The minimum investment amount required for each EB-5 investor varies depending on where the EB-5 project is located. If the project is located within a designated Targeted Employment Area (TEA), investors only need to come up with $500,000 to invest. If the project is not within a TEA, each investor must invest a minimum amount of $1 million.
What is a Targeted Employment Area (TEA)?
Targeted Employment Area(s) can be designated based on either population or unemployment rate. Rural areas with populations smaller than 20,000 and not located within metropolitan statistical areas (MSAs) qualify as TEAs. The population count is obtained from the latest census in the area.
Areas can also be designated as TEAs if the local rate of unemployment is at least 150% of the national average.
For example, if the national rate of unemployment is 8%, an area could be classified as a TEA if the unemployment rate across the entire region is 12% or higher.
Areas once qualified as TEAs may lose their designation of population counts or unemployment rates change substantially. Designation is done on an annual basis, so proof of TEA designation must be obtained within the previous year.
How do I find out if my EB-5 project is located in a TEA?
Many states publish lists of TEAs that have already been designated, but that does not preclude other qualifying areas from being designated as they become qualified. TEA designation is generally judged based off the census tract; however, designation based on unemployment rate is difficult to do this way since employment statistics are not published by census tract.
The census share method is one other way by which new TEAs can be identified. In this method, the unemployment rates in two neighboring ecnsus areas within the same county (or group of counties) are considered together. This information is obtained from the American Community Survey (ACS) and then used along with the BLS data to identify areas with qualifying high unemployment rates.
TEA designation: A state-by-state basis
While the population and unemployment rules for TEA designation remain the same nationwide, the method by which these numbers are determined varies by state. The census-share method is used in many states, but individual state agencies decide how census tracts can be combined in their state. Thus, it is important to consider state regulations when considering a TEA.
As an example, California regulations state that no more than 12 neighboring census tracts can be used to designate TEAs. States also vary in which set of data they use. New York, for example, uses data they obtained back in 2000. Other states use data from the previous calendar year, and still others use data from within the past 12 months. Some states are more likely to approve new census tract TEAs than others are. Other states have districts that affect the TEA status of an area.