Senate Judiciary Committee Chairman Chuck Grassley and ranking member Senator Patrick Leahy introduced sweeping, bipartisan legislation on June 3, 2015, to reauthorize and reform the EB-5 Regional Center program, which is currently set to expire on September 30, 2015. The Immigrant Investor Program known as “EB-5” provides visas for foreign nationals who invest a certain amount of capital in the U.S. economy and create jobs. The EB-5 Regional Center program allows for a certain number of those visas for foreign investors to pool their capital in centers that fund U.S. projects and commercial enterprises.

Bill S.1501 is intended to strengthen Department of Homeland Security (DHS) and Securities and Exchange Commission oversight, ensure greater accountability and transparency, discourage fraud and provide a higher priority for national security. In addition to the Regional Center oversight and compliance aspects of this bill, the proposed changes will also affect minimum investment amounts, targeted employment areas, job creation, changes in processing, sources of funds, and concurrent filing and age-outs. The bill would extend the EB-5 Regional Center program for a period of five years to September 30, 2020.

Below are some of the material proposals in the proposed legislation:

• Amends the definition of “Targeted Employment Area” (TEA):

- The Bill amends the definition of a TEA to include an area consisting of a single census tract that has 150 percent of the national average unemployment rate, a closed military base, or a rural area.

- For TEAs in a Metropolitan Statistical Area (MSA) or Combined Statistical Area (CSA), at least 50 percent of a project’s job creation must be within that MSA or CSA.

- If the TEA is outside of a MSA or CSA, then at least 50 percent of the jobs must be created within the county in which the TEA is located. If not, the total number of jobs will be reduced until the 50 percent threshold is met.

• Raises the investment threshold to $800,000 for TEAs and $1.2 million for non-TEAs:

- The minimum investment amount can be amended by regulation, and will automatically adjust in proportion to the Consumer Price Index every five years.

- The minimum investment in a TEA cannot be less than half, nor more than three-quarters of the non-TEA minimum.

• Requires for the first time that foreign investors prove the creation of direct jobs, in addition to verifiable indirect jobs, before they are able to adjust to permanent residence.
• An investor in a commercial enterprise affiliated with a regional center can use jobs predicted to be created indirectly to satisfy up to 90 percent of the job creation requirement, which is a considerable difference from the present rules for calculating jobs.
• A maximum of 30 percent of the total jobs that are created can be created as a result of non-EB-5 investment, even if the non-EB-5 investment represents more than 30 percent of the project’s funding, which is also a considerable difference from the present rules for calculating jobs.
• Sets standards for DHS employees to prevent preferential treatment and enhances transparency of how decisions regarding applications are made.
• Provides for changes in the processing of exemplar applications and I-526 and I-829 petitions:

- Exemplar filings and pre-approval of projects are mandatory.

 - Processing time is 120 days for an exemplar application and allows for priority processing with an additional fee.

- Processing time for an I-526 petition is limited to 150 days, on average, and I-829 processing is limited to 180 days.

• Provides increased authority to DHS to deny or terminate regional centers or visas where there is fraud, criminal misuse, or a threat to public safety or national security.
• Requires background checks of regional center and project developer principals.
• Requires DHS to vet EB-5 projects earlier in the process, before foreign nationals apply for visas or invest in projects.
• Enhances the Department’s ability to investigate the source of funds:

- Seven years of tax returns mandatory for investors.

- Gifted funds can only be used for EB-5 investments if gifted by a spouse, parent, child, sibling, or grandparent.

- Funds used to pay administrative fees must be sourced.

- Loans must be obtained from a reputable bank or properly chartered institution.

• Requires increased disclosures to investors regarding business risks and conflicts of interest, and compliance with securities laws.
• Establishes an “EB-5 Integrity Fund” in which regional centers would pay an annual fee to be used by the Department of Homeland Security to conduct audits and site visits to detect fraud and monitor compliance.