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by Mona Shah & Omar Hakim
The Battle to Reform EB-5:
After months of vigorous debates, endless negotiations, constant redrafting, and a frenzy of last minute investor filings, it was much ado about nothing! Congress, never known for efficiency, decided to bow into pressure from many within the EB-5 industry, who believed the pending legislation would be the death knell to the EB-5 program. The program was thus extended, without any changes, until September 30, 2016.
Sadly, these past few months have witnessed a bitter divide within the EB-5 community. It unearthed pent up frustration that many stakeholders harbored against the New York, Miami and Vegas elites. Some looked to the legislation as a way of rectifying the uneven distribution of investor interest, while others looked to maintain the lucrative status quo. After all, cheap financing without a dilution of equity is difficult to come by.
The authors of the bill certainly looked to champion the underdogs within the industry at the expense of the urban elite. Bodies such IIUSA made bona fide attempts to bridge the gap. The Public Policy Committee of IIUSA spent many days drafting and re-drafting the proposed legislation to make it workable. Equally, the EB-5 Investment Coalition committed a lot of time and political capital to tackling the hurdles. Notwithstanding this, had the bill passed last Wednesday, the stringent measures and resulting harsh consequences would have been damaging.
For example, there was much support for a two-tier market EB-5 market, with $800k investments required for investments in special investment areas under a revised TEA definition, and $1 million required for investments in non-TEA areas, that can include “glamor” projects. However, analysis has been conducted showing that set-asides of visas to create a “fast track” for certain projects that met special requirements would have resulted in a 10 to 15 year backlog via retrogression for non-designated projects that did not meet the special requirements. These set-asides would have completely killed the viability of the non-designated projects.
The TEA issue dominated the reform debate, but there were many other hurdles to overcome in the approximately 40-page reform bill. To the dismay of many, the clock ran out before all of the details of the reform bill could be ironed out.
In the original bill, S. 1501, the minimum investment amount was $800,000 in TEA areas and $1,200,000 in non-TEA areas. The last version of the draft bill brought the non-TEA minimum investment amount to $1,000,000 to try to create a workable EB-5 two-tier market. There is the fear that the hardliners that lost this battle will insist that the investment amount revert back to $800,000 and $1.2 million in the next battle.
While an extension with no changes is much better than a bad bill or letting the program lapse, it is not without risk. We anticipate that there will be another rush of investors before the September 30, 2016 deadline, much as there was before the September 30, 2015 deadline. As a result, without an increase in visa numbers, retrogression is likely to become a very major issue for all in the near future. The issue of a visa increase must be addressed if the EB-5 program is to continue and thrive.
Further, 2016 is a presidential election year, a notoriously difficult time to achieve major reform efforts. As a result, there is the distinct possibility that the EB-5 program could see another one-year extension without reform on September 30, 2016. The subject matter of the bill, including the attempts to create a two-tiered EB-5 market have not disappeared. If the EB-5 community is to heal the divisions and stand unified before the opponents of the program, we must work to achieve meaningful and quality legislation should be enacted that would benefit everyone.
Integrity Measures to be Introduced:
There is very broad consensus on the implementation of integrity measures. Senator Flake is expected to release a bill to implement these measures in the coming days. These integrity measures would include 1) USCIS oversight visits to project and Regional Center locations to ensure that projects have been accurately represented to USCIS and investors 2) requiring that the bona fides of Regional Center and project principals be verified, including background checks 3) giving USCIS broader discretion to reject EB-5 applications because of fraud and/or national security concerns and 4) requiring greater transparency from USCIS in their adjudication of EB-5 applications. We are hopeful that these measures will be implemented in the coming month, as there is broad and overwhelming support in the EB-5 community for these reforms.
Overall, there was a sense of relief that a temporary ceasefire was reached allowing the EB-5 community to continue to bring in millions of dollars in direct investments to the United States and create thousands of jobs for Americans. It has been our pleasure and honor to be a part of the hard work that EB-5 community has been doing to bring the EB-5 program through the difficult and necessary process to achieve reforms, and we expect to continue to do so in 2016!
Mona Shah is a dual licensed attorney, in the UK and the US. While in England, Mona worked as a Prosecutor with the British Crown Prosecution Service, before moving to New York. Mona has more than 17 years of experience and extensive knowledge of all facets of U.S. immigration law; her practical expertise ranges from specialist business petitions to complicated, multi-issue deportation and removal litigation in both state & federal courts. Mona is highly proficient and experienced in EB-5 law and practice, with hands-on experience setting up, working with and establishing EB-5 projects, both direct pooled investments and Regional Centers, nationwide. In addition, she has dealt with complex, multifaceted RFE’s for both Regional Centers as well as for the Investor. Mona is the author of a published book for investors on the EB-5 laws and procedures. Mona regularly writes and publishes articles and opinions, as well as addressing investors and developers in EB-5 related seminars in the US and overseas. Mona has been interviewed by mainstream news channels and quoted in major newspapers. Mona was also voted as one of the top 25 EB-5 attorneys by EB-5 Investors.com. Mona is also an adjunct professor at the Zicklin Business School of Baruch College, part of the City Universities of New York. She teaches part time courses on EB-5. Mona Shah & Associates have been instrumental in the success of numerous projects, crafting projects and marketing overseas, bringing in millions of dollars for the US as well as helping to create thousands of jobs.
Omar Hakim is an attorney at Mona Shah & Associates in New York City. The firm is an established source for EB-5, assisting numerous Regional Centers/EB-5 Projects and Investors in navigating this complex, nuanced and constantly changing area of immigration law. Omar offers clients years of experience in corporate finance, the financial regulatory system, securities matters and in general corporate governance matters. Additionally, he is able to draw on his experiences at major federal regulatory agencies and bodies, which includes work at the SEC, the United States House of Representatives Committee on Financial Services, and the CFTC. He earned his J.D. at the University of Virginia; his Master of Laws in Securities and Financial Regulation at the Georgetown University Law Center; and his B.A. in Economics at Georgetown University.
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