EB5 Investors Magazine | Page 46

O pinion Is an increase of the EB-5 $500,000 minimum inevitable? by Mona Shah The EB-5 Program is due to be renewed this September. The issue on the table appears to be, not whether it will be renewed, but what changes Congress will make to the program. Politicians from both major parties support the renewal of the program, but for some, only with changes. Presidential hopeful Jeb Bush, for example, has publically voiced his opinion that Targeted Employment Area designation should be eliminated entirely, leaving the EB-5 investment amount at $1 million. Today the EB-5 investment program has evolved into a fullfledged industry that revolves around the $500,000 figure, and yet still brings billions of dollars in foreign investment into the United States. Whether the TEA’s $500,000 minimum investment amount will be raised or eliminated entirely are concerns for all within this industry. Is there a need to increase the minimum amount of $500,000? The TEA investment amount of $500,000 was set more than two decades ago. When adjusted based on the Consumer Price Index, 1990’s $500,000 has the purchasing power of only $275,235 in today’s dollars. In comparison to other immigrant investor programs, the United States’ EB-5 investment program requires the least amount of investor capital. I have converted foreign currency to the current value in USD to help illustrate the comparison. Australia requires USD $4 million, the UK requires USD $3 million, New Zealand requires USD $1.2 million, and the Maltese investment program requires USD $2 million. Portugal is the second most popular immigrant investor program in China, and it’s a 500k investment into real estate. 44 The significant difference between these other investment programs and the EB-5 visa is the fact that the money is invested into “safe” (non-risky investments) like government bonds. The basic requirements of EB-5 program – creating jobs and stimulating the economy -- distinguish it from the other investment programs. In addition, while some argue that investing $500,000 in an entrepreneurial stand-alone project is unlikely to sustain a viable business creating 10 permanent jobs, the same amount pooled, either in a direct pooled or a regional center project certainly has proven success. Does the current state of affairs contradict congressional intent? When the Regional Center Program as we know it today emerged, regional centers looked to the success of our Canadian neighbors, who had been attracting considerable wealth from the Asian Pacific with an investment amount of only $400,000. The United States needed a competitive investment amount to keep up with its Northern Neighbors. Today, around 90 percent of all EB-5 projects are in TEA’s and are thus at the $500,000 level. Congress created TEAs to benefit rural areas or areas with high unemployment. This was done to encourage immigrants to invest in new commercial enterprises that are principally doing business and creating jobs in areas of greatest need. Clearly Congress’ intent was not to maximize investment, but to direct foreign investment into undeveloped areas. However, today, many of the large scale EB-5 regional center projects are found in affluent urban areas like Manhattan, Los Angeles, and Miami, as census tracts are often manipulated to allow for a TEA designation. Is this a flagrant flouting of congressional intent? While manipulating the census tracts may be considered, arguendo, inappropriate scheming or gerrymandering by some, the ultimate goal and purpose of the EB-5 program is to create jobs and, in turn, stimulate the economy. EB5 INVESTORS MAGAZINE