TEA Report

TEA’s: The Past and Present

TEA’s: The Past and Present

The EB-5 Immigrant Investor Program is a great opportunity for some individuals to get legal status in the U.S. based on business investments, but it's also something that's quickly changing. Investors need up-to-date information to manage the dynamics of the EB-5 investment process, and to understand how this program works and how it has evolved over time.

 History of the EB-5 Program

Since 1990, the EB-5 Immigrant Investor Program has sought to connect foreign capital with communities in the U.S. that need help with economic growth.

In some areas of the U.S., local economies are just not growing fast enough. Economically depressed rural and urban areas need assistance – this is why Congress created this program, and added incentives to spur economic growth in these areas.

EB-5 investors can take advantage of an idea called TEA, which stands for Targeted Employment Area. According to the current rules of the EB-5 Program, investors need to contribute a minimum investment of $1 million as one of the criteria to successfully acquire an EB-5 Visa. If the investor can identify a project location which qualifies as a TEA, an area designated as having high unemployment, the minimum threshold is cut to $500,000.

The lower investment threshold for projects in a TEA acts as an incentive for investors to target these communities. By offering green card eligibility through the EB-5 Program, the government is allowing a number of outside investors to pursue their dreams while helping local economies grow.

The Gray Areas of the TEA

Targeted employment areas were created specifically to provide incentive to EB-5 investors who invest in them. USCIS defines a TEA as a rural area with under 20,000 inhabitants, or an area with at least 150% of the national average unemployment rate

Under the EB-5 Program, states determine their own rules for what constitutes a qualifying TEA area. However, experts on the process have seen a general trend toward what some observers call “gerrymandering.”  Essentially, investors can use multiple contiguous census tracts to put together an application that qualifies a combined overall unemployment rate, allowing many different sorts of areas for TEA status. Looking at the ratio of projects that are actually funded with a higher investment threshold, it's clear to see that most investors are leveraging state TEA qualification rules in order to invest less money.

With this in mind, investors need to understand how the government is likely to respond to this, and what might happen to the program in the future.

Recent Reform Attempts

Early last year, the Department of Homeland Security produced a notice of proposed rulemaking changes that would reform how TEAs are defined, by setting more standards for qualifying for the reduced investment threshold. The proposal would have lowered the number of tracts that can be used, and set a new, higher threshold for non-qualifying projects.

Throughout the year, legislators talked about further clarifying EB-5 criteria. In April, 2017 Senator Grassley (R-IA), the Senate Judiciary Committee Chairman, and former Senate Judiciary Committee Ranking Member Senator Leahy (D-VT) proposed the American Job Creation and Investment Promotion Reform Act of 2017.  

In a nutshell, this act proposed requiring more information about the economics of the census tract involved in creating a TEA. By showing more of the numbers around poverty and median family income in an area, the proposal sought to ensure that investors really pursue projects in targeted high unemployment areas according to the philosophy of the EB-5 Program as it was put together

Later, Senator John Cornyn, Senate Majority Whip and Immigration Subcommittee Chairman at the time, wrote the EB-5 Immigrant Investor Visa and Regional Center Program Comprehensive Reform Act of 2017, also known as the EB-5 Reform Act.

This sought to add a third criterion clarifying what qualifies as a distressed urban census tract and stated that the poverty rate for this area had to be above 30%.  Median family income had to be under 60% of either the statewide median family income or the metropolitan statistical area’s median family income.

While neither proposal was passed, it does serve to point out that portions of the EB-5 Program have caught the attention of lawmakers and the possibility that changes could be pursued again in the future.






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