Most foreign investment dollars under the EB-5 program go to gerrymandered districts where wealthy neighborhoods are combined with high-unemployment areas to qualify.
That’s the finding of the U.S. Government Accountability Office (GAO), which works for Congress and assesses how taxpayer dollars are spent. At the request of both the House and Senate Judiciary Committees, GAO sought to quantify the extent to which gerrymandering within the EB-5 program occurs.
Critics of the EB-5 program contend that fraud and gerrymandering of EB-5 zones are diverting the program’s economic benefits away from their intended target of high-unemployment areas. Instead, EB-5 projects—mostly real estate projects—and their developers have benefitted. President-elect Donald Trump’s family has used EB-5 investments for development projects.
Background on EB-5
Congress created the EB-5 immigrant visa to encourage job creation and capital investment in the U.S.by foreign investors. The EB-5 program allows foreign nationals and their families to get green cards by investing $1 million in a new business or regional center that will create at least 10 permanent full-time jobs. The program allows an investment of only $500,000 if the business or center is in a rural or high-unemployment area.
About 10,000 EB-5 visas are available annually to foreign investors and their families seeking to immigrate to the U.S.
Congress created the EB-5 Regional Center Program as a pilot program in 1992. This program allows foreign investors to invest their money in projects called regional centers. A regional center is a business—often a real-estate project—approved by the U.S. Citizenship and Immigration Services (USCIS).
Just as the EB-5 Regional Center Program was set to expire in September, Congress extended the program through December 9. That extension gives the lame-duck Congress a chance to review the program. Senators Chuck Grassley and Patrick Leahy of the Senate Judiciary Committee continue to push for reforms with any reauthorization of the regional center program.
GAO reviewed a random sample of EB-5 petitions filed during the fourth quarter of 2015. Nearly all (99%) of the 6,652 petitions reviewed sought to invest $500,000 in a project located in a high-unemployment area. A high-unemployment area consists of an unemployment rate of at least 150% of the national average.
GAO found that 90% of those petitions where the foreign national invested $500,000 combined census areas. A majority—63%—combined two to 10 census areas. While 26% combined 11 to 100 census areas, the remaining combined more than 100 areas. The EB-5 program allows combined areas.
In addition, GAO noted it assessed USCIS’s management and oversight of the EB-5 program earlier this year and last year. At the time, GAO found USCIS’s method for reporting results invalid and unreliable. Moreover, GAO recommended that USCIS track and report data that investors report and verify total investments and jobs created through the EB-5 Program on its forms. This fiscal year, USCIS plans to develop a case management system to track and report such data.
What’s in Store?
It remains unclear what changes are in store for EB-5 Regional Center program if it survives the current political climate. A previous blog post on EB-5 provides details on House legislation that seeks to reform the program. As currently written, that legislation would place onerous burdens on foreign investors.
The EB-5 program brings immigrants to the U.S. who are actively creating jobs for our citizens. However, the program has been the target of great scrutiny due to individuals who have committed fraud and abuse it. Clearly, common-sense regulations should be in place for the regional center program to give investors confidence that they will be able to follow the rules to successfully get their green cards.
Contact us if you have questions about EB-5 or want help to come to or stay in Silicon Valley to create the life you’ve dreamed about for yourself and your family.