The EB-5 Regional Center program has been extended through December 11, 2015.  The program is an employment-based visa vehicle allowing foreign investors and their families to earn U.S. green cards by investing in new commercial enterprises that create, directly or indirectly, at least 10 full-time American jobs per investor.  It was launched in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors into the U.S., and allows for up to 10,000 green cards to be issued per year (which remain conditional for two years pending confirmation of investment and job creation).  Almost all EB-5 projects are located in “Targeted Employment Areas” – rural or high unemployment districts – where the minimum investment is currently $500,000.

The EB-5 Regional Center program was created as a pilot program and therefore must be renewed every three years.  The program was due to sunset on September 30, 2015, but its short-term extension was secured as part of Congress’ temporary spending bill that will keep the federal government – and the EB-5 Regional Center program – operating until December 11, 2015.  Only projects affiliated with “EB-5 Regional Centers” may count jobs created by the indirect and induced effects of the investment, offering a large benefit to a developer trying to utilize as much EB-5 investment as possible for a given project.

In recent years, the number of EB-5 applications has exploded, in large part due to demand from U.S. businesses and developers seeking to take advantage of this unique source of investment capital.  Developers of real estate projects, including hotels, senior living facilities, residential housing, casinos and other large projects, have been able to successfully combine multiple EB-5 investors into one project so long as the requisite aggregate number of jobs is created.  EB-5 financing typically provides below-market interest rates as well as flexibility in capital structure and business terms, making it an attractive source of funds, especially as traditional bank-financing became more difficult to secure in the aftermath of the U.S. recession.

While the EB-5 Regional Center program has been temporarily extended, there are changes looming for the future.  Proposed legal reforms aimed at increasing oversight and enforcement, and maximizing the amounts invested, may include the following changes, among others:

• Increase of minimum investment amount (estimates range from $800,000 to $1.2 million);
• Stricter definition of “Targeted Employment Area,” leading to a restriction of geographic locations for projects;
• Standardization of job creation tracking methodology;
• Refinement of the manner in which indirect and induced jobs may be counted; and
• Increased regulatory compliance requirements for regional centers, developers and investors, including enhanced SEC oversight, periodic audits of Regional Centers and heightened background checks for investors.

While these reforms could technically be applied retroactively to any projects applied for after September 30, 2015, the more realistic result will be for changes to be effective sometime after January 1, 2016.  In the meantime, many in the community have been working to file regional center-related petitions as quickly as possible and in any event before December 11, and are staying tuned to see the direction the EB-5 program will take in the future.