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The Impact of COVID-19 on the EB-5 Immigrant Investor Program



EB-5 Creation


In 1990, Congress established the EB-5 Immigrant Investor Program as a means to stimulate economic development and promote jobs in the United States. The EB-5 visa creates a path towards lawful permanent residency for foreigners who invest in the U.S. economy. In order to be eligible for an EB-5 visa, prospective applicants must invest a sufficient amount of capital, which varies based on the location of the enterprise, and create or preserve at least ten permanent jobs in the U.S. After the 2008 recession, the EB-5 program garnered bipartisan support as a tool for economic recovery. Since its inception in 1990, the program has raised over $20.6 billion in foreign direct investment with no cost to the American taxpayer. Other more liberal estimates find that the Immigrant Investor Program generated a minimum of $5.2 billion in private investment over an eight-year period, and likely added several billion dollars to the U.S. economy each year. With its emphasis on job creation, the program was 500% more efficient at job creation than the 2009 American Recovery and Reinvestment Act, adding tens of thousands of jobs per year. However, while Congress widely supported the EB-5 program post-recession, 2019 marked a significant decline in the program’s popularity. With the introduction of the Modernization Rule, which substantially increased the minimum investment required by petitioners, applicants began to feel the economic constraints of the program.


COVID-19 Impact on Immigration


The COVID-19 pandemic led to further catastrophic economic effects around the world, and EB-5 investors were not immune from such harm. As a response to the pandemic, President Trump temporarily banned numerous visas through his “Proclamation Suspending Entry of Immigrants Who Present Risk to the U.S. Labor Market During the Economic Recovery Following the COVID-19 Outbreak.” The EB-5 visa was not included in Trump’s ban. Nonetheless, EB-5 investors still experienced the weight of the pandemic. As a response, United States Citizenship and Immigration Services (USCIS) temporarily shut down U.S. consulates and embassies in March 2020, effectively halting visa issuances.


USCIS Response to the COVID-19 Pandemic


Due to the closure of the U.S. embassies and consulates, USCIS implemented special accommodations for EB-5 investors and applicants, including deadline extensions and case-by-case considerations of extenuating circumstances. Further, some of the EB-5 visa requirements include completing an in-person interview and a biometric appointment. Because of the pandemic, these requirements were often impossible to complete. To compensate for this difficulty, USCIS offered additional accommodations, such as removing penalties for rescheduling appointments for illness-related reasons.


COVID-19 Impact on The EB-5 Immigrant Investment Program


Despite USCIS’s efforts to combat the pandemic’s effects on EB-5 visas, only 32% of the total available visas were issued during the 2020 fiscal year. To put this figure in perspective, USCIS issued between 94% and 102% of the available EB-5 visas in the previous three years. Some speculate that the lost visas attributable to the pandemic will cause millions of dollars of lost investments and jobs.


EB-5 investors who were engaged in the program prior to the COVID-19 pandemic also faced difficulties due to the virus. As previously mentioned, one requirement of the EB-5 visa program is that investors must create or preserve at least ten jobs. Notably, USCIS may revoke an EB-5 visa if it finds that the implementation of the commercial enterprise results in a material deviation from the proposed business model. Even though USCIS has agreed to take a more holistic approach to each individual investment situation, it is not yet clear whether USCIS will deem failure to secure the required jobs during the pandemic as material changes, which could result in an influx of terminations.


Popular EB-5 industries also evolved during the COVID-19 pandemic. While commercial real estate was already a hallmark of new commercial enterprises, it became more appealing during the pandemic as a volatile stock market pushed investors towards more stable investments. However, with the stock market contraction in February 2020, many foreign investors lost capital. Coupled with the 2019 increase in the required minimum investment, the EB-5 may now be significantly less affordable to foreign investors than it was prior to the pandemic. While other countries continue to experience high inflation and economic difficulties, however, foreign investors continue to seek financial stability in the U.S. through the EB-5 visa program.


The Future of the EB-5 Immigrant Investment Program


The EB-5 Reform and Integrity Act of 2021, which was introduced in the Senate last March, proposes some key changes to the EB-5 program. The proposed act requires investors to report any proposed changes to the Department of Homeland Security and seeks, among other things, to lower processing times. It is predicted that EB-5 visas will increase post-pandemic given President Biden’s immigration-friendly administration, mass vaccinations, and the EB-5 Reform and Integrity Act. While some see the EB-5 program as a means for economic recovery, as demonstrated by its post-recession success, others are concerned about the United States’ potential reliance on foriegn investment.