become available for EB-5 petitioners with approved
petitions born in mainland China (and their derivative beneficiaries).
The annual EB-5 visa cap was reached for the first time in fiscal year
2014.\30\ In May 2015, the State Department found it necessary to
establish a waiting list for petitioners with approved petitions born
in mainland China, when it announced that immigrant visas were
available only for such petitioners (with investments in regional
center projects and/or projects in TEAs) whose priority dates were
earlier than May 1, 2013.\31\ That waiting list has since grown, so
that EB-5 visas are only now available for petitioners born in mainland
China with priority dates before August 22, 2014--which represents a
wait of over 40 months. As there are over seven years' worth of
beneficiaries in the pipeline, the wait time will likely only grow.
---------------------------------------------------------------------------
\30\ DHS, 2014 Yearbook of Immigration Statistics (table 7).
\31\ U.S. Dep't of State, Bureau of Consular Aff., Visa Bulletin
for May 2015, available at https://travel.state.gov/content/travel/en/legal/visa-law0/visa-bulletin/2015/visa-bulletin-for-may-2015.html. This is a result of the interaction between the
employment-based green cards per-county caps and the fact that the
overwhelming majority of EB-5 visas (75% in fiscal year 2017) go to
beneficiaries born in maintain China. See section 202 of the INA, 8
U.S.C. 1152; Bureau of Consular Affairs, U.S. State Department,
Report of the Visa Office Fiscal Year 2017 (table V (part 3)).
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Given that over 80% of EB-5 petitioners who receive immigrant visas
do not adjust their status from within the United States, but receive
their visas overseas,\32\ many potential EB-5 investors may choose not
to wait for such an extended period of time before they can immigrate
to the United States, especially considering that most petitioners
invest the required capital well before their petitions are approved.
This might at least in part account for the fact that the number of
petitions filed has fallen each year since reaching a high water mark
in fiscal year 2015. By fiscal year 2018, the number of petitions filed
had fallen by more than half.\33\ In the future, the number of foreign
investors impacted by the per-country cap and the resultant waiting
list for EB-5 visas who choose to file petitions may well further
decline to the point that total petitions filed each year may not even
account for the 9,940 visas allocated. This decline, of course, would
be independent of the particular minimum investment amounts required by
regulation, but may mitigate any decline that might be associated with
such amounts. This is because some prospective petitioners who might
have foregone use of the program due to increases in the investment
amounts would have already foregone use of the program due to overall
waitlist issues.
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\32\ In fiscal year 2017, 83% of EB-5 visas were issued
overseas. See DHS, 2017 Yearbook of Immigration Statistics (table
7).
\33\ In fiscal year 2015, USCIS received 14,373 EB-5 petitions;
in fiscal year 2016, 14,147; in fiscal year 2017, 12,165; and in
fiscal year 2018, 6,424. See U.S. Citizenship and Immigration
Services, Number of Form I-526, Immigrant Petition by Alien
Entrepreneur, by Fiscal Year, Quarter, and Case Status 2008-2018,
available at https://preview.uscis.gov/sites/default/files/USCIS/Resources/Reports%20and%20Studies/Immigration%20Forms%20Data/Employment-based/I526_performancedata_fy2018_qtr4.pdf.
---------------------------------------------------------------------------
To commenters who suggest that DHS establish a new standard minimum
investment amount below the $1 million threshold, DHS notes that the
current investment amounts are the minimum set by statute, and DHS does
not have authority to reduce them beyond those amounts.
Comments: Many commenters suggested that the proposed increase
would make the EB-5 program less competitive with other countries'
programs. Several commenters suggested that the proposed rule's
comparisons to other investor visa programs were flawed and failed to
account for the differences between the programs other than the
investment amount, highlighting that the EB-5 program stands alone in
requiring investors to place their investment at-risk. Two commenters
questioned DHS' comparison to Canada's closed Immigrant Investor
Venture Capital Program, which they described as having failed because
it required a high capital contribution and funds that must be placed
at risk, instead of focusing on its Quebec Program. One commenter noted
that the comparison failed to account for other investor immigration
programs with minimum investment amounts ranging from $40,000 USD to
$1.8 million USD, including programs in Antigua and Barbuda, Austria,
Belgium, Cayman Islands, Cyprus, Dominica, Grenada, Hong Kong, Ireland,
Jersey, Malaysia, Malta, Monaco, Portugal, and Singapore.
Response: Even with the increase, the EB-5 program will remain
competitive with other countries' visa programs as discussed in the
NPRM.\34\ In the NPRM, DHS compared the EB-5 program to the United
Kingdom's Tier 1 Investor Visa, Australia's Significant and Premium
Investment Programs, Canada's Immigrant Investor Venture Capital Pilot
Program, and New Zealand's Investor 1 Resident Visa. See 82 FR at 4757.
DHS noted in the NPRM that it has no means of ascertaining an
investor's preference for a given program, but believes an investor's
decision would be based in part on the investment amount and country-
specific investment risk preferences of each investor. Id. DHS focused
on the UK, Australia, Canada, and New Zealand because these countries
offer similar program requirements, immigration benefits, and
comparable financial risk to the United States.
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\34\ The United Kingdom's Tier 1 Investor visa requires a
minimum investment of [pound]2,000,000 (approximately $2.7 million
USD), and offers permanent residence to those who have invested at
least [pound]5,000,000 (approximately $8.1 million USD). Tier 1
(Investor) Visa, Gov. UK, https://www.gov.uk/tier-1-investor/overview. Australia's Significant and Premium Investment Visa
Programs require AU $5 million (approximately $3.9 million USD) and
AU $15 million (approximately $11.8 million USD), respectively; its
``investor stream'' visa program requires an AU $1.5 million
(approximately $1.2 million USD) investment and a host of other
requirements. Business Innovation and Investment Visa, Australian
Government, http://www.homeaffairs.gov.au/Trav/Visa-1/188-. Canada's
Immigrant Investor Venture Capital Pilot Program required a minimum
investment of CDN $2 million (approximately $1.6 million USD) and a
net worth of CDN $10 million (approximately $8 million USD) or more.
Immigrant Investor Venture Capital Pilot Program, Government of
Canada, https://www.canada.ca/en/immigration-refugees-citizenship/services/immigrate-canada/immigrant-investor-venture-capital/eligibility.html. New Zealand's Investor 1 Resident Visa requires a
NZ $10 million (approximately $7.1 million USD) investment, and its
Investor 2 Resident Visa requires a NZ $3 million (approximately
$2.1 million USD) investment. Investor Visas, New Zealand Now,
https://www.newzealandnow.govt.nz/move-to-nz/new-zealand-visa/visas-to-invest/investor-visa. Currency exchange calculations are as of
January 2018.
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DHS disagrees with the comment suggesting that these programs do
not carry risk. While the types of investments allowed in each program
differ, they carry varying levels of financial risk. The UK requires
[[Page 35764]]
investments in government bonds, share capital, or loan capital.\35\
Australia permits investment in a variety of options, including bonds,
stocks, and equity funds.\36\ Canada required investment into an at-
risk Immigrant Investor Venture Capital Fund for 15 years.\37\ New
Zealand's investment options include government bonds, residential
property development, and equity in public or private New Zealand
firms.\38\ Such investments present levels of risk that are generally
comparable to the level of risk associated with many EB-5 investments.
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\35\ Tier 1 (Investor) Visa, Gov.UK, available at https://www.gov.uk/tier-1-investor/overview.
\36\ Business Innovation and Investment Visa, Australian
Government, available at http://www.homeaffairs.gov.au/Trav/Visa-1/188-.
\37\ Determine your eligibility--Immigrant Investor Venture
Capital Pilot Program, Government of Canada, available at https://www.canada.ca/en/immigration-refugees-citizenship/services/immigrate-canada/immigrant-investor-venture-capital/eligibility.html.
\38\ Investor Visas, New Zealand Now, available at https://www.newzealandnow.govt.nz/move-to-nz/new-zealand-visa/visas-to-invest/investor-visa.
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With respect to the Quebec Program, DHS does not believe it is
comparable to the EB-5 program. The Quebec program requires a CDN
$800,000 (approximately $620,000 USD), 5-year non-interest bearing
investment.\39\ While this amount is lower than the new EB-5 minimum
investment amounts, that program also has numerous other primary
requirements in order to qualify. These include requirements that the
applicant have net assets of CDN $1.6 million (approximately $1.2
million USD), experience in management, as well as a requirement that
the investor intends to settle in the Province of Quebec. The EB-5
program does not have additional experience requirements. Additionally,
the EB-5 program does not require settlement in a particular location
in the United States, which would be highly restrictive. The investor
simply loans his or her money to the Canadian government for 5 years.
While there is no risk posed to the investor in terms of losing some or
all of the principal, the zero-interest condition means that investors
in the Quebec program do incur an opportunity cost of investing, as the
present value of their investment would be discounted for the five-year
period.\40\
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\39\ Investor Program, Government of Quebec, available at http://www.immigration-quebec.gouv.qc.ca/en/immigrate-settle/businesspeople/applying-business-immigrant/three-programs/investors/index.html.
\40\ We refer to the Quebec program in the present tense because
although it had been terminated several years ago, it was reopened
recently (2018) for a temporary period.
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DHS reviewed each of the countries where government-provided
information was readily available.\41\ Some countries may require a
lower investment amount, but include additional requirements that the
EB-5 program does not require. For example, to be considered for a
visa/entry permit to enter the Hong Kong Special Administrative Region
for investment as an entrepreneur, the applicant must, among meeting
other requirements, have a ``good education background, normally a
first degree in a relevant field.'' \42\ In general, DHS found that
none of the countries raised by commenters present a straight-line
comparison to the EB-5 program. There is no way to quantify an
individual's desire to resettle in the United States or any other
country. Each country has varying requirements, and there is no
universal standard of success for an immigrant investor program. That
said, DHS believes the increase is reasonable when the minimum
investment amount is compared to the investor visa programs of
similarly developed economies, such as the United Kingdom, Canada,
Australia, and New Zealand, which typically require higher investment
thresholds than what DHS proposes.\43\
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\41\ Citizenship by Investment, Antigua & Barbuda, available at
http://cip.gov/ag; Persons of Independent Means and Investors,
Cayman Islands, available at http://www.immigration.gov.ky/portal/page/portal/immhome/livinghere/independentmeans; Citizenship by
Investment, Commonwealth of Dominica, available at http://cbiu.gov.dm/faqs; Investment as Entrepreneurs, Hong Kong Immigration
Department, available at http://www.immd.gov.hk/eng/services/visas/investment.html; Investor and Entrepreneur Schemes, Department of
Justice and Equality, Irish Naturalisation and Immigration Service,
available at http://www.inis.gov.ie/en/INIS/Pages/New%20Programmes%20for%20Investors%20and%20Entrepreneurs; Jersey
Immigration Rules, States of Jersey, available at https://www.gov.je/travel/informationadvice/visitors/documents/ld%20immigration%20rules%20jm%20130217.pdf; Individual Investor
Programme, Republic of Malta, available at http://iip.gov.mt/.
\42\ Investment as Entrepreneurs, Immigration Department, The
Government of the Hong Kong Special Administrative Region; available
at http://www.immd.gov.hk/eng/services/visas/investment.html.
\43\ See Madeleine Sumption and Kate Hooper, ``Selling Visas and
Citizenship: Policy Questions from the Global Boom in Investor
Immigration'', Migration Policy Institute (October 2014) at 7,
available at https://www.migrationpolicy.org/research/selling-visas-and-citizenship-policy-questions-global-boom-investor-immigration
(``Among the popular English-speaking destinations, the United
Kingdom has the highest minimum threshold at GBP 1 million, followed
by New Zealand and Australia which require US $1.2 million and US
$1.3 million respectively. The United States' minimum is
significantly cheaper, at US $500,000, but requires a more risky
investment (in private-sector businesses rather than government
bonds).'').
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Comments: A few commenters suggested the increase would favor
continued participation by wealthy investors only, instead of
encouraging innovative, forward-thinking entrepreneurs, small
businesses, and younger investors.
Response: Congress enacted the investor visa program to attract
entrepreneurs and job-creators into the U.S. economy \44\ and infuse
new capital into the country.\45\ Congress did not specify any
particular type of investor it was seeking.\46\ As discussed
previously, DHS believes that the increase to the minimum investment
amount is appropriate because inflation has eroded the present-day
value of the minimum investment required to participate in the EB-5
program since Congress set the initial investment amounts in 1990, and
this final rule is an effort at remedying that erosion. In addition,
DHS believes the increased amount will attract the same type of
investment levels that Congress intended to attract in 1990.
---------------------------------------------------------------------------
\44\ 136 Cong. Rec. S35,615 (Oct. 26, 1990).
\45\ S. Rept. 101-55, p. 21 (1989).
\46\ 136 Cong. Rec. S35,615.
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DHS recognizes that many EB-5 petitioners do not necessarily take
an entrepreneurial role in the operations of their new commercial
enterprise; however, the EB-5 program has been and may continue to be
used by petitioners who do take an entrepreneurial role in the
operations of their new commercial enterprise. Moreover, under the
current regulatory and statutory regime, the EB-5 program contains no
specific entrepreneurship requirements. DHS does not differentiate
between and collects no data on petitioners who take an entrepreneurial
role in the operations of their new commercial enterprise relative to
those who do not. Accordingly, DHS has no data to support and there is
no persuasive reason to believe that raising the minimum investment
amount would disproportionately decrease the number of petitioners who
take an entrepreneurial role in their new commercial enterprise
relative to those who do not.
Comments: Several commenters stated that the proposed increase to
the standard investment amount would result in long wait times for
projects involving Chinese EB-5 investors due to currency control
efforts in China that limit the transfer of funds, and concluded that
the increase therefore will undermine almost any legitimate project.
One commenter estimated the proposed increases in investment amounts
would extend the transfer time
[[Page 35765]]
by at least 5 times and another commenter suggesting the transfer time
would be close to 11 months. Other commenters suggested a more limited
increase to encourage investors from countries other than China to
continue to participate in the program. Another commenter stated the
proposed increase in investment amounts would render the program
dependent on investors from China.
Response: DHS does not believe it is appropriate to limit the
increase to the minimum investment amount below what was proposed in
order to attempt to attract investment from specific countries, nor
does DHS believe that the policies of any specific country should
dictate the administration of the EB-5 program. DHS believes the
increase to the minimum investment amount based on inflation is
appropriate and justified for the reasons described.
2. Use of CPI-U
Comments: Multiple commenters provided input on the methodology
used to calculate the proposed investment amount increases or provided
alternative approaches. Several commenters stated that DHS should
increase the minimum investment amount by the annual household income
growth rate because it is a better gauge of job creation over time than
an unadjusted CPI metric and would better link the increase to job
creation. Another commenter commented that DHS should link the
investment amount increase to average wage level because changes in
wages better show the amount required to create the requisite number of
jobs. Other commenters stated that the increase should consider changes
in exchange rates since 1990, and how those changes have affected
foreign investors. For instance, one commenter stated that a $1 million
investment would have cost 17 million Indian rupees in 1990, but would
cost 65 million Indian rupees in 2017. Another commenter stated that
the rule should compare the value in U.S. dollars of the currency of
the country where the investor has earned or otherwise accumulated his
or her capital, because there are several countries where the current
minimum investment amount is now higher than it was in 1990, in
inflation-adjusted local currency.
Some commenters agreed with the use of CPI-U to calculate the
proposed increase, but disagreed with calculating the increase from
1990. Some of these commenters noted that the standard investment
amount has never been competitive. They stated that the TEA investment
amount only became competitive in 2008, when the price of the
investment program began to match demand and the number of petitions
began to increase, or in 2011 when the visa allocation was fully
utilized. Several commenters noted that 2011 was the first year the
number of Form I-526 petitions filed represented nearly the supply of
visas available (thus, visa supply nearly equaled visa demand). These
commenters recommended that DHS calculate the adjustment to the minimum
investment amounts from a base year later than 1990, such as 2008 or
2011.
In addition, one commenter suggested DHS attempt some analysis of
the price elasticity of demand for EB-5 visas before adjusting the
minimum investment amount based on the CPI-U for the past 25 years in
one adjustment.
Response: DHS considered a number of different measures upon which
to base the proposed adjustment and future adjustments. DHS considered
both the average household income and average wage level as potential
bases for the proposed adjustments as the commenters suggested;
however, both only look at one factor to determine inflation. DHS
acknowledges that job creation outcomes depend on multiple factors in
addition to the wage level. Such factors may include, but are not
limited to, the perceived level of economic stability and growth
potential, taxation, workforce availability, level of infrastructure
development and price stability.
DHS chose the unadjusted All Items Consumer Price Index for All
Urban Consumers (CPI-U) for the U.S. City Average (BLS CPI Series Id:
CUSR0000SA0) because it considers multiple inflationary factors over
time.\47\ DHS appreciates that singular factors such as average wage
and income changes can reflect and influence inflation, but because
such factors are narrower in focus, DHS does not believe that they
translate to the overall cost of doing business in today's economy as
well as the CPI-U does. The unchained CPI-U (BLS CPI Series Id:
CUSR0000SA0) for all items is the ``broadest and most comprehensive
CPI,'' and is the most widely used measure of inflation.\48\ Because
the CPI-U is an indicator of the change in costs of goods and services
necessary for adequate capitalization of an EB-5 enterprise, DHS
believes that the CPI-U also provides an appropriate reference point
for the purpose of ensuring the statutorily required level of job
creation. DHS therefore believes that, as proposed, the CPI-U is an
appropriate measure for changes to the minimum investment amount.
---------------------------------------------------------------------------
\47\ CPI-U measures the average change over time in the prices
paid by urban consumers for a market basket of consumer goods and
services. Bureau of Labor Statistics, Consumer Price Index:
Frequently Asked Questions, available at http://www.bls.gov/cpi/cpifaq.htm; Bureau of Labor Statistics, Consumer Price Index:
Addendum to Frequently Asked Questions, available at http://www.bls.gov/cpi/cpiadd.htm#2_1. (last accessed June 28, 2018).
---------------------------------------------------------------------------
DHS recognizes that other alternative measures may provide a
broader or more accurate measure of inflation for certain purposes, but
DHS also notes that the government uses CPI-U for a range of inflation
adjustments. The technical change that DHS made to the inflation
adjustment formula in this rule (tying the adjustment back to 1990,
rather than to the prior adjustment) will ensure that disparities
between different measures are not exacerbated over time. Thus, DHS
believes the CPI-U is the most appropriate reference point for purposes
of establishing the new investment amount with respect to determining
the present-day cost to the investor.
Some commenters recommended using average household income or
average wage level. The commenters stated that those measurements may
better reflect the amount required to create the requisite number of
jobs. However, as stated above, DHS believes an adequately capitalized
enterprise (as determined by the costs of goods or services required to
do business) also strongly correlates to job creation, and the CPI-U is
valuable in this regard because it is appropriately reflects the change
in costs of goods and services. DHS also believes it is appropriate to
adjust the minimum investment amount upward based on inflation without
directly correlating the minimum investment amount to the statutory
requirement to create a minimum of 10 jobs. As DHS stated in the NPRM,
Congress did not provide for adjustments in the investment threshold to
be directly related to the EB-5 job creation requirements.\49\ Indeed,
the controlling statutory authorities permit varying investment amounts
in various circumstances (e.g., investment in TEAs or high employment
areas) while maintaining the requirement that 10 jobs be created.
---------------------------------------------------------------------------
\49\ 82 FR at 4744.
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DHS also disagrees with comments that suggest it should determine
the impact of the minimum investment amount on the U.S. economy by
considering the relative value of another country's currency, or the
relative value of U.S. currency in other countries. The EB-5 program
encourages investment in the United States and thus it is
[[Page 35766]]
appropriate to use the value of U.S. currency in the United States as
the focal point. Although some commenters claim that in many source
countries, the contribution amount has gone up since 1990 when their
own currencies, adjusted for inflation, are referenced, DHS believes it
is more reasonable to focus on the U.S. economy rather than take into
account currency value fluctuations from certain source countries, or
currency values worldwide. DHS notes that the statute set specific
minimum investment amounts that are meant to apply to all investors.
DHS also disagrees with calculating the adjustment from a later
year than 1990. Commenters who recommend using a later year rely on a
supply and demand rationale, arguing that the investment amounts-or
``price'' of the program-only started to match demand around 2008 or
2011, depending on the commenter. As stated earlier, DHS disagrees that
prior lower utilization of the program was due primarily to the
investment amounts being set too high. Both the CIS Ombudsman and the
GAO pointed out programmatic problems that contributed to the lower
utilization of the program. Therefore, DHS does not believe it is
reasonable to assume that supply and demand reached equilibrium simply
due to the ``cost'' having dropped in present-day values; rather,
multiple factors contributed to the program's lower utilization in the
early years and its later oversubscription. DHS believes that
calculating the increase to account for inflation from 1990 will ensure
the program requirements reflect the present-day dollar value of the
investment amount established by Congress in that year.
Regarding commenters' concern that the increased investment amounts
will shrink demand for the EB-5 visa to levels experienced in the 1990s
and early 2000s, DHS believes these suppositions fail to fully account
for the range of factors that contribute to demand (or lack thereof)
for the program. As discussed in the sections in the NPRM detailing
potential benefits and costs, and now updated for this Final Rule, DHS
appreciates that the minimum investment amount is one key factor that
could affect utilization of the program, and the increase in the
minimum investment amount might deter some investors, or otherwise make
an investment under the EB-5 program no longer affordable for some
potential investors. DHS does not anticipate, however, that the demand
for the EB-5 visa will likely revert to 1990 levels, or even fall to
levels that fail to fully account for the 9,940 visas available a year,
solely because of the increase in the minimum investment amount, due to
the numerous other factors involved, including those that have led to
higher utilization of the program since 2008. Notably, no commenters
provided concrete evidence to support the speculation that demand would
decrease so dramatically.
Finally, with respect to the commenter's suggestion that an
analysis of the price elasticity of demand for the EB-5 visa would
offer valuable information regarding investor demand for the EB-5 visa
and their price sensitivity, DHS observes that the commenter
erroneously assumes DHS has access to certain data and can control
certain variables. Since the inception of the program in 1990, the
required minimum investment amounts, for a standard investment or an
investment in a TEA, have never changed. Calculating a price elasticity
of demand for the EB-5 visa would require that DHS know the ratio of
the percent change in EB-5 visa demand to the percent change in the
investment amount. However, there are likely numerous factors that have
influenced the growth of EB-5 investor applications over the past
several decades. DHS cannot develop a model that controls for all of
the specific variables nor predicts future unforeseeable events. DHS
could not accurately measure the influence of the two investment levels
on demand for past and future EB-5 investment applications.
3. Adjustments Every Five Years Tied to CPI-U
Comments: Some commenters supported increasing the minimum
investment amounts every five years. One commenter agreed with the
general concept of periodically increasing the minimum investment
amount to prevent past practice from repeating. One commenter stated
that applying the overall inflation in the U.S. economy to the minimum
investment amount every 5 years would compound the damaging impact of
raising the minimum investment amount to $1.8 million now. Another
commenter suggested developing a different model that would allow the
minimum investment amount to increase or decrease based on overall
demand for EB-5 immigrant visas and differences in demand between TEA
and non-TEA investments (though this commenter acknowledged that the
statute does not allow for decreases in the minimum investment amount
below the statutory minimum). Two other commenters suggested that an
increase should not be automatic every five years, but instead DHS
should evaluate whether an increase is appropriate at that time and how
the increase would affect investment and job creation.
Response: DHS agrees with the commenters who stated that it is
important to include a periodic inflation-adjustment mechanism to avoid
a recurrence of the current situation, where the minimum investment
amount remains unchanged for a lengthy period and is eroded by
inflation, and thus provides for adjustment based on the change in the
cumulative annual percentage change in CPI-U. DHS disagrees with basing
the amount on the overall demand of the program, as the statute does
not specify that demand be the primary (or even a necessary) factor in
making a determination to increase the minimum investment amount.
Moreover, demand could fluctuate for a variety of reasons outside of
the minimum investment amount and thus does not provide a reliable,
consistent metric that would permit USCIS and stakeholders to
anticipate adjustments (if any) to the minimum investment amount for
purposes of consistent adjudication and investment structuring.
Further, because the minimum investment amount has not been adjusted
since the program's inception, DHS does not have adequate data to
propose adjustment of the minimum investment amount based on the impact
of such adjustments on overall demand of the program.
DHS also disagrees with the suggestion to evaluate how an increase
would affect investment and job creation prior to making future
adjustments, rather than utilizing an automatic increase. First,
Congress did not explicitly tie the statutory investment amount to the
aggregate level of investors, investment, or job creation. The statute
contains only individualized requirements for each investor to invest
the specified minimum amount of capital and create at least 10 jobs. It
is therefore reasonable for adjustments to the individual investment
amount to keep pace with inflation, as discussed elsewhere in this
rule, rather than be tied to total investors, investment, or job
creation.
Moreover, DHS believes that an automatic adjustment based on CPI-U
affords greater certainty for investment decisions because stakeholders
can predict the level of adjustment on the readily available CPI-U. As
noted by the Organization for Economic Co-operation and Development
(OECD):
The aim of policies for attracting foreign direct investment
must necessarily be to
[[Page 35767]]
provide investors with an environment in which they can conduct
their business profitably and without incurring unnecessary risk.
Experience shows that some of the most important factors considered
by investors as they decide on investment location are: A
predictable and non-discriminatory regulatory environment and an
absence of undue administrative impediments to business more
generally.\50\
\50\ Christiansen, Hans, Checklist for Foreign Direct Investment
Incentive Policies, Investment and Services Division, OECD Committee
on International Investment and Multinational Enterprises (CIME)
OECD, 2003, available at https://www.oecd.org/daf/inv/investment-policy/2506900.pdf.
Given that uncertainty and perceived risk affect investment decisions,
DHS believes that an automatic adjustment of the minimum investment
amount that occurs every five years provides predictability and
consistency to stakeholders so they can tailor business plans
accordingly, without needing to wait for DHS' determination.
This rule also makes a technical correction to the inflation
adjustment formula for the standard minimum investment amount and the
high employment area investment amount, such that future inflation
adjustments will be based on the initial investment amount set by
Congress in 1990, rather than on the most recent inflation adjustment.
Thus, for instance, the next inflation adjustment will be based on the
initial minimum investment amount of $1,000,000 in 1990, rather than
this rule's minimum investment amount of $1,800,000, which is a rounded
figure. This change better implements the intent of the proposed rule;
it ensures that future inflation adjustments more accurately track
inflation since 1990, rather than being based on rounded figures.
4. Implementation of the Increase in Investment Amount
Comments: Multiple commenters provided suggestions on how to
implement the increase in the minimum investment amounts, with most of
these commenters advocating a phased-in approach. One commenter
suggested a transition period to ensure the minimum investment amount
catches up to the ideal minimum investment amount without drying up
access to capital. Other commenters recommended an incremental approach
because the market responds better to smaller increases over time
rather than a single increase, and it would also minimize disruptions
in EB-5 program activity. Several commenters encouraged DHS to
implement a reasonable, stepped increase over the next 5 years.
Response: DHS considered phasing in the minimum investment amount
over the next five years, including increasing the amount every year or
every other year. However, DHS believes constantly changing amounts
would present challenges to the EB-5 market, in that continual,
frequent increases would commonly require different investment amounts
for different petitioners within the same investment project over a
period of time. Such differences would require frequent adjustments to
offering documents that could overly complicate adjudications and place
burdens on the EB-5 market, including EB-5 petitioners. Most
importantly, a phased-in approach or transition period means the
minimum investment amount would not fully account for the change in
inflation for another five years. DHS believes it is important to take
steps to revise the program by making the adjustment now rather than
continuing to delay the impact of the inflation-adjusted increase.
5. Increase to the TEA Minimum Investment Amount
Comments: Some commenters expressed support for the proposed
increase to the TEA minimum investment amount from $500,000 to $1.35
million. A commenter stated that the demand for EB-5 visas is high and
the program is oversubscribed, and a higher minimum investment per visa
will ``increase the overall funding flow and relieve some of the
pressure/challenge'' to create 10 jobs per visa.
Many commenters stated that the proposed TEA investment amount was
too high. Many of these commenters argued that the proposed increase
would be detrimental to the future viability of the EB-5 program,
especially in light of the fact that the vast majority of historical
investments have been made in TEA investments. Many commenters made
similar arguments against the proposal to increase the TEA minimum
investment amount as they made against the proposal to increase the
standard minimum investment amount, such as: The proposed increase
would make the EB-5 program less competitive with the immigration
investment programs of other countries; the proposed increase would
result in minimum investment amounts far exceeding those under
consideration by Congress; the proposed increase would have the
unintended consequence of severely limiting the participation of many
successful mid-career professionals and entrepreneurs; and the proposed
increase would especially burden investors from China due to currency
control restrictions. Another commenter recommended that the TEA
investment amount not be increased in light of a recent GAO study,
which found that rural America only accounted for 3 percent of the
projects under the EB-5 program. Some commenters said that an increased
TEA investment amount provides a disincentive for the type of projects
in areas of high unemployment and rural areas that the program should
encourage, and would disproportionately and negatively affect areas
needing investment the most.
Commenters proposed several alternative increases to the TEA
minimum investment amount. A commenter suggested investment levels
``somewhat less than'' the levels proposed in recent legislation (e.g.,
H.R. 5992, the American Job Creation and Investment Promotion Reform
Act, which proposed a TEA minimum investment amount of $800,000)
because such levels would not shock the investor market, would maintain
the competitiveness of the U.S. program relative to the costs of entry
for similar investment-related immigration programs in other nations,
and could ``be reasonably supported by data comparable to that cited
by'' another commenter. The commenter did not identify which of the
other commenter's data it found most relevant, and how data comparable
to the other commenter's data would be used to support an $800,000
minimum investment amount.
One commenter suggested setting the TEA investment amount at
$650,000 now and gradually increasing the amount to adjust for
inflation. This commenter stated that the EB-5 market would not
withstand an increase as dramatic as the one proposed; according to the
commenter, because the majority of investments are currently made at
the $500,000 level, increasing the amount to $1.35 million will
significantly reduce the investor pool and make the EB-5 program an
unattractive investment when compared with other countries. Other
commenters suggested TEA minimum investment amounts ranging from
$600,000 to $1 million, similarly arguing that the proposed investment
amounts are too high.
One commenter argued for applying an inflation-based increase to
the TEA minimum investment amount, rather than the standard investment
amount, so that the TEA minimum investment amount would be $900,000.
The commenter argued that if a further policy goal is to reduce the TEA
versus non-TEA differential to 25 percent instead of the current 50
percent, then
[[Page 35768]]
the minimum for non-TEA investment amount would become $1.2 million.
Response: DHS considered the comments received on this proposed
change and, for the reasons explained in the Investment Level
Differential Between Standard Investment Amount and TEA Investment
Amount section below, it will retain the 50 percent differential
between TEA and non-TEA investment amounts.
DHS agrees with commenters who supported the proposed increase to
$1.35 million in that DHS also believes a higher minimum investment per
visa would ``increase the overall funding flow and relieve some of the
pressure/challenge'' to create 10 jobs per visa. DHS notes that an
increase from $500,000 to $900,000, though not as high as $1.35
million, will have a similar benefit.
Many commenters, however, asserted that the proposed minimum
investment amount for TEAs was too high, or higher than Congress has
considered in recent legislation. The proposed increase in the minimum
investment amount for TEAs was intended in part to remedy the imbalance
referred to in comments, where the vast majority of investments are
currently in entities in TEAs, contrary to the balance Congress appears
to have expected.\51\ While DHS continues to have some concern about
the imbalance, the reforms to the designation process for high
unemployment TEAs finalized in this rule will better ensure that, even
if some imbalance remains, it is benefiting truly deserving
communities, as Congress intended. Also, it should be kept in mind that
Congress set aside thousands of EB-5 visas a year for those investors
(and their immediate family members) investing in TEAs. In fact, while
no less than 3,000 visas must be so set aside each year, Congress left
DHS with the discretionary ability to set aside even more.\52\ Congress
did not reserve visas for investors investing in non-TEA projects.
These features of the program provide additional indication that
Congress considered the goal of incentivizing investments in rural and
high-unemployment areas of crucial importance. This set-aside, along
with the provision authorizing DHS to institute a substantial
investment differential between the TEA and non-TEA investments, are
the primary tools that Congress gave the administering agency to
achieve this goal.\53\ Ultimately, DHS believes in a meaningful
incentive to invest in rural areas and areas of true high-unemployment,
and thus, upon careful consideration of the comments related to this
issue, DHS opted to retain the differential between TEA and non-TEA
investments at 50 percent.
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\51\ See 136 Cong. Rec. S36,615 (Oct. 26, 1990) (statement of
Sen. Simon). Senator Simon stated: ``The general rule-and the vast
majority of the investor immigrants will fit in this category-is
that the investor must invest $1 million and create 10 U.S. jobs,''
but he was also ``mindful'' of the need to target investments in
rural areas and noted that the higher the differential, the more
encouragement there would be to invest in TEAs).
\52\ Section 203(b)(5)(B)(i) of the INA.
\53\ Congress also gave DHS the ability to set the minimum
investment amount in non-rural areas with very low unemployment
rates at up to three times the standard minimum investment amount
(or up to $5,400,000 under the revised initial minimum investment
amounts under this rule). Section 203(b)(5)(C)(iii) of the INA. This
tool has never been utilized, but would be an option to explore in
the future.
---------------------------------------------------------------------------
With regard to commenters' suggestions that the current utilization
and oversubscription of the program are mainly a result of the fact
that presently a significant number of investors can afford to invest
at the TEA level amount of $500,000, DHS believes that minimum
investment levels represent only one of a range of factors that likely
influence demand for the program, including as compared to other
countries' investor visa programs. Commenters did not discuss other
factors, referenced earlier in this preamble, that likely account for
the program's current and past utilization.
DHS considered commenters' other objections that repeated those
expressed regarding the increase to the standard minimum investment
(the increase will make the EB-5 program less competitive against the
immigration investment programs of other countries; the increase
represents amounts far exceeding those under consideration by Congress;
the increase would have the unintended consequence of severely limiting
the participation of many successful mid-career professionals and
entrepreneurs; and the increase would especially burden investors from
China due to currency control restrictions). DHS disagrees with these
commenters for the same reasons stated earlier in this preamble.\54\
DHS likewise disagrees with the commenter suggesting that the TEA
minimum investment should be implemented gradually for the same reasons
described earlier in this preamble related to phasing-in the standard
minimum investment amount.
---------------------------------------------------------------------------
\54\ DHS also received comments on the investment level
differential between the standard minimum investment amount and
minimum investment amount for TEAs, which will be addressed in the
following section.
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DHS agrees with commenters who assert that not enough EB-5
investment has gone to rural areas and areas of truly high
unemployment, but disagrees that this rule will discourage investment
in such areas. On the contrary, DHS believes that the changes made in
this rule to the TEA investment amounts and the TEA designation process
will increase total investment in rural and high unemployment areas. As
discussed in greater detail below, the changes to the TEA designation
process made by this final rule will help ensure that areas eligible
for the lesser investment amounts as areas of high unemployment are
actually areas of high unemployment. DHS also maintains the 50 percent
investment level differential between the TEA minimum investment amount
and the standard minimum investment amount--rather than reducing it to
25 percent as proposed--in order to continue to incentivize investments
in TEAs. DHS believes that the increase in the minimum investment
amount in TEAs, while less than proposed, and the reforms to the TEA
designation process will result in more overall infusion of capital
into rural and high unemployment areas.
DHS considered the alternatives proposed by commenters for the
level of the TEA minimum investment amount, such as setting the amount
at a number ranging from $600,000 to $1 million. However, having
determined to increase the standard minimum investment to $1.8 million
based on the CPI-U inflation rate for reasons explained elsewhere in
this preamble, investments in TEAs below $900,000 are not permissible
under the controlling statute.
DHS also disagrees with the proposal to first adjust the TEA
minimum investment amount for inflation, and then determine the
standard minimum investment amount based on that. In the statute,
Congress set the standard minimum investment amount and gave DHS the
authority to increase it. With respect to targeted employment areas,
Congress authorized DHS to specify a minimum investment amount that is
less than, but no less than half of, the standard amount. Consistent
with the mechanism for determining TEA minimum investments under the
authorizing statute, in this final rule DHS initially sets the standard
amount and then establishes a lesser minimum investment amount for
targeted employment areas. INA section 203(b)(5)(C), 8 U.S.C.
1153(b)(5)(C). In addition, if the minimum investment amount for TEAs
were adjusted for inflation first and the 25 percent differential were
maintained, as the commenter suggests, the differential between the two
investment tiers would have been only $300,000, which is
[[Page 35769]]
appreciably smaller than the differential initially proposed
($450,000). As discussed further below, the $300,000 differential could
reduce the incentive to invest in TEAs. Therefore, the final rule
applies the CPI-U-based increase to the standard minimum investment
first. Id.
While DHS disagrees with some of the commenters' bases for setting
the minimum investment amount for a TEA, DHS will ultimately set the
amount lower than proposed for the reasons discussed below. The final
rule does not reduce the differential between the standard minimum
investment amount and the TEA minimum investment amount from 50 percent
to 25 percent as proposed. Rather, this final rule sets the TEA minimum
investment amount at $900,000, making the difference between the two
investment tiers $900,000.
6. Investment Level Differential Between Standard Investment Amount and
TEA Investment Amount
Comments: Some commenters expressed support for the proposed
investment level differential, reasoning that it will maintain a
meaningful incentive for foreign investors to invest in a TEA. One
commenter stated that the adjustment to a TEA minimum investment amount
that is 75 percent of the standard minimum investment amount will
continue to attract investors to investments in TEAs since the relative
proportion of EB-5 investments that are made in TEAs is already very
high. Multiple commenters stated that the differential between the
standard minimum investment amount and the minimum investment amount
for TEAs should be decreased to encourage non-TEA investments.
Referencing anecdotal evidence, a commenter recommended a differential
no greater than $200,000 to create an active market for non-TEA
investments and demand at both price points. Another commenter
recommended that the percentage discount for TEAs should be no more
than 20 percent as the only way to make a non-TEA investment feasible.
One commenter recommended that the minimum investment amount for a TEA
investment should be two-thirds of the standard minimum investment
amount, but did not supply any data to support this differential.
Another commenter recommended a more gradual decrease in the
relative difference between the standard minimum investment amount and
the TEA minimum investment amount to ``reduce the severity of the shift
of capital'' between TEA and non-TEA investments.
Other commenters recommended that the current 50 percent
differential should be maintained. One of these commenters argued that
a substantial differential is essential as an effective incentive to
make investments in TEAs, and that a substantial differential reflects
congressional intent. Another commenter stated that the rule should
maintain the 50 percent differential between TEA and non-TEA minimum
investment amounts, or at the very least maintain the $500,000
differential by raising the minimum investments amounts to $750,000 in
a TEA and $1.25 million outside of a TEA (which would represent a 40
percent differential). Several commenters felt that revisions to the
designation of a high unemployment TEA would be effective in directing
funds to rural and high unemployment areas without changing the
differential between the two minimum investment amount levels.
One commenter agreed with DHS that the 50 percent differential
between the standard investment amount and the TEA investment amount
has not struck the balance that Congress intended, but believes DHS's
proposed solution to this problem would substitute one static
differential for another, which is not nearly as market driven as what
the commenter would propose to be implemented--a changeable
differential (the commenter acknowledged that such a differential would
require congressional action). This commenter also encouraged DHS to
support legislative resolution of this issue, contending that such
solutions would be much more effective in improving the program's
reputation and operability.
Response: After reviewing the comments, DHS decided that the final
rule should maintain the 50 percent minimum investment amount
differential between TEAs and non-TEAs. In order to address the
imbalance between TEA and non-TEA investments, DHS had originally
proposed reducing the differential between the investment amounts to 25
percent in addition to changing the way certain high unemployment TEAs
are designated. DHS was concerned that maintaining the current
differential of 50 percent, a reduction of $900,000 from the increased
standard investment amount, might not adequately correct the current
imbalance between TEA and non-TEA investments where the vast majority
of investments are in TEAs, many of which have been criticized as
gerrymandered as discussed below.\55\ DHS was also concerned that
maintaining the 50 percent differential may result in too large of a
dollar difference that may create unintended distortions in investment
decisions, and that maintaining the differential at a dollar amount
similar to the one that previously existed ($500,000 to $450,000) could
soften the impact of the multiple changes that will impact TEA
investments. Thus, DHS settled on a midpoint between the maximum
discount allowed by Congress of 50 percent, and no discount at all.
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\55\ Cf. 136 Cong. Rec. S35,615 (Oct. 26, 1990) (statement of
Sen. Simon) (``The general rule--and the vast majority of the
investor immigrants will fit in this category--is that the investor
must invest $1 million and create 10 U.S. jobs.'').
---------------------------------------------------------------------------
DHS continues to recognize that addressing the imbalance between
TEA and non-TEA investments is worthwhile; however, it must balance
that concern with a continued interest in providing a strong incentive
to attract investments to rural areas and areas of true high
unemployment under the modified TEA designation standards, in order to
promote those congressional aims. As noted by one of the commenters,
the NPRM quoted Senator Rudolph Boschwitz and Senator Paul Simon, both
of whom expressed in 1990 the importance of attracting investment to
rural locations and areas with particularly high unemployment.\56\
Notably, Senator Simon stated that the lower the investment level for
TEAs, the more encouragement there would be for investments in those
areas.\57\ The same commenter quotes an April 6, 2017 letter from
Senator Charles Grassley and other lawmakers to Senator Mitch McConnell
and others identifying rural and distressed urban areas as ``the very
communities this program was originally intended to benefit.'' \58\ DHS
finds the comment that a substantial differential is essential as an
effective incentive to make investments in TEAs, and that a substantial
differential is consistent with congressional intent, to be persuasive.
DHS also feels that
[[Page 35770]]
maintaining the 50% differential is responsive to commenters who
suggested lower differentials and discounts, as well as commenters who
suggested gradual implementation of the differential change, since the
differential will no longer be changing over time. Further, DHS is
satisfied that the reform to TEA designations and the move away from
deferring to state TEA designations will address the concerns about
gerrymandering that contribute to the imbalance between TEA and non-TEA
investments: That investors may choose TEA investments because the
designated areas are affluent, due to gerrymandering. It is possible
that the percentage of petitioning investors seeking to invest in
projects in TEAs will decrease simply because they no longer will have
the ability to invest in projects in affluent areas and at the same
time reap the benefits of investing in TEA areas. The GAO found that of
a random sample of petitioning investors (filing petitions in the
fourth quarter of fiscal year 2015) investing in high-unemployment
TEAs, 90% were investing in projects that relied on combining census
tracts or census block groups.\59\ GAO also found that, for those
petitioners that elected to invest in a high unemployment TEA, the
unemployment rate in the census tract(s) where the projects were
---------------------------------------------------------------------------
physically located was:
\56\ See 135 Cong. Rec. S7858-02 (July 13, 1989) (statement of
Sen. Boschwitz that the amendment's purpose was to ``attract
significant investments to rural America.''); 136 Cong. Rec. S35,615
(Oct. 26, 1990) (statement of Sen. Simon: ``[W]e are mindful of the
need to target investments to rural America and areas with
particularly high unemployment--areas that can use the job creation
the most . . . America's urban core and rural areas have special job
creation needs.'')
\57\ Id.
\58\ Letter from Senator Grassley, Senator Leahy, Senator
Feinstein, Representative Goodlatte, and Representative Conyers to
Senator McConnell, Speaker Ryan, Senator Schumer, and Representative
Pelosi (Apr. 6, 2017), available at https://d2xxqpo46qfujt.cloudfront.net/downloads/letter-to-leadership.pdf.
\59\ GAO, Immigrant Investor Program: Proposed Project
Investments in Targeted Employment Areas, GAO-16-749R, at 7 (figure
2) (Sept. 19, 2016).
0-2% in 7% of EB-5 petitioners,
greater than 2-4% in 29% of EB-5 petitioners,
greater than 4-6% in 41% of EB-5 petitioners,
greater than 6-8% in 12% of EB-5 petitioners,
greater than 8-10% in 3% of EB-5 petitioners,
greater than 10-12% in 3% of EB-5 petitioners, and
greater than 12% in 6% of EB-5 petitioners.\60\
---------------------------------------------------------------------------
\60\ Id. at 8 (table 1).
Joint commenters noted that GAO's findings indicate that only 12
percent of EB-5 petitioners that qualified for the lower investment
amount based on being in high-unemployment TEAs were actually investing
in projects physically located in census tracts with unemployment rates
of greater than 8 percent. However, the national unemployment rate in
the fourth quarter of 2015 averaged 5.15 percent. The commenters stated
that given that, under section 203(b)(5)(B)(ii) of the INA, ``high
unemployment'' means ``at least 150 percent of the national average
rate,'' these projects would have had to show an unemployment rate of
in the neighborhood of 7.725 percent.\61\ Accordingly, if DHS had
looked at the actual physical location of the projects, few would have
qualified as being in high unemployment areas.
---------------------------------------------------------------------------
\61\ Id.
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Congress authorized DHS to create a multi-leveled investment
framework with different minimum investment amounts for investments in
TEAs. This final rule retains the current 50 percent differential
between TEA and non-TEA investment amounts. DHS believes it is
reasonable to conclude, as a matter of common sense, that the revisions
to the high unemployment TEA designation standards and process
finalized in this rule will likely ameliorate the current imbalance
between TEA and non-TEA investments, although some investors may
continue to favor investments in more affluent urban areas. Even if the
imbalance remains, keeping the current 50 percent differential for TEA
investments will benefit the areas intended by Congress by preserving
the incentive for investments in rural and high unemployment areas. DHS
acknowledges the commenter's concern that a static differential is not
market driven. DHS also notes that this final rule in no way affects
Congress's ability to pursue a legislative change, for which the
commenter advocated.
D. Revisions to the Targeted Employment Area (TEA) Designation Process
1. Standards Applicable to the Designation of a TEA
1.1. Proposal To Allow Designation of a City or Town With High
Unemployment and a Population of 20,000 or More
Comments: Several commenters discussed the proposal to allow cities
and towns with a population of 20,000 or more to be independently
designated as a TEA if the average unemployment rate for the city or
town is at least 150 percent above the national average. Most of these
commenters supported the proposal. Two commenters stated this was a
logical extension of the current policy. One commenter said that
setting clear guidelines will help clear up discrepancies and
inconsistencies in the EB-5 immigration process. One commenter stated
that the addition of municipalities will lead to robust economic growth
and opportunities for communities that need it most. One commenter
opposed to the proposal contended that the proposal limits areas that
can independently qualify as TEAs by removing the TEA possibility for
all cities and towns with populations less than 20,000 that can
currently qualify through state designation. The commenter further
added that the proposal mistakenly confused the population criteria for
TEAs because the 20,000 population requirement pertains to cities and
towns residing in counties outside of MSAs that do not meet the
requirements for rural TEA status. The commenter stated the population
criteria should be 25,000 and not 20,000 because BLS data is only
published for cities and towns with populations of 25,000 or more.
Response: DHS disagrees with the commenter opposing this proposal
but recognizes that the proposal was inadvertently over-inclusive,
because DHS intended the proposal to provide additional options for
non-rural cities and towns outside of MSAs to qualify as a TEA. DHS did
not intend to create an additional option for cities and towns within
MSAs. And DHS did not intend to create an artificial distinction
between cities and towns within MSAs that have a population of 20,000
or more, on the one hand, and cities and towns within MSAs that have a
population under 20,000, on the other. The current regulations do not
contain such a distinction.
Accordingly, the final rule only finalizes a portion of the
proposal. The final rule allows designation of cities and towns with a
population of 20,000 or more outside of MSAs as a specific and separate
area that may qualify as a TEA based on high unemployment. See final 8
CFR 204.6(j)(6)(ii)(A). DHS is not finalizing the aspect of the
proposal that allowed such designation for cities and towns with a
population of 20,000 or more within an MSA. The statute expressly
excludes cities and towns with populations of 20,000 or more as well as
MSAs from qualifying as ``rural'' TEAs and existing regulations have
permitted MSAs to independently qualify as TEAs based on high
unemployment, but non-rural cities and towns with a population of
20,000 or more outside of MSAs have had only one expressly identified
means to qualify as TEAs, i.e., based on the unemployment levels of the
county in which they are located.\62\ In order to
[[Page 35771]]
address this lack of parity with respect to TEA options available to
NCEs principally doing business in non-rural areas outside of MSAs, DHS
is finalizing the rule to expressly include cities and towns with a
population of 20,000 or more outside of MSAs as a specific and separate
area that could independently qualify as a TEA if the average
unemployment rate is at least 150 percent of the national average. See
final 8 CFR 204.6(j)(6)(ii)(A).
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\62\ Under the current regulatory framework, cities and towns
with a population of 20,000 or more inside an MSA can qualify as a
high unemployment area through either their county or their MSA.
However, cities and towns with a population of 20,000 or more
outside an MSA can qualify as a high unemployment area only through
their county. Under the final rule, cities and towns with a
population of 20,000 or more will each have two options to qualify
as a high unemployment--through the county or MSA if inside an MSA
or through the city/town or county if outside an MSA.
---------------------------------------------------------------------------
Under the EB-5 statute, cities and towns with a population of
20,000 or more cannot qualify as ``rural'' TEAs, INA section
203(b)(5)(B)(iii), 8 U.S.C. 1153(b)(5)(B)(iii), and DHS believes that
maintaining the population criterion at 20,000 for cities and towns
outside of MSAs to qualify as a high unemployment area TEA comports
with the overall statutory framework. Additionally, while DHS
appreciates the comment regarding data availability from the Bureau of
Labor Statistics, DHS further notes that publicly available
unemployment data for those cities or towns with a population between
20,000 and 25,000 can be found within other government sources of
unemployment data, such as the U.S. Census Bureau's American Community
Survey (ACS).\63\
---------------------------------------------------------------------------
\63\ Available at https://www.census.gov/programs-surveys/acs/geography-acs/areas-published.html.
---------------------------------------------------------------------------
Lastly, DHS notes that other geographic areas with high
unemployment that are not specifically mentioned above and in the final
rule can pursue TEA designation through the census tract approach.
1.2. Definition of Rural Area
Some commenters commented on DHS's proposed amendment to the
definition of ``rural area'' clarifying that qualification as a rural
area is based on data from the most recent decennial census of the
United States. One commenter supported the proposed clarification on
the definition of ``rural area.''
Comments: Some commenters stated that there has been a larger
legislative discussion about the definition of what qualifies as
``rural'' for purposes of a TEA, and accordingly, that ``regulatory
discussion should be held'' until a legislative resolution is enacted.
Another commenter said proposed 8 CFR 204.6(j)(6)(i) must be revised
for consistency with the definition of ``rural area'' that appears in
both Section 203 of the INA and the substantive definition of ``rural
area'' at 8 CFR 204.6(e), as well as an Office of Management and Budget
(OMB) directive that states that many counties included in an MSA
``contain both urban and rural territory and populations.'' \64\ The
commenter suggested replacement text for 8 CFR 204.6(j)(6)(i).
---------------------------------------------------------------------------
\64\ OMB, Revised Delineations of Metropolitan Statistical
Areas, Micropolitan Statistical Areas, and Combined Statistical
Areas, and Guidance on Uses of the Delineations of These Areas, OMB
Bulletin No. 15-01 (July 15, 2015), available at https://obamawhitehouse.archives.gov/sites/default/files/omb/bulletins/2015/15-01.pdf.
---------------------------------------------------------------------------
Response: DHS disagrees with the commenters. The agency is bound by
the statutory framework established by Congress in 1990 when it defined
a ``rural area'' for TEA designation purposes as ``any area other than
an area within a metropolitan statistical area or within the outer
boundary of any city or town having a population of 20,000 or more''. 8
U.S.C. 1153(b)(5)(B)(iii); INA 203(b)(5)(B)(iii). Although, arguably,
MSAs may include rural territory and populations, for purposes of the
EB-5 program and this regulation, DHS will continue to mirror the
statutory language. The final rule revises the existing regulatory text
to conform with that statutory framework as interpreted by the agency.
See final 8 CFR 204.6(e). Further, this final rule in no way adversely
affects Congress's ability to enact relevant legislation. With respect
to consistency between the definition of ``rural area'' at 8 CFR
204.6(e) and (j)(6)(i), the final rule revises the definition of
``rural area'' at 8 CFR 204.6(e) to be consistent with both the
existing and revised regulations at 8 CFR 204.6(j)(6)(i). DHS
appreciates the commenter's proposed changes to 8 CFR 204.6(j)(6)(i),
but believes the revisions to the definition of ``rural area'' at 8 CFR
204.6(e) achieves consistency between applicable regulatory
requirements without disturbing the existing agency interpretation as
found in both the current and revised regulatory requirements at 8 CFR
204.6(j)(6)(i).
1.3. Alternative Proposals for How To Designate a TEA
Several commenters offered alternative proposals for TEA
definitions for purposes of designation.
Comments: A couple of commenters indicated that public
infrastructure projects, where the borrower and beneficiary of the EB-5
capital is solely a governmental body, should be automatically included
in the definition of a TEA. These commenters were concerned that
without expressly designating public infrastructure projects as TEAs,
use of the EB-5 program by public infrastructure projects could be
hampered because the project necessarily spans multiple census tracts,
counties, and state boundaries. One commenter said the TEA definition
should be expanded to include an area that is within the boundaries of
a state or federally defined economic development incentive program, as
each of these designations is based on a multi-variable formula.
Another commenter asserted that some states have rural cities with
populations as low as a few hundred residents each, but that these
cities fail to qualify for the rural TEA designation because they sit
on the outskirts of a county that falls within a large MSA. The
commenter suggested that the rule discriminates against rural cities
that happen to be in bigger states, and argued that ``a rural city
should be a rural city'' no matter where it is located. One commenter
stated that TEA opportunities could be expanded by granting rural TEA
status to all census tracts not within an urbanized area with a
population of 50,000 or more, as defined by the most recent decennial
census data, if the individual census tract meets a predetermined
minimum size and maximum population density criteria, such as greater
than 100 square miles and population density of fewer than 25 people
per square mile. Another commenter suggested the definition could be
broadened to include regions with high level of rent burden or provide
flexibility on the job creation requirement if the investor provides
affordable housing in the development. Another commenter stated that
TEA status should only be given to rural and high poverty areas in the
urban MSAs. Some of these commenters opposed the entire idea of a TEA.
These commenters suggested that the non-TEA investment amount has never
been competitive and that visa set-asides would provide the necessary
incentives for rural and distressed urban areas.
Response: DHS is bound by the statutory definition of a TEA and
rural area at section 203(b)(5)(B) of the INA and DHS cannot redefine a
TEA in a manner that is inconsistent with these statutory parameters.
The statute defines a TEA as a ``rural area or an area which has
experienced high unemployment (of at least 150 percent of the national
average rate)'' and, in turn, defines rural area as ``any area other
than an area within a metropolitan statistical area or within the outer
boundary of any city or town having a population of 20,000 or more
(based on the most recent decennial census of the United States).''
While several comments suggested areas that may be in need of
investment, Congress set the parameters within
[[Page 35772]]
which DHS may define a TEA; the final rule fits within the statutory
framework. Each of the different alternative criteria suggested are not
reasonable interpretations of the statute because they either (1) are
not limited to areas as defined by the statute (public infrastructure
projects focus on activities rather than areas), (2) are contrary to
the existing statutory definitions (smaller cities and towns in
outlying areas of a county within an MSA are still within an MSA and
thus cannot be rural), or (3) contain criteria that go beyond those
mandated by the statute (high rent burden, high poverty (or low income)
areas and population density are not based on unemployment or absolute
population and areas with a population of 50,000 or more exceeds the
population criterion of 20,000 or more set by statute). For USCIS to
base TEAs on economic indicators other than unemployment data or to
allow local designations based on such indicators would require a
statutory change. Finally, while DHS has the discretion to adjust the
minimum investment amount for investments within TEAs, the statute
nonetheless reserves 3,000 visas for investment into TEAs and,
therefore, DHS may not eliminate TEAs entirely. See INA sec.
203(b)(5)(B)(i), 8 U.S.C. 1153(b)(5)(B)(i).
1.4. Other Comments on the Proposed Standards for Designating TEAs
Comment: One commenter stated that the proposal aims to tighten the
TEA definition, but hobbles the TEA incentive by decreasing the
monetary differential between TEA and non-TEA investment amounts. The
commenter stated that industry studies indicate that tightening the TEA
definition could, by itself, have the effect of making a majority of
EB-5 projects subject to the standard investment level. The commenter
mentioned one study that notes that over 80 percent of EB-5 projects in
the study's database of large-scale EB-5 projects would not qualify as
a TEA by solely changing the TEA standard for special designations of
high unemployment areas.
Response: DHS agrees with the commenter that decreasing the
monetary differential between TEA and non-TEA investment amounts
undermines the incentive to invest in TEAs. As discussed above, Senator
Rudolph Boschwitz and Senator Paul Simon both expressed in 1990 the
importance of attracting investment to rural locations and areas with
particularly high unemployment. Notably, Senator Simon stated that the
lower the investment level for TEAs, the more encouragement there would
be for investments in those areas.\65\
---------------------------------------------------------------------------
\65\ See 136 Cong. Rec. S35,615 (Oct. 26, 1990) (statement of
Sen. Simon).
---------------------------------------------------------------------------
The commenter cites to a publication by Jeanne Calderon and Gary
Friedland of New York University's Stern School of Business, who state
that
[T]he two essential ingredients to a meaningful TEA incentive are
(1) a narrowly defined area that limits the number of projects that
may qualify for the TEA discount, and (2) a sufficiently wide TEA
spread between the minimum amount required for a TEA project
location and other location.\66\
\66\ Gary Friedland and Jeanne Calderon, EB-5 Prescription for
Reform: Legislation or Regulation?, NYU Stern School of Business,
June 19, 2017, page 11 available at http://www.stern.nyu.edu/sites/default/files/assets/documents/EB-5%20Prescription%20for%20Reform%20-%20Legislation%20or%20Regulation%206.19.2017%20draft.pdf.
DHS agrees with the commenter that although the reforms to high
unemployment TEA designation and process address the first ingredient,
reducing the differential undermines the second ingredient. Thus, in
the final rule, DHS maintains a 50 percent differential between the TEA
investment amount and non-TEA investment amount in order to encourage
development outside of affluent areas and increase investment in TEAs.
Additionally, many TEAs have been criticized as being
``gerrymandered'' to qualify for the reduced threshold amount.\67\ DHS
believes the best solution to deter ``gerrymandered'' TEAs and to more
effectively utilize the congressionally mandated TEA incentive is to
reform both the TEA definitions and designation process while
maintaining the 50 percent differential. DHS believes these changes
will more optimally incentivize targeted investment into areas of need
that Congress sought when establishing the TEA provisions of the EB-5
program.
---------------------------------------------------------------------------
\67\ For instance, one industry participant expressed a belief
that a clear majority of EB-5 capital was going to projects relying
on ``some form of gerrymandering'' to qualify for the reduced
minimum investment requirement. Eliot Brown, ``How a U.S. Visa-for-
Cash Plan Funds Luxury Apartment Buildings; Program Meant to Spur
Jobs in Poor Areas Largely Finances Developments in Affluent
Neighborhoods,'' Wall St. J., Sept. 9, 2015, available at https://www.wsj.com/articles/how-immigrants-cash-funds-luxury-towers-in-the-u-s-1441848965 (last visited Dec. 17, 2018) (citing Michael Gibson,
managing director, USAdvisors.org).
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2. Proposal To Eliminate State Designation of TEAs
Multiple commenters discussed the proposed shift of TEA designation
from the states to DHS. Of those, most but not all opposed the proposal
to shift all TEA designation from the states to USCIS.
Comments: Several commenters provided support for the proposal to
shift the TEA designation authority from the states to DHS as written.
Several of these commenters supported the proposal because it would
standardize and streamline the TEA designation process, provide much
needed transparency, and align the TEA designations process with
congressional intent. One commenter noted that most TEA projects are
not actually located in rural or economically distressed areas because
states have had such a high degree of flexibility to designate a TEA.
Many commenters argued that the states have the most expertise with
local employment and unemployment data, as well as knowledge of local
demographics and economies to make TEA designation determinations. In
addition, some commenters indicated their appreciation of working with
local officials and that such coordination has mutual benefits for the
project and the local economic development agencies, which they felt
would be lost if states were removed from the designation process. One
commenter stated that a state-based perspective is more likely to
capture an accurate reality of unemployment and the rural conditions of
Indian tribes.
Response: DHS recognizes that states may possess expertise in local
demographics and economies and that states may play an important role
in facilitating EB-5 projects. However, DHS must weigh such expertise
against transparency in TEA designations and a state's natural self-
interest in promoting economic development.\68\ This self-interest has
resulted in the application of inconsistent rules for designation of
high unemployment areas by the states. This inconsistency results in
acceptance of TEAs that are criticized as ``gerrymandered.'' \69\ TEA
designations made by states under the existing system thus do not
reliably fulfill the congressional intent of the program to
[[Page 35773]]
incentivize the investment of EB-5 capital in actual high unemployment
areas. To better adhere to this congressional intent, DHS believes the
EB-5 program is best served by shifting the designation of high
unemployment areas from the states to DHS.
---------------------------------------------------------------------------
\68\ The Distortion of EB-5 Targeted Employment Areas: Time to
End the Abuse: Hearing Before the S. Comm. On the Judiciary, 114th
Cong. 12 (2016) (statement by Gary Friedland, Scholar-in-Residence,
N.Y. Univ., Stern School of Bus.) (``Compounding the problem, often
the state agency that is charged with making the TEA determination
is the same agency that promotes local economic development.'') .
\69\ [thinsp]See, e.g., ``Eliot Brown, Swanky New York Condo
Project Exploits Aid Program,'' Wall St. Journal, Oct. 13, 2015,
http://www.wsj.com/articles/posh-tower-proposed-for-struggling-new-york-neighborhood-central-park-south-1444728781; Patrick McGeehan
and Kirk Semple, ``Rules Stretched as Green Cards Go to Investors,''
New York Times, Dec. 18 2011, available at https://nyti.ms/2FgZoQq.
---------------------------------------------------------------------------
DHS also rejects the commenter's assertion that states are better
positioned to determine the unemployment of Indian tribal areas. The
commenter failed to provide any data to support the claim that a state-
based perspective is more likely to capture an accurate reality of
unemployment in and the rural conditions of Indian tribal areas. The
U.S. Census Bureau conducts outreach to Indian tribes to collect
information, including unemployment rates, from Indian tribes.\70\
---------------------------------------------------------------------------
\70\ See Tribal Consultation Handbook: Background Materials for
Tribal Consultations on the 2020 Census, Fall 2015, U.S. Department
of Commerce, U.S. Census Bureau, available at https://www.census.gov/content/dam/Census/library/publications/2015/dec/2020_tribal_consultation_handbook.pdf. See also My Tribal Area, a
collection of American Community Survey data for tribal areas,
available at https://www.census.gov/tribal/.
---------------------------------------------------------------------------
Comment: One commenter stated that because USCIS adjudications of
TEA designations are not within the agency's area of immigration-law
expertise, such adjudications would not receive deference under Chevron
USA v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), if
challenged in federal court. The commenter suggested that the
possibility of litigation over such adjudications was ``another reason
to give serious consideration to allowing the states to retain the
authority to make [TEA] determination[s].''
Response: DHS disagrees with the commenter's interpretation of the
case law, but in any case has elected to move forward with its proposal
for the reasons expressed elsewhere in this preamble.
Comments: Some commenters expressed concerns about the impact of
the proposal on processing times. Some commenters argued that states
have the resources and capacity to process high unemployment
designation letters relatively quickly, whereas shifting the high
unemployment designation authority to DHS would exacerbate processing
backlogs and delay investments and project progress. Some commenters
explained that DHS must be committed to a speedy TEA designation
process, as the TEA designation must be secured early in the process of
analyzing whether a particular project is suitable for EB-5 investment.
One commenter stated that currently, almost all states are able to
provide a TEA designation in two weeks or less. The commenter
questioned DHS's ability to process TEA requests in under 30 days,
which the commenter claimed is what would be required to make the
system viable. One commenter noted that developers often seek multiple
TEA designation letters from states as part of their due diligence,
further compounding the adjudication demands on DHS. One commenter
expressed concern about resources at USCIS being moved from Form I-526
and Form I-829 adjudications to TEA designation determinations, which
would further increase petition backlogs for all EB-5 forms. Two
commenters said it is unclear whether there will be any ability for TEA
designations to be made prior to adjudication of the Form I-526
petition or Form I-924 application. The commenters stated that TEA
designations should be available to projects prior to filing of the
Form I-526 or Form I-924. One commenter stated that DHS should allow
the filing of Forms I-924 and Forms I-526 while a TEA designation is
pending, arguing that if the DHS process is uniform and predictable,
investors and market participants can proceed on an efficient parallel
track to expedite projects.
Response: The framework detailed in the NPRM and finalized in this
rule should not add a significant additional burden to petitioners or
to DHS in the adjudication process. DHS is committed to providing
timely TEA designation decisions as part of the adjudication process.
DHS does not foresee an increase in petition backlogs based on handling
high unemployment area designations as the agency already reviews state
designation evidence provided by petitioners As in the current process,
EB-5 petitioners will be required to provide evidence to demonstrate
the area in which the new commercial enterprise into which they are
investing is principally doing business is a TEA. The new framework,
while implementing a new methodology, still requires petitioners to
demonstrate that the area specified in the regulations in which the NCE
is principally doing business has the requisite unemployment level. DHS
will still review this data as it currently reviews high unemployment
area designation letters from states, by reviewing the area for which
TEA designation is sought to confirm it complies with the new
methodology for including census tracts. As DHS has now set the
parameters for the size of a TEA, something states previously did,
there is no longer a role for the states. The new methodology allows
petitioners to determine on their own whether the proposed location is
a TEA by reviewing the census tract and, if necessary, the adjoining
tracts.
This rule does not establish a separate application or process for
obtaining TEA designation from USCIS prior to filing the EB-5 immigrant
petition and USCIS will not issue separate TEA designation letters for
areas of high unemployment. DHS will make the determination as part of
the existing adjudication process and does not anticipate an impact to
the overall timing of the adjudication process.
DHS recognizes that this final rule represents a shift from the
current process by which designations of certain high unemployment
areas may be obtained from states in advance of filing. If a regional
center prefers to seek TEA determination in advance of investor
petition filings, the regional center may file an exemplar application
as part of a Form I-924 adjudication. If the exemplar application is
approved, the approval (including the TEA determination) will receive
deference in individual investor petition filings associated with that
exemplar in accordance with existing USCIS policy (for example, absent
a material change in facts affecting the underlying favorable
determination or its applicability to eligibility for the individual
investor). For non-regional center investors, unemployment data is
readily available by which they can determine if an investment in a
particular area satisfies applicable TEA designation requirements. As a
result of the clearer, more objective designation standards under this
final rule, this rule should provide sufficient certainty regarding the
amount and timing of an investment to establish eligibility when filing
their petitions.
DHS notes that this change harmonizes the process for all types of
TEAs--including rural areas, for which no preliminary determination
process exists. In any event, if necessary, DHS could raise associated
fees to bring on board additional adjudicators.
Comments: Some commenters said it is clear from the Federal
Register and the Adjudicator's Field Manual that congressional intent
was to allow states to have the right to issue high unemployment area
designations. These commenters referenced the issuance of the EB-5
regulations in 1991 where legacy INS previously decided to delegate the
TEA designation process to the states and further cited the now-
superseded Adjudicator's Field Manual that explained how the agency
provided deference to decisions made by the states, emphasizing that
USCIS has no
[[Page 35774]]
role in the determination process. One commenter said that DHS assuming
the role of high unemployment area designation overturns two decades of
allowing the formulation of high unemployment areas to be determined by
states. One commenter stated that the proposal is directly contrary to
the government's asserted priority to transfer authority from the
Federal Government to the states, while another commenter expressed
concern that the shift would ``politicize'' the designation process.
Response: DHS disagrees with the assertion that the congressional
intent of the EB-5 program was to allow states to designate high
unemployment areas. Commenters referenced no statutory text or
legislative history to this effect. Regulations promulgated by the
legacy Immigration and Naturalization Service (INS), the predecessor to
USCIS, and not INA section 203(b)(5), authorized the role of states in
the TEA designation process. It is clear that the congressional intent
of the TEA provision was to incentivize EB-5 investment in areas of
actual high unemployment. Currently, as a result of each state's
interest in promoting investment with its borders, the states' role in
designating high unemployment areas for purposes of the EB-5 program
has resulted in instances when high unemployment area designations
include areas far outside of actual distressed areas that many have
called ``gerrymandered.'' \71\ For these reasons, DHS has determined
that it is necessary to shift the high unemployment area designation
from the states to DHS.
---------------------------------------------------------------------------
\71\ [thinsp]See, e.g., Eliot Brown, ``Swanky New York Condo
Project Exploits Aid Program,'' Wall St. Journal, Oct. 13, 2015,
http://www.wsj.com/articles/posh-tower-proposed-for-struggling-new-york-neighborhood-central-park-south-1444728781; Patrick McGeehan
and Kirk Semple, ``Rules Stretched as Green Cards Go to Investors,''
New York Times, Dec. 18 2011, https://nyti.ms/2FgZoQq.
---------------------------------------------------------------------------
DHS recognizes that eliminating the state role in high unemployment
area designation represents a significant change from the existing
regulations.\72\ However, as pointed out in the NPRM, allowing states
to make high unemployment area designations has resulted in the
application of inconsistent rules by various states in order to
facilitate EB-5 funding to increase economic development within those
states.\73\ The result is that 97 percent of all EB-5 petitions filed
in 2015 were within state-designated high unemployment areas, and
according to the GAO's analysis of I-526 petitions from the fourth
quarter of fiscal year 2015, the vast majority of EB-5 petitioners who
purported to invest in areas of high unemployment had invested in
projects physically located in a census tract or tracts with
unemployment levels below the 150% of the national unemployment rate
threshold for high unemployment.\74\ DHS believes that this is
inconsistent with clear congressional aims in enacting the EB-5 program
and therefore warrants a change in policy mandating high unemployment
area designations by DHS rather than by the states.
---------------------------------------------------------------------------
\72\ DHS notes that no comments on this change from any state
government were submitted.
\73\ Is the Investor Visa Program an Underperforming Asset?:
Hearing Before the H. Comm. on the Judiciary, 114th Cong. 62 (2016)
(statement of Matt Gordon, Chief Exec. Officer, E3 Inv. Group)
(``Generally, States quickly learned to be as permissive as possible
in an attempt to attract ever greater amounts of EB-5 capital.'');
see also The Distortion of EB-5 Targeted Employment Areas: Time to
End the Abuse: Hearing Before the S. Comm. on the Judiciary, 114th
Cong. 12 (2016) (statement of Gary Friedland, Scholar-in-Residence,
N.Y. Univ., Stern School of Bus.) (``USCIS' continued delegation to
the states of the TEA authority without guidelines results in the
application of inconsistent rules by the various states. More
important, each state has the obvious self-interest to promote
economic development within its own borders. Delegation presents an
opportunity for the states to establish lenient rules to enable
project locations to qualify as a TEA. Compounding the problem,
often the state agency that is charged with making the TEA
determination is the same agency that promotes local economic
development. As a consequence, virtually every EB-5 project location
qualifies as a TEA.'').
\74\ See GAO, Immigrant Investor Program: Proposed Project
Investments in Targeted Employment Areas, GAO-17-487T, at 8 (Mar. 8,
2017).
---------------------------------------------------------------------------
DHS disagrees with the proposition that removing states from the
high unemployment area designation process will ``politicize'' the
designation process. DHS has proposed a clear and objective high
unemployment area designation framework allowing high unemployment
areas consisting of a census tract, or contiguous census tracts, in
which the new commercial enterprise is principally doing business, if
the weighted average of the unemployment rate for the tract or tracts
is at least 150 percent above the national average. Such determinations
will not be based on subjective or political factors. DHS will make
high unemployment designation determinations based solely on publicly
available data. DHS believes this final rule makes the process more
transparent and uniform and less subject to political whims by
eliminating the current political pressures within each state
associated with the current process.
Comments: One commenter said shifting designation responsibility to
the Federal Government will invariably make it harder for direct
investments (i.e., non-regional center investments) to compete with
larger, better funded regional centers. Another commenter suggested
issuance of TEA designation by DHS would be appropriate for regional
center projects because these projects can cross state lines and the
size allows for more financial resources to pay for independent
economic studies. The commenter stated that, on the other hand, TEA
designation by DHS is not appropriate for direct investment projects
because the projects tend to be smaller and in the same state, and
because coordinating with the local government provides the project
with valuable economic and demographic data.
Response: DHS rejects the notion that its administration of the TEA
designation process will make it harder for direct investment projects.
This final rule lays out a TEA designation process easily navigated by
any petitioner--whether associated with a regional center or not--for
little or no cost. The data necessary for the TEA designation
determination is publicly available from the Bureau of Labor Statistics
or U.S. Census Bureau. A TEA designation request alternatively can be
supported with other data, public or private, provided that DHS can
validate that data. The TEA designation process will not require
additional costly studies, or steps beyond what is already required as
part of the Form I-526 petition, that would make TEA designation
unviable for direct investment projects. More importantly, whereas DHS
has laid out a transparent process for all new commercial enterprises
to use, each state has a different high unemployment area designation
process that petitioners must satisfy. Investigating and complying with
a particular state's requirements beyond those specified in the
regulations, or with multiple states' different requirements for direct
investments that are either not location-specific or located in
multiple jurisdictions, is likely to require more financial resources
than adhering to a single, uniform set of standards and processes
through DHS. DHS thus is not persuaded that changes made by this rule
will be detrimental to or disproportionately affect direct investment
projects. Nothing in this rule would inhibit their ability to
coordinate with units of local government.
Comments: Several commenters suggested that DHS clearly communicate
to the states a program-wide set of well-defined, technically sound,
and transparent guidelines, standards, and rules, such as providing a
limit of census tracts, or particular data the state must use for the
designation. This would allow the states
[[Page 35775]]
to continue to be the designators of high unemployment areas, but would
require the states to operate in a more streamlined manner.
Response: DHS rejects the proposal. While the changes in this rule
to the definition of a high unemployment area that qualifies as a TEA
could provide the rules for state designators, DHS would still need to
make individual determinations on each state designation as to whether
it complies with those rules. DHS believes it would be duplicative and
wasteful, administratively burdensome, and more difficult to evaluate
the individualized determinations of the various states than to
implement and administer a nationwide standard on its own.
3. Proposal To Change Special Designation of a High Unemployment Area
Some commenters supported the proposed changes to the special
designation of a high unemployment area. Several commenters said the
changes align with congressional intent to provide an incentive for
projects located in a truly high unemployment area and reduce TEA
gerrymandering and manipulation. Other commenters emphasized that TEA
gerrymandering and manipulation has been well documented and criticized
by Congress, the media, scholars, and industry insiders. Other
commenters appreciated the proposal as a reasonable ``compromise'' to
the possible definitions of the geographic area that could constitute a
TEA.
3.1 Alternatives--Use of Census Tracts vs. Block Groups
Comments: Multiple commenters suggested the use of block groups,
which are the smallest geographic configuration for which employment
and unemployment data is available, instead of, or in addition to,
census tracts. Commenters listed several benefits to using block groups
instead of census tracts. One commenter indicated block groups allow
TEAs to better reflect true high unemployment areas that using larger
areas will not allow (e.g., in smaller pockets of high unemployment
inner city areas). Another commenter noted that, in urban areas, block
group high unemployment areas are more equitable because resident
demographics can change drastically from one city block to the next.
Commenters indicated that more than 15 states currently use census
block groups as allowable sub-municipal building blocks in the design
of areas for high unemployment area approval, and many other states
have indicated a willingness to consider a census block approach for
defining high unemployment area TEAs. In proposing the use of census
blocks, commenters generally suggested a limitation regarding the
number of census block groups that could be used to define a high
unemployment area, as long as the limitation reflected the fact that
census block groups are a significantly smaller area. Commenters
offered examples, such as San Antonio's limitation to 24 block groups
and Houston's 60-block-group limitation.
Response: DHS disagrees with commenters supporting the use of
census block groups in lieu of or in addition to census tracts. While
data is available for both census block groups and census tracts in 5-
year estimates,\75\ census tract boundaries are delineated with the
intention of being maintained over a long period of time so that
statistical comparisons can be made from census to census.\76\ While
census tracts are occasionally split due to population growth or merged
as a result of substantial population decline, such changes are
generally reflected in census tract numbering to preserve continuity
for comparison purposes. Census block groups do not offer the same
longevity analysis and census blocks are not delineated based on
population. In fact, many census blocks are unpopulated.\77\ Thus,
census tract data is ultimately more reliable for purposes of
designating areas of high unemployment, as census tracts, unlike census
blocks, generally contain certain levels of population at any given
time, which strengthens the reliability of the unemployment data
collected for that population.\78\ As DHS reviews areas to determine
whether they qualify for high unemployment area designation at the time
of investment or at the time of filing the EB-5 petition, as
appropriate, DHS believes the use of census tracts provides both
petitioners and the industry with an overall more statistically
reliable area for high unemployment area designation.
---------------------------------------------------------------------------
\75\ See U.S. Census Bureau, American Community Survey (ACS):
When to Use 1-year, 3-year, or 5-year Estimates, available at
https://www.census.gov/programs-surveys/acs/guidance/estimates.html
(last accessed June 27, 2018).
\76\ See U.S. Census Bureau, Geographic Terms and Concepts--
Census Tract, available at https://www.census.gov/geo/reference/gtc/gtc_ct.html (last accessed June 27, 2018).
\77\ See U.S. Census Bureau, Census Blogs: What are Census
Blocks? Available at https://www.census.gov/newsroom/blogs/random-samplings/2011/07/what-are-census-blocks.html (last accessed June
27, 2018).
\78\ See U.S. Census Bureau, Geographic Terms and Concepts--
Census Tract, available at https://www.census.gov/geo/reference/gtc/gtc_ct.html (last accessed June 27, 2018); U.S. Census Bureau,
Geographic Terms and Concepts--Block Groups, https://www.census.gov/geo/reference/gtc/gtc_bg.html (last accessed June 27, 2018).
---------------------------------------------------------------------------
Commenters indicated some states are currently utilizing census
block groups in their high unemployment area designations and suggested
that numerical limitations could be placed on the number of census
blocks that may be utilized, yet neither the use by states nor
numerical limitations address the issues presented by census blocks
relative to census tracts discussed above. The final rule contains a
consistent and clear adjudication framework to reduce these issues.
Comments: Some commenters stated that limiting high unemployment
area configurations to census tracts would negatively affect the many
states that currently utilize both block groups and census tracts.
These commenters stated that the exclusion of census block groups would
particularly affect states in the western United States, where less
densely populated areas can result in census tracts that are several
tens of square miles, even hundreds of square miles, in size.
Response: While DHS appreciates the concerns raised, DHS disagrees
with the commenters' concerns about the impact to the western United
States and believes that because the final rule will eliminate the
states' role in the high unemployment area designation process, it will
result in uniform application across the United States. As discussed
elsewhere, census tracts are drawn based on the total population within
the area. Tracts that are hundreds of square miles in size often would
not require a high unemployment area designation based on the census
tract, but would instead qualify as a rural area, and thereby be
eligible for TEA designation even if ineligible under the high
unemployment area criteria. Further, even if such a large tract was not
rural, any concentrated urban area within that tract that is a city or
town of sufficient population size could independently qualify on that
basis. Finally, because the census tract is based on population size,
the size of the area of the tract is ultimately irrelevant. No matter
the tract size, the methodology for determining whether the tract (or
combination of tracts) constitutes a TEA is the same, based on the
unemployment rate, with the calculation being unaffected by the size of
the tract.
3.2. Alternative--Commuter Patterns
Comments: Numerous commenters stated that the designation of a high
unemployment TEA should include a ``commuter pattern'' analysis that
would
[[Page 35776]]
focus on defining a high unemployment area as encompassing the area in
which workers may live and be commuting from, rather than just where
the investment is made and where the NCE is principally doing business.
Multiple commenters stated that the rule should recognize the
relationship between job locations and where workers live and that
urban centers where the jobs are located are not necessarily a measure
of where unemployed residents reside. These commenters stated that
limiting TEA designation to the project's census tracts and any
immediately adjacent tracts (sometimes called ``spooled tracts'' or
``donuts'') is unnecessarily restrictive, fails to take into account
the linear economic development of cities following a block-by-block
path and/or transit lines, and would make many large job-creating
projects in highly concentrated urban areas ineligible because the non-
contiguous worker-supplying areas (where significant job benefits would
accrue) would be excluded from the TEA designation calculations. Two
commenters said the rule inappropriately ignores that EB-5 investment
projects benefit U.S. workers outside the specific project location who
use regional mass transit to commute to urban centers of employment.
One of these commenters asserted that, if the proposed TEA definitions
are implemented, many large-scale urban projects that meet current
requirements and have benefited from significant foreign investment
would no longer qualify for EB-5 investment. Similarly, some
individuals wrote that the proposal to limit TEAs in urban cores to a
single census track or cluster of ``spooled'' census tracts would
unfairly disadvantage ``the most economically viable urban projects''--
described by the commenters as those that create jobs for workers
commuting from the greater metropolitan area.
Commenters offered various suggestions to implement a commuter-
based approach. Two commenters recommended employing the contiguous
model approach with a state-defined limit of census tracts, which would
limit the area that could be utilized, but still provide a wide enough
perimeter to allow for commuting pattern approach. Two commenters
recommended that the rule include high unemployment, non-contiguous
census tracts (or block groups, as discussed above) in the TEA
designation. One commenter recommended a statistically driven,
replicable commuter-based methodology for urban ``high unemployment
areas'' that would combine ACS unemployment data with the census's best
available commuting data (which the commenter noted is already used for
current high unemployment designations) and also merge ACS unemployment
data with the Federal Highway Administration's online Census
Transportation Planning Products (CTPP). The commenter said its
proposed ``9-step'' approach was consistent with statutory text, but
encouraged closer analysis and refinement of the proposed approach by
industry and government experts.
Response: DHS disagrees with these commenters. The statutory
language regarding TEA designations provides that the targeted
employment area (i.e., the area experiencing high unemployment or rural
area) must be the area in which the new commercial enterprise will
create jobs.\79\ The proposals put forth by the commenters were either
the same approach previously analyzed by DHS and already deemed
inappropriate or similar approaches that nonetheless presented the same
unresolved issues. While DHS appreciates the arguments made by
commenters regarding economic development and commuting patterns, DHS
believes that the commuter-based approaches presented do not adequately
address the issue of selectively choosing among high unemployment
commuting areas rather than more comprehensively including all areas to
and from which an individual may commute (including areas of low
unemployment), which may ultimately result in merely a different form
of the same type of ``gerrymandering'' that DHS seeks to address with
this regulation. Moreover, DHS believes that the statutory incentive
for the reduced investment amount in a targeted employment area is best
effectuated by restricting its application to investments in new
commercial enterprises that create jobs in the actual area experiencing
high unemployment or rural area--not in non-rural areas without high
unemployment that are physically distant or otherwise disconnected from
selected outlying areas with high unemployment from which prospective
workers may commute. Moreover, as discussed in the NPRM, the commuter
pattern approach previously considered by DHS was deemed too
operationally burdensome to implement as it posed challenges in
establishing standards to determine the relevant commuting area that
would fairly account for variances across the country.\80\ In addition,
DHS could not identify a commuting-pattern standard that would
appropriately limit the geographic scope of a TEA designation
consistent with the statute and the policy goals of this regulation to
address ``gerrymandering'' concerns and more closely link the locus of
investment and job-creation with areas actually experiencing high
unemployment.
---------------------------------------------------------------------------
\79\ INA 203(b)(5)(B)(i) states: ``No less than 3,000 of the
visas made available under this paragraph for each fiscal year shall
be reserved for qualified immigrants who invest in a new commercial
enterprise described in subparagraph (A) which will create
employment in a targeted employment area'' (emphasis added).
\80\ DHS reviewed a proposed commuter pattern analysis
incorporating the data table from the Federal Highway
Administration, ``CTPP 2006-2010 Census Tract Flows,'' available at
http://www.fhwa.dot.gov/planning/census_issues/ctpp/data_products/2006-2010_tract_flows/ (last updated Mar. 25, 2014). DHS also
reviewed the CTTP updated status report (January 2018) entitled
``Small and Custom Geography Policy Change Announcement CTPP
Oversight Board is Discontinuing Census TAZ for Small Geography Data
Reporting and Urging the Transportation Planning Community to Engage
in 2020 Census Participant Statistical Areas Program (PSAP),'' which
is available at: https://www.fhwa.dot.gov/planning/census_issues/ctpp/status_report/sr0118/fhwahep18046.pdf, which will phase in
slight methodological changes over the next year. DHS found the
required steps to properly manipulate the Census Transportation
Planning Product (CTPP) database might prove overly burdensome for
petitioners with insufficient economic and statistical analysis
backgrounds. Further, upon contacting the agency responsible to
manage the CTPP data, DHS was informed that the 2006-2010 CTPP data
is unlikely to be updated prior to FY2018 to incorporate proposed
changes to the data table. U.S. Census is currently reviewing the
CTPP proposed changes. As an alternative methodology for TEA
commuter patter analysis, DHS reviewed data from the U.S. Census
Tool, On the Map, available at http://onthemap.ces.census.gov, which
is tied to the U.S. Census Bureau's American Community Survey.
Although the interface appeared to be more user-friendly overall,
using this data would be operationally burdensome, potentially
requiring hours of review to obtain the appropriate unemployment
rates for the commuting area.
---------------------------------------------------------------------------
Assuming that a commuting patterns model might result in jobs being
created for workers residing in high-unemployment areas, the only way
to demonstrate that this is the case would be to require that
petitioners provide W-2s or other evidence demonstrating where the
workers lived. Even where such evidence could be provided, it would be
too complex and operationally burdensome to determine which cases would
be impacted and to review such evidence and link each worker to a
separate area of high unemployment for each petitioner.
In any event, commuter pattern analysis would unduly limit the
effects of TEA investments on the areas that Congress most intended to
benefit. For instance, the Leadership Conference on Civil and Human
Rights has argued that ``it is imperative that Investor Visa funds go
directly into building infrastructure in communities in West
[[Page 35777]]
Baltimore and the South Bronx and the like. Projects in neighboring
areas will leave these communities of concentrated poverty no better
off in terms of development and infrastructure after their
conclusion.'' \81\ In comments to the proposed rule, the Leadership
Conference similarly suggested that a commuter pattern analysis would
be misused to continue the practice of cobbling together census tracts
in order to get the TEA discount for an area that is not in fact a high
poverty area.
---------------------------------------------------------------------------
\81\ Nancy Zirkin, Executive Vice President, Leadership
Conference on Civil and Human Rights, ``Is the Investor Program an
Underperforming Asset?'' U.S. House of Representatives, 3-4, (Feb.
11, 2016), available at https://docs.house.gov/meetings/JU/JU00/20160211/104454/HHRG-114-JU00-20160211-SD004.pdf.
---------------------------------------------------------------------------
DHS considers a variety of officially recognized areas (e.g.,
metropolitan statistical areas and counties) for determining whether a
given area has experienced high unemployment. Under both the final rule
and existing regulations, petitioners may demonstrate that the
metropolitan statistical area in which their new commercial enterprise
is principally doing business has the requisite unemployment; MSA
designation is based in part on commuting ties among related
counties.\82\ Thus, petitioners are not entirely without options to
achieve TEA designation in non-rural areas that account for commuter
patterns and that does not present the same issues as the other
approaches discussed above.
---------------------------------------------------------------------------
\82\ 2010 Standards for Delineating Metropolitan and
Micropolitan Statistical Areas; Notice, 75 FR 37246 (June 28, 2010).
---------------------------------------------------------------------------
Comments: Several commenters stated that it would be inconsistent
for DHS to dismiss a commuter-based TEA option in the urban context
because ``rural'' TEAs rely on key OMB and Census Bureau definitions
that depend on commuting ties. These commenters point to the U.S.
Census Bureau's definition of a core based statistical area (CBSA) as
defined by the U.S. Census Bureau:
A statistical geographic entity defined by the U.S. Office of
Management and Budget (OMB), consisting of the county or counties
associated with at least one core (urban area) of at least 10,000
population, plus adjacent counties having a high degree of social
and economic integration with the core as measured through commuting
ties with the counties containing the core. Metropolitan and
micropolitan statistical areas are the two types of CBSAs.\83\
---------------------------------------------------------------------------
\83\ 76 FR 53042.
Response: DHS is bound by the statutory framework defining what
constitutes a TEA. As explained above, the statute specifically defines
what constitutes a rural area and the final rule conforms to the
statutory definition. With respect to areas experiencing high
unemployment, petitioners may demonstrate that the metropolitan
statistical area in which their new commercial enterprise is
principally doing business has the requisite unemployment. Because
metropolitan statistical areas themselves are defined by reference to
commuting patterns, petitioners have a TEA option for non-rural areas
that is reasonably commuter-based.
3.3. Alternative--Tract/Block Limitation
Comments: Multiple commenters stated that the proposed TEA
definition should be limited to a single census tract, the tract in
which the project is located. The commenters stated that this would
reduce the chance that the TEA status of a project location might be
based on the economic condition of a remote tract that does not reflect
the characteristics of the project tract. However, these commenters
also suggested that if DHS is determined to allow contiguous/adjacent
census tracts to be included, all contiguous/adjacent tracts should be
taken into account rather than allowing the applicant to ``pick and
choose'' any single contiguous/adjacent tract that, taken together with
the project tract, would meet the high unemployment test.
Response: DHS appreciates the concerns raised by the commenters.
While DHS believes that a single-tract approach would be operationally
efficient to implement, DHS appreciates the concerns held by many other
commenters regarding the changes to the TEA designation process.
Allowing petitioners the flexibility to incorporate those tracts
adjacent to the tract(s) in which the new commercial enterprise is
principally doing business helps meet the policy goals of reducing
inconsistencies and inequities in adjudications while also recognizing
that a single-tract approach may itself be inequitable to particular
businesses with close connections to adjacent areas that may cross
census tract boundaries. DHS believes the compromise to allow for the
inclusion, as needed, of adjacent census tracts will provide for some
flexibility in business and economic development while still providing
significant incentive to invest in a high unemployment area as Congress
intended.
Comment: While supporting some sort of tract limitation to prevent
gerrymandering, several commenters argued that there should be
unlimited configurations of census blocks, block groups, or other
political subdivisions if the high unemployment area is located
entirely within either an MSA or county. To further prevent attempts to
gerrymander TEAs for projects close to the border of MSA regions, some
commenters said the rule could include a limit to the number of sub-
municipal areas (e.g., a limit of 12 or 15 sub-municipal areas) if the
TEA were to cross an MSA or county boundary.
Response: DHS disagrees with these commenters. The final rule
continues the existing policy of allowing an entire MSA or county to be
designated as a TEA. Further, the final rule clarifies that a city or
town with a population of 20,000 or more outside of an MSA can be
designated entirely as a TEA if otherwise eligible. Where a new
commercial enterprise is principally doing business in a non-rural area
that cannot qualify at the MSA, county, or city/town outside of an MSA
level, the final rule offers the smaller geographic area of a census
tract(s) and the adjacent census tracts to qualify as a TEA. As
previously explained, DHS believes the census tract is the most
appropriate and smallest geographic area from which relevant, reliable
data can be obtained regarding unemployment statistics. DHS rejects the
use of census blocks, block groups, or other smaller sub-municipal
areas for the reasons stated above. Allowing unlimited census tracts
within an MSA or county would wholly or substantially continue the
existing practice of certain states along with the attendant concerns
regarding high unemployment area designation inconsistencies and
inequities that the final rule eliminates.
3.4. Alternative--California Approach
Comments: Several commenters supported the approach implemented by
California, which limits the geographic or political subdivision to 12
contiguous census tracts. One commenter said all gerrymandering
concerns can be fully addressed by limiting the number of combined
areas to 12, or to some other agreed-upon number when a TEA crosses MSA
(or county) boundaries. One commenter said the stated goal of
uniformity can be attained by imposing a single federal standard for
TEA determinations, such as California's rule which has a limit of no
more than 12 contiguous census tracts. The commenter also said that the
concerns about gerrymandering can be adequately addressed by requiring
the responsible state agency to articulate a reasonable basis for its
determination that investment at the project site will have a
beneficial job-creating impact across the entire area of the TEA. One
commenter supported the California
[[Page 35778]]
approach, but suggested a limit of 15 contiguous census tracts.
Response: DHS disagrees with the commenters that gerrymandering
concerns would be fully addressed by limiting the number of combined
areas when a high unemployment area crosses MSA or county lines. DHS
expressed concerns in the NPRM that the use of a limitation approach,
such as the one espoused by the California Governor's Office of
Economic and Business Development, would not be appropriate for
nationwide application. In particular, given the disparity in the size
and shape among potentially includable tracts across various regions in
the United States, DHS continues to believe that the type of
limitations on the number of tracts used as suggested by the commenters
would still result in projects in certain regions being much farther
removed from each of its constituent tracts than in other regions,
ultimately undermining the very purpose of reforming the high
unemployment area designation process. The final rule does not adopt a
numerical limitation on the number of tracts used to ensure that the
analysis is focused specifically on the area in which job creation is
occurring, taking into account both the population density and
geographic area.
3.5. Alternative--New Markets Tax Credit Program and Other Suggestions
Comments: Several commenters stated that a better approach to
defining TEAs would be to utilize the criteria established under
another proven federal economic development program called the New
Markets Tax Credit (NMTC) program, rather than a single criterion
(unemployment rate). A commenter stated that NMTCs may be applied based
on three criteria,\84\ but because they do not focus solely on
unemployment rates, Congress would have to act in order to recognize
the NMTC criteria for determining a non-rural area as a TEA. One
commenter asserted that the use of single-variable definition
(unemployment rate) is contrary to economic development principles
practiced elsewhere in the Federal Government, such as measures used by
HUD to establish beneficial geographies for the NMTC Program. Another
commenter provided potential guidelines and definitions within the NMTC
framework that could be adopted in the TEA designation context,
suggested allowing use of an unlimited amount of census tracts or block
groups, and suggested the incorporation of the ``urban cluster.''
Another commenter suggested use of the NMTC criteria as an alternative
to the proposed rule's limited geographic area for high unemployment
area designation, together with use of a single dataset to determine
the unemployment rate. One commenter requested that DHS allow a Gateway
City \85\ TEA designation.
---------------------------------------------------------------------------
\84\ The criteria used to determine low income communities for
the purposes of the NMTC are (1) median income levels of either the
urban distressed area or rural area; (2) poverty rate of the area;
or (3) unemployment rate of the area.
\85\ As an example of what the commenter means by Gateway City,
see an explanation of the Massachusetts Gateway City Initiative
available at http://www.worcestermass.org/city-initiatives/gateway-cities-initiative.
---------------------------------------------------------------------------
Response: While DHS appreciates these suggestions, the statutory
definitions of a TEA includes rural areas and areas experiencing high
unemployment (of at least 150 percent of the national average rate).
DHS believes the statute is best interpreted as limiting consideration
to these two factors.
4. Other Comments on Proposal To Change to Special Designation of High
Unemployment Area
Approximately 45 commenters provided other input on the proposed
special designation process for high unemployment areas.
Comments: One commenter stated that in the preamble to the proposed
rule, DHS incorrectly defined how the weighted average of the
unemployment rate is calculated, noting that all official unemployment
rate calculations derived by BLS and individual states utilize the
civilian labor force concept, not the total/full labor force (which
includes military personnel). Another commenter stated that the rule
presents an oddly complicated manner of calculating a weighted average,
asserting that the calculation for a TEA's unemployment is simple: Sum
the number of unemployed people across all of the tracts, sum the
number of people in the Civilian Labor Force across all of the tracts,
and divide the number of unemployed by the Civilian Labor Force.
Response: DHS appreciates these technical comments regarding the
unemployment data calculations. While the commenter references BLS
unemployment rate figures, BLS does not make unemployment data publicly
available for geographic areas with populations less than 25,000.
DHS mistakenly indicated in the NPRM that it would consider labor
force to be ``civilians ages 16 and older who are employed or employed,
plus active duty military'', thus appearing to rely solely on total
labor force. See 82 FR at 4748 n.41. Elsewhere, DHS referenced the U.S.
Census Bureau's American Community Survey (ACS) data as an example in
the NPRM because the survey provides publicly available unemployment
data at smaller geographic area levels such as the census-tract level,
see 82 FR at 4749; ACS's unemployment data is based on its calculation
of the civilian labor force. Thus, the NPRM was not intended to require
the use of total labor force. Similarly, the final rule does not
provide one specific set of data from which petitioners can draw to
demonstrate their investment is being made in a TEA. Rather, the burden
is on the petitioner to provide DHS with evidence documenting that the
area in which the petitioner has invested is a high unemployment area,
and such evidence should be reliable and verifiable. DHS believes that
the unemployment data provided to the public by both ACS and BLS
qualify as reliable and verifiable data for petitioners to reference in
order to carry their evidentiary burden.
Regardless of which reliable and verifiable data petitioners choose
to present to DHS, the data should be internally consistent. For
example, DHS notes that although both BLS and the Census Bureau rely on
the concept of the civilian labor force in their unemployment rate
calculations, they employ different methodologies. If petitioners rely
on ACS data to determine the unemployment rate for the requested TEA,
they should also rely on ACS data to determine the national
unemployment area to which the TEA is compared.
Finally, DHS opted to use the methodology in the final rule to
ensure proper weight is given to the more heavily populated tracts. The
method suggested by the commenter reduces the effect that a more
densely populated area may have on the average.
Comment: Several commenters suggested that USCIS should publish a
single dataset covering the entire country that practitioners must use
for TEA unemployment calculations to standardize the process and
enhance predictability in designations.
Response: DHS disagrees with these commenters, as DHS believes
there is already data available to the public to use in calculating the
unemployment rate for particular areas, such as the data provided by
the U.S. Census Bureau in the American Community Survey. To invest at
the reduced amount, petitioners will be required to demonstrate that
their investment is within a TEA using reliable and verifiable data
such as data from ACS or
[[Page 35779]]
BLS to qualify under the requirements of a high unemployment area.
Comments: One commenter stated that the methodology presented for
deriving the unemployment rate uses ACS data that is insufficiently
current for EB-5 purposes, and asserted that all states properly use
ACS data in conjunction with the latest available official county
estimates in order to best reflect current economic status. One
commenter stated that the proposed rule did not specify which dataset
should be used for TEA calculations, recommending that USCIS follow the
guidance given by the BLS Local Area Unemployment Statistics (LAUS)
branch in their Technical Memo S-10-20. Another commenter presumed that
USCIS would utilize the most current unemployment datasets and the
census-share methodology--ACS and BLS--to create a mapping system that
would enable the user to readily determine whether a project location
qualifies as a TEA. A commenter urged the selection of a single dataset
from which the unemployment statistics are obtained, recommending the
ACS 5-year estimates.
Response: DHS appreciates these suggestions. DHS recognizes that
ACS data for census tracts is currently provided in five-year estimates
and that states may have more recent data at the census tract level.
However, given that--as the commenter acknowledged--states utilize
different methodologies than ACS and BLS, petitioners may not be able
to compare the state census tract data to a national unemployment rate
that utilizes the same methodology. Although DHS recognizes that there
are benefits to limiting the unemployment statistics to a single
dataset, the final rule does not provide one specific set of data from
which petitioners can draw to demonstrate their investment is being
made into a TEA because currently no one dataset is perfect for every
scenario. Thus, the burden is on the petitioner to provide DHS with
evidence documenting that the area in which the petitioner has invested
is a high unemployment area, and such evidence should be reliable and
verifiable. DHS believes that the unemployment data provided to the
public by the U.S. Census Bureau's American Community Survey as well as
data available from the Bureau of Labor Statistics qualify as reliable
and verifiable data for petitioners to reference in order to carry
their evidentiary burden, though, as noted above, the data relied upon
should be internally consistent. For instance, if petitioners rely on
ACS data to determine the unemployment rate for the requested TEA, they
should also rely on ACS data to determine the national unemployment
area to which the TEA is compared.
Comments: Some commenters asserted that there is limited or no
evidence that even the most egregious gerrymanders have done anything
less than create needed jobs for high unemployment regions. One
commenter wrote that ``Manhattan for instance, a big area of
controversy for TEA critics, has in fact had projects with
gerrymandered TEAs. Even the most luxurious developments in Manhattan
that boast condos with no less than $3 million price tag per unit, have
created much needed jobs for construction workers in the Bronx, Queens,
Brooklyn, Harlem, and Long Island. If the agency can find any research
out there that shows otherwise, please provide that research before any
final rule on the TEA issue.''
Response: DHS appreciates these comments regarding gerrymandering
concerns. In addition to the DHS data analysis detailed in the NPRM,
the Government Accountability Office (GAO) completed an audit of EB-5
TEA data in 2016.\86\ GAO's review determined that approximately 90
percent of petitioners from the fourth quarter of FY 2015 who elected
to invest in a high unemployment TEA did so in an area not consisting
of a single census tract, census block group, or county. Of those
petitioners, 38 percent combined 11 or more tracts in order to
demonstrate the project was in a high unemployment area, with 12
percent utilizing more than 100 census tracts. DHS believes the high
percentage of petitioners utilizing so many census tracts gives rise to
a significant concern that congressional intent relating to TEA
investments is too often not being met. DHS believes this is because
the percentages likely reflect efforts to artificially construct areas
that meet the unemployment threshold requirement to qualify for the
reduced investment amount incentive rather than an intention to locate
the investment in the area actually experiencing high unemployment. DHS
recognizes that many investment projects regardless of location will
create jobs, some of which might even be filled by individuals from
outlying areas experiencing high unemployment (though verifying whether
jobs are being created for such individuals would be a significant
challenge). Still, DHS continues to believe that congressional intent
for the reduced investment amount incentive is best served by locating
investment into areas actually experiencing high unemployment rather
than other locations strung together to such areas and to which
individuals from such areas could potentially commute for employment.
In order to best assist in the revitalization of those areas, the
actual development must be located there. The final rule provides clear
criteria for the designation and eliminates state involvement to ensure
that the TEA incentive is not afforded to gerrymandered areas where
high unemployment may not truly exist.
---------------------------------------------------------------------------
\86\ GAO, Immigrant Investor Program: Proposed Project
Investments in Targeted Employment Areas, GAO-16-749R, Published
Sept. 19, 2016, available at http://www.gao.gov/products/GAO-16-749R.
---------------------------------------------------------------------------
Comments: A few commenters said the proposed revisions to the
method of determining a high unemployment area would disproportionately
favor rural areas over urban areas and even further disadvantage the
more densely populated urban areas. One commenter stated that the
approach in the rule skews in favor of certain American towns and
cities while disfavoring other urban markets simply because they vary
in population density, arguing that population density does not provide
a rational basis to prefer certain urban TEAs to the detriment of
others.
Another commenter cited Census Tract 99 in New York County--a tract
that is the site of some EB-5 projects--to illustrate some of the
commenter's key concerns about DHS's TEA proposal in the NPRM. The
commenter argued that BLS and ACS data, as well as data made available
through the U.S. Census Bureau's Longitudinal Employer-Household
Dynamics (LEHD) tool, show that high unemployment tracts within New
York County are well within standard commuting distances to Census
Tract 99. The commenter stated that ``[a]ccording to the NYC MTA, a
person could board the subway at the north end of Manhattan Island and
travel to a subway station in the middle of Census Tract 99 in 30-50
minutes for $2.75 or less one-way. The DHS proposal should recognize
that an unemployed person is unlikely to object to that kind of
commute.'' The commenter also pointed out that a focus on unemployment
rates in a particular area, rather than total numbers of unemployed
persons, potentially obscures the impact that DHS's proposal could have
on economically distressed urban areas. The commenter stated that in
2014, New York County had on average 55,387 unemployed workers, as
compared to 75,259 unemployed workers statewide for Iowa, and 14,302
for Vermont. The commenter concluded that any proposal should not seek
to ``fix'' the lack of rural and highly
[[Page 35780]]
distressed urban project deal flow in the EB-5 program by establishing
rules that discourage investment in some urban areas. Rather, TEA
designations should encourage new investment and new job creation under
the EB-5 program in a fair and predictable way, with positive
inducements for projects to locate in rural or distressed urban areas.
The commenter ultimately supported the ``New Markets Tax Credit''-like
approach that DHS has addressed elsewhere in this preamble.
Another commenter stated that DHS should strive to ensure that both
urban and rural projects have ``equal opportunity'' to improve their
respective communities.
Response: DHS believes the final rule does ensure that both urban
and rural projects have equal opportunity to improve their respective
communities. Petitioners have overwhelmingly obtained TEA designation
in urban (i.e., non-rural) areas in recent years.\87\ Although projects
in more affluent urban areas may have created employment for employees
living in high unemployment areas within a reasonable commuting
distance, DHS notes that it is challenging to verify this, and would
require the provision of W-2 forms or other sufficient documentation
for direct jobs. In addition, allowing such areas to qualify as a TEA
may have deterred direct EB-5 funding in areas truly experiencing high
unemployment and in dire need of revitalization. Also, developers of
projects in affluent urban areas may be able to market the projects to
potential EB-5 investors as more likely to (1) result in the investors
receiving green cards because the projects are less likely to fail, (2)
result in the investors seeing their capital returned because they are
less likely to fail, and (3) deliver a higher rate of return on the
investors' investments.\88\ These factors could more than compensate
for the higher required investment amount. In fact, to the extent that
a higher rate of return and more safety for invested capital are
expected, foreign investors might actually prefer to increase the
amount of capital they invest in these projects above the minimums
required. Foreign investors may also see investments in projects in
affluent urban areas to be more prestigious. In addition, to the extent
that projects in affluent areas that can no longer attract EB-5 capital
still proceed with other sources of capital, while more projects in
poor or rural areas receive EB-5 capital without which they could not
proceed, overall investment in the U.S. economy may increase.
---------------------------------------------------------------------------
\87\ See GAO, Immigrant Investor Program: Proposed Project
Investments in Targeted Employment Areas, GAO-16-749R, Published
Sept. 19, 2016, available at http://www.gao.gov/products/GAO-16-749R
(showing that approximately 97% of petitioners from the fourth
quarter of fiscal year 2015 were estimated to have invested into a
high unemployment TEA).
\88\ ``Foreign investors see glitzy projects in gateway cities
as more secure investments, both for getting their money back and
for getting their green cards.'' Jeff Collins, ``Need a Fast Track
to Citizenship? Invest in These Orange County Luxury Hotels,''
Orange County Register, (Oct. 13, 2015) (quoting Pat Hogan,
president of CMB Regional Centers).
---------------------------------------------------------------------------
The final rule clarifies the requirements for TEA designation in
high unemployment areas and also eliminates state involvement in the
high unemployment area designation process to better ensure consistent,
equitable adjudications across the country. DHS is bound by the
statutory framework defining rural areas and areas of high unemployment
(based on unemployment rate greater than 150 percent of the national
average rather than total number of unemployed individuals). By
utilizing the census tract (and/or adjacent tract(s)) in which the new
commercial enterprise is principally doing business, DHS is regulating
consistent with the statutory framework to ensure that the area most
directly affected by the investment and in which jobs are created is
the focus regardless of population size or density.
5. Other Comments on the TEA Designation Process
Multiple commenters provided other input on the TEA designation
process.
Comments: Numerous commenters recommended grandfathering the
existing TEA methodology, including suggestions to allow for a
``meaningful'' transition period, or at least allow petitioners who
properly filed prior to the change to continue to qualify. Several of
these commenters asserted that the rule should include a transition or
phase-in period or delayed effective date to enable projects that are
presently in the market to make the necessary changes in their
operations going forward. One commenter expressed uncertainty in how
the revised TEA designation process would be implemented, particularly
with respect to its effect on current projects and conditional
permanent residents, pending Form I-526 and Form I-829 petitions, and
exemplars approved by DHS prior to the effective date of the rule.
Response: DHS believes that an extension to the transition period
is appropriate, given the potential impacts of the TEA designation
changes on current projects and investors. DHS is therefore is
providing for an effective date that is 120 days after publication of
this rule, i.e., 90 days beyond the minimum implementation period
required by 5 U.S.C. 553(d), and 60 days beyond the minimum
implementation period required for major rules under 5 U.S.C.
801(a)(3). The implementation period is intended to provide additional
time for EB-5 petitioners and the EB-5 market to adjust investment
plans. Even those commenters that requested specific implementation
periods longer than 120 days (e.g., six months or one year) did not
provide clear, actionable data underlying such recommendations. An
implementation period longer than 120 days would likely place an
additional burden on agency operations and potential petitioners,
because it would likely result in an influx of new petitions prior to
the effective date that could lengthen adjudication delays and visa
backlogs. Such an influx would generally be consistent with past
experience during times when petitioners anticipate significant changes
to the program.
DHS has detailed how it will implement the rule in Sections I.E and
I.F of this preamble, and elsewhere in this rule. As explained
elsewhere, the changes in this rule will apply to all Form I-526
petitions filed on or after the effective date of the final rule.
Petitions filed before the effective date will be adjudicated under the
regulations in place at the time of filing. DHS disagrees with the
commenter's request that TEA designations be available prior to Form I-
924 and Form I-526 filings. In accordance with the statutory framework,
under which TEA designation must be determined ``at the time of the
investment,'' INA section 203(b)(5)(B)(ii), 8 U.S.C. 1153(b)(5)(B)(ii),
and consistent with longstanding policy, a TEA determination is made at
the time the Form I-526 petitioner makes his or her investment or at
the time the Form I-526 petition is filed for petitioners who are
actively in the process of investing. As with the existing process, DHS
will review the TEA designation evidence with the Form I-526
petitioner's filing to determine eligibility at that time. For
petitioners who have a pending or approved Form I-526, already received
conditional permanent resident status, or a pending Form I-829 petition
based on a previously approved Form I-526, a TEA determination will
have already been made or will be made based on the regulations in
place at the time of filing of those Form I-526 petitions.
Comments: A few commenters said the final rule should clarify that
the TEA designation is honored from when the funds are actually
invested, not
[[Page 35781]]
when the funds are placed in escrow, because a location's TEA
designation is subject to change based on changed circumstances.
Response: DHS disagrees with the commenters. Section
203(b)(5)(B)(ii) of the INA provides that the area must qualify as a
TEA at the time of investment. However, section 203(b)(5)(A)(i) of the
INA also provides that to be eligible for an EB-5 visa, a petitioner
may either have invested or be actively in the process of investing
capital into an NCE. Applicable administrative precedent decisions have
further clarified that petitioners must demonstrate that the NCE into
which they have invested or are actively in the process of investing is
principally doing business in a TEA at the time of filing the
petition.\89\ To make the TEA determination in a manner consistent with
the statutory provisions and the precedent decisions, and promote
predictability in the capital investment process, DHS has implemented a
policy of making the TEA determination as follows:
---------------------------------------------------------------------------
\89\ See Matter of Soffici, 22 I&N Dec. 158, 159 (Assoc. Comm.
1998) (``A petitioner has the burden to establish that his
enterprise does business in an area that is considered `targeted' as
of the date he files his petition.''); see also Matter of Izummi, 22
I&N Dec. 169, 173 n. 3 (Assoc. Comm. 1998) (``A petitioner must
establish that certain areas are targeted employment areas as of the
date he files his petition; just because a particular area used to
be rural many years ago, for example, does not mean that it still
is.'').
---------------------------------------------------------------------------
If the petitioner has invested capital into the NCE, and
the capital has been made available to the job-creating entity (JCE) in
the case of investment through a regional center, prior to the filing
of the Form I-526 petition, then the TEA analysis focuses on whether
the NCE, or JCE in the case of an investment through a regional center,
is principally doing business in a TEA at the time of investment.
If, at the time of filing the Form I-526 petition, the
petitioner is actively in the process of investing capital into the NCE
but the capital has not been made available to the JCE in the case of
investment through a regional center, then the TEA analysis focuses on
whether the NCE, or JCE in the case of investment through a regional
center, is principally doing business in a TEA at the time of filing
the Form I-526 petition.\90\
---------------------------------------------------------------------------
\90\ USCIS Policy Manual, 6 USCIS-PM G, Chapter 2.
---------------------------------------------------------------------------
The final rule does not change this policy. DHS believes that this
policy is consistent with the relevant statutory provisions and
precedent decisions and is the most fair to individual investors
because it provides predictability for the capital investment process.
If the commenters' suggestion was followed, it would be unclear at what
point the area in which the NCE is principally doing business needs to
qualify as a TEA. The moment at which the investor who was actively in
the process of investing at time of filing has completed that process
can vary depending on a number of factors--including at some point
after the adjudication of the Form I-526 petition. In other words,
because investments need to be structured prior to filing the Form I-
526 petition but may continue after the adjudication of the Form I-526
petition, the commenters' proposed policy would lead to circumstances
where it could not be known whether the area would qualify as a TEA
until after the Form I-526 petition has been adjudicated. This would
create an untenable degree of uncertainty in the capital investment
process. Furthermore, DHS would have no basis for determining TEA
eligibility at either the time of filing or at the time of adjudication
because the petitioner would have no basis to demonstrate TEA
eligibility at such times. DHS recognizes the commenters' concern that
it is possible that some project tracts that qualify as a TEA at the
time of filing of the petition might not qualify as a TEA when a
petitioner who was actively in the process of investing at time of
filing has completed that process. The change in policy suggested by
the commenters would create uncertainty and unpredictability in the
capital investment process; and would render DHS incapable of
determining TEA eligibility in cases where the petitioner is actively
in the process of investing at the time of filing the petition.
Comments: Some commenters said the TEA process should be
eliminated, along with the increased minimum investment at the two-tier
level, and instead should be replaced by a set-aside of visas for the
desired targets (rural, high unemployment, infrastructure, and
manufacturing). One commenter suggested that DHS incentivize the
creation of direct jobs by allowing projects that do so to be exempt
from the necessity of being in a TEA to be subject to the lower minimum
investment amount.
Response: DHS declines to adopt the commenters' suggestions
regarding TEAs. DHS lacks the authority to make some of the changes
requested by these commenters given the current statutory framework of
the EB-5 program. DHS cannot completely eliminate TEA designations
because 3,000 visas are statutorily set aside for investment in TEAs
(rural and high unemployment areas).
DHS could eliminate the differential between the standard minimum
investment amount and the TEA minimum investment amount, thereby
eliminating the two-tier investment amount system currently in place,
leaving the visa set aside as the only incentive for investment in
TEAs. However, DHS declines to do so and has decided to maintain the 50
percent differential to continue to incentivize investment in rural and
high unemployment areas. Removing the differential and leaving in place
only the visa set aside as an incentive would not leave a sufficient
incentive in place for investment in TEAs. Congress permitted DHS to
offer a two-tier investment system, with reduced minimum investment
amounts in TEAs relative to outside of TEAs. DHS is addressing the
current imbalance in which almost all investments are made in
potentially gerrymandered TEAs by revising the designation of areas of
high unemployment that may qualify as a TEA. This change, in
combination with maintaining the 50 percent differential, will maintain
a sufficient incentive for investment in TEAs while ensuring that the
TEAs benefiting from the incentives align with congressional intent.
Finally, DHS does not have the statutory authority to reduce the
minimum investment amount for investments in a new commercial
enterprise that creates direct jobs. The statute only authorizes a
lower minimum investment amount for investments made in a TEA.
E. Technical Changes
1. Separate Filings for Derivatives
Comments: Many commenters supported the proposal that derivatives
file their own separate Form I-829 petitions if not included in the
principal's Form I-829 petition for reasons other than the death of the
principal. The commenters stated this would protect derivatives against
termination of their conditional permanent residence when the principal
investor's conditional permanent residence is abandoned. One commenter
disagreed with the proposal, recommending that USCIS retain what the
commenter believed to be the current practice of allowing the spouse's
or child's biographical documents to be ``interfiled'' when a family
member is not included in the investor's Form I-829 petition. The
commenter stated that because the filings would be identical to the
investor's filing, USCIS would not need to review project documents
filed
[[Page 35782]]
with the spouse or child's petition and USCIS should not charge a
filing fee since it will not be re-adjudicating the I-829 project
documents.
Response: DHS believes the commenter who disagreed with the
proposal misunderstands the proposed change. DHS did not propose to
change the current process, under which derivatives may still request
to be added to a principal's pending Form I-829 if they pay the
biometric fee, and are otherwise eligible to be classified as the
principal's derivatives. Such derivatives may be added to the pending
Form I-829 even in case of divorce during the conditional residence
period. Instead, DHS proposed to standardize the process for those
derivatives who file an individual Form I-829 petition and cannot be
included on the principal's Form I-829, generally because the principal
fails or refuses to file a Form I-829. Under these circumstances, the
final rule clarifies the current DHS practice of requiring all
derivatives connected to a single principal investor to file
separately. Thus, for example, if there are two derivatives (either a
spouse and child, or two children) and the principal refuses to file a
Form I-829 petition, each derivative is required to file a separate
Form I-829 petition. This final rule only allows derivatives to apply
together on a single Form I-829 petition when the principal is
deceased, because INA 204(l) directs DHS to adjudicate
``notwithstanding the death of the qualifying relative.'' Because the
principal would have had the option to file a single Form I-829 on
behalf of the whole family, the option remains even though the
principal is deceased. This rule does not change the current DHS
practice, and DHS is simply clarifying the language in 8 CFR
216.6(a)(1) to avoid a situation where derivatives filing separately do
so incorrectly, causing their petition to be rejected.
2. Equity Holders
Comment: DHS received one comment on the proposal to consider
equity holders in a new commercial enterprise as sufficiently engaged
in policymaking if the equity holder is provided with the rights,
duties, and powers normally provided to equity holders in those types
of entities. This commenter indicated there is a difference between
equity holders that manage the company and third party managers that
manage the company, which should be clarified in the rule. The
commenter asserted that this clarification is important in the context
of limited liability companies (LLCs), which, unlike limited
partnerships, do not have a General Partner and Limited Partners; or a
corporation, which has officers and directors. The commenter stated
that an LLC will either be member managed or manager managed.
Response: DHS believes the language in the rule at final 8 CFR
204.6(j)(5)(iii) is broad enough to encompass a variety of different
possible ownership and management structures, including members of both
member-managed LLCs and manager-managed LLCs because each of those
types of LLCs normally provide their respective members (equity
holders) with different rights, duties, and powers. In the future, DHS
may consider issuing policy guidance to provide additional
clarification if deemed necessary.
F. Other Comments on the Rule
1. Processing Times
Comments: Multiple commenters discussed current USCIS processing
times or the impact the proposed rule would have on processing times.
Many commenters expressed frustration with USCIS processing times,
stating that current wait times are harming investors. Commenters
recommended electronic submissions and premium processing to decrease
delays.
Response: DHS appreciates the concerns raised by these comments
regarding USCIS processing times. DHS is considering ways to improve
the EB-5 program to decrease processing times. However, DHS does not
believe that the changes made by this rule will have an adverse effect
on processing times. With respect to Form I-526 petitions, this rule
only raises the investment amounts and provides more specific
requirements for petitioners investing in targeted employment areas.
These changes should not increase adjudication times. With respect to
Form I-829 petitions, this rule clarifies when derivative family
members must file their own petition and seeks to improve the
adjudication process by providing flexibility in interview locations.
DHS does not anticipate this will adversely affect Form I-829
processing times because the adjudication standards remain the same.
The recommendation regarding electronic submissions and premium
processing to decrease delays is outside the scope of this rulemaking.
Comments: Numerous commenters expressed concerns about processing
times in TEA designations as DHS takes over the designation process
from the states.
Response: DHS is committed to providing timely TEA decisions as
part of the adjudication process. DHS does not foresee an increase in
petition backlogs based on handling TEA designations, because the
agency currently reviews the TEA designation evidence provided by
petitioners to determine TEA statutory eligibility. The framework
detailed in the NPRM and finalized in this rule should not increase the
burden to petitioners or to DHS in the adjudication process. As in the
current process, EB-5 petitioners will be required to provide evidence
to demonstrate the area in which the new commercial enterprise into
which they are investing is principally doing business is a TEA. The
new framework requires petitioners to identify the census tract(s) in
which the NCE is doing business and provide population and unemployment
statistics for that tract and any other adjacent tracts that are
relevant to the determination. USCIS will review this data in a manner
similar to how USCIS currently reviews high unemployment area
designation letters from states; it will review the proposed area to
confirm it is the area in which the NCE is principally doing business
and review the underlying data and methodology associated with the
statistics provided.\91\ In fact, the use of a uniform methodology for
all TEA designations could improve the efficiency of these
determinations as adjudicators will be more familiar with the new
framework. As such, DHS does not anticipate a negative impact to the
overall timing of the adjudication process.
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\91\ USCIS Policy Manual, 6 USCIS-PM G, Chapter 2.
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2. Visa Backlogs
Comments: Many commenters discussed visa backlogs in the EB-5
program. Multiple commenters stated that the current visa backlog was
negatively affecting participation in the EB-5 program. Several
commenters argued that if DHS intends to increase the minimum
investment amount, it should focus on fixing the visa backlog first or
at the same time.
Response: Congress, not DHS, has set the annual visa allocation for
the EB-5 program. These concerns should more properly be addressed to
Congress.
3. Timing of the Rule
Comments: Most commenters were concerned about the implementation
and timing of the rule and its impact on previously filed EB-5
petitions and current projects. Many commenters argued that the
proposed rule, if finalized, should not apply retroactively, and USCIS
should grandfather currently approved and pending petitions and
applications, or
[[Page 35783]]
grandfather in entire projects such that future EB-5 petitioners in
grandfathered projects would only need to invest at the lowered
investment thresholds in place prior to the effective date. Several
commenters requested a transition period before the rule's effective
date to provide a grace period for the change and prevent a chilling
effect on the EB-5 investment market, and one commenter suggested
twelve months to allow certain projects additional time to complete
fundraising. Some commenters requested clarification on how the rule
would affect current projects. One commenter stated that the petitions
filed up to the date of promulgation of the rule should only be subject
to the new requirements if they are denied by USCIS because of project
discrepancies, when adjudicated after the date of enactment.
Conversely, another commenter stated that due to the current visa
backlog, DHS should apply the rule to pending EB-5 applications because
otherwise changes would not affect the EB-5 program for several years.
Response: This final rule will become effective 120 days after
publication, as outlined earlier in this preamble. Specifically, the
provisions of this final rule will apply to Form I-526 petitions filed
on or after that effective date. Form I-526 petitions filed prior to
the effective date of the rule will be allowed to demonstrate
eligibility based on the regulatory requirements in place at the time
of filing of the petition.
With respect to the commenter suggesting this rule be applied only
to denied petitions that fail to remedy project discrepancies prior to
the effective date of the rule, any petition filed on or after the date
of this implementation will be required to establish eligibility under
the new rules. This seems to reflect the commenter's suggested
approach.
DHS disagrees with the comments suggesting grandfathering approved
projects under the current rules. Grandfathering of approved projects
would result in unequal treatment of petitions filed after the rule is
in effect and would be overly burdensome operationally. Further,
grandfathering approved projects would have the effect of delaying the
application of this rule for a substantial number of petitioners, which
would tend to undermine the immediate effectiveness of the policy aims
of this rule. It would grant existing projects in affluent urban areas
that have been marketed as TEAs an unfair competitive advantage against
new projects in such areas, which will need to attract investors at the
higher minimum investment amount. It would also thwart congressional
intent by allowing such projects to continue to attract investors using
the incentives that Congress intended for high unemployment and rural
areas only, potentially reducing the amount of EB-5 capital going to
those areas. While DHS appreciates the comment suggesting that pending
petitions be subject to this rule due to the current backlog,
implementation would be difficult because petitioners for each pending
petition would have to make material changes to their petitions to meet
the new standards, including by investing additional amounts that they
did not anticipate. DHS believes this would unfairly harm investors
that filed based on the eligibility requirements in place at that time
and invested in projects that had been planned and initiated with the
investment amounts in place at the time. For example, in addition to
the fact that resulting project changes would likely be considered
material changes, requiring pending petitions to increase their
investment could provide a project with too much capital, and in turn
potentially precipitate a misappropriation of excess funds. DHS
believes applying the new rules to petitions filed on or after the
effective date is the best way to implement this rule. As such, and as
mentioned above, DHS will apply the regulatory scheme in place at the
time of filing when adjudicating Form I-526 petitions, which means that
this final rule will apply to Form I-526 petitions filed on or after
the effective date.
While DHS is declining commenters' suggestion to grandfather
approved projects, DHS has considered how pending petitions associated
with existing projects could be affected and is making one revision to
the regulations in this final rule to address a problem that could
affect some pending petitions as a result of this regulatory change.
DHS is adding one regulatory text clarification at 8 CFR 204.6(n)
regarding how this rule will be implemented with respect to petitioners
with pending or approved petitions who filed prior to the effective
date of the final rule. Investment offering documents are typically
associated with a particular number of investors investing a specific
dollar amount. Projects that are still accepting new investors after
the effective date of this rule may have to change their offering
documents to account for the new minimum investment amounts, or to
maintain compliance with other securities regulations. The change in
offering documents also could provide existing investors with pending
petitions with an option to withdraw their investment as a result of
applicable securities laws. Accordingly, the offering documents
associated with a Form I-526 petition filed before the effective date
of this rule may be affected, and such modifications normally would
likely result in a denial of the petition based on a material change.
The regulatory text at final 8 CFR 204.6(n) provides that amendments or
supplements to offerings made to maintain compliance with applicable
securities laws, based solely upon this rule's effectiveness, will not
independently result in ineligibility of petitioners with pending or
approved Form I-526 petitions who filed prior to this rule's effective
date and who remain invested, or who are actively in the process of
investing, and who have no right to withdraw or rescind their
investment or commitment to invest into such offering when their
petition is adjudicated. This addition clarifies that petitioners will
not be adversely affected by a change to offering documents,
necessitated by this final rule's changes, so long as the petitioner's
investment remains at risk through adjudication and the petitioner
continues to meet program requirements. Additionally, the provision
that changes to offering documents should not include a right to
withdraw or rescind at the time of adjudication allows petitioners to
remove or reject such provisions because of changes necessitated by
this regulation without penalty, in accordance with the existing
material change policy.
4. Material Change
Comment: One commenter recommended expanding the NPRM to
incorporate the material change portion of the policy memorandum (PM-
602-0083) issued May 30, 2013, to avoid confusion and codify the
material change policy. The commenter asserted that this change would
make clear that an investor who obtained conditional LPR status may
proceed with the I-829 petition, and provide evidence that the
requirements for the removal of conditions have been satisfied, without
the need to file a new Form I-526 petition if there have been changes
to the business plan since the Form I-526 was filed. The same commenter
suggested that DHS expand its material change policy to allow those
with approved Form I-526 petitioners to remain eligible for adjustment
of status even if material changes occur in the interim.
Response: DHS believes existing policy guidance on material change
is sufficiently clear, specifically that
[[Page 35784]]
USCIS does not deny Form I-829 petitions based solely on the failure to
adhere to the business plan contained in the Form I-526 petition,\92\
and thus will not codify the policy into regulation at this time. DHS
also does not intend to change its material change policy through this
final rule, but did solicit public feedback on potential changes to the
policy in the EB-5 Immigrant Investor Regional Center Program
ANPRM.\93\
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\92\ USCIS Policy Manual, 6 USCIS-PM G (Aug. 23, 2017).
\93\ 82 FR 3211 (Jan. 11, 2017).
---------------------------------------------------------------------------
5. Comments Outside the Scope of This Rulemaking
DHS received many comments outside the scope of this rulemaking.
For instance, some comments suggested potential ways to improve the EB-
5 program as a whole or sought guidance regarding existing requirements
that would have been unaffected by the proposed rule. Because these
comments are outside the scope of this rulemaking, DHS is not providing
responses to these comments. To the extent that the suggestions for
program improvements do not require congressional action to change the
statutory authority governing the EB-5 program, DHS may consider these
suggestions when developing the proposed rule that DHS plans to issue
following the ANPRM or in future guidance materials. With respect to
comments requesting guidance on current requirements, DHS may consider
including clarifications in future guidance materials.
Comments from the public outside the scope of this rulemaking
concerned the following issues:
Allowing stand-alone program petitioners to count indirect
jobs, as indirect jobs relate to the impact of the investment on the
community where the project is located;
Creating a more balanced and fair approach to counting
direct job creation for stand-alone projects;
Encouraging more stand-alone EB-5 investment projects
``where actual, full-time, permanent jobs are more likely to be
created,'' rather than regional center construction projects which
frequently depend on indirect jobs to satisfy the job creation
requirement;
Requiring that investors show that jobs established
through indirect modeling methodologies are full-time jobs and that the
investors have actually created the requisite number of jobs;
Eliminating projects that rely solely on ``tenant
occupancy'' to fulfill the job creation requirements in which regional
center funding is used to construct or renovate office or retail space;
Placing meaningful limits on the number of jobs created by
non-EB-5 capital that can be attributed to EB-5 investors;
Setting different differentials for regional center
petitioners investing in TEAs, and non-regional center investors
investing in TEAs;
Clarifying which indirect jobs may count towards the job
creation requirement;
Clarifying how the adjudications backlog affects the job
creation requirement. The commenter stated that many construction jobs
are temporary and disappear prior to the investor establishing
conditional residency, putting many investors at risk of having their
petitions denied for failing to create 10 jobs;
Revamping or completely eliminating the job-creating
entity process in favor of making qualified investments in individual
state-approved infrastructure projects;
Amending the regulations to clearly state that the I-924
amendments are not necessary to amend the geography of a previously
filed I-924, or that a Form I-526 petition may be filed subject to the
expansion of a previously filed and pending Form I-924; \94\
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\94\ Please refer to existing DHS policy guidance addressing
these commenters' concerns. See Form I-924 Instructions, available
at http://www.uscis.gov/I-924; see also Update to March 3, 2017
Stakeholder Engagement Remarks, available at https://www.uscis.gov/sites/default/files/USCIS/Working%20in%20the%20US/alert2017_march.pdf.
---------------------------------------------------------------------------
Allowing Forms I-924 to be perfected after filing because,
the commenter states, the critical point for demonstrating full
eligibility is at time of adjudication;
Authorizing expedited processing for Form I-526 petitions
and Form I-924 applications;
Allowing parole for all investors who have already
invested and filed a Form I-526 petition;
Allowing concurrent filing of the Form I-526 petition and
the Form I-485, Application to Register Permanent Residence or Adjust
Status;
Requiring practitioners who prepare source of funds
documents to file an attestation with the Form I-526 petition stating
that they performed certain due diligence checks;
Making regional center exemplar filings mandatory and
prohibiting an investor from filing a Form I-526 petition in connection
with a regional center until an exemplar is provisionally approved;
\95\
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\95\ DHS solicited public comment on the issue of mandatory
exemplar filings in the January 11, 2017 ANPRM (82 FR 3211).
---------------------------------------------------------------------------
Encouraging more public infrastructure projects to
participate in the EB-5 program to facilitate the flow of much-needed
capital to public infrastructure projects nationally, in order to save
taxpayer dollars and fuel improvement initiatives that might otherwise
be delayed by funding challenges;
Prohibiting the use of publicly tradeable securities, such
as municipal bonds, to qualify as an eligible use of EB-5 capital;
Allowing only investors who come from countries that
enforce similar labor and financial laws as the United States;
Precluding roll-over of the required 3,000 visas set aside
for TEAs into the regular EB-5 visa pool and instead requiring the set-
aside to remain available only for investments in rural and depressed
areas;
Precluding reauthorization of the Regional Center Program
because of its potential for fraud;
Expanding the Regional Center Program to help spur the
private market;
Changing requirements to allow a petitioner to remain
eligible despite regional center termination;
Creating a mandatory administrative appeals process for
the EB-5 program, requiring investors to exhaust their administrative
remedies prior to going to the judicial system; \96\
---------------------------------------------------------------------------
\96\ Note that EB-5 petitioners can appeal decisions related to
their Form I-526 petitions to the Administrative Appeals Office
(AAO) within USCIS. USCIS, When to Use Form I-290B, Notice of Appeal
or Motion, available at https://www.uscis.gov/i-290b/jurisdiction
(last visited June 22, 2018).
---------------------------------------------------------------------------
To ensure transparency, requiring third-party
administration of the investment funds that are being used in the EB-5
projects to show the investor that there is compliance with the
business plan;
Prioritizing non-Chinese petitions because there is a low
likelihood that any visas for Chinese investors will be available in
the near future;
Removing conditions on residence for investors with a visa
backlog of more than two years;
Modifying 8 CFR 204.6(j) to provide that the list of
evidence of property transferred from abroad for use in a U.S.
enterprise is a list of possible, but not required, evidence;
Not counting 2,000 EB-5 cases that the commenter indicated
were processed late due to USCIS oversight toward the visa quota
because it would
[[Page 35785]]
unfairly penalize investors for USCIS's error;
Modifying Department of State's Visa Bulletin;
Reducing visa wait times for Chinese nationals;
Increasing the number of EB-5 visas to 30,000 or 50,000,
or modifying the number of visas through administrative remedies or
legislation;
Adjusting the EB-5 visa limit from 10,000 individuals to
10,000 petitions, 30,000 individuals, or 10,000 families (excluding EB-
5 derivatives from the EB-5 visa quota);
Increasing the number of visas allocated to TEAs;
Allocating 10,000 EB-5 visas for rural areas, high
unemployment urban areas, and manufacturing and infrastructure
projects;
Increasing administration fees;
Allocating visas from other visa categories; and
Recapturing unused visas in any given year.
Approximately 20 commenters discussed fraud and integrity measures
in the EB-5 program. Most of the commenters supported the proposed
rule, but many urged USCIS to go further to prevent fraud in the
program. Several commenters generally encouraged USCIS to take action
to address fraud in the EB-5 program. Example areas of fraud identified
by commenters include the following:
Document fraud and money laundering;
EB-5 applicants applying for federal public benefits; and
Evasion of U.S. taxes through failure to disclose fully
business profits earned overseas.
Several commenters recommended additional measures USCIS could
implement to address fraud in the EB-5 program, including the
following:
Audits and site visits not only for regional center
projects, but for standalone projects as well; \97\
---------------------------------------------------------------------------
\97\ DHS notes that site visits are currently conducted on both
regional center and standalone projects.
---------------------------------------------------------------------------
Securities and Exchange Commission oversight and
regulation of broker/dealers and agent activities anywhere investors
are being sought;
Prohibit the sale or rental of regional centers;
Mandatory interviews of immigrant investors within 90 days
of filing their Form I-829;
Disclosure and accounting of commissions paid by
developers to raise capital on annual Form I-924A filings;
Monitor and regulate regional centers; and
Offer defrauded investors remedies, such as parole in
place, employment authorization, and age-out protections for minors.
DHS appreciates these proposals to improve program integrity and
combat fraud. DHS, however, did not address these issues in the
proposed rule, and therefore these suggestions fall outside of the
scope of this rulemaking. As such, DHS will not address these
suggestions in this final rule. DHS, however, is committed to
strengthening the security and integrity of the immigration system
through efficient and consistent adjudications of benefits and fraud
detection.
G. Public Comments and Responses on Statutory and Regulatory
Requirements 98
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\98\ As noted above, numerous commenters expressed concerns that
the proposed investment amount increase and TEA reform would disrupt
the program and reduce the number of projects and investments under
the program. DHS has addressed these claims in the appropriate
portions of the preamble above. DHS also addresses some of these
comments in the following discussion, because the claims made by the
commenters specifically allege potential economic impacts, such as
effects on investment and job creation.
---------------------------------------------------------------------------
1. Data, Estimates, and Assumptions Used (Executive Orders 12866 and
13563)
Comments: Multiple commenters discussed the data, estimates, and
assumptions utilized by USCIS to ascertain the costs of the rule. A
commenter stated that stakeholders require additional time to provide
data-based estimates regarding economic impacts of the new investment
amounts and impacts on jobs. Some commenters suggested that until
additional data collection and analysis is conducted, the rulemaking
should not move forward. Likewise, several commenters recommended that
DHS withdraw the proposed rule so that the impacts of the rule can be
more thoroughly studied, including how the proposed rule might hinder
the job benefits estimated by a study conducted by the Commerce
Department. A commenter suggested that DHS did not calculate an
expected cost to stakeholders or the EB-5 program goals based on the
proposed investment level and TEA definition. The commenter concluded
that, given enough time, it was willing to work with its members to
quantify the impacts of the new investment levels on ongoing and
proposed projects and associated projects.
Response: DHS disagrees with commenters suggesting that either more
time for comments is required or that it should withdraw the entire
rule to allow further study of the effects of the rule. DHS recognizes
that EB-5 investment structures are complex and typically involve
multiple layers of investment, finance, development, and legal business
entities. Further, DHS acknowledges that data limitations preclude a
detailed analysis of the potential quantitative costs of this rule.
However, DHS does not see how extending the timeline for implementing
the rule would be beneficial. Additional time would not allow DHS to
estimate with accuracy how many investors or projects might be affected
by the proposal. When the NPRM was published, DHS invited public
participation, in the form of comments, data, and other information,
from EB-5 stakeholders. DHS specifically sought comments on all aspects
of the NPRM, including the economic analysis included in the NPRM. DHS
believes the 90-day comment period was an adequate amount of time
during which stakeholders could have submitted data-based estimates and
information on any or all proposals of the NPRM, as exemplified by the
fact that some commenters submitted data-based comments. All
stakeholders, however, had the same opportunity and nearly three months
to provide data-based estimates of the potential effects of the rule.
DHS notes that Section 6 of E.O. 12866 recommends that, in most cases,
the comment period be not less than 60 days. In this case, DHS provided
the public with approximately 30 more days than recommended, and more
time than it has in recent years for other rules. Because DHS believes
the changes to the EB-5 program made by this final rule are valuable
for the reasons described above, it will not delay further the
effectiveness of the rule in response to commenters' requests. DHS
appreciates all stakeholder feedback it received on the NPRM.
2. Costs (Executive Orders 12866 and 13563)
2.1. General Economic Costs of the Rule
Comments: Many commenters submitted comments concerning the
economic costs of the rule, including loss of jobs and adverse economic
impacts. Some commenters believed the rule's proposals would have a
negative impact on industry, generally impairing the flow of EB-5
capital to projects in the U.S. and hindering job creation and economic
growth. A commenter anticipated the proposal would adversely affect
current and future EB-5 projects, while other commenters generally
lamented the potential loss of U.S. jobs. One commenter cited the
[[Page 35786]]
Commerce Department study that analyzed the job-creating impact of the
investor visa program,\99\ noting the study found 11,000 immigrant
investors provided $5.8 billion in capital for the FY 2012 and FY 2013,
supporting an estimated 174,039 jobs in the United States. The
commenter stated that these positive economic impacts of the EB-5
program are threatened by the rule's proposal to increase the minimum
investment amounts, because such increases would ``discourage
investment in American job markets that need it most. Investors will
have the option of going to Australia, or Canada--high income countries
with lower visa monetary requirements.'' The commenter stated that
``USCIS has been unable to determine the possible impact of the new
rules.'' One commenter stated that the proposed increase to the minimum
investment amount was too high and would effectively stop the flow of
$2.5 billion in foreign direct investments to the United States.
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\99\ Estimating the Investment and Job Creation Impact of the
EB-5 Program, Economics & Statistics Administration, Office of the
Chief Economist, U.S. Department of Commerce (2017), available at
https://www.commerce.gov/sites/commerce.gov/files/migrated/reports/estimating-the-investment-and-job-creation-impact-of-the-eb-5-program_0.pdf.
---------------------------------------------------------------------------
Response: DHS believes it is reasonable to increase the minimum
investment amount to account for inflation to ensure the required
minimum investment amounts reflect the present-day dollar value of the
investment amounts established by Congress. Given that the minimum
investment amounts have not been increased since the program's
inception, and multiple factors have contributed to increased or
decreased utilization of the program in the past, DHS cannot accurately
predict how the increase to the minimum investment amounts will affect
demand on the program. DHS acknowledges that it is reasonable to assume
some number of investors will be unwilling or unable to invest at the
increased investment amount. However, their capital contributions may
very well be more than replaced by other investors investing at the
higher minimum investment levels. In addition, given the
oversubscription of the program--as long as a sufficient number of
investors file petitions each year to account for the allotment of
visas provided by Congress, the program's overall contribution of
capital to the U.S. economy will increase. However, commenters who
claim that the increases to investment amounts will have a significant
negative impact (e.g., the claim that the investment increase would
stop $2.5 billion in foreign direct investments into the U.S.) provided
no objective data to support those claims. Like DHS, commenters can
only speculate as to precisely how the increases will affect the EB-5
market. DHS believes factors other than the investment amount
significantly contribute to the program's utilization. Though the
precise impact of the increases on the EB-5 market is unknowable, DHS
believes it is reasonable to increase the investment amounts based on
the CPI-U to reflect the present-day value of the amounts set by
Congress in 1990 for the reasons discussed earlier in this preamble.
In addition, DHS acknowledges the Commerce Department study cited
by one commenter that analyzed the job-creating impact of the investor
visa program. The study did estimate that for FY 2012 and FY 2013,
11,000 immigrant investors provided $5.8 billion in capital that was
``expected to create an estimated 174,039 jobs,'' \100\ but the study
was based on forecasts made in economic impact analyses provided by
petitioners, and not verification of jobs actually created.\101\ DHS
notes that the majority of EB-5 investments have been made through
regional centers (approximately 92 percent, as discussed below).
Regional center investments use methodologies that rely on indirect job
creation. Such indirect job creation estimates accrue to numerous
downstream industries, and therefore, it is not possible to verify
exactly how many new jobs could be attributed to a specific EB-5
investment once it is made (it is also possible that indirect job
forecasts may overstate actual job creation linked to any specific
investment). The study also includes jobs associated with non-EB-5
investor sources of capital, which is allowed under current
regulations.\102\ Relatedly, the GAO's audit of EB-5 TEA data in 2016
revealed that in the GAO's sampling from the fourth quarter of fiscal
year 2015, the median percentage of total potential EB-5 investment in
petitioner projects was only 29 percent of the total estimated project
cost, and the estimated mean percentage was 40 percent.\103\ Because
jobs created by non-EB-5 funding can be credited to EB-5 investors, and
many projects could still be viable without EB-5 funding given that
such funding makes up only a portion of overall funding, DHS does not
believe it is reasonable to assume that a certain loss of EB-5
investment necessarily translates to a commensurate loss of jobs.
Notably, the Commerce Study does not conclude that the predicted number
of jobs expected to be created through EB-5 funding would not be
created but for the EB-5 funding. Thus, the Commerce Department study
was not helpful in evaluating the impacts of the final rule.
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\100\ Id. at 1-2.
\101\ Id. at 7.
\102\ 8 CFR 204.6(g)(2).
\103\ GAO, Immigrant Investor Program: Proposed Project
Investments in Targeted Employment Areas, GAO-16-749R, Published
Sept. 19, 2016, available at http://www.gao.gov/products/GAO-16-749R.
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2.2. Costs to Investors, Regional Centers and New Commercial
Enterprises
Comments: Multiple commenters discussed costs to investors,
regional centers, and NCEs, generally expressing concern regarding the
impacts the proposed changes would have on various aspects of the EB-5
program and ability of investors to participate in the program. A
commenter warned that the proposed changes to the minimum investment
amounts would create an influx of investment at the current lower
minimum investment level (in the hope of filing prior to the effective
date of the increase). The commenter asserted that this rush to invest
at the current minimum investment levels would be costly to investors,
giving them less time to evaluate projects and trapping the investors
in underperforming projects. Relatedly, some commenters expressed
concern that changes to the program would increase both the petition
processing times and the financial burden of obtaining visas, which
will further discourage investment in American job markets as investors
look to other options.
Response: DHS appreciates the comments, but notes that it is an
individual investor's decision as to the appropriate timing for his or
her investment and the individual's responsibility to evaluate and
decide whether to invest in specific projects. No provision in this
rule requires investors to make anything less than fully considered and
informed investment decisions based on individual circumstances at the
time of the investment. DHS also disagrees that the provisions in this
rule will increase processing times. USCIS works diligently to
adjudicate and process EB-5 petitions in a timely manner and will
continue to do so following the changes made in this final rule. In
addition, USCIS has considered its staffing needs following the
promulgation this rule, and will remain attentive to such needs in the
course of implementation of this rule.\104\ Finally, as mentioned in
several
[[Page 35787]]
earlier instances, DHS believes the increase in the investment amount
is appropriate and that the EB-5 program will remain competitive
relative to other countries' immigrant investor programs.
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\104\ See USCIS, EB-5 National Stakeholder Engagement Talking
Points by IPO Acting Chief Julia Harrison (hereinafter ``Harrison
Talking Points'') (Nov. 7, 2017), available at http://ilw.com/immigrationdaily/news/20171206.pdf (``[w]e had just created a
division of Adjudicators and Economists who would focus on the I-829
adjudications and customer service inquiries. I am happy to share
that this restructuring has paid off. The collaboration and cross
training of the Adjudications Officer and Economist have contributed
to a reduction in the I-829 processing time. It's just one month so
far but I expect that trend to continue in FY2018 . . . A year ago
it took us on average 20 days to resolve a customer inquiry. Now it
takes us about 5 days to respond to inquiries, some of which are
resolved within that time frame . . . Building on the success of the
I-829/Customer Service team, during the last half of FY2017, IPO
launched a multidisciplinary team made up of Economists and
Adjudications Officers to focus on the Form I-526 adjudication . . .
Some of the near term benefits gained from the new team include: The
potential for an increase in staffing capacity and knowledge gained
through training and the expansion of current employees' skill sets.
This will allow IPO to better meet our mission.'').
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Comments: Several commenters stated that they anticipated that a
reduction in investors caused by the increased investment amount would
ultimately put several of the regional centers out of business, noting
that one of the costs laid out by DHS in the NPRM is that some
investors may not be able or willing to invest at the proposed higher
investment level. Similarly, one commenter suggested that raising the
investment amount increases an investor's perception of risk in the
investment, which would reduce interest in the program, therefore
forcing regional centers out of business. However, the commenters did
not provide verifiable evidence or data to support the claims.
Response: In the NPRM, DHS discussed the difficulties of
quantifying the impacts of the rule's provisions on EB-5 entities due
to the absence of data, such as data on regional center operating
revenues. DHS wrote that it is reasonable to assume that the changes in
the investment amounts may affect some regional centers, but that it
was not possible to predict the extent of those impacts. In the Final
Regulatory Flexibility Analysis (FRFA) accompanying this final rule,
DHS again discusses the rule's potential impacts on regional centers,
albeit mainly in the context of whether or not regional centers can be
classified as small entities. That discussion, however, is relevant to
the commenter's concerns. In that section, DHS recognizes that the
increase in the investment amount could deter some investors, but
asserts that it cannot determine with accuracy the quantitative effects
of the rule, because it is not possible to know exactly how many
potential investors may be deterred from the program due to the rule's
provisions or how regional centers may respond if some investors may be
unable or unwilling to invest at the higher minimum investment amounts.
2.3. Costs of Increasing the Investment Amounts
Comments: Many commenters discussed the costs of increasing the
investment amounts. Overall, the majority of commenters suggested that
changing the investment amounts would result in a contraction of the
EB-5 program and lead to job loss, with commenters writing that the
future marketability of the program is in jeopardy. A commenter noted
that raising minimum investment amounts could possibly result in lower
investment levels in absolute terms depending on how much demand is
reduced by raising the minimum investment amount. The same commenter
noted giving the largest price hike to investors in targeted employment
areas may not be wise from an economic perspective, as those are likely
to be the more price-sensitive investors.
Response: DHS recognizes that it is possible that the absolute
amount of investment could decrease if the proportionate decline in
investments outweighs the proportionate increase from the higher
investment amount. Of course, it could also increase. For example,
there were an average of 9,238 approved Form I-526 petitions annually
from 2015-2017. If the 80 percent higher levels of required investment
do not lead to a reduction in the number of EB-5 investments, the
absolute amount of investment would increase by 80 percent.\105\ As is
described in the preamble above, DHS considered the public comments and
as a result, this final rule will retain the 50 percent differential
between the general and reduced investment amount and set the latter at
$900,000. In response to the comment, a general analysis conducted by
DHS reveals that it would take a substantial reduction in the number of
investors in order for TEA investment to decline taken in total.
Adjusting the 9,238 investments total from above for the TEA portion of
all investments, 96 percent (discussed below), yields 8,868 annual TEA
investments amounting to $4.43 billion in investment. At the TEA
investment amount of $900,000 in this final rule, this same level of
total TEA investment would be achieved with 4,927 investors, which
represents 44 percent fewer investors. Furthermore, small and even
moderate reductions in investors actually stand to generate growth in
total investment. For example, investor declines of 10, 20, and 30
percent would grow aggregate TEA investment 62, 44, and 26 percent,
respectively. Investor declines would however result in reductions in
the total numbers of jobs required to be created. We emphasize that
this analysis does not reflect DHS predictions about what will happen
to investment levels or job creation, but is intended to convey,
generally, that based on the number of investors alone, it would take a
substantial reduction to actually reduce TEA total investment from
recent levels.
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\105\ This calculation assumes that the proportion of TEA and
non-TEA investments will be the same going forward. Based on an
average of 9,238 annual investments, with 96 percent in TEAs and 4
percent not in TEAs yields 8,868 investments made at $500,000 and
370 made at $1,000,000, for a total of $4.80 billion. Taking these
same numbers of investments made at the new amounts, 900,0000 and
1,800,000, respectively, yields a new amount of $8.65 billion in
investment, which is an 80 percent increase (calculation: (8.65/
4.80)-1). There could be variation to these amounts. If, for
example, a higher percentage of investments were in non-TEA projects
(since fewer projects would qualify for TEA status under the new
standard), the increase in total investment would be even higher.
If, due to this rule or other circumstances, a higher proportion of
investments are made into TEAs, then total investment could decline,
although more investment would flow to targeted areas. Since DHS
cannot accurately forecast the ultimate effects on projects or their
composition in terms of targeted areas, both possibilities exist.
---------------------------------------------------------------------------
Thus, while DHS believes it is possible that some investors may be
deterred from investing at the higher amount, evidence or data has not
been provided by commenters to suggest that the decrease in demand
would be as significant as claimed. In the absence of data indicating
whether the final rule will lead to a decrease in overall investment,
and by how much, DHS believes it is reasonable to raise the minimum
investment amounts, which have remained unchanged for decades, for the
reasons already addressed.
Finally, as it pertains to the reduced investment amount of $1.35
million in the proposed rule and the $900,000 amount contained in this
final rule, DHS does not have enough information or data to predict the
likely difference in aggregate investment as a result of DHS's
determination to use the $900,000 amount. Total TEA investment at the
$900,000 level this rule finalizes could be greater or smaller than at
the initially proposed $1.35 million.
Comments: One commenter cites to a specific report, the 2016 World
Wealth Report, and stated that 90 percent of high net worth individuals
globally have a net worth of $5 million or less. The commenter further
stated that such individuals will allocate up to 25
[[Page 35788]]
percent of their net worth to ``long term, low yield'' investment. The
commenter recognized that EB-5 investors do not necessarily have the
same investment preferences (e.g., EB-5 investors ``may well commit a
significantly higher amount just to reach their goal of U.S. permanent
residence''). The commenter estimated based on the above, and practical
experience, that investors with a net worth as low as $1.5 million have
been willing to commit $500,000 in support of their immigration goals.
The commenter suggested that if DHS increases the minimum investment
amounts as proposed, ``most in this category will not be willing to
participate in the program.''
Response: DHS disagrees that the commenter's assumptions about the
willingness of investors to invest at the increased investment amounts
is sufficiently supported by the source cited. The comment relies on
the report for the finding that 90 percent of high net-worth
individuals have a net worth of $5 million or less, and states, without
support, that the majority of EB-5 investors fall into this category.
The commenter also relies on either the report or unnamed studies for
the assertion that such investors will allocate up to 25 percent of
their net worth to ``this type of investment (long-term, low-yield)'',
and states, without accompanying citations or other support, that EB-5
investors would be willing to invest up to one-third of their total net
worth. DHS believes the commenter's assumptions are inadequately
supported. In addition, the commenter does not explain why EB-5
investments can be accurately described as long-term \106\ and low
yield or how EB-5 investments are comparable to other types of
investments, and also fails to quantify the other factors that may
motivate an EB-5 investment based on objective data. Thus, the comment
does not establish a clear relationship between the report cited and
the quantitative estimates provided in the comment.
---------------------------------------------------------------------------
\106\ In fact, to be eligible for removal of conditions on their
permanent residence status, EB-5 investors need only sustain their
investment for the two-year period of conditional residence
beginning on the date they obtain that status.
---------------------------------------------------------------------------
Comments: Some commenters contended that DHS's proposed increases
to the minimum investment amounts would cause the number of EB-5
investors interested in participating in the program to return to the
levels from the 1990s. These commenters pointed to low utilization of
the program during that time and stated that even the reduced minimum
investment amount of $500,000 was too high for investors. Based on
those assumptions, the commenters estimated that the number of
petitions would drop by 88 percent when compared to the number of
petitions filed in 2011 and 97 percent when compared to the number of
petitions filed in 2016. The commenters concluded that the reduced
interest would be damaging to the U.S. economy and reduce the number of
jobs created by the EB-5 program.
In addition, one commenter stated that it had asked ``many
potential investors and others about the impact of [the proposed]
investment amounts on their interest and/or ability to invest in the
[United States].'' The commenter reported that ``[t]he proposed
increase would drastically reduce potential investors' interest and
ability to invest.'' DHS notes that the commenter referenced the
specific proposed investment level of $1.35 million, but our response
is not different in the context of finalizing the reduced investment
level of $900,000.
Response: DHS disagrees with the commenters' basic premise that
lower utilization of the program in the 1990s was solely because even
the reduced minimum investment amount was too high for investors.
Rather, as discussed in previous sections, DHS has reason to believe
use of the program over time has been affected by a range of factors,
including administration of the program, stakeholder confidence, and
changes in the U.S. economy. For example, the CIS Ombudsman concluded
in 2009 that the lower utilization level was ``principally caused by
significant regulatory and administrative obstacles, as well as
uncertainties that undermine investor and stakeholder confidence.''
\107\ In addition, Congress never chose to decrease the minimum
required investment amounts during the years in which the program was
undersubscribed for any reason, including in order to specifically
encourage more utilization of the program. And as the minimum
investment amounts have not changed since the program's inception, DHS
cannot predict with certainty what the impacts of the changes will be,
with respect to both the number of investors willing to participate in
the program and any changes in potential job creation. DHS acknowledges
that the higher investment amounts could deter some portion of
investors. However, commenters do not support their assertions that
demand would fall to a specific historical level based on price alone
with a valid methodological approach.
---------------------------------------------------------------------------
\107\ CIS Ombudsman, Employment Creation Immigrant Visa (EB-5)
Program Recommendations, March 18, 2009, at *17, available at
https://www.dhs.gov/xlibrary/assets/CIS_Ombudsman_EB-5_Recommendation_3_18_09.pdf.
---------------------------------------------------------------------------
Similarly, a commenter reported that, based on an informal survey
of potential investors, the proposed increases would reduce investors'
ability and willingness to participate in the program. Although the
commenter does not provide substantive data or analysis to support
their claim, DHS recognizes that many potential EB-5 investors may
prefer to have as small a required investment amount as possible, but
may be prepared to invest more if necessitated by law. DHS also
acknowledges that there could be a decline in investors. However, in
the absence of objective evidence on the impacts of the proposed
increases on demand, DHS believes that it is reasonable to increase the
minimum investment amounts to account for inflation for the reasons
stated elsewhere, and to make future inflation adjustments based on the
initial amount set by Congress in 1990.
2.4. Costs of Shifting the TEA Designation Responsibility From States
to USCIS
Comment: One commenter suggested that the proposal to eliminate
state involvement in the TEA designations has the potential to reduce
costs for the industry. The same commenter, however, wrote that USCIS
should consider some process for local involvement in unusual
circumstances.
Response: DHS agrees that the change in the process for TEA
designation has the potential to reduce costs for the industry. DHS,
however, rejects the commenter's suggestion that there should continue
to be local involvement in TEA designation. As discussed in earlier
comment responses, congressional intent of the TEA provision was to
incentivize EB-5 investment in areas of actual high unemployment.
Currently, the states' dual role in both TEA designation and promoting
investment within their borders incentivizes states to secure TEA
designations through ``gerrymandering'' without due regard for whether
the designated area truly is experiencing high unemployment. For these
reasons, DHS has determined that it is necessary to shift the TEA
designation mechanism from the states to DHS.
2.5. Costs to USCIS
Comments: A few commenters provided input on potential costs to
USCIS. One commenter noted that the rulemaking would extend processing
times, requiring an increase in USCIS
[[Page 35789]]
adjudicator staffing. Similarly, another commenter wrote the rule would
add TEA designation to an already overwhelmed and short-staffed
adjudications team. Conversely, a few commenters suggested that the
increased investment amounts will drastically reduce the number of
investors, which would in turn reduce the workload for USCIS
adjudicators. Regarding the proposal to eliminate state involvement in
the designation of high unemployment areas, a commenter suggested DHS
consider the increase in USCIS workload that would result. The
commenter stated that USCIS should publish a ``census tract-based
depiction of the entire U.S, so regional centers and developers can
begin planning for the implementation of the new regulation.'' The
commenter suggested that USCIS should consider the resources required
to produce such a publication.
Response: DHS appreciates commenters' concerns over USCIS staffing
issues, but conveys to the public that at a very broad level, staffing
and adjudication time were considered when the rule was proposed.
Additionally, USCIS conducts a fee study on a biennial basis which
takes into consideration volume projections of forms and staffing
levels, among other things.\108\ USCIS staffing level plans are, in
part, based on these studies in conjunction with anticipated regulatory
changes. Further, as noted above, USCIS' Immigrant Investor Program
Office (IPO) has restructured into multidisciplinary teams, which
reduced Form I-829 adjudication times, and launched a similar
initiative for Form I-526 adjudications in late 2017.\109\ Finally, DHS
rejects the commenter's suggestion that USCIS create and publish a
census tract-based depiction of the entire United States. Foremost,
census tract maps and unemployment data are otherwise publicly
available, and it will be up to the petitioner to submit reliable and
verifiable evidence to demonstrate that his or her investment is within
a TEA. See final 8 CFR 204.6(j)(6)(ii)(B). In addition, the commenter
raises concerns over the increased workload to DHS involved in taking
over TEA designations from states, but does not say how publishing a
map would increase or decrease the workload. DHS therefore believes the
operational burden for USCIS to create and publish a census tract-based
map of the United States would be prohibitive and redundant given that
this type of data is publicly available to use in calculating the
unemployment rate for a particular area.
---------------------------------------------------------------------------
\108\ In accordance with the requirements and principles of the
Chief Financial Officers Act of 1990, 31 U.S.C. 901-03, (CFO Act),
and Office of Management and Budget (OMB) Circular A-25, USCIS
reviews the fees deposited into the Immigration Examinations Fee
Account (IEFA) biennially.
\109\ See Harrison Talking Points, available at http://ilw.com/immigrationdaily/news/20171206.pdf.
---------------------------------------------------------------------------
3. Other Impacts (Executive Orders 12866 and 13563)
3.1. Impacts on the Number of Projects Receiving EB-5 Capital
Comments: Some commenters discussed impacts the proposed regulation
would have on the number of projects receiving EB-5 capital.
Commenters, including regional centers and individuals, expressed
general concern that the increase in minimum investment amount would
adversely affect current and future EB-5 projects by decreasing capital
available to the EB-5 program participants. A couple of other
commenters expressed concern that the lack of EB-5 investors would
prevent projects from moving forward due to the lack of needed capital.
Response: As mentioned in the NPRM, due to the absence of data, DHS
is unable to determine the number of current or future projects that
may be negatively affected by the rule's provisions. This is in large
part because DHS does not have data to estimate how this rulemaking or
other factors may influence potential future investors' behavior. In
the NPRM, DHS acknowledges that it is reasonable to suggest that some
individuals may be deterred from investing at the increased investment
amounts, and therefore some projects may be affected. DHS notes,
however, that at the increased investment amounts projects will have to
recruit fewer EB-5 investors to meet the same capital funding needs.
DHS also notes that, even where a project may not be able to obtain the
full amount of EB-5 capital originally contemplated, there may be other
sources of potential capital that could be drawn upon to satisfy a
given project's capital needs (for example, bank financing, non-EB-5
equity investment, etc.), although the financing from other sources
could be costlier in terms of interest and other fees. One of the prime
advantages of EB-5 capital for developers is that it can entail a low
cost of capital. ``Many of such projects could easily have been
financed on the private market, according to [New York University Stern
School of Business scholar-in-residence] Gary Friedland. . . . `It's a
profit enhancement. . . .' ''\110\ EB-5 capital has also been
characterized as ``lower-cost capital with favorable terms.''\111\
Further, DHS has no way to estimate when and how such other sources of
capital may be used to offset any potential loss of EB-5 capital
investment. DHS further believes the increases in the investment amount
will bring the investment amounts from 1990 in line with their real
values today and EB-5 capital will continue to be an important source
of investment for projects.
---------------------------------------------------------------------------
\110\ Eliot Brown, ``How a U.S. Visa-for-Cash Plan Funds Luxury
Apartment Buildings; Program Meant to Spur Jobs in Poor Areas
Largely Financed Developments in Affluent Neighborhoods,'' Wall St.
J., Sept. 9, 2015, available at https://www.wsj.com/articles/how-immigrants-cash-funds-luxury-towers-in-the-u-s-1441848965 (last
visited Dec. 17, 2018).
\111\ Id.
---------------------------------------------------------------------------
3.2. Impacts on Particular Sectors of the Economy and Geographic Areas
Comments: Some commenters discussed sectors of the economy and
geographic areas that may be disproportionately affected by the
proposed rule. One commenter worried that certain industries, such as
transportation and non-profit industries, ``where conventional capital
is almost impossible,'' have utilized EB-5 capital in order to survive
and create jobs. Some commenters expressed concern that the proposed
rulemaking (specifically, removing the ability for states to designate
TEAs) would negatively affect job growth and wellbeing of areas that
need economic development the most, notably rural areas and high
unemployment areas. Another commenter suggested that the proposed
increase for TEA projects would unfairly affect the ability of rural
projects to compete with projects in wealthy census blocks of the U.S.
cities, as well as other countries, and proposed that the TEA
investment amount increase to no more than $800,000, and be maintained
at 50% of the standard investment amount.
Response: Business plans and economic analyses submitted to DHS
associated with EB-5 petitions involve many industries and project
types, and DHS does not dispute the commenter's claim that conventional
financing may be difficult to obtain in some sectors. However, the
commenter submitted no credible information or data to support the
claim that the proposed changes to the program would cause a
significant reduction in investment and job creation to a particular
industry or the economy overall. DHS reiterates that the popularity and
growth of the EB-5 program has likely been driven by
[[Page 35790]]
numerous factors, including but not limited to, its sourcing of capital
funding for projects across U.S. industries. GAO's analysis--taken from
a random sample of 200 of the 6,652 petitions submitted by petitioners
to participate in the EB-5 program in the fourth quarter of fiscal year
2015--estimated that of the 99% of EB-5 petitioners who elected to
invest in a TEA, about 3% chose to invest in rural areas and about 97%
chose to invest in a high unemployment area (GAO noted that the
percentages do not add up to 99 due to rounding), and of the EB-5
petitioners who elected to invest in high unemployment areas, only 12%
invested in projects actually located in census tracts where the
unemployment rate was over 8%.\112\ Thus, given that only a small
minority of investments are currently being made in either a rural area
or a project located in census tracts with an unemployment rate of over
8%, even though over 30% of visas (3,000 out of 9,940) are statutorily
reserved for investments in TEAs, it is very possible that the reforms
contained in this rule will increase the percentage of EB-5 capital
going towards rural areas and areas of true high unemployment.
---------------------------------------------------------------------------
\112\ GAO, Immigrant Investor Program: Proposed Project
Investments in Targeted Employment Areas, GAO-17-487T, at 4-5, 8
(table 1) (Mar. 8, 2017).
---------------------------------------------------------------------------
Additionally, and as discussed in earlier comment responses, DHS
agrees that not enough EB-5 investment has gone to rural areas and
areas of truly high unemployment. The changes made in this rule to the
TEA designation process, and DHS's decision to maintain the
differential between the investment tiers at 50% (as one commenter
suggested), or $900,000, were intended to better reflect Congressional
intent with respect to incentivizing investments in these areas.. In
addition, the higher minimum investment amount will mean that more
capital per investor is being infused into those areas, and with the
changes to the TEA designation process, DHS expects that more capital
overall will be infused in areas of truly high unemployment.
3.3. Impacts of Change in the TEA Designation Standard
Comments: Several commenters addressed impacts of the proposed
changes to the TEA designation standard. A commenter stated that the
proposed TEA requirement would arbitrarily exclude lower unemployment
areas that would otherwise attract a significant number, if not the
majority, of their workers from nearby higher unemployment areas. The
commenter stated that the proposed designation requirements lacked a
sound economic or labor market rationale or basis, and would result in
loss of economic projects, investment, and potential job creation
opportunities. Some commenters stated that the increased investments
and designation for TEAs would ``destroy'' the EB-5 program. Another
commenter proposed that the TEA designation requirements should ensure
that urban and rural projects are provided equal opportunity to improve
their communities through job creation.
Response: DHS disagrees with the commenter that the new TEA
requirements are arbitrary or would randomly exclude high unemployment
areas. On the contrary, DHS believes the new high unemployment area
designation standard brings clarity and consistency to a process that
lacked uniformity nationwide. In developing the proposed high
unemployment area standard, DHS sought to ensure the designation is
made in a transparent and objectively defined manner, and not one in
which the rules are subject to shifting applications by the states or
other interested entities based on economic, political, or other
rationales, some of which may be unrelated to incentivizing EB-5
investment in areas of true high unemployment. DHS disagrees that the
new TEA designation standard, as it applies to either or both the TEA
geography reform or the TEA investment amount increase, will destroy
the EB-5 program, and notes that the commenter provides no credible
evidence or information to support their assertion. As noted in other
instances in the preamble, we believe there will continue to be
sufficient interest in the EB-5 program notwithstanding the changes.
Additionally, DHS adopts the new requirements to better align TEA
designation requirements with Congressional intent and to ensure both
urban and rural areas are provided appropriate opportunity to be
designated as TEAs (and qualify for the reduced minimum investment
amount incentive) in order to attract EB-5 capital funding.
3.4. Other Comments on Impacts
Comments: One commenter stated that increasing the investment
amounts would negatively affect the ability of mid-career professionals
and entrepreneurs to participate in the EB-5 program and this impact
would deprive the economy of potential contributions of these younger
investors. The commenter presented anecdotal evidence to support the
claim that investors would be less interested and less able to invest
at the higher investment amounts.
Response: As noted above, Congress enacted the investor visa
program to attract entrepreneurs and job-creators into the U.S. economy
\113\ and infuse new capital into the country.\114\ Congress did not
specify any particular type of investor it was seeking.\115\ As
discussed previously, DHS believes that the increase to the minimum
investment amount is appropriate because inflation has eroded the
present-day value of the minimum investment required to participate in
the EB-5 program since Congress set the initial investment amounts in
1990, and this final rule is an effort at remedying that erosion. In
addition, DHS believes the increased amount will attract the same type
of investment levels that Congress intended to attract in 1990.
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\113\ 136 Cong. Rec. 35,615 (Oct. 26, 1990).
\114\ S. Rept. 101-55, p. 21 (1989).
\115\ 136 Cong. Rec. 35,615.
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DHS recognizes that many EB-5 petitioners do not necessarily take
an entrepreneurial role in the operations of their new commercial
enterprise; however, the EB-5 program has been and may continue to be
used by petitioners who do take an entrepreneurial role in the
operations of their new commercial enterprise. Moreover, under the
current regulatory and statutory regime, the EB-5 program contains no
specific entrepreneurship requirements. DHS does not differentiate
between and collects no data on petitioners who take an entrepreneurial
role in the operations of their new commercial enterprise relative to
those who do not. Accordingly, DHS has no data to support and there is
no persuasive reason to believe that raising the minimum investment
amount would disproportionately decrease the number of petitioners who
take an entrepreneurial role in their new commercial enterprise
relative to those who do not.
4. Other Comments on the Regulatory Impact Analysis (Executive Orders
12866 and 13563)
Comments: Approximately 10 commenters provided other input on the
Regulatory Impact Analysis. One commenter asserted that DHS has not
fulfilled its obligation, under Executive Orders 12866 and 13563, to
share how it weighed the option to pursue regulatory action as opposed
to not taking action while Congress works to pursue partial reforms
using the legislative process. According to the commenter, it is
counterproductive to revise vital components of the program while
Congress is debating possible program reforms. Another commenter
[[Page 35791]]
said the impact analysis should be rejected as being an incomplete and
not fully-considered analysis of the implications of the proposed
increases in the proposed minimum investment amounts.
Response: The commenters appear to misunderstand the requirements
of the Executive Orders. Executive Order 12866 is an exercise of the
President's authority to manage the Executive Branch of the United
States under Article II of the Constitution. The implementation of the
Executive Orders and OMB Circulars, and other internal guidance, is a
matter of Executive Branch consideration and discretion.
The fact that preparation of a regulatory impact analysis (RIA)
under Executive Order 12866 is a matter of Executive Branch discretion
is underscored by the terms of Executive Order 12866, section 10, which
provides that nothing in the Executive order shall affect any otherwise
available judicial review of agency action. The Executive Order is
intended only to improve the internal management of the Federal
Government and does not create any right or benefit, substantive or
procedural, enforceable at law or equity by a party against the United
States, its agencies or instrumentalities, its officers or employees,
or any other person.
The internal, managerial nature of this and other similarly worded
Executive Orders has been recognized by the courts, and actions taken
by an agency to comply with the Executive Order are not subject to
judicial review. Cal-Almond, Inc. v. USDA, 14F.3d 429, 445 (9th Cir.
1993) (citing Michigan v. Thomas, 805 F.2d 176,187 (6th Cir. 1986)).
DHS made a good faith effort to analyze the impacts of this rule.
DHS reviewed numerous studies and requested comment from the public but
received no credible data or information that would provide a more
accurate estimate of the impacts.
DHS also disagrees that the current rulemaking is counterproductive
when legislative reforms are under consideration. As mentioned in an
earlier comment response, some members of Congress, commenting on this
rule, requested that DHS take this regulatory action in part because of
Congress' inability to enact legislative reforms over the 114th and
115th Congresses. In fact, the Chairs of the House and Senate Judiciary
Committees noted that ``Congress has failed to reform'' the EB-5
program.\116\ DHS is finalizing this NPRM to implement needed reforms
in a timely manner. Promulgation of these regulatory change does not
preclude legislative changes by Congress.
---------------------------------------------------------------------------
\116\ U.S. Senator Charles Grassley, U.S. Representative Bob
Goodlatte, Press Release: Grassley, Goodlatte Call on DHS to
Finalize EB-5 Regulations, End Unacceptable Status Quo, (March 22,
2018) available at https://judiciary.house.gov/press-release/goodlatte-grassley-call-dhs-finalize-eb-5-regulations-end-unacceptable-status-quo/. Senator Grassley had noted a few days
earlier that members of Congress had been working on reform
aggressively for years, but to no avail. See 164 Cong. Rec. S1778
(March 19, 2018).
---------------------------------------------------------------------------
5. Comment on Unfunded Mandates Reform Act (UMRA)
Comment: One commenter disagreed with DHS that no unfunded mandates
exist in the proposed rule. According to the commenter, states have
developed systems to track and review portions of the EB-5 program as
it relates to their state. The commenter provided background regarding
the State of California's process for analyzing regional center
information and determining census tracts that would qualify as areas
of high unemployment. The commenter suggested that the proposed
federalization of the designation of high unemployment areas would
eliminate the state-based processes. The commenter urged DHS to consult
with California and other states with unique regulatory frameworks
prior to transitioning, and suggested governors and mayors also be
consulted to determine the needs of their respective states and cities.
Response: DHS disagrees with the commenter that unfunded mandates
are imposed by this final rule. The UMRA's written statement
requirements apply when a Federal mandate is likely to result in the
expenditure by State, local, and tribal governments, in the aggregate,
or by the private sector, of $100,000,000 or more (adjusted annually
for inflation) in any 1 year. 2 U.S.C. 1532(a). A federal
intergovernmental mandate means any provision in legislation, statute,
or regulation that would impose an enforceable duty upon State, local,
or tribal governments (except certain conditions of Federal assistance
or duties arising from participation in a voluntary Federal programs).
2 U.S.C. 658(5)(A). While one state might have voluntarily developed a
system to track and review portions of the EB-5 program, this rule does
not create any enforceable duties. See id.; 2 U.S.C. 1555. Furthermore,
by eliminating state designation of high unemployment areas, DHS is
assuming the administrative burden (and relieving states of the burden)
of determining which areas qualify as TEAs, rather than relying on
state designations. Additionally, for the purposes of the UMRA of 1995,
this rule does not impose costs exceeding the threshold of $100 million
(or the inflation-adjusted value equivalent of $100 million in 1995
dollars).
IV. Statutory and Regulatory Requirements
A. Executive Orders 12866 (Regulatory Planning and Review), 13563
(Improving Regulation and Regulatory Review), and 13771 (Reducing
Regulation and Controlling Regulatory Costs)
Executive Orders 12866 and 13563 direct agencies to assess the
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. Executive Order 13771 (``Reducing Regulation and
Controlling Regulatory Costs'') directs agencies to reduce regulation
and control regulatory costs.
This rule has been designated a ``significant regulatory action''--
although not an economically significant regulatory action--under
section 3(f) of Executive Order 12866. Accordingly, the rule has been
reviewed by the Office of Management and Budget. This rule is a
regulatory action under Executive Order 13771.
(1) Summary
This final rule changes certain aspects of the EB-5 program that
are in need of reform and updates the regulations to reflect statutory
changes and codify existing policies. This final rule makes five major
categories of revisions to the existing EB-5 program regulations. Three
of these categories, which involve (i) priority date retention; (ii)
increasing the investment amounts; and (iii) reforming the TEA
designations, are substantive. The two other major categories focused
on (iv) procedures for removal of conditions on lawful permanent
residence; and (v) miscellaneous changes, involve generally technical
adjustments to the EB-5 program. Details concerning these three major
substantive and two major technical categories of changes are provided
in above sections, and in Table 2 in terms of benefit-cost
considerations.
Within the five major categories of revisions to existing
regulations, this
[[Page 35792]]
final rule also makes some changes from the NPRM. Most importantly, the
reduced investment amount for TEAs will be raised to $900,000 instead
of the proposed $1.35 million, in order that the 50 percent
differential between investment tiers be maintained. The other
nonsubstantive changes between this final rule and the NPRM are listed
here:
Clarification that the priority date of a petition for
classification as an investor is the date the petition is properly
filed;
Clarification that a petitioner with multiple approved
immigrant petitions for classification as an investor is entitled to
the earliest qualifying priority date;
Modifying the original proposal that any city or town with
a population of 20,000 or more may qualify as a TEA, to provide that
only cities and towns with a population of 20,000 or more outside of
metropolitan statistical areas (MSAs) may qualify as a TEA;
Adding that amendments or supplements to any offering
necessary to maintain compliance with applicable securities laws based
upon the changes in this rulemaking will not independently result in
denial or revocation of a petition, provided the petition meets certain
criteria; and
Additional minor non-substantive and clarifying changes.
DHS analyzed the five major categories of revisions carefully. EB-5
investment structures are complex, and typically involve multiple
layers of investment, finance, development, and legal business
entities. The interconnectedness and complexity of such relationships
make it very difficult to quantify and monetize the costs and benefits.
Furthermore, since demand for EB-5 investments incorporate many factors
related to international and U.S. specific immigration and business,
DHS cannot predict with accuracy changes in demand for the program
germane to the major categories of revisions that increase the
investment amounts and reform the TEA designation process. DHS has no
way to assess the potential increase or reduction in investments either
in terms of past activity or forecasted activity, and cannot therefore
quantitatively estimate any impacts concerning job creation, losses or
other downstream economic impacts driven by these major provisions.
There are several costs involved in the final rule for which DHS
has conducted quantitative estimates. For the technical revision that
clarifies that derivative family members must file their own petitions
to remove conditions on their permanent residence when they are not
included in the principal investor's petition, we estimate costs to be
approximately $91,023 annually for those derivatives. Familiarization
costs to review the rule are estimated to be $629,758 annually.
In addition, DHS has prepared a Final Regulatory Flexibility
Analysis (FRFA) under the Regulatory Flexibility Act (RFA) to discuss
potential impacts to small entities. As discussed further in the FRFA,
DHS cannot estimate the exact impact to small entities. DHS, however,
does expect some impact to regional centers and non-regional center
projects. As it relates to the FRFA, each of 1,570 business entities
involved in familiarization of the rule would incur costs of about
$401.
Table 2--Summary of Changes and Impact of the Adopted Provisions
----------------------------------------------------------------------------------------------------------------
Current policy Adopted change Impact
----------------------------------------------------------------------------------------------------------------
Priority Date Retention
----------------------------------------------------------------------------------------------------------------
Current DHS regulations do not permit DHS will allow an EB-5 immigrant Benefits:
investors to use the priority date of an petitioner to use the priority date of Makes visa
immigrant petition approved for an immigrant petition approved for allocation more
classification as an investor for a classification as an investor for a predictable for investors
subsequently filed immigrant petition subsequently filed immigrant petition with less possibility for
for the same classification. for the same classification for which large fluctuations in visa
the petitioner qualifies, unless DHS availability dates due to
revokes the petition's approval for regional center
fraud or willful misrepresentation by termination.
the petitioner, or revokes the petition Provides greater
for a material error. certainty and stability
regarding the timing of
eligibility for investors
pursuing permanent
residence in the U.S. and
thus lessens the burden of
unexpected changes in the
underlying investment.
Provides more
flexibility to investors
to contribute to more
viable investments,
potentially reducing fraud
and improving potential
for job creation.
Costs:
None anticipated.
[[Page 35793]]
Increases to Investment Amounts
----------------------------------------------------------------------------------------------------------------
The standard minimum investment amount DHS will account for inflation in the Benefits:
has been $1 million since 1990 and has investment amount since the inception Increases in
not kept pace with inflation--losing of the program. DHS will raise the investment amounts are
almost half its real value. minimum investment amount to $1.8 necessary to keep pace
Further, the statute authorizes a million to account for inflation with inflation and real
reduction in the minimum investment through 2015, and includes a mechanism value of investments;
amount when such investment is made in a to automatically adjust the minimum Raising the
TEA by up to 50 percent of the standard investment amount based on the investment amounts
minimum investment amount. Since 1991, unadjusted CPI-U every 5 years. increases the amount
DHS regulations have set the TEA DHS will retain the TEA minimum invested by each investor
investment threshold at 50 percent of investment amount at 50 percent of the and potentially increases
the minimum investment amount. standard amount. The minimum investment the total amount invested
Similarly, DHS has not increased the amount in a TEA will initially increase under this program.
minimum investment amount for to $900,000. For regional
investments made in a high employment DHS is not changing the equivalency centers, the higher
area beyond the standard amount. between the standard minimum investment investment amounts per
amount and those made in high investor will mean that
employment areas. As such, DHS will set fewer investors will have
the minimum investment amounts in high to be recruited to pool
employment areas to be $1.8 million, the requisite amount of
and follow the same mechanism for capital for the project,
future inflationary adjustments. so that searching and
matching of investors to
projects could be less
costly.
Costs:
Some investors may
be unable or unwilling to
invest at the higher
levels of investment.
There may be fewer
jobs created if fewer
investors invest at the
higher investment amounts.
For regional
centers, the higher
amounts could reduce the
number of investors in the
global pool and result in
fewer investors, thus
potentially making the
search and matching of
investors to projects more
costly.
Potential reduced
numbers of EB-5 investors
could prevent certain
projects from moving
forward due to lack of
requisite capital.
........................................ An increase in
the investment amount
could make foreign
investor visa programs
offered by other
countries more
attractive.
----------------------------------------------------------------------------------------------------------------
TEA Designations
----------------------------------------------------------------------------------------------------------------
A TEA is defined by statute as a rural DHS will eliminate state designation of Benefits:
area or an area that has experienced high unemployment areas. DHS also Rules out TEA
high unemployment (of at least 150 amends the manner in which investors configurations that rely
percent of the national average rate). can demonstrate that their investments on a large number of
Currently, investors demonstrate that are in a high unemployment area. census tracts indirectly
their investments are in a high (1) DHS will add cities and towns with a linked to the actual
unemployment area in two ways: population of 20,000 or more outside of project tract by numerous
(1) providing evidence that the MSAs as a specific and separate area degrees of separation.
Metropolitan Statistical Area (MSA), the that may qualify as a TEA based on high Potential to
specific county within the MSA, or the unemployment. better stimulate job
county in which a city or town with a (2) DHS will amend its regulations so growth in areas where
population of 20,000 or more is located, that a TEA may consist of a census unemployment rates are the
in which the new commercial enterprise tract or contiguous census tracts in highest, consistent with
is principally doing business, has which the new commercial enterprise is congressional intent.
experienced an average unemployment rate principally doing business if Costs:
of at least 150 percent of the national the new commercial enterprise This TEA provision
average rate; or is located in more than one census could cause some projects
(2) submitting a letter from an tract; and and investments to no
authorized body of the government of the the weighted average of the longer qualify as being in
state in which the new commercial unemployment rate for the tract or high unemployment areas.
enterprise is located, which certifies tracts is at least 150 percent of the DHS presents the potential
that the geographic or political national average. number of projects and
subdivision of the metropolitan (3) DHS will also amend its regulations investments that could be
statistical area or of the city or town so that a TEA may consist of an area affected in Table 5.
with a population of 20,000 or more in comprising the census tract(s) in which
which the enterprise is principally the new commercial enterprise is
doing business has been designated a principally doing business, including
high unemployment area. any and all adjacent tracts, if the
weighted average of the unemployment
rate for all included tracts is at
least 150 percent of the national
average.
[[Page 35794]]
Current technical issues: DHS will amend its regulations to Conditions of Filing:
The current regulation does not include the following technical Benefits:
clearly define the process by which changes: Adds clarity and
derivatives may file a Form I-829 Clarify the filing process for eliminates confusion for
petition when they are not included on derivatives who are filing a Form I-829 the process of derivatives
the principal's petition. petition separately from the immigrant who file separately from
Interviews for Form I-829 investor. the principal immigrant
petitions are generally scheduled at the Provide flexibility in investor.
location of the new commercial determining the interview location Costs:
enterprise. related to the Form I-829 petition. Total cost to
The current regulations require Amend the regulation by which applicants filing
an immigrant investor and his or her the immigrant investor obtains the new separately will be $91,023
derivatives to report to a district permanent resident card after the annually.
office for processing of their permanent approval of his or her Form I-829 Conditions of Interview:
resident cards. petition because DHS captures biometric Benefits:
data at the time the immigrant investor Interviews may be
and derivatives appear at an ASC for scheduled at the USCIS
fingerprinting. office having jurisdiction
Add 8 CFR 204.6(n) to allow over either the immigrant
certain investors to remain eligible investor's commercial
for the EB-5 classification if a enterprise, the immigrant
project's offering is amended or investor's residence, or
supplemented based upon the final the location where the
rule's effectiveness. Form I-829 petition is
being adjudicated, thus
making the interview
program more effective and
reducing burdens on the
immigrant investor.
Some petitioners
will benefit by traveling
shorter distances for
interviews and thus see a
cost savings in travel
costs and opportunity
costs of time for travel
and interview time.
........................................ Costs:
None anticipated.
Investors obtaining a
permanent resident card:
Benefits:
Cost and time
savings for applicants for
biometrics data.
Costs:
None anticipated.
Eligibility Following
Changes to Offering:
Benefits:
An amendment to a
project's offering based
on the final rule's
provisions might not
result in the denial or
revocation of a petition.
Costs:
None anticipated.
----------------------------------------------------------------------------------------------------------------
Miscellaneous Changes
----------------------------------------------------------------------------------------------------------------
Current miscellaneous items: DHS will amend its regulations to make These provisions are
8 CFR 204.6(j)(2)(iii) refers to the following miscellaneous changes: technical changes and will
the former U.S. Customs Service. DHS is updating references at 8 have no impact on
Public Law 107-273 eliminated CFR 204.6(j)(2)(iii) from U.S. Customs investors or the
the requirement that alien entrepreneurs Service to U.S. Customs and Border government.
establish a new commercial enterprise Protection.
from both INA section 203(b)(5) and INA Removing references to
section 216A. requirements that alien entrepreneurs
8 CFR 204.6(j)(5) introductory establish a new commercial enterprise
text and (j)(5)(iii) reference in 8 CFR 216.6.
``management''; Removing references to
Current regulation at 8 CFR ``management'' at 8 CFR 204.6(j)(5)
204.6(j)(5) has the phrase ``as opposed introductory text and (j)(5)(iii);
to maintain a purely passive role in Removing the phrase ``as
regard to the investment''; opposed to maintain a purely passive
Public Law 107-273 allows role in regard to the investment'' from
limited partnerships to serve as new 8 CFR 204.6(j)(5);
commercial enterprises; Clarifies that any type of
Current regulation references entity can serve as a new commercial
the former Associate Commissioner for enterprise;
Examinations. Replacing the reference to the
8 CFR 204.6(k) requires USCIS to former Associate Commission for
specify in its Form I-526 decision Examinations with a reference to the
whether the new commercial enterprise is USCIS AAO.
principally doing business in a targeted Amending 8 CFR 204.6(k) to
employment area. specify how USCIS will issue a
Sections 204.6 and 216.6 use the decision.
term ``entrepreneur'' and Revising sections 8 CFR 204.6
``deportation.'' These sections also and 216.6 to use the term ``investor''
refer to Forms I-526 and I-829. instead of ``entrepreneur'' and to use
8 CFR 204.6(i) and (j)(6)(ii)(B) the term ``removal'' instead of
use the phrase ``geographic or political ``deportation.''
subdivision'' in describing state Removing references to
designations of high unemployment areas ``geographic or political subdivision''
for TEA purposes. in 8 CFR 204.6(i) and (j)(6)(ii)(B).
The priority date of a petition Providing clarification in 8
for classification as an investor is the CFR 204.6(d) that the petitioner of
date the petition is properly filed. multiple immigrant petitions approved
for classification as an investor
generally is entitled to the earliest
qualifying priority date.
----------------------------------------------------------------------------------------------------------------
In addition to the above, applicants will need to read and review the rule to become familiar with the final
rule provisions. Familiarization costs to read and review the rule are estimated at $629,758 annually.
[[Page 35795]]
(2) Background and Purpose of the Final Rule
The preceding sections of the preamble review key historical
aspects and goals of the program, and specific justifications for the
particular provisions in the final rule. This section supplements and
provides additional points of analysis that are pertinent to this
regulatory impact assessment.
A person wishing to immigrate to the United States under the EB-5
program must file an Immigrant Petition by Alien Investor (Form I-526).
Each individual immigrant investor files a Form I-526 petition
containing information about their investment.\117\ The investment must
be made into either an NCE within a designated regional center in
accordance with the Regional Center Program or a standalone NCE outside
of the Regional Center Program (``non-regional center'' investment).
The NCE may create jobs directly (required for non-regional center
investments), or pool immigrant investors' funds into associated NCEs
that in turn undertake job-creating activities directly or, more
typically, indirectly through JCEs which receive EB-5 capital from the
regional center (RC)-associated NCEs. With respect to regional center
investors, once a regional center has been designated, affiliated
investors can submit Form I-526 petitions in the concurrent year and in
future years, provided the regional center maintains its designation.
Each year, the stock of approved regional centers represents the
previous year's approved total, plus new regional centers approved
during the current year, minus regional centers that are terminated in
the concurrent year.\118\
---------------------------------------------------------------------------
\117\ To be eligible at the time of the Form I-526 petition's
filing, investors must demonstrate either that they have already
invested their funds into the NCE or that they are actively in the
process of investing. Some investors choose to demonstrate
commitment of funds by placing their capital contribution in an
escrow account, to be released irrevocably to the NCE upon a certain
trigger date or event, such as approval of the Form I-526 petition.
\118\ Between May 2008 and July 2017, 128 regional centers have
been terminated. USCIS, Immigrant Investor Regional Centers,
available at http://www.uscis.gov/working-united-states/permanent-workers/employment-based-immigration-fifth-preference-eb-5/immigrant-investor-regional-centers.
---------------------------------------------------------------------------
DHS analysis of Form I-526 filing data for FY 2014-2016 indicates
that on average, 13,103 Form I-526 petitions were filed annually.
Investments in regional centers accounted for an average of 12,042 such
petitions annually, or 92 percent of all submitted Form I-526
petitions, while non-regional center investments accounted for an
average of 1,062 Form I-526 petitions annually, or about 8 percent.
EB-5 filings grew rapidly starting in 2008, when the U.S. financial
crisis reduced available U.S.-based commercial lending funds and
alternative funding sources, such as the EB-5 program, were sought.
Based on the type of projects that Form I-526 petitions describe, it
appears that EB-5 capital has been used as a source of financing for a
variety of projects, including a large number of commercial real estate
development projects to develop hotels, assisted living facilities, and
office buildings.
In general, DHS databases do not track the total number of
investment projects associated with each individual EB-5 investment by
petitioners, but rather track the NCE associated with each individual
investment. Any given NCE could fund multiple projects. DHS analysis of
filing data reveals that for FY 2014-2016, on average per year, 1,461
unique NCEs were referenced in the Form I-526 petitions submitted. On
average 51 percent of the overall number of unique NCEs were found in
petitions associated with regional centers, and 49 percent of the
overall number of NCEs, were found in non-regional center-associated
petitions. This suggests that on average, unique NCEs are more common
in non-regional center filings, as 92 percent of individual petitioner
filings are associated with regional centers.\119\
---------------------------------------------------------------------------
\119\ IPO NCE data records indicate that the disparity in the
regional center petitioner filings compared to unique NCEs--92
percent of total petitioner filings compared to 49 percent of unique
NCEs--exists because regional center projects include 18 investors
on average, while non-regional center investments include only 1.5
investors on average.
---------------------------------------------------------------------------
DHS obtained and analyzed a random sample of Form I-526 petitions
that were submitted in FY 2016. The files in the sample were pending
adjudicative review at IPO in May 2016.\120\ As the results obtained
from analysis of this random sample are utilized in forthcoming
sections of this regulatory analysis, it henceforth will be referred to
as the ``2016 NCE sample'' for brevity. A key takeaway from the review
of the sample is that a majority of all NCEs (80 percent) blended
program capital with capital from other sources. For regional center
NCEs sourced with blended capital, the EB-5 portion comprised 40
percent of the total capital outlay, while for non-regional center NCEs
sourced with blended capital, the EB-5 portion comprised 50 percent of
the total capital outlay.
---------------------------------------------------------------------------
\120\ The figures for yearly volumes of Form I-526 filings are
publicly available under DHS performance data: USCIS, Number of Form
I-526 Immigrant Petitions by Alien Entrepreneurs by Fiscal Year,
Quarter, and Case Status 2008-2016, available at https://www.uscis.gov/sites/default/files/USCIS/Resources/Reports%20and%20Studies/Immigration%20Forms%20Data/Employment-based/I526_performancedata_fy2017_qtr2.pdf. The NCE data were obtained
from file tracking data supplied by IPO. Because the NCE file
submissions contain detailed business plan and investor information,
the NCE data are not captured in formal DHS databases that are
provided publicly, but rather in internal program office and
adjudication records.
---------------------------------------------------------------------------
(3) Baseline Program Forecasts
DHS produced a baseline forecast of the total number of Form I-526
receipts, beginning in the first year the rule will take effect and
extending for 10 years for the period FY 2017-2026.\121\ This Form I-
526 forecast includes the historical trend of Form I-526 receipts from
FY 2005 to FY 2015, the filing projections from the USCIS Volume
Projections Committee (VPC), and input from IPO. The VPC projects that
the high rate of growth in EB-5 investment filings, which averaged 39
percent annually since FY 2008, will slow to about 3.3 percent over the
next 3 years and will subsequently level off. The program grew
exponentially starting in 2008 with the economic downturn. At that
time, commercial lending was extremely difficult to obtain. As the U.S.
economy has improved, commercial lending is now more viable, resulting
in fewer overall petitions. In addition, in the past, USCIS has
experienced significant spikes in filings in anticipation of the
possibility that Congress would either allow the Regional Center
Program to sunset or implement new legislative reforms that would
increase the required minimum investment amounts, as investors sought
to ``beat'' the new levels. These spikes have occurred around the
program's anticipated sunset (e.g., September 2015, December 2015, and
September 2016). USCIS believes that the filing growth rate will level
off once the program is extended for longer than one year at a time.
DHS used this information to inform a forecasting model based on a
logistic function that captures the past increase in receipts from a
low baseline, the exponential growth that the program experienced from
FY 2008-2015, and a very small rate of growth anticipated for the next
3 years leading to a leveling off of future growth. The technical
details are provided in the accompanying footnote, and as can be seen
in the graph, the DHS estimation technique closely fits past
[[Page 35796]]
filings and captures the expected trends alluded to earlier.\122\
---------------------------------------------------------------------------
\121\ DHS did not attempt a similar forecast for Form I-924
receipts, because DHS does not have a sound basis for predicting how
the rule will affect such receipts.
\122\ DHS utilized a logistic function of the format, (C/
([lambda] + [beta]e-rt)) where input t is the
time year code (starting with zero), e is the base of the natural
logarithm, and C, [lambda], [beta], and [rho] are parameters such
that C/[lambda] asymptotically approaches the maximum level of the
predicted variable, the Form I-526 receipts. The parameters [beta]
and [rho] jointly impact the inflection and elongation of the
sigmoidal curve. DHS did not attempt an estimation procedure focused
on minimizing the sum of squared errors (such as least squares
regression) or other fitting technique, and instead chose the
parameters to reflect the past trend of actual receipts and the
expected leveling off in their growth rate. For the final forecast
run, the specific calibration was C = 17,000, [lambda] = 1.05,
[beta] = 180, and [rho] = .66. The maximum expected level of
receipts (equal to 17,000/1.05 which is approximately 16,200) was
determined via input from EB-5 program management.
---------------------------------------------------------------------------
Figure 1 graphs the volume of ``past'' actual Form I-526 filings
from 2005 to 2016, compared with the past receipts for the same period
estimated by our forecasting function, plus the forecasts thereafter
for future filings. Additionally, changes in receipts driven by this
rule could cause variations in the future receipts that are not
reflected in the present forecasts.
[GRAPHIC] [TIFF OMITTED] TR24JY19.012
The forecast values are listed in Table 3:
Table 3--DHS Forecasts for Investor Form I-526 Receipts and NCEs
------------------------------------------------------------------------
FY Investors NCEs
------------------------------------------------------------------------
2017............................................ 15,241 1,481
2018............................................ 15,685 1,524
2019............................................ 15,925 1,547
2020............................................ 16,052 1,560
2021............................................ 16,119 1,566
2022............................................ 16,153 1,570
2023............................................ 16,171 1,571
2024............................................ 16,181 1,572
2025............................................ 16,185 1,573
2026............................................ 16,188 1,573
-----------------------
10-year total............................... 159,900 15,538
-----------------------
Annual Average.............................. 15,990 1,554
------------------------------------------------------------------------
The last column of Table 3 provides estimates of the total number
of NCEs. An assumption of the NCE forecasts is that there is no change
in the relationship between the number of NCEs and the number of Form
I-526 filings over time.\123\ The impact of these provisions on the
forecasts will be described in the relevant sections of this analysis.
---------------------------------------------------------------------------
\123\ In other words, the assumption is that the current number
of investors per NCE holds in the future. For the NCE projections,
the 2016 value is set at the 2014-2016 average of 1,404. For each
year thereafter, the figure is based on the growth rate of predicted
Form I-526 receipts.
---------------------------------------------------------------------------
(4) Economic Impacts of the Major Rule Provisions
a. Retention of Priority Date
This rule will generally allow an EB-5 immigrant petitioner to use
the priority date of an approved EB-5 petition for any subsequently
filed EB-5 petition for which the petitioner qualifies. Provided that
petitioners have not yet obtained lawful permanent residence pursuant
to their approved petition and that such petition has not been revoked
on certain grounds, petitioners will be able to retain their priority
date and therefore retain their place in the visa queue. DHS is
allowing priority date retention to: Address situations in which
petitioners may become ineligible through circumstances beyond their
control (e.g., the termination of a regional center) as they wait for
their EB-5 visa priority date to become current; and provide investors
with greater flexibility to deal with changes to business conditions.
For example, investors with an approved petition involved with an
underperforming or failing investment project will be able to move
their investment funds to a new, more promising investment project
without losing their place in the visa queue.
There will be an operational benefit to the investor cohort because
priority date retention will make visa allocation more predictable with
less possibility for massive fluctuations due to regional center
termination that could, in the case of some large regional centers,
negatively affect investors who are in the line at a given time. This
change will provide greater certainty and stability for investors in
their pursuit of permanent residence in the United States, helping
lessen the burden of situations unforeseen by the investor related to
their investment. In addition,
[[Page 35797]]
by allowing priority date retention, investors obtain greater
flexibility in moving their investment funds out of potentially risky
projects, thereby potentially reducing fraud and improving the
potential for job creation in the United States. DHS cannot quantify or
monetize the net benefits of the priority date retention provision or
assess how many past or future investors might be affected.
b. Investment Amount Increase
DHS will raise the standard minimum investment amount from the
current $1 million to $1.8 million to account for the rate of inflation
from the program's inception in 1990 until the time of the proposed
rule. DHS will also raise the reduced investment amount for TEA
projects to $900,000, which is 50 percent of the general investment
amount.\124\ DHS will further adjust the minimum investment amounts
every 5 years. The standard level will be adjusted for inflation based
on the 1990 level and the reduced amount will be adjusted to maintain
50 percent of the standard minimum investment amount. These increases
are needed because the investment amounts have never been adjusted to
keep pace with inflation, thereby eroding the real value of the
investments.
---------------------------------------------------------------------------
\124\ The adjustment to the standard minimum investment amount
is based on the CPI-U, which, as compared to a base date of 1982-
1984, was 130.7 in 1990 and 237.017 in 2015. The actual increase in
prices for the period was approximately 81.34 percent, obtained as
((CPI-U2015/CPI-U1990)-1)). The $1.8 million
investment amount is rounded. See generally Bureau of Labor
Statistics, Inflation & Prices, available at http://www.bls.gov/data/#prices.
---------------------------------------------------------------------------
DHS believes it is reasonable to assume that some prospective
investors under the current rule may be unable or unwilling to invest
at either of the higher levels of investment under the new rule.
However, DHS is unable to estimate the potential reduction in
investments either in terms of past activity or forecasted activity,
and cannot therefore estimate any impacts concerning job creation,
losses or other downstream economic impacts driven by the investment
amount increases. DHS evaluates the source of investor funds for
legitimacy but not for information on investor income, wealth, or
investment preferences. DHS therefore cannot estimate how many past
investors would have been unable or unwilling to have invested at the
new amounts, and hence cannot make extrapolations to potential future
investors and projects. However, as noted earlier, it would take a
substantial reduction in investors to actually reduce total investment
below current levels. If the 80 percent higher levels of required
investment do not lead to a reduction in the number of EB-5
investments, the absolute amount of investment would increase by 80
percent. There is currently about $4.43 billion in annual TEA
investment under the program. At the TEA investment amount of $900,000
in this final rule, this same level of total TEA investment would be
achieved with 44 percent fewer investors. Furthermore, small and even
moderate reductions in investors actually stand to generate growth in
total investment. It is entirely possible that total investment will
actually increase, even if the number of investors were to decrease.
In addition to the effect on investors, it is reasonable to assume
that the changes to the investment amounts will also affect regional
centers. If the higher amounts reduce the number of investors in the
global pool, competition for fewer investors may make it more costly
for regional centers to identify and match with investors. However, the
net effect on regional center costs is not something DHS can forecast
with accuracy.
DHS also believes that for both regional center and non-regional
center investments, the projects and the businesses involved could be
affected. A reduced number of EB-5 investors could preclude some
projects from going forward due to outright lack of requisite capital.
Other projects will likely see an increase in the share of non-EB-5
capital, such as capital sourced to domestic or other foreign sources.
As alluded to in Section Two of this analysis, analysis of the 2016 NCE
sample reveals that 80 percent of NCEs blend EB-5 capital with other
sources of capital. DHS believes that the costs of capital and return
to capital could be different depending on the source of the capital.
As a result, a change in the composition of capital could change the
overall profitability for one or more of the parties involved; however,
if the project on the whole promises net profitability, taking into
account risk and potential returns from other investments, it may
proceed as planned. The specific impact on each party for each project
will vary on a case-by-case basis, and will be dependent on, among
other things, the particular financial structures and agreements
between the regional center, investors, NCE, and project developer. It
will also be determined by local and regional investment supply and
demand, lending conditions, and general business and economic factors.
DHS also considers that an increase in the investment amount could
make other countries' foreign investor visa programs more attractive
and therefore there could be some substitution into such programs. The
decision to invest in another country's program will depend in part on
the investment and country-specific risk preferences of each investor.
While DHS has no means of ascertaining such preferences, it is possible
that some substitution into non-U.S. investor visa programs could occur
as a result of the higher required investment amounts. However,
according to DHS research, substitution into another country's
immigrant investor program will likely be more costly for investors
than investing in the EB-5 program even with increases in the EB-5
investment amounts. DHS has laid out some of the comparisons to other
countries' immigrant investor programs earlier in the preamble.
There are numerous ancillary services and activities linked to both
regional center and direct investments, such as, but not limited to,
business consulting and advising, finance, legal services, and
immigration services. However, DHS is not certain how the rule will
affect these services. Similarly, DHS does not have information on how
the revenues collected from these types of activities contribute to the
overall revenue of the regional centers or direct investments.
[[Page 35798]]
In summary, DHS believes that the increase in the minimum
investment amount will bring the investment amounts in line with real
values. DHS recognizes that some of the investment increase benefits
could be offset if some investors are deterred from investing at the
higher amounts. DHS does not have the data or information necessary to
attempt to estimate such mitigating effects. It is possible that the
higher investment amounts could deter some investors from EB-5 activity
and therefore negatively affect regional center revenue in some cases,
although the magnitudes and net effects of these impacts cannot be
estimated. It is also possible that the higher investment amounts could
attract additional capital overall and stimulate projects to get off
the ground that otherwise might not. Due to the complexity of EB-5
financial arrangements and unpredictability of market conditions, DHS
cannot forecast with confidence how many projects would be affected by
the increased investment amounts through a change in the number of
individuals investing through the EB-5 program. Some projects could be
forgone while others will proceed with a higher composition of non-EB-5
capital, with resultant changes in profitability and rates of return to
the parties involved. An overall decrease in investments and projects
will potentially reduce some job creation and result in other
downstream effects.
c. Periodic Adjustments to the Investment Amounts
In addition to initially raising the investment thresholds to
account for inflation, DHS will adjust the standard investment
threshold every 5 years (as compared to $1,000,000 in January 1990 at
the program's inception) to account for future inflation, and to adjust
the reduced investment threshold for TEAs to keep pace with the
standard amount. DHS projected the effects of this methodology using a
relatively low, recent inflation index (1.5 percent) and a more
moderate inflation index (3.2 percent). DHS made two separate
projections based on two different indexes because DHS cannot predict
with certainty what the future inflation index will be. The 1.5 percent
estimate is based on the average rate of inflation for the period 2009-
2017, which economists generally consider to be relatively low compared
to earlier periods. The 3.2 percent estimate used for the higher-end
projection is based on the 3.2 percent inflation rate in 2011, which
was the highest annual inflation rate observed from the 2009 to 2017
period. DHS believes it is appropriate to characterize the 3.2 percent
rate as a ``moderate'' inflation baseline, because although it is
higher than the average annual rate since 2009, it is not considered by
economists to be high as compared to other historical periods.\125\
---------------------------------------------------------------------------
\125\ Allan Meltzer, ``A Slow Recovery with Low Inflation,''
Hoover Inst., Econ. Working Paper No. 13,110 (2013), available at
http://www.hoover.org/sites/default/files/13110_-_meltzer_-_a_slow_recovery_with_low_inflation.pdf; see also Michael T. Kiley,
Low Inflation in the United States: A Summary of Recent Research,
FEDS Notes, Board of Governors of the Federal Reserve System (Nov.
23, 2015), available at http://www.federalreserve.gov/econresdata/notes/feds-notes/2015/low-inflation-in-the-united-states-a-summary-of-recent-research-20151123.html; Mary C. Daly and Bart Hobijn,
Downward Nominal Wage Rigidities Bend the Phillips Curve, Fed.
Reserve Bank S.F., Working Paper No. 2013-08 (2014), available at
http://www.frbsf.org/economic-research/files/wp2013-08.pdf. The
inflation rates reflect the yearly seasonally adjusted average for
the consumer price index for all urban consumers (CPI-U) and are
found at: https://www.bls.gov/cpi/tables/supplemental-files/historical-cpi-u-201808.pdf.
---------------------------------------------------------------------------
Table 4 lists the general minimum investment amounts and reduced
investment amounts after 5 and 10 years if the amounts are raised
initially as finalized in this rule. The figures are in millions of
U.S. dollars and are rounded to the nearest fifty-thousandth. DHS notes
that estimates are slightly different than those provided in the
proposed rule due to the modification to the inflation adjustment.
Table 4--Projected Investment Amounts at 5-Year Revisions
[Figures are in millions of $]
----------------------------------------------------------------------------------------------------------------
Projected investment amount
-------------------------------
Based on Based on
Provision: Initial increase Revision average moderate
(year) inflation inflation
scenario, 1.5 scenario, 3.2
percent percent
----------------------------------------------------------------------------------------------------------------
Standard Investment Amount = $1.8 Million in 2018............... 5 1.95 2.12
10 2.10 2.48
Minimum Investment Amount = $900,000 in 2018.................... 5 .98 1.06
10 1.05 1.24
----------------------------------------------------------------------------------------------------------------
DHS attempted to assess the costs of these changes. As described
earlier, the potential cost of the higher amounts may result in a
reduction in the number of investors and projects and a lower share of
EB-5 capital for some projects, which could result in capital losses,
fewer jobs created, and other reductions in economic activity. Or,
there could be an increase in overall EB-5 capital flowing into the
economy, which could result in more jobs created and increases in
economic activity. DHS is not able to predict how many investors and
projects will be affected, nor can we predict the impact to the capital
available for projects.
d. Targeted Employment Areas
Under the current regulations, a state may designate an area in
which the enterprise is principally doing business as a high
unemployment TEA if that area is a geographic or political subdivision
of a metropolitan statistical area (MSA) or of a city or town with a
population of 20,000 or more. As is the current practice, state
determinations for TEAs define the appropriate boundaries of a
geographic or political subdivision that constitutes the TEA, although
it is the responsibility of the petitioner to provide the supporting
data and methodology involved in the state TEA determination. DHS
ensures state designations comply with the statutory requirement that
the proposed area designated by the state has an unemployment rate of
at least 150 percent above the national average by reviewing state
determinations of the unemployment rate and assessing the method or
methods by which the state authority obtained the unemployment
statistics.\126\ Currently DHS does not
[[Page 35799]]
limit the number of census tracts that a state can aggregate as part of
a high unemployment TEA designation. TEA configurations that DHS has
evaluated from state designations have included the census tract or
tracts where the NCE is principally doing business (``project
tract(s)''), one or more directly adjacent tracts, and others that are
further removed, resulting in configurations resembling a chain-shape
or other contorted shape. This final rule will remove states from the
high unemployment area designation process; instead, investors will be
required to provide sufficient evidence to DHS in order to qualify for
the reduced investment threshold. Under this final rule, DHS will
generally limit the number of census tracts that could be combined for
this purpose.\127\ Specifically, DHS will allow for a high unemployment
area to consist of an area comprised of the census tract(s) in which
the new commercial enterprise is principally doing business, including
any and all adjacent tracts, if the weighted average of the
unemployment rate for all included tracts is at least 150 percent of
the national average. Additionally, DHS will allow cities and towns
with a population of 20,000 or more outside of MSAs to qualify as a TEA
based on high unemployment. See final 8 CFR 204.6(j)(6)(ii)(A).
---------------------------------------------------------------------------
\126\ USCIS Policy Manual, 6 USCIS-PM G, Chapter 2.A(5).
\127\ According to USCIS policy in effect at the time of
issuance of this rulemaking:
A new commercial enterprise is principally doing business in the
location where it regularly, systematically, and continuously
provides goods or services that support job creation. If the new
commercial enterprise provides such goods or services in more than
one location, it will be principally doing business in the location
most significantly related to the job creation.
Factors considered in determining where a new commercial
enterprise is principally doing business include, but are not
limited to, the location of:
Any jobs directly created by the new commercial
enterprise;
Any expenditure of capital related to the creation of
jobs;
The new commercial enterprise's day-to-day operation;
and
The new commercial enterprise's assets used in the
creation of jobs.
USCIS Policy Manual, 6 USCIS-PM G (Nov. 30, 2016).
---------------------------------------------------------------------------
In order to assess the impacts of the changes to the TEA
designation requirements, DHS performed further analysis on the 2016
NCE sample. First, DHS determined, based on the sample, that 98 percent
of regional center investments and 68 percent of non-regional center
investments are made into TEAs. Because the 2016 sample significantly
over-represents non-regional center investments, DHS also determined
the percentage of investments overall that were applied to TEAs. DHS
found that 96 percent of investments and 83 percent of NCEs were
applied to TEAs.\128\ About 9 percent of investments that were made
into TEAs were made into rural TEAs. The non-regional center share of
rural TEA investments was slightly higher than that of regional
centers, at 9 and 11 percent, in order.
---------------------------------------------------------------------------
\128\ To account for the over-representation on non-regional
center investments, DHS uses a weighted average approach to increase
precision in the estimates. In the 2016 NCE sample non-regional
center NCE investments constitute exactly half, but more broadly
they account for less than a tenth (8 percent) of submitted
investments. This bias is not a feature of the sampling methodology
but rather an inherent feature of the population, because non-
regional center investments comprise almost half, 49 percent, of all
NCEs. Note that there is a slight sampling discrepancy in NCEs as
well but it is very slight, at 1 percent. The weighted average for
TEA investments is the sum of the regional center share of
investments (.92) multiplied by the TEA share found in the sample
(.98), and the non-regional share of investments (.08) multiplied by
the TEA share in the sample (.68). The resulting weighting equation
is .90 + .06 = .96 or 96 percent. The weighted average for TEA NCEs
is the sum of the regional center share of NCEs (.51) multiplied by
the TEA share found in the sample (.98), and the non-regional share
of NCEs (.49) multiplied by the TEA share in the sample (.68). The
resulting weighting equation is .50 + .33 = .83.
---------------------------------------------------------------------------
DHS then parsed the TEA filings comprising the 2016 NCE sample into
specific cohorts. Specifically, DHS is interested in the number and
share of projects and NCEs that would likely be affected by the rule.
DHS thus split the sample of NCEs into regional center and non-regional
center groups, and then broke these into two subgroups each. The first
subgroup is the number of filings that comprised rural, and then high
unemployment TEA filings that did not rely on state designations to
qualify. The TEAs in this cohort did not require state designations
because the project was located in a specific geographical unit that
met the unemployment threshold.\129\ These TEAs would be unaffected by
the changes being finalized in this rule as they pertain to TEA reform.
This first subgroup also adds the filings that relied on one or two
census tracts, respectively. These too will be unaffected by the
specific TEA changes proposed in this rule. Hence the first subgroup
represents filings that would not be affected by the rule. The second
subgroup is the remainder--those filings into high unemployment TEAs
that relied on three or more census tracts. This final rule will
potentially affect some of the designations in this second subgroup.
---------------------------------------------------------------------------
\129\ For the TEA geographies that met the high unemployment
threshold in the sample analyzed, 90 percent utilized MSAs and the
remaining 10 percent utilized counties.
---------------------------------------------------------------------------
Having broken out the filings to identify the segment that would
potentially be affected, DHS proceeded to estimate the shares of
investments and NCEs potentially impacted, as well as the actual
numbers, on an annual basis. There are two caveats to our analysis.
Foremost, we emphasize that the figures presented represent potential
and likely maximum impacts for the following reason. Some of the group
that relied on three or more tracts may have been configured in a
manner that could meet the new provision. The data that DHS analyzed
only contained the number of tracts, not the raw data to evaluate the
actual geographical configuration and to determine if it would meet the
provision in the final rule. Second, the figures for investments and
NCEs apply to petitions filed and thus not to actual approvals or
investments actually made. The weighted percentages and figures
applicable are summarized in the Table 5 below, noting that the amounts
are based on the average of filings for FY 2014-2016; potential changes
in future filing patterns are discussed later.
Table 5--TEA Metrics
----------------------------------------------------------------------------------------------------------------
Investments NCEs
---------------------------------------------------------------
TEA cohort Share Share
Amount (percent) Amount (percent)
----------------------------------------------------------------------------------------------------------------
Not affected by the rule........................ 6,207 46 832 57
Potentially affected by the rule................ 7,075 54 628 43
----------------------------------------------------------------------------------------------------------------
[[Page 35800]]
As the table reveals, just over half (54 percent) of investments,
or about 7,075 annually, could potentially be affected, though we
stress again that this is an upper bound estimate. In reality, some
portion of the maximum cohort for projects and NCEs will have continued
to qualify for TEA designation under the changes by this rule. However,
currently DHS does not have reliable, statistically valid information
from which DHS can more accurately estimate the share and number of
projects and NCEs likely to be affected by the rule. Slightly under
half, 43 percent, of NCEs could be impacted.
DHS obtained Census Bureau data on adjacent tracts that were
utilized in studies unrelated to the current rulemaking provision.\130\
From the population of 74,001 tracts provided in the Census dataset,
DHS randomly sampled 390 tracts, which is slightly more than the 383
needed for 95 percent confidence and a 5 percent margin of error. The
average number of adjacent tracts was 6.4 and the median was 6, with a
maximum of 11, a minimum of 3, and a range of 8. Since ``partial''
tracts are not viable under the EB-5 program, the average was rounded
to the nearest whole number and 1 tract was added to account for the
primary tract for which the adjacencies were counted, to yield an
average of 7 total tracts. This suggests that it may not be unusual for
a TEA designation of three or more tracts to satisfy the adjacency
requirements of this final rule.
---------------------------------------------------------------------------
\130\ As of 2016, the Census Bureau records show 73,057 Tracts
in the United States, including the District of Columbia but not
counting U.S. Territories. U.S. Census Bureau, 2010 Census Tallies
of Census Tracts, Block Groups and Blocks, available at https://www.Census.gov/geo/maps-data/data/tallies/tractblock.html. The data
utilized in this analysis is currently available publicly from Brown
University's (Providence, RI) American Communities Project website
at http://www.s4.brown.edu/us2010/Researcher/Pooling.htm.
---------------------------------------------------------------------------
The benefit of this aspect of the final rule is that it will
prevent certain TEA configurations that rely on a large number of
census tracts indirectly linked to the actual project tract(s) by
multiple degrees of separation. As a result, some investments may be
re-directed to areas where unemployment rates are truly high, according
to the 150 percent threshold, and therefore may stimulate job creation
where it is most needed.
DHS also considered an alternative provision, under which TEA
designations would be subject to a twelve-tract limit. This limit is
used by the State of California in its TEA certifications. DHS
considered this limit as an alternative approach because it is the only
case in which a state limits the number of census tracts to a specific
number. Analysis of the NCE sample revealed that for tract
configurations with two or more tracts, the average number of tracts
aggregated was 16, but the median was 7. The figures are slightly
higher at 17 and 8, respectively, when the cohort is isolated to three
or more multiple tract configurations. The difference in the mean and
median indicates that the distribution is right-skewed, characterized
by a small number of very large-tract number compilations, evidenced by
a sample range of 198 tracts. DHS notes that there is sufficient
variation in the data to preclude state locational bias, as 21 states
and the District of Columbia were represented in the 2016 NCE sample.
Ultimately, DHS did not choose this alternative option because it is
not necessarily appropriate for nationwide application, as the
limitation to 12 census tracts may be justifiable for reasons specific
to California but may not be apt on a national scale.
DHS stresses that the maximum cohorts presented in Table 5
overstate the number and shares of future investments and NCEs that
will be affected by the TEA reform provision because some of the
configurations that relied on multiple tracts (3 or more) may be able
to meet the requirements of the rule. Furthermore, the number of
affected investments and NCEs is also likely to be lower because
regional centers may be able to replace forgone projects in places that
will not meet the high unemployment criteria under the final rule with
other projects that will in fact qualify. For example, a regional
center seeking to locate a project on one city block that will no
longer qualify as a TEA may opt to locate the project on another block
that could qualify as a TEA under the new rule. In that sense, the
final rule may provide additional incentive for investments in rural
areas, because such investments will be unaffected by this rule, or in
areas that are more closely associated with high unemployment. DHS
believes that some regional centers will not be able to make such a
substitution and that there may be costs in the forms of forgone
investments and projects, and accompanying reductions in job creation
and other economic activity (unless other investments and projects
create compensatory or more than compensatory economic activity).
DHS has described some of the possible negative consequences of a
reduced number of investors. A decrease in investments and projects may
potentially reduce some job creation and have other downstream effects.
In addition to the amendments examined in the preceding analysis,
DHS will allow cities and towns with a population of 20,000 or more
outside of MSAs as a specific and separate area that may qualify as a
TEA based on high unemployment. This is a narrower change than was
introduced in the NPRM, where it was proposed to allow any city or town
with a population of 20,000 to qualify as a TEA based on high
unemployment. DHS cannot estimate the additional number of NCEs that
will qualify as principally doing business in and creating jobs in a
TEA based on this amendment. However, DHS anticipates the change will
provide benefits in that additional areas may qualify as a TEA based on
high unemployment, potentially offering investors more opportunities to
invest in a TEA at the reduced investment amount, and encouraging job
creation in more areas of high unemployment.
e. Other Provisions
DHS has also analyzed the other provisions in the rule:
Removal of Conditions Filing. DHS is revising its regulations to
clarify that, except in limited circumstances, derivative family
members must file their own petitions to remove conditions from their
permanent residence when they are not included in a petition to remove
conditions filed by the principal investor. Generally, an immigrant
investor's derivatives are included in the principal immigrant
investor's Form I-829 petition. However, there have been cases where
the derivatives are not included in the principal's petition but
instead file one or more separate Form I-829 petitions. This final rule
clarifies that, except in the case of a deceased principal, derivatives
not included in the principal's Form I-829 petition cannot use one
petition for all the derivatives combined, but must each separately
file his or her own Form I-829 petition. Based on IPO review of
historical filings for this group, on average over a 3-year period
about 24 cases per year involved such circumstances. Biometrics are
currently required for the joint Form I-829 petition submissions, so
the provision requiring separate filings will not impose any additional
biometric, travel, or associated opportunity costs. The only costs
expected from this specific provision in the final rule will be the
separate filing fee and associated opportunity cost. DHS has attempted
to quantify these new costs as follows. The filing fee for a Form I-829
petition is $3,750. DHS estimates that the form
[[Page 35801]]
takes 4 hours to complete. DHS recognizes that many dependent spouses
and children do not currently participate in the U.S. labor market, and
as a result, are not represented in national average wage calculations.
In order to provide a reasonable proxy of time valuation, DHS has to
assume some value of time above zero and therefore uses an hourly cost
burdened minimum wage rate of $10.66 to estimate the opportunity cost
of time for dependent spouses. The value of $10.66 per hour represents
the Federal minimum wage with an upward adjustment multiple of 1.47 for
benefits.\131\ Each applicant will face a time cost burden of $42.64,
which when added to the filing fee, is $3,792.64. Extrapolating the
past number of average annual filings of 24 going forward, total
applicant costs will total $91,023.36 annually.\132\
---------------------------------------------------------------------------
\131\ Minimum Wage, U.S. DOL, available at http://www.dol.gov/dol/topic/wages/minimumwage.htm (indicating the Federal Minimum Wage
is $7.25 per hour). The benefits-to-wage multiplier is calculated as
follows: (Total Employee Compensation per hour)/(Wages and Salaries
per hour). See Economic News Release, U.S. Department of Labor,
Bureau of Labor Statistics, Table 1. Employer costs per hour worked
for employee compensation and costs as a percent of total
compensation: Civilian workers, by major occupational and industry
group (June 2018), available at https://www.bls.gov/news.release/archives/ecec_06082018.pdf.
\132\ Calculation: The burdened wage of $10.66 per hour
multiplied by 4 hours.
---------------------------------------------------------------------------
Removal of Conditions Interview. In addition to the separate filing
requirement discussed earlier, DHS is improving the adjudication
process relevant to the investor's Form I-829 interview process by
providing flexibility in interview scheduling and location. Section
216A(c)(1)(B) of the INA, 8 U.S.C. 1186b(c)(1)(B), generally requires
Form I-829 petitioners to be interviewed prior to final adjudication of
the petition, although DHS may waive the interview requirement at its
discretion. See INA section 216A(d)(3), 8 U.S.C. 1186b(d)(3). Under
this rule, DHS is giving USCIS greater flexibility to require Form I-
829 interviews and determine the appropriate location for such an
interview. Additionally, current DHS regulations allow for Form I-829
petitioners to be interviewed prior to final adjudication of a Form I-
829 petition, but require the interview to be conducted at the USCIS
District Office holding jurisdiction over the immigrant investor's new
commercial enterprise. However, there is no requirement that the
immigrant investor reside in the same location as the new commercial
enterprise, and DHS has determined through some preliminary surveys
conducted by IPO that many immigrant investors are located a
considerable distance from the new commercial enterprise. Therefore,
DHS clarifies that USCIS has authority to schedule an interview at the
USCIS office holding jurisdiction over either the immigrant investor's
commercial enterprise, the immigrant investor's residence, or the
location in which the Form I-829 petition is being adjudicated. DHS
cannot currently determine how many petitioners will potentially be
affected by these changes. From fiscal years 2012 to 2016, DHS received
an average of 2,137 Form I-829 petitions. While not all of these
petitioners will require an interview or face hardship to travel for an
interview, some of this maximum population may be affected.\133\ Some
petitioners will benefit by traveling shorter distances for interviews
and thus see a cost savings in travel costs and opportunity costs of
time for travel and interview time.
---------------------------------------------------------------------------
\133\ USCIS, Number of I-829 Petitions by Entrepreneurs to
Remove Conditions by Fiscal Year, Quarter, and Case Status 2008-
2016, available at https://www.uscis.gov/sites/default/files/USCIS/Resources/Reports%20and%20Studies/Immigration%20Forms%20Data/Employment-based/I829_performancedata_fy2017_qtr2.pdf.
---------------------------------------------------------------------------
Process for Issuing Permanent Resident Cards. DHS also amends
regulations governing the process by which immigrant investors obtain
their new permanent resident cards after the approval of their Form I-
829 petitions. Current regulations require the immigrant investor and
his or her derivatives to report to a district office for processing of
their permanent resident cards after approval of the Form I-829
petition. This process is no longer necessary in light of intervening
improvements in DHS's biometric data collection program.\134\ DHS now
captures the required biometric data while the Form I-829 petition is
pending, at the time the immigrant investor and his or her derivatives
appear at an Application Support Center for fingerprinting, as required
for the Form I-829 background and security checks. DHS then mails the
permanent resident card directly to the immigrant investor by U.S.
Postal Service registered mail after the Form I-829 petition is
approved. Accordingly, there is generally no need for the immigrant
investor and his or her derivatives to appear at a district office
after approval of the Form I-829 petition.
---------------------------------------------------------------------------
\134\ DHS already has authority to collect this information
under 8 CFR part 103.
---------------------------------------------------------------------------
DHS does not estimate any additional costs for this provision. This
provision will likely benefit immigrant investors and any derivatives,
including by providing savings in cost, travel, and time, since this
regulation will no longer require them to report to a district office
for processing of their permanent resident cards. DHS also benefits by
removing a process that is no longer necessary.
Petitioner Eligibility Following a Change in a Project's Offering.
DHS also modifies its regulations to indicate that amendments or
supplements made to an EB-5 project's offering in order to maintain
compliance with securities laws based upon the final rule's changes to
8 CFR 204.6 shall not independently result in denial or revocation of
an investor's petition. DHS does not estimate any additional costs for
this provision. This allowance will likely benefit certain investors
whose eligibility for the EB-5 classification may have been at risk,
absent this provision, because of an amendment to offering documents
based on the changes made in this final rule. The petitions for this
narrowly defined population of investors will not be denied or revoked
under the circumstances put forth at new 8 CFR 204.6(n), provided the
investors were eligible at the time of filing their petitions and
remain eligible at the time of adjudication.
Miscellaneous Other Changes. DHS is also making a number of other
technical changes to the EB-5 regulations. First, DHS is updating a
reference to the former United States Customs Service, so that it will
now refer to U.S. Customs and Border Protection. Second, DHS is
conforming DHS regulations to Public Law 107-273, which eliminated the
requirement that immigrant entrepreneurs establish a new commercial
enterprise from both section 203(b)(5) and section 216A of the INA.
Accordingly, DHS removes references to this requirement in 8 CFR 216.6.
Third, DHS is further conforming DHS regulations to Public Law 107-273
by removing the references to ``management'' at 8 CFR 204.6(j)(5)
introductory text and (j)(5)(iii). Fourth, DHS is removing the phrase
``as opposed to maintaining a purely passive role in regard to the
investment'' from 8 CFR 204.6(j)(5). Fifth, DHS is allowing any type of
entity to serve as a new commercial enterprise. Sixth, DHS is amending
8 CFR 204.6(k) to remove the requirement on USCIS to specify in the
decision on the EB-5 petition whether the new commercial enterprise is
principally doing business in a TEA. Finally, DHS is making revisions
to otherwise unaffected sections of section 204.6 and 216.6 to replace
the term ``entrepreneur'' with the term ``investor.''
Since the NPRM, DHS is making six additional miscellaneous changes
to (1)
[[Page 35802]]
remove references to ``geographic or political subdivision'' in 8 CFR
204.6(i) and (j)(6)(ii)(B), (2) provide clarification in 8 CFR 204.6(d)
that the petitioner of multiple immigrant petitions approved for
classification as an investor is entitled to the earliest qualifying
priority date, (3) changing ``approved EB-5 immigrant petition'' to
``immigrant petition approved for classification as an investor,
including immigrant petitions whose approval was revoked on grounds
other than those set forth below,'' and ``approved petition'' to
``immigrant petition approved for classification as an investor,'' (4)
changing ``based upon that approved petition'' to ``using the priority
date of the earlier-approved petition'' in final 8 CFR 204.6(d), (5)
clarifying that a TEA may include census tracts directly adjacent to
the census tract(s) in which the NCE is primarily engaged in business,
and (6) making a technical correction to the inflation adjustment
formula for the standard minimum investment amount and the high
employment area investment amount, such that future inflation
adjustments will be based on the initial investment amount set by
Congress in 1990, rather than on the most recent inflation adjustment.
All of these provisions are technical changes and will have no impact
on investors or the government. Therefore, the benefits and costs for
these changes were not estimated.
Miscellaneous Costs. Familiarization costs: DHS assumes that there
will be familiarization costs associated with this rule. To estimate
these costs, DHS relied on several assumptions. First, DHS believes
that each approved regional center will need to review the rule. Other
than regional centers, the NCEs will also need to be familiar with the
final rule. Based on the 851 regional centers as having approved Forms
I-924 and 719 non-regional center NCEs when this analysis was conducted
(July 3, 2017), a total of at least 1,570 identified entities will
likely need to review the rule. DHS believes that lawyers will likely
review the rule and that it will take about 4 hours to review and
inform any additional parties of the changes in this final rule. Based
on the BLS ``Occupational Employment Statistics (OES)'' dataset, the
current mean hourly wage for a lawyer was $68.22.\135\ DHS burdens this
rate by a multiple of 1.47 to account for other compensation and
benefits, to arrive at an hourly cost of $100.28. The total cost of
familiarization is $629,758.4 annually based on the current number of
approved regional centers and non-regional center NCEs in the recent
past.\136\
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\135\ The wage figure reflects the May 2017 update from Bureau
of Labor Statistics, Occupational Employment Statistics (OES) data
set, provided in HTML format available at https://www.bls.gov/oes/2017/may/oes_nat.htm#23-0000.
\136\ Calculation: 1,570 entities x 4 hours each x burdened
hourly wage of $100.28.
---------------------------------------------------------------------------
B. Small Business Regulatory Enforcement Fairness Act of 1996
This rule is not a major rule as defined by section 804 of the
Small Business Regulatory Enforcement Fairness Act of 1996. This rule
will not result in an annual effect on the economy of $100 million or
more, a major increase in costs or prices, or significant adverse
effects on competition, employment, investment, productivity,
innovation, or on the ability of United States companies to compete
with foreign-based companies in domestic and export markets. However,
as some small businesses may be affected under this regulation, DHS has
prepared a Final Regulatory Flexibility Analysis under the Regulatory
Flexibility Act.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as
amended by the Small Business Regulatory Enforcement Fairness Act of
1996, Public Law 104-121, 5 U.S.C. 601-612, requires Federal agencies
to consider the potential impact of regulations on small entities
during the development of their rules. The term ``small entities''
comprises small businesses, not-for-profit organizations that are not
dominant in their fields, and governmental jurisdictions with
populations of less than 50,000. An ``individual'' is not defined by
the RFA as a small entity, and costs to an individual from a rule are
not considered for RFA purposes. In addition, the courts have held that
the RFA requires an agency to perform a regulatory flexibility analysis
of small entity impacts only when a rule directly regulates small
entities.\137\ Consequently, any indirect impacts from a rule to a
small entity are not costs for RFA purposes.
---------------------------------------------------------------------------
\137\ A Guide for Government Agencies How to Comply with the
Regulatory Flexibility Act, May 2012 page 22. See Direct versus
indirect impact discussion, available at https://www.sba.gov/sites/default/files/advocacy/rfaguide_0512_0.pdf.
---------------------------------------------------------------------------
However, the changes proposed by DHS to modernize and improve the
EB-5 program may have the potential to affect several types of business
entities involved in EB-5 projects. Therefore, DHS prepared an Initial
Regulatory Flexibility Analysis (IRFA) under the RFA in the proposed
rule because some of the entities involved may be considered small
entities.
In the IRFA of the NPRM, DHS explained that there were four main
types of business entities involved in EB-5 that could be affected by
the proposed rule changes: Immigrant Investors, Regional Centers (RCs),
New Commercial Enterprises (NCEs), and Job-Creating Entities (JCEs).
DHS explained that the investors who invest funds and file Form I-526
petitions are individuals who voluntarily apply for immigration
benefits on their own behalf and thus do not meet the definition of a
small entity. Therefore, the EB-5 investors were not considered further
for purposes of the RFA.
DHS also explained in the IRFA that the complex, multi-layered
structure of most EB-5 investments, coupled with a lack of data
concerning revenue and employment, made it impossible for DHS to
determine if NCEs and JCEs were small entities. These constraints still
apply and DHS cannot determine if these entities are small in terms of
the RFA. DHS sought public feedback on the topic but did not receive
data or information that could facilitate an appropriate small entity
analysis for this final rule.
In the IRFA, DHS explained that RCs were difficult to analyze
because of the lack of official data concerning employment, income, and
industry classification of the regional center itself. First, DHS
explained that the bundled investments that RCs typically pool and
structure as loans do not constitute revenue. Second, RCs typically
report the North American Industry Classification (NAICS) codes
associated with the sectors they plan to direct investor funds toward,
but these codes do not generally apply to the RCs business themselves.
In addition, information provided to DHS concerning RCs generally does
not explicitly include revenues or employment.\138\ As a result, DHS
was unable to make a determination concerning the small entity status
of RCs in the IRFA.
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\138\ DHS conducted a small entity analysis on EB-5 regional
centers for the 2016 comprehensive fee rule, which went into effect
on December 23, 2016. See 81 FR 73292. However, the same data
constraints as described in the NPRM of this rule made it impossible
to draw any conclusions.
---------------------------------------------------------------------------
Since the IRFA, DHS was able, despite data constraints, to obtain
some information under some specific assumptions to develop a
methodology to analyze the small entity status of RCs, as will be
explained in detail under section D. Therefore, DHS presents this Final
Regulatory Flexibility Analysis (FRFA), which includes this additional
[[Page 35803]]
analysis. In summary, DHS was able to determine that a significant
number of RCs may be small entities. However, DHS was still not able to
conclusively determine the impact of this final rule on those small
entities.
Final Regulatory Flexibility Analysis
Small entities that may incur additional indirect costs by this
rule are the RCs that pool immigrant investors' funds into associated
NCEs that in turn undertake job-creating activities directly or, more
typically, indirectly through JCEs that receive EB-5 capital from the
RC-associated NCEs (most often through loans). RC activity has grown
substantially since 2008, and as of July 3, 2017, there were 851
approved RCs. RC-affiliated Form I-526 petitions accounted for 13,103,
or 92 percent, of Form I-526 petitions submitted annually from 2014-
2016. Since RCs, NCEs, and JCEs all have a role to play in the EB-5
program, the regulatory changes promulgated in this final rule notice
could affect all three types of entities. However, as was discussed in
the IRFA of the NPRM, DHS does not have a way of knowing if NCEs and
JCEs are small entities.
1. A Statement of the Need for, and Objectives of, the Rule.
DHS is updating its EB-5 regulations to modernize aspects of the
EB-5 program and improve areas of the program in need of reform. The
rule will also reflect statutory changes and codify existing policies.
Elsewhere in this preamble, DHS provides further background and
explanation for changes being made in this final rule.
2. A Statement of the Significant Issues Raised by the Public
Comments in Response to the Initial Regulatory Flexibility Analysis, A
Statement of the Assessment of the Agency of Such Issues, and A
Statement of Any Changes Made in the Proposed Rule as a Result of Such
Comments.
DHS received several comments on the IRFA analysis provided with
the proposed rule. These comments are summarized and addressed as
follows:
1. Industry Classifications/NAICS Codes To Classify Regional Centers
A commenter that represents multiple regional centers stated that
according to its members, RCs typically are classified under NAICS code
523, Securities, Commodity Contracts, and Other Financial Investments
and Related Activities. According to the commenter, subsector 523 is
identified in the Small Business Administration's (SBA) size standard
list as a small entity based on a revenue level of $38.5 million or
less. See 13 CFR 121.201. The commenter suggested that DHS should
review such data, and that if most regional centers are small
businesses, additional analysis is needed to assess potential changes
to the course of the regulatory process.
DHS appreciates the commenter's suggestion on using the size
standard revenue found in NAICS subsector 523 to determine the small
entity status of RCs. However, DHS disagrees that subsector 523, and
its corresponding size standard revenue, is the only appropriate
industry in which to classify RCs. Subsector 523 primarily engages in
underwriting, brokering, or providing other services related to
securities, commodity contracts, and other financial investments and
related activities.\139\ However, other NAICS categories might also
apply to certain RCs. For instance, DHS determined that some RCs could
be classified under NAICS code 522310, Mortgage and Nonmortgage Loan
Brokers, given the prevalence of the NCE to JCE loan model and the role
that RCs typically occupy in facilitating such loans. NAICS industry
522310 is comprised of establishments primarily engaged in arranging
loans by bringing borrowers and lenders together on a commission or fee
basis.\140\ The small business size standard for NAICS industry 522310
is based on a revenue level of $7.5 million or less. Regardless of
which NAICS code applies to some RCs, however, DHS reiterates that the
revenue of RCs is still difficult to determine because of the lack of
official data concerning income and employment of the RC. Therefore,
even if a NAICS code allows for industry classification of the RC
itself, application of the size standard is more challenging. The
information provided by RC applicants as part of the Form I-924 and I-
924A processes does not include RC revenues or employment, which would
be necessary to compare against the SBA size standard.
---------------------------------------------------------------------------
\139\ 2017 NAICS Definition of Subsector 523 Securities,
Commodity Contracts, and Other Financial Investments and Related
Activities, available at https://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=523&search=2017 NAICS Search.
\140\ 2017 NAICS Definition of 522310, Mortgage and Nonmortgage
Loan Brokers, available at https://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=522310&search=2017 NAICS Search.
---------------------------------------------------------------------------
2. Industry Classifications/NAICS Codes To Classify NCEs
One commenter stated that if most NCEs and JCEs consider projects
within a few industries, it would not be burdensome for DHS to review
IPO annual reports to make the most economically sound conclusions as
to the NAICS codes for most EB-5 program NCEs and JCEs.
As described in the proposed rule and similar to challenges with
identifying RCs as small entities, DHS had challenges in trying to
identify NCEs and JCEs as small entities. The multiplicity of ways in
which an NCE can engage in the job creating activity make it difficult
to assign a NAICS code to any particular entity that constitutes or
comprises part of what is considered the NCE. Additionally, DHS does
not require RC applicants or petitioners to submit on their
applications or petitions the type of revenue and employment data
appropriate for analysis, regardless of the type of NCE or how it is
structured. Also, due to data capture limitations, it is not feasible
for DHS to reliably estimate the number of JCEs at this time. DHS
anticipates forthcoming form revisions that may collect additional data
on JCEs that receive EB-5 capital, and expects to be able to examine
this more closely in the future.
3. Sources of Revenue for RCs and NCEs
A commenter stated that although revenue and employee numbers for
RCs and NCEs are not collected on the Form I-924A for Annual
Certification, the revenue and employee numbers are contained in
supplementary papers filed annually with the Form I-924A.
DHS reiterates that the information provided by RC applicants as
part of the Form I-924 and I-924A processes does not include adequate
data to allow DHS to reliably identify the small entity status of
individual RCs or businesses entities, such as NCEs and JCEs, under
their purview. Information provided to DHS concerning RCs generally
does not include RC revenues or employment of the RCs themselves.
4. Other Comments on the RFA
There were several other comments concerning the RFA. One commenter
claimed that individual investors should be considered small entities
for purposes of this RFA. A second claimed that although DHS has
acknowledged its responsibilities under the RFA, it is actually not
compliant with the RFA because of the lack of detailed analysis. A
third claimed that the rule would cause significant impacts on many
small businesses, but that DHS did not seriously consider any
alternative proposals. These commenters suggest that the rule should
not be implemented until a more detailed analysis of small entity
impacts can be undertaken and evaluated.
DHS appreciates the commenters' concerns but disagrees with the
premise that DHS did not comply with the RFA. DHS has fully complied
with the requirements of the RFA, which are
[[Page 35804]]
procedural in nature. Sections 603 and 604 of the RFA describe what
information needs to be included in an IRFA and FRFA. DHS has provided
that information. DHS notes the RFA provides analytical flexibilities
to agencies and does not contain a requirement for a detailed analysis;
for instance, section 607 of the RFA states a quantitative analysis is
not required to comply with the RFA's analytical requirements.\141\
---------------------------------------------------------------------------
\141\ Section 607 of the RFA, Preparation of Analyses, states
that in complying with the provisions of sections 603 and 604 of
this title, an agency may provide either a quantifiable or numerical
description of the effects of a proposed rule or alternatives to the
proposed rule, or more general descriptive statements if
quantification is not practicable or reliable.
---------------------------------------------------------------------------
DHS explained in the proposed rule and in this final rule the
reasons why this data is difficult to obtain and assess. Since the
proposed rule, however, DHS has attempted to seek some additional data
on RCs and has included that analysis in this final regulatory
flexibility analysis. This additional analysis provides an estimated
percentage of RCs that may be considered small entities. As DHS has
described in this analysis and in the published NPRM, DHS was not able
to obtain additional data on JCEs. Additionally, aside from the
suggestion to review investor and RC filings (which, as described
above, DHS has done), commenters did not provide any data sources that
would allow small entity analysis for JCEs.
DHS disagrees with the commenter that investors must be considered
under the RFA. An investor who wishes to immigrate to the United States
through the EB-5 program must file an Immigrant Petition by Alien
Investor (Form I-526). Individuals who file Form I-526 petitions apply
for immigration benefits on their own behalf and thus do not meet the
definition of a small entity. Therefore, DHS reiterates that investors
need not be considered further for purposes of regulatory flexibility
analysis.
Finally, although the commenters claimed that there would likely be
significant costs to small entities, they did not provide credible data
or analysis to support the claim. As it pertains to compliance with
regulatory flexibility analysis requirements, DHS complied with such
requirements. For instance, DHS considered several alternatives, and
determined that a significant share of affected business entities could
be small entities, as described below.
3. The Response of the Agency to Any Comments Filed by the Chief
Counsel for Advocacy of the Small Business Administration in Response
to the Proposed Rule, and a Detailed Statement of Any Change Made to
the Proposed Rule in the Final Rule as a Result of the Comments.
No comments were filed by the Chief Counsel of Advocacy of the SBA.
4. A Description of and an Estimate of the Number of Small Entities
to Which the Rule Will Apply or an Explanation of Why No Such Estimate
Is Available.
As mentioned above, DHS was able to obtain some additional
information on RCs since the publication of the NPRM. RCs file Form I-
924 with DHS that includes a plan of operations for the RC and
information regarding fees and surcharges paid to the RC. Additionally,
individuals investing through the RC program file Form I-526 with DHS
based on a specific NCE, which are affiliated with a specific RC. For
this analysis, DHS manually consulted internal file tracking datasets
on Form I-526 and NCE submissions for RC investors. NCEs can have
multiple investors, but each individual investor must file a unique
Form I-526. DHS searched for filed Forms I-526 and grouped them
according to NCE. Then, DHS connected the identified NCEs to the unique
regional center. Through this process, DHS obtained the number of
investors and year of each investment for each of the approved RCs.
When reviewing Forms I-924 submitted by RCs to DHS, adjudicators
and economists prepare economic due diligence reports (EDD) as part of
the adjudication process. These EDDs are not captured in formal DHS
databases. However, for this analysis, DHS manually obtained EDDs for
574 regional centers with approved Forms I-924 in FY 2017. The EDDs
contain data from the Form I-924 submission, such as the administrative
fee that the RC may charge to investors as well as plans and
projections concerning investors. DHS assumes that these administrative
fees contribute to the revenues of RCs.\142\ While the RCs submit
projections of anticipated numbers of investors, the actual investments
and related Form I-526 filings submitted under the purview of RCs can
only be determined after the Form I-924 is approved. Thus, DHS cannot
rely on these early projections in determining RC revenue. But DHS can
multiply the administrative fees by the number of associated EB-5
investors. Therefore, in an effort to reach a more accurate count of RC
revenue, DHS manually matched each RC EDD to the corresponding
investors from the Form I-526.
---------------------------------------------------------------------------
\142\ The administrative fees charged to the investor may cover
various charges related to the economic impact analysis, legal fees,
business plan development, and immigration services fees.
---------------------------------------------------------------------------
Through the process described in the preceding paragraph, DHS
obtained the number of investors per RC and proceeded to refine the RC
cohort by removing RCs that did not have relevant data, RCs that have
been terminated, and those RCs that had no affiliated Form I-526
petitions associated with them (as those would present no information
that could be used in the analysis). For those RCs included in the
analysis, DHS notes that the numbers of Forms I-526 filed under a
specific RC (and related administrative fee payments) are not spread
evenly across years, as some years have more Form I-526 submissions
than others. This posed substantial challenges for DHS analysis,
because there is no natural cutoff (such as a fiscal year or calendar
year) for analyzing the data and it does not allow DHS to capture the
number of unique investors to each RC. If DHS were to extend the
analytical cohort back to earlier approvals in order to capture the
total number of investors unique to the RC, the timeframe for analysis
would span multiple years.\143\ Therefore, this makes DHS' ability to
accurately assess RC revenue against the SBA standards difficult.\144\
---------------------------------------------------------------------------
\143\ See ``How to Comply with the Regulatory Flexibility Act,''
(2017) U.S. Small Business Administration, Office of Advocacy,
available at page. 114, available at https://www.sba.gov/sites/default/files/advocacy/How-to-Comply-with-the-RFA-WEB.pdf.
\144\ The SBA Table of Small Business Size Standards is found
at: https://www.sba.gov/sites/default/files/files/Size.
---------------------------------------------------------------------------
To address the timing issue, DHS analyzed the time-distribution of
the filing of Form I-526 petitions associated with designated RCs and
found that the clear bulk of filings--exactly four-fifths--were made in
the first year and the second year after a RC was designated, while
only 7 percent of filings were made in the same year the RC was
designated. Moreover, a larger share, 13 percent, were made in the
first half of 2017), as is reported in Figure 2:
[[Page 35805]]
[GRAPHIC] [TIFF OMITTED] TR24JY19.013
For the purposes of this analysis, DHS assumes that each Form I-526
filed under an RC represents an instance in which the RC will receive
an administrative fee that will contribute to the RC's revenue.
Although DHS cannot assume that administrative fees are paid when the
forms are filed, this analysis assumes the fees will be paid
eventually.
DHS believes that the Form I-526 filings made through RCs that were
designated in 2014 are a reasonable benchmark for analysis that
mitigate the aforementioned constraints as best as possible.
For the RCs approved in 2014 that had EDDs with viable information,
and were non-terminated and ``active'' (meaning that they actually had
Form I-526 filings in 2016), we obtained a cohort of 95 RCs that were
associated with 6,308 individual investors. DHS analysis reveals that
the number of investors per RC varies substantially, with a range of
2,272. The distribution is highly right-skewed, with a mean of 85, a
median of 39, and a skewness value of 8. These results indicate suggest
that the median is a proper measure for central location. Next, DHS
analyzed the administrative fees in the cohort. The distribution is
tight (or clustered closely together) with both the mean and median at
$50,000. Next DHS estimated revenues for each RC in the analytical
cohort by multiplying the total number of investors who filed a Form I-
526 for each RC by its actual administrative fee reported on the EDD,
which yielded a median revenue amount of $1,250,000 over the period
considered. DHS recognizes that by using the total number of investors
who filed a Form I-526 for each RC over the course of 2014, when the RC
was designated, FYs years 2015 and 2016, and the first half of 2017
does not exactly match the SBA size standard time-frame, which is based
on a single calendar year. However, DHS believes that this is the best
analysis that can be conducted given the uniqueness of regional
centers. DHS believes that our modified methodology provides a
reasonable estimate of RC revenue.\145\
---------------------------------------------------------------------------
\145\ An additional assumption in this FRFA analysis is that the
only source of regional center revenue is administrative fees
charged to each investor. DHS believes that some regional centers
may also obtain revenue from charges made to NCEs for management,
consulting, or loan arrangements. DHS does not have data on these
fees and thus relies on the aforementioned assumption of the single
revenue stream accruing to administrative fees charged to investors.
---------------------------------------------------------------------------
To determine the appropriate size standard for the RCs, DHS
extensively reviewed various NAICS codes. DHS determined that NAICS
code 522310, Mortgage and Nonmortgage Loan Brokers defined as an
``industry [that] comprises establishments primarily engaged in
arranging loans by bringing borrowers and lenders together on a
commission or fee basis,'' may be an appropriate NAICS industry in
which RCs might be found given the typical activities undertaken by RC-
associated NCEs (loaning EB-5 capital to the JCEs) and the role
typically undertaken by RCs in facilitating those activities. The SBA
size standard for the NAICS category chosen is based on a revenue of
$7.5 million. DHS compared the revenues of the 95 RCs against this size
standard and concludes that approximately 89 percent of RCs may be
small entities for the purposes of this FRFA. Extrapolating this share
to the 864 approved RCs would mean that approximately 769 RCs may be
small entities.
DHS evaluated the suggestion from a commenter that regional centers
should be classified under NAICS code subsection 523, as either ``an
entity engaged in miscellaneous investment activities'' or ``an entity
engaged in miscellaneous intermediation.'' However, DHS believes that
the coding we chose is the most appropriate to use in the analysis
because it applies to the majority of regional center projects, and
thus is a more accurate reflection of the regional center
entities.\146\
---------------------------------------------------------------------------
\146\ DHS points out for the administrative record that even
though a large majority of regional centers would be small entities
under the analysis undertaken, both classifications recommended by
the commenter would involve revenue based size standards of $38.5
million, which means that an even larger share of regional centers
would be small entities.
---------------------------------------------------------------------------
DHS again caveats that due to the uniqueness of the RC business
operation system and constraints on data, this analysis incorporates
some modifications to the typical methodology that DHS utilizes in its
rulemakings. Namely, DHS had to use a three-and-a-half-year timeframe
instead of the standard one-year timeframe and was compelled to assign
an industry code based on a description of RCs that is our best
knowledge of how RCs tend to function. Lastly, we note that the number
of investors utilized likely understates the true time-independent
revenue of RCs since there will generally be forthcoming investments
(and associated fee payments) not measurable at the point in time when
the analysis was conducted.
While DHS believes the methodology described in this section can
lead to reasonable assumptions on the number of small entities that may
be RCs, DHS still cannot determine the exact impact of this rule on
those small entities. Part of this issue is due to the fact that DHS is
not sure how many, if any, investors will be deterred from the EB-5
program
[[Page 35806]]
due to the increased investment amounts and the new TEA requirements.
DHS cannot estimate the full potential impact of this rule on RC
revenue.
5. A Description of the Projected Reporting, Recordkeeping and
Other Compliance Requirements of the Rule, Including an Estimate of the
Classes of Small Entities Which Will Be Subject to the Requirement and
the Type of Professional Skills Necessary for Preparation of the Report
or Record.
The final rule does not directly impose any new or additional
``reporting'' or ``recordkeeping'' requirements on filers of Forms I-
526, I-829 or I-924. The rule does not require any new professional
skills for reporting. However, the rule may create some additional time
burden costs related to reviewing the proposed provisions, as is
discussed earlier. As noted, DHS believes that lawyers would likely
review the rule and that it would take about 4 hours to review and
inform any additional parties of the changes in this rule. As was
discussed above under ``Miscellaneous Costs,'' the current benefits-
burdened hourly wage of a lawyer is $100.28. At this rate each
reviewing entity would face a familiarization cost of $401.12
While DHS has estimated these costs, and assumes that they may
affect some small entities, for reasons stated previously, data
limitations prevent DHS from determining the extent of the impact to
the small entities.
6. A Description of the Steps the Agency Has Taken to Minimize the
Significant Economic Impact on Small Entities Consistent with the
Stated Objectives of Application Statutes, Including a Statement of the
Factual, Policy, and Legal Reasons for Selecting the Alternative
Adopted in the Final Rule and Why Each of the Other Significant
Alternatives to the Rule Considered by the Agency Which Affect the
Impact on Small Entities Was Rejected.
While DHS has determined, via the preceding analysis, that a
significant share of regional centers may be considered small entities,
DHS does not have enough data to determine the impact that this rule
may have on those entities. Therefore, while many regional centers may
be small entities, DHS cannot determine whether this rule will have a
substantial impact, positive or negative, on those small entities.
DHS considered several alternatives to reform the TEA designation
process, but found that they did not adequately accomplish the
objective of INA section 203(b)(5)(B)(ii). One alternative DHS
considered was limiting the geographic or political subdivision of TEA
configurations to an area containing up to, but no more than, 12
contiguous census tracts, an option currently used by the state of
California in its TEA designation process.\147\ However, DHS is not
confident that this option is necessarily appropriate for nationwide
application, as the limitation to 12 census tracts may be justifiable
for reasons specific to California but may not be practical on a
national scale. Another significant alternative DHS considered that
would be relatively straightforward to implement and understand would
be to limit the geographic or political subdivision of the TEA to the
actual project tract(s). While this option would be easy to put in
practice for both stakeholders and the agency, it was considered too
restrictive in that it would exclude immediately adjacent areas that
would be affected by the investment.
---------------------------------------------------------------------------
\147\ See Cal. Governor's Office of Bus. and Econ. Dev., EB-5
Investor Visa Program, available at http://business.ca.gov/International/EB5Program.aspx.
---------------------------------------------------------------------------
DHS also considered options based on a ``commuter pattern''
analysis, which focuses on defining a TEA as encompassing the area in
which workers may live and be commuting from, rather than just where
the investment is made and where the new commercial enterprise is
principally doing business. The ``commuter pattern'' proposal was
deemed too operationally burdensome to implement as it posed challenges
in establishing standards to determine the relevant commuting area that
would fairly account for variances across the country.\148\ In
addition, DHS could not identify a commuting-pattern standard that
would appropriately limit the geographic scope of a TEA designation
consistent with the statute and the policy goals of this proposed
regulation.
---------------------------------------------------------------------------
\148\ In the NPRM and development of this final rule, DHS
reviewed a proposed commuter pattern analysis incorporating the data
table from the Federal Highway Administration, ``CTPP 2006-2010
Census Tract Flows,'' available at (http://www.fhwa.dot.gov/planning/census_issues/ctpp/data_products/2006-2010_tract_flows/)
(last updated Mar. 25, 2014). DHS also reviewed the CTTP updated
status report (released in January 2018), entitled ``CTPP Oversight
Board is Discontinuing Census TAZ for Small Geography Data Reporting
and Urging the Transportation Planning Community to Engage in 2020
Census Participant Statistical Areas Program (PSAP),'' available at
https://www.fhwa.dot.gov/planning/census_issues/ctpp/status_report/sr0118/fhwahep18046.pdf, which will phase in slight methodological
changes over the next year. DHS found that the required steps to
properly manipulate the Census Transportation Planning Product
(CTPP) database might prove overly burdensome for petitioners with
insufficient economic and statistical analysis backgrounds. As an
alternate methodology for TEA commuter pattern analysis, DHS
reviewed data from the U.S. Census tool, On the Map, available at
http://onthemap.ces.census.gov/, which is tied to the U.S. Census
Bureau's American Community Survey. Although the interface appeared
to be more user-friendly overall, using this data would be
operationally burdensome, potentially requiring hours of review to
obtain the appropriate unemployment rates for the commuting area.
---------------------------------------------------------------------------
With respect to the minimum investment amount provision, DHS
proposed an alternative to setting the reduced TEA investment amount to
half of the standard minimum amount ($900,000 instead of $1,350,000),
consistent with the existing regulatory framework.\149\ DHS initially
proposed a reduction to 75 percent rather than 50 percent of the
standard minimum amount to better balance the Congressional aim of
incentivizing investment in TEAs with the goal of encouraging greater
investment in the United States more generally. History suggests that a
50 percent reduction coincides with an imbalance in favor of TEA
investments. DHS continues to have some concern about the imbalance,
though Congress granted DHS explicit authority to create this
``imbalance'' to incentivize investments in targeted employment areas.
8 U.S.C. 203(b)(5)(C)(ii). However, the reforms to the designation
process for certain high unemployment TEAs finalized in this rule will
ensure that, even if some imbalance remains, it is benefiting truly
deserving communities as Congress intended. Ultimately, DHS believes in
a meaningful incentive to invest in rural areas and areas of true high-
unemployment, and thus, upon careful consideration of the comments
related to this issue, DHS opted to retain the differential between TEA
and non-TEA investments at 50 percent.
---------------------------------------------------------------------------
\149\ The current reduced minimum investment amount ($500,000)
is 50 percent of the standard minimum investment amount
($1,000,000).
---------------------------------------------------------------------------
D. Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995 (UMRA) is intended, among
other things, to curb the practice of imposing unfunded Federal
mandates on State, local, and tribal governments. Title II of the UMRA
requires each Federal agency to prepare a written statement assessing
the effects of any Federal mandate in a proposed or final agency rule
that may result in a $100 million or more expenditure (adjusted
annually for inflation) in any one year by State, local, and tribal
governments, in the aggregate, or by the private sector. The value
equivalent of $100 million in 1995 adjusted for inflation to 2016
levels by the Consumer Price Index for
[[Page 35807]]
All Urban Consumers (CPI-U) is $157 million.
As noted above, this rule does not include any unfunded Federal
mandates. The requirements of Title II of the UMRA, therefore, do not
apply, and DHS has not prepared a statement under the UMRA.
E. Executive Order 13132
This rule would not have substantial direct effects on the States,
on the relationship between the National Government and the states, or
on the distribution of power and responsibilities among the various
levels of government. Therefore, in accordance with section 6 of
Executive Order 13132, it is determined that this rule does not have
sufficient federalism implications to warrant the preparation of a
federalism summary impact statement.
F. Executive Order 12988
This rule meets the applicable standards set forth in sections
(3)(a) and (3)(b)(2) of Executive Order 12988.
G. National Environmental Policy Act
DHS Directive (Dir.) 023-01 Rev. 01 and Instruction (Inst.) 023-01-
001 Rev. 1 establish the policies and procedures that DHS and its
components use to comply with NEPA and the Council on Environmental
Quality (CEQ) regulations for implementing NEPA, 40 CFR parts 1500-
1508. The CEQ regulations allow federal agencies to establish, with CEQ
review and concurrence, categories of actions which experience has
shown do not individually or cumulatively have a significant effect on
the human environment (``categorical exclusions'') and, therefore, do
not require an Environmental Assessment (EA) or Environmental Impact
Statement (EIS). 40 CFR 1507.3(b)(1)(iii), 1508.4.
Inst. 023-01-001 Rev. 01 establishes Categorical Exclusions that
DHS has found to have no such effect. Inst. 023-01-001 Rev. 01 Appendix
A Table 1. Inst. 023-01 -001 Rev. 01 requires the action to satisfy
each of the following three conditions: (1) The entire action clearly
fits within one or more of the categorical exclusions; (2) the action
is not a piece of a larger action; and (3) no extraordinary
circumstances exist that create the potential for a significant
environmental effect. Inst. 023-01-001 Rev. 01 section V.B (1)-(3).
This final rule amends the regulations implementing the EB-5
immigrant visa program. The final rule purely relates to the agency's
administration of the EB-5 program. DHS does not believe that NEPA
applies to this action as any attempt to analyze a potential
environmental impact associated with changes to the agency's
administration of the EB-5 program contemplated by this rule would be
largely, if not completely, speculative. Specifically, this rule
changes a number of eligibility requirements and introduces priority
date retention for certain immigrant investor petitioners. It also
amends existing regulations to reflect statutory changes and codifies
existing EB-5 program policies and procedures. Additionally, the rule
does not affect the number of visas which can be issued and for this
reason as well would have no impact on the environment. DHS does not
know where new commercial enterprises will be established, or where
petitioners will invest or live. To the degree that it is possible to
ascertain reasonably foreseeable impacts, DHS knows only that this rule
does not change the number of visas Congress initially authorized in
1990. Public Law 101-649. With a current population in excess of 323
million and a land mass of 3.794 million square miles, an unchanged
10,000 visas annually is insignificant by any measure.
While DHS believes that NEPA frequently does not apply to USCIS
rules, that analysis is unnecessary here because DHS has determined
that if NEPA were to apply, this rule fits within categorical
exclusions number A3(a) in Inst. 023-01-001 Rev. 01, Appendix A, Table
1: ``Promulgation of rules . . . strictly of an administrative or
procedural nature'' and A3(d) for rules that interpret or amend an
existing regulation without changing its environmental effect.
This rule is not part of a larger action and presents no
extraordinary circumstances creating the potential for significant
environmental effects. Therefore, this proposed rule is categorically
excluded from further NEPA review.
H. Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13,
all Departments are required to submit to the Office of Management and
Budget (OMB), for review and approval, any reporting requirements
inherent in a rule. See Public Law 104-13, 109 Stat. 163 (May 22,
1995). USCIS is revising one information collection in association with
this rulemaking action: Immigrant Petition by Alien Entrepreneur (Form
I-526), consistent with the changes proposed in the NPRM, and is making
conforming changes to two information collections: Petition by
Entrepreneur to Remove Conditions on Permanent Resident Status, Form I-
829, Application for Regional Center Designation Under the Immigrant
Investor Program, approved OMB Control Number 1615-0045; and Form I-
924, Annual Certification of Regional Center, and Form I-924A,
Supplement to Form I-924, approved under OMB Control Number 1615-0061.
Specifically, the Form I-526 will collect additional information
about the targeted employment area and the new commercial enterprise
into which the petitioner is investing to determine the eligibility of
qualified aliens to enter the United States to engage in commercial
enterprises. In accordance with the final regulatory text, DHS is
changing the title of Form I-526 to ``Immigrant Petition by Alien
Investor'' from ``Immigrant Petition by Alien Entrepreneur.''
DHS is also making two additional conforming changes. First, DHS
will update the references to the Form I-526, which will now be
entitled ``Immigrant Petition by Alien Investor'' in Forms I-829, I-
924, and I-924A. Second, as this final rule replaces references to
``entrepreneur'' with ``investor,'' DHS will replace the references to
``entrepreneur'' with ``investor'' in the Forms I-829, I-924, and I-
924A. Accordingly for Forms I-829, I-924, and I-924A, USCIS will submit
a Form OMB 83-C, Correction Worksheet, and amended form and
instructions to OMB for review and approval in accordance with the PRA.
Overview of Information Collection-Form I-526
(1) Type of Information Collection: Revision to a currently
approved information collection.
(2) Title of the Form/Collection: Immigrant Petitioner by Alien
Entrepreneur.
(3) Agency form number, if any, and the applicable component of the
DHS sponsoring the collection: Form I-526; USCIS.
(4) Affected public who will be asked or required to respond, as
well as a brief abstract: Primary: Individuals. Form I-526 is used by
the USCIS to determine if an alien can enter the U.S. to engage in
commercial enterprise
(5) An estimate of the total number of respondents and the amount
of time estimated for an average respondent to respond: The estimated
total number of respondents for the information collection is 15,799
and the estimated hour burden per response is 1hour and 50 minutes.
(6) An estimate of the total public burden (in hours) associated
with the collection: The total estimated annual hour burden associated
with this collection is 28,912 hours.
[[Page 35808]]
(7) An estimate of the total public burden (in cost) associated
with the collection: The estimated total annual cost burden associated
with this collection of information is $17,378,900.
List of Subjects
8 CFR Part 204
Administrative practice and procedure, Adoption and foster care,
Immigration, Reporting and recordkeeping requirements.
8 CFR Part 216
Administrative practice and procedure, Aliens.
Regulatory Amendments
Accordingly, DHS amends chapter I of title 8 of the Code of Federal
Regulations as follows:
PART 204--IMMIGRANT PETITIONS
0
1. The authority citation for part 204 continues to read as follows:
Authority: 8 U.S.C. 1101, 1103, 1151, 1153, 1154, 1182, 1184,
1186a, 1255, 1324a, 1641; 8 CFR part 2.
0
2. Section 204.6 is amended by:
0
a. Revising the section heading and paragraphs (a), (c), and (d);
0
b. In paragraph (e):
0
i. Removing the terms ``entrepreneur'' and ``entrepreneur's'' and
adding in their place ``investor'' and ``investor's,'' respectively, in
the definitions for Capital, Invest, and Qualifying employee;
0
ii. Removing the terms ``Immigrant Investor Pilot'' and ``Pilot'' and
adding in their place the term ``Regional Center'' in the definitions
for Employee and Full-time employment;
0
iii. Adding a definition for Regional Center Program in alphabetical
order;
0
iv. Revising the definitions for Rural area and Targeted employment
area;
0
v. Removing ``entrepreneur's Form I-526'' and adding in its place
``investor's EB-5 immigrant petition'' in the definition for Troubled
business;
0
c. Revising paragraphs (f)(1), (2), and (3);
0
d. In paragraph (g)(1), removing the term ``entrepreneur'' and adding
in its place the term ``investor'';
0
e. Revising paragraphs (g)(2), (i), (j)(2)(iii), (j)(5) introductory
text, (j)(5)(iii), (j)(6)(i) and (ii), and (k); and
0
f. Adding paragraph (n).
The revisions and additions read as follows:
Sec. 204.6 Petitions for employment creation immigrants.
(a) General. An EB-5 immigrant petition to classify an alien under
section 203(b)(5) of the Act must be properly filed in accordance with
the form instructions, with the appropriate fee(s), initial evidence,
and any other supporting documentation.
* * * * *
(c) Eligibility to file and continued eligibility. An alien may
file a petition for classification as an investor on his or her own
behalf.
(d) Priority date. The priority date of a petition for
classification as an investor is the date the completed, signed
petition (including all initial evidence and the correct fee) is
properly filed. The priority date of an immigrant petition approved for
classification as an investor, including immigrant petitions whose
approval was revoked on grounds other than those set forth below, will
apply to any subsequently filed petition for classification under
section 203(b)(5) of the Act for which the alien qualifies. A denied
petition will not establish a priority date. A priority date is not
transferable to another alien. In the event that the alien is the
petitioner of multiple immigrant petitions approved for classification
as an investor, the alien shall be entitled to the earliest qualifying
priority date. The priority date of an immigrant petition approved for
classification as an investor shall not be conferred to a subsequently
filed petition if the alien was lawfully admitted to the United States
for permanent residence under section 203(b)(5) of the Act using the
priority date of the earlier-approved petition or if at any time USCIS
revokes the approval of the petition based on:
(1) Fraud or a willful misrepresentation of a material fact by the
petitioner; or
(2) A determination by USCIS that the petition approval was based
on a material error.
(e) * * *
Regional Center Program means the program established by Public Law
102-395, Section 610, as amended.
Rural area means any area other than an area within a standard
metropolitan statistical area (as designated by the Office of
Management and Budget) or within the outer boundary of any city or town
having a population of 20,000 or more based on the most recent
decennial census of the United States.
Targeted employment area means an area that, at the time of
investment, is a rural area or is designated as an area that has
experienced unemployment of at least 150 percent of the national
average rate.
* * * * *
(f) * * *
(1) General. Unless otherwise specified, for EB-5 immigrant
petitions filed on or after November 21, 2019, the amount of capital
necessary to make a qualifying investment in the United States is one
million eight hundred thousand United States dollars ($1,800,000).
Beginning on October 1, 2024, and every five years thereafter, this
amount will automatically adjust for petitions filed on or after each
adjustment's effective date, based on the cumulative annual percentage
change in the unadjusted All Items Consumer Price Index for All Urban
Consumers (CPI-U) for the U.S. City Average reported by the Bureau of
Labor Statistics, as compared to $1,000,000 in 1990. The qualifying
investment amount will be rounded down to the nearest hundred thousand.
DHS may update this figure by publication of a technical amendment in
the Federal Register.
(2) Targeted employment area. Unless otherwise specified, for EB-5
immigrant petitions filed on or after November 21, 2019, the amount of
capital necessary to make a qualifying investment in a targeted
employment area in the United States is nine hundred thousand United
States dollars ($900,000). Beginning on October 1, 2024, and every five
years thereafter, this amount will automatically adjust for petitions
filed on or after each adjustment's effective date, to be equal to 50
percent of the standard minimum investment amount described in
paragraph (f)(1) of this section. DHS may update this figure by
publication of a technical amendment in the Federal Register.
(3) High employment area. Unless otherwise specified, for EB-5
immigrant petitions filed on or after November 21, 2019, the amount of
capital necessary to make a qualifying investment in a high employment
area in the United States is one million eight hundred thousand United
States dollars ($1,800,000). Beginning on October 1, 2024, and every
five years thereafter, this amount will automatically adjust for
petitions filed on or after each adjustment's effective date, based on
the cumulative annual percentage change in the unadjusted All Items
Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City
Average reported by the Bureau of Labor Statistics as compared to
$1,000,000 in 1990. The qualifying investment amount will be rounded
down to the nearest hundred thousand. DHS may update this figure by
publication of a technical amendment in the Federal Register.
(g) * * *
(2) Employment creation allocation. The total number of full-time
positions created for qualifying employees shall be allocated solely to
those alien investors who have used the
[[Page 35809]]
establishment of the new commercial enterprise as the basis for a
petition. No allocation must be made among persons not seeking
classification under section 203(b)(5) of the Act or among non-natural
persons, either foreign or domestic. USCIS will recognize any
reasonable agreement made among the alien investors in regard to the
identification and allocation of such qualifying positions.
* * * * *
(i) Special designation of a high unemployment area. USCIS may
designate as an area of high unemployment (at least 150 percent of the
national average rate) a census tract or contiguous census tracts in
which the new commercial enterprise is principally doing business, and
may also include any or all census tracts directly adjacent to such
census tract(s). The weighted average of the unemployment rate for the
subdivision, based on the labor force employment measure for each
census tract, must be at least 150 percent of the national average
unemployment rate.
(j) * * *
(2) * * *
(iii) Evidence of property transferred from abroad for use in the
United States enterprise, including U.S. Customs and Border Protection
commercial entry documents, bills of lading, and transit insurance
policies containing ownership information and sufficient information to
identify the property and to indicate the fair market value of such
property;
* * * * *
(5) Petitioner engagement. To show that the petitioner is or will
be engaged in the new commercial enterprise, either through the
exercise of day-to-day managerial control or through policy
formulation, the petition must be accompanied by:
* * * * *
(iii) Evidence that the petitioner is engaged in policy making
activities. For purposes of this section, a petitioner will be
considered sufficiently engaged in policy making activities if the
petitioner is an equity holder in the new commercial enterprise and the
organizational documents of the new commercial enterprise provide the
petitioner with certain rights, powers, and duties normally granted to
equity holders of the new commercial enterprise's type of entity in the
jurisdiction in which the new commercial enterprise is organized.
(6) * * *
(i) In the case of a rural area, evidence that the new commercial
enterprise is principally doing business within an area not located
within any standard metropolitan statistical area as designated by the
Office of Management and Budget, nor within any city or town having a
population of 20,000 or more as based on the most recent decennial
census of the United States; or
(ii) In the case of a high unemployment area:
(A) Evidence that the metropolitan statistical area, the specific
county within a metropolitan statistical area, the county in which a
city or town with a population of 20,000 or more is located, or the
city or town with a population of 20,000 or more outside of a
metropolitan statistical area, in which the new commercial enterprise
is principally doing business has experienced an average unemployment
rate of at least 150 percent of the national average rate; or
(B) A description of the boundaries and the unemployment statistics
for the area for which designation is sought as set forth in paragraph
(i) of this section, and the reliable method or methods by which the
unemployment statistics were obtained.
(k) Decision. The petitioner will be notified of the decision, and,
if the petition is denied, of the reasons for the denial. The
petitioner has the right to appeal the denial to the Administrative
Appeals Office in accordance with the provisions of part 103 of this
chapter.
* * * * *
(n) Offering amendments or supplements. Amendments or supplements
to any offering necessary to maintain compliance with applicable
securities laws based upon changes to this section effective on
November 21, 2019 shall not independently result in denial or
revocation of a petition for classification under section 203(b)(5) of
the Act, provided that the petitioner:
(1) Filed the petition for classification under section 203(b)(5)
of the Act prior to November 21, 2019;
(2) Was eligible for classification under 203(b)(5) of the Act at
the time the petition was filed; and
(3) Is eligible for classification under 203(b)(5) of the Act,
including having no right to withdraw or rescind the investment or
commitment to invest into such offering, at the time of adjudication of
the petition.
PART 216--CONDITIONAL BASIS OF LAWFUL PERMANENT RESIDENCE STATUS
0
3. The authority citation for part 216 continues to read as follows:
Authority: 8 U.S.C. 1101, 1103, 1154, 1184, 1186a, 1186b, and 8
CFR part 2.
0
4. Amend Sec. 216.6 by:
0
a. Revising the section and paragraph (a)(1);
0
b. Removing and reserving paragraph (a)(4)(i);
0
c. Removing ``entrepreneur'' and adding in its place ``investor'' in
paragraph (a)(4)(iv);
0
d. Revising paragraphs (a)(5) and (6) and (b);
0
e. Removing and reserving paragraph (c)(1)(i); and
0
f. Revising paragraphs (c)(2) and (d).
The revisions read as follows:
Sec. 216.6 Petition by investor to remove conditional basis of
lawful permanent resident status.
(a) * * *
(1) General procedures. (i) A petition to remove the conditional
basis of the permanent resident status of an investor accorded
conditional permanent residence pursuant to section 203(b)(5) of the
Act must be filed by the investor with the appropriate fee. The
investor must file within the 90-day period preceding the second
anniversary of the date on which the investor acquired conditional
permanent residence. Before the petition may be considered as properly
filed, it must be accompanied by the fee required under 8 CFR
103.7(b)(1), and by documentation as described in paragraph (a)(4) of
this section, and it must be properly signed by the investor. Upon
receipt of a properly filed petition, the investor's conditional
permanent resident status shall be extended automatically, if
necessary, until such time as USCIS has adjudicated the petition.
(ii) The investor's spouse and children may be included in the
investor's petition to remove conditions. Where the investor's spouse
and children are not included in the investor's petition to remove
conditions, the spouse and each child must each file his or her own
petition to remove the conditions on their permanent resident status,
unless the investor is deceased. If the investor is deceased, the
spouse and children may file separate petitions or may be included in
one petition. A child who reached the age of 21 or who married during
the period of conditional permanent residence, or a former spouse who
became divorced from the investor during the period of conditional
permanent residence, may be included in the investor's petition or must
each file a separate petition.
* * * * *
(5) Termination of status for failure to file petition. Failure to
properly file the petition to remove conditions within the 90-day
period immediately preceding the second anniversary of the date on
which the investor obtained lawful
[[Page 35810]]
permanent residence on a conditional basis shall result in the
automatic termination of the investor's permanent resident status and
the initiation of removal proceedings. USCIS shall send a written
notice of termination and a notice to appear to an investor who fails
to timely file a petition for removal of conditions. No appeal shall
lie from this decision; however, the investor may request a review of
the determination during removal proceedings. In proceedings, the
burden of proof shall rest with the investor to show by a preponderance
of the evidence that he or she complied with the requirement to file
the petition within the designated period. USCIS may deem the petition
to have been filed prior to the second anniversary of the investor's
obtaining conditional permanent resident status and accept and consider
a late petition if the investor demonstrates to USCIS' satisfaction
that failure to file a timely petition was for good cause and due to
extenuating circumstances. If the late petition is filed prior to
jurisdiction vesting with the immigration judge in proceedings and
USCIS excuses the late filing and approves the petition, USCIS shall
restore the investor's permanent resident status, remove the
conditional basis of such status, and cancel any outstanding notice to
appear in accordance with 8 CFR 239.2. If the petition is not filed
until after jurisdiction vests with the immigration judge, the
immigration judge may terminate the matter upon joint motion by the
investor and DHS.
(6) Death of investor and effect on spouse and children. If an
investor dies during the prescribed 2-year period of conditional
permanent residence, the spouse and children of the investor will be
eligible for removal of conditions if it can be demonstrated that the
conditions set forth in paragraph (a)(4) of this section have been met.
(b) Petition review--(1) Authority to waive interview. USCIS shall
review the petition to remove conditions and the supporting documents
to determine whether to waive the interview required by the Act. If
satisfied that the requirements set forth in paragraph (c)(1) of this
section have been met, USCIS may waive the interview and approve the
petition. If not so satisfied, then USCIS may require that an interview
of the investor be conducted.
(2) Location of interview. Unless waived, an interview relating to
the petition to remove conditions for investors shall be conducted by a
USCIS immigration officer at the office that has jurisdiction over
either the location of the investor's commercial enterprise in the
United States, the investor's residence in the United States, or the
location of the adjudication of the petition, at the agency's
discretion.
(3) Termination of status for failure to appear for interview. If
the investor fails to appear for an interview in connection with the
petition when requested by USCIS, the investor's permanent resident
status will be automatically terminated as of the second anniversary of
the date on which the investor obtained permanent residence. The
investor will be provided with written notification of the termination
and the reasons therefore, and a notice to appear shall be issued
placing the investor in removal proceedings. The investor may seek
review of the decision to terminate his or her status in such
proceedings, but the burden shall be on the investor to establish by a
preponderance of the evidence that he or she complied with the
interview requirements. If the investor has failed to appear for a
scheduled interview, he or she may submit a written request to USCIS
asking that the interview be rescheduled or that the interview be
waived. That request should explain his or her failure to appear for
the scheduled interview, and if a request for waiver of the interview,
the reasons such waiver should be granted. If USCIS determines that
there is good cause for granting the request, the interview may be
rescheduled or waived, as appropriate. If USCIS waives the interview,
USCIS shall restore the investor's conditional permanent resident
status, cancel any outstanding notice to appear in accordance with 8
CFR 239.2, and proceed to adjudicate the investor's petition. If USCIS
reschedules that investor's interview, USCIS shall restore the
investor's conditional permanent resident status, and cancel any
outstanding notice to appear in accordance with 8 CFR 239.2.
(c) * * *
(2) If derogatory information is determined regarding any of these
issues or it becomes known to the government that the investor obtained
his or her investment funds through other than legal means, USCIS shall
offer the investor the opportunity to rebut such information. If the
investor fails to overcome such derogatory information or evidence that
the investment funds were obtained through other than legal means,
USCIS may deny the petition, terminate the investor's permanent
resident status, and issue a notice to appear. If derogatory
information not relating to any of these issues is determined during
the course of the interview, such information shall be forwarded to the
investigations unit for appropriate action. If no unresolved derogatory
information is determined relating to these issues, the petition shall
be approved and the conditional basis of the investor's permanent
resident status removed, regardless of any action taken or contemplated
regarding other possible grounds for removal.
(d) Decision--(1) Approval. If, after initial review or after the
interview, USCIS approves the petition, USCIS will remove the
conditional basis of the investor's permanent resident status as of the
second anniversary of the date on which the investor acquired
conditional permanent residence. USCIS shall provide written notice of
the decision to the investor. USCIS may request the investor and
derivative family members to appear for biometrics at a USCIS facility
for processing for a new Permanent Resident Card.
(2) Denial. If, after initial review or after the interview, USCIS
denies the petition, USCIS will provide written notice to the investor
of the decision and the reason(s) therefore, and shall issue a notice
to appear. The investor's lawful permanent resident status and that of
his or her spouse and any children shall be terminated as of the date
of USCIS' written decision. The investor shall also be instructed to
surrender any Permanent Resident Card previously issued by USCIS. No
appeal shall lie from this decision; however, the investor may seek
review of the decision in removal proceedings. In proceedings, the
burden shall rest with USCIS to establish by a preponderance of the
evidence that the facts and information in the investor's petition for
removal of conditions are not true and that the petition was properly
denied.
Kevin K. McAleenan,
Acting Secretary of Homeland Security.
[FR Doc. 2019-15000 Filed 7-23-19; 8:45 am]
BILLING CODE 4410-10-P