How Redeployment of At-Risk EB-5 Capital Works During The Regional Center Program Lapse
Capitol Letters
With Aaron L. Grau
Executive Director of IIUSA, the EB-5 Regional Center Program’s advocacy group, writes about the program’s legislative prospects.
EB-5 investors, developers, and program administrators are scrambling to prevent (further) fallout caused by the uncertainty of the program’s lapse in June. One area most impacted is the question of redeploying EB-5 investor funds. EB-5 investors are required to keep their capital invested at-risk until the completion of the investor’s USCIS’ defined “sustainment period.” However, during this lapse in the EB-5 Regional Center program, there is a great deal of uncertainty.
An additional twist is the federal government’s “guidance” published during the summer of 2020. The long-awaited “guidance” read much more like a policy shift than direction on implementing existing redeployment protocols. Specifically, the guidance disallows a regional center’s ability to redeploy an investor’s capital anywhere other than the geographic area in which the regional center is licensed to make initial investments.
Regional Centers receive a geographic designation where their job-creating investments can be made. For example, if a regional center‘s designated area is New York State, then the job-creating project must be in New York State and EB-5 investors’ capital must flow to the job-creating project in New York State.
The summer 2020 “guidance” has a considerable impact; limiting the number of places where dollars can be reinvested and therefore jeopardizing an immigrant investor’s application status.
For example, a regional center that is permitted to make investments in rural communities in Alaska executes a successful investment that returns the invested EB-5 capital back to the New Commercial Enterprise (NCE). However, since none of the EB-5 immigrant investors have completed their USCIS defined “sustainment period” (which must be completed before an EB-5 investor can be repaid) the EB-5 investor’s investment must remain in the NCE and at-risk.
Under the new “guidance”, to keep that investment at risk, the NCE must redeploy the repaid capital in that same rural area in Alaska (in the Regional Center’s designated territory). This presents a problem for Regional Centers with designated areas that are very small geographic areas and rural areas because there are likely far fewer opportunities to make such redeployment investments in those areas. Typically, these redeployment investments are more easily made in urban areas, but urban areas are not immune to this challenge either, i.e., whether or not there is an investment opportunity, let alone an appropriate investment opportunity that allows for EB-5 dollars.
The legislative initiative for reauthorization seeks to address this concern and to allow regional centers to redeploy EB-5 investor capital into a project that is not necessarily in the Regional Center’s restricted geographic area. It’s IIUSA’s hope that along with the reauthorization, this particular policy issue is addressed because the current “guidance” provided by USCIS is lacking and causing unnecessary and counter-productive issues for the EB-5 community.
Aaron Grau, Executive Director of Invest in the USA (IIUSA), is a former Majority Counsel on the U.S. Senate Health Education, Labor, and Pensions Committee, where he developed Senate hearings and negotiated and drafted several pieces of federal legislation and was part of the Senate team that created the Workforce Investment Act.