EB-5 “Integrity” Reform Bill Introduced in Congress

A new EB-5 Reform bill has been introduced in Congress. While a comprehensive EB-5 reform bill did not end up being passed as was expected, this new bill would make some major changes to the EB-5 program that was extended in its current form back in December. The bill, S.2415, “EB-5 Integrity Act of 2015” was introduced by Senator Flake (R-AZ) and is co-sponsored by both Senator Schumer (D-NY), and Senator Cornyn (R-NY). Having the support of Senator Schumer is important since he was reportedly the key force in extending the EB-5 program in its current form without any reforms during the Omnibus negotiations, and also since he is expected to be the Democratic leader once Senator Harry Reid steps down at the end of 2016.

The bill would not make any changes to the minimum investment level and would also not make any changes to the rules designating Targeted Employment Areas (TEAs), the two most contentious areas of the EB-5 reform process thus far. The bill would instead focus on so-called “Integrity” measures to provide increased regulatory oversight and enhanced government administration of the EB-5 program. If passed, the bill would make significant changes to the EB-5 program, including:

  • Establishing an “EB-5 Integrity Fund” that would be funded by $10,000-$20,000 per regional center and $1,000 per investor
  • Permit the Department of Homeland Security to conduct background checks on Regional Centers
  • Banning foreign ownership of a Regional Center, including financial support of foreign governments
  • Direct and Third Party Promoters must register with USCIS and meet specific requirements
  • Increased authority for DHS to regulate Regional Centers and deny or revoke investor petitions for reasons such as fraud
  • Source of Funds requirements would include new restrictions on gifts and loans
  • New process for preapproval of an EB-5 project before investors file their petitions
  • Additional securities regulation of Regional Centers

The chances of the bill passing remain to be seen, especially if it can be passed significantly sooner than the scheduled sunset of the Regional Center program on September 30, 2016. If it does not pass before then, the provisions could be ultimately adopted by a later comprehensive bill that would make additional changes to the minimum investment amount and TEA designations.

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