The EB-5 program allows companies to raise capital from wealthy foreigners seeking a permanent-residency visa, also known as a green card.
An immigration program that’s been a boon to huge real-estate projects from Seattle to Manhattan is facing expiration unless Congress acts on a proposed five-year extension.
On Friday, Congress passed a stop-gap bill to keep federal agencies funded through Wednesday. That gives lawmakers time to complete negotiations over a $1.1 trillion budget and decide on the future of the EB-5 visa program.
The EB-5 program allows companies to raise capital from wealthy foreigners seeking a permanent-residency visa, also known as a green card. While developers are the biggest beneficiaries of billions of dollars in EB-5 capital, projects in manufacturing, agriculture and other industries also tap into the program.
But the jobs-for-visas program has been dogged by fraud scandals here and elsewhere and by concerns that EB-5 capital is being misdirected to prosperous areas at the expense of rural areas and inner-city neighborhoods starving for investment. In August, the Government Accountability Office slammed the program.
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The program hit its 10,000-visa annual limit for the first time in 2014, primarily due to a surge of interest from China.
The biggest question is whether Congress will close a legal loophole to ensure that EB-5 capital goes to economically struggling areas as originally intended.
About 90 percent of EB-5 capital is invested in so-called “targeted employment areas,” which are supposed to have at least 1.5 times the national jobless rate. Immigrants choose to invest in targeted areas because they only have to put in $500,000 to be eligible for the green card, which otherwise requires a $1 million investment.
But because of how current rules are interpreted, EB-5 promoters can string together high- and low-unemployment areas and build projects in the low-unemployment area. States competing for EB-5 capital facilitate this practice. In March, The Seattle Times documented how developers exploit the loophole.
A copy of the compromise proposal hashed out by House and Senate leaders, obtained by The Seattle Times, suggests lawmakers want to crack down on developers’ abuse of the cheaper EB-5 visa to build projects in prosperous urban districts.
The proposal reserves 4,000 visas annually for rural areas and “priority urban investment areas,” a move that could shorten the wait time for immigrant investors.
Priority urban areas would be defined as a single census tract with high-poverty or low median family income, or no more than two adjacent census tracts with an average jobless rate that’s 1.5 times the national rate.
Foreigners who want the discount on the $1 million EB-5 visa could also qualify by investing in a manufacturing project or a public-works project administered by a federal, state or local agency.
Also eligible for the cheaper EB-5 visa: Projects on closed military bases or in “special investment zones,” which are essentially the same type of urban area now exploited by developers, but the proposal limits to 12 the number of census tracts that could be strung together.
While the proposal encourages more EB-5 projects in high-priority areas, it also raises the cheaper EB-5 visa’s minimum investment to $800,000.
Audrey Singer, a research scholar at The Brookings Institution who has called for reforms, said the draft legislation should require the federal immigration agency to collect and analyze more detailed data on EB-5 projects to assess the program’s successes and failures as a tool for economic development.
Some industry experts say any changes could be a moot point because of a six-year backlog in EB-5 visa applications.
Because Congress is not expected to raise the number of visas, the nation will lose that foreign direct investment to other countries, such as Portugal, said Ali Jahangiri, CEO of EB5 Investors, an industry-trade magazine.
The EB-5 program is a tiny slice of new foreign investment. Last month, the federal Bureau of Economic Analysis reported that spending by foreign direct investors to acquire, establish or expand U.S. businesses was $241.3 billion in 2014.
Real estate drew the most investment into new businesses or expansion of foreign-owned U.S. businesses, the bureau reported.