New EB-5 Rules Regarding TEAs

The new EB-5 rules not only increase the minimum investment amount from $500,000 to $900,000 in a Targeted Employment Area (“TEA”) but also remove states from the process of designating TEAs. 

The new rules will require the following:

•  USCIS, not the states, will determine TEAs
• No gerrymandering (irregularly shaped TEAs)
• Only city, county or census tracts directly adjacent to the census tract in which the project is located can be included in the TEA

States Are Removed from the Process – DHS Takes Over TEA Designation
It appears that after November 21, 2019, USCIS will not issue separate TEA letters before one files an I-526 EB-5 petition.  One will have to request TEA designation and provide supporting data with the I-526 petition to determine if the project is eligible for TEA designation.

Under the old rules, a high unemployment area TEA was an area comprised of a city, county or other political subdivision, or one or more census tracts that experienced a weighted average above 150% of the national unemployment rate.

 The new rules only allow using a city, county or one or more combined census tracts that has a weighted average 150% above the national average unemployment rate.  The new rules require that all the census tracts must be directly adjacent to and abut (have a common boundary with) the tract in which the project is located.

 Moreover, the rules do not specify the methodology that USCIS will use.  Thus, an expert in TEAs will have to provide a report using the proper methodologies.  I highly recommend Michael Kester at Impact Data Source for this.

The new rules will greatly restrict projects seeking the $900,000 minimum investment amount from qualifying as projects in Targeted Employment Areas.  This will diminish the ability of many small businesses, such as restaurants, to qualify for EB-5 capital.

Rural Area Definition

A TEA may also be a “rural” area.  The new rules do not impact “rural area” TEAs.  The new rule merely clarifies the existing language defining a “rural area” as an area not within either a Metropolitan Statistical Area (“MSA”) or a city or town having a population of 20,000 or more. 

Note: In California, for example, few places are “rural,” as there are not many areas outside an MSA except for uninhabitable places, such as mountain peaks and deserts.  Just because corn fields are everywhere does not mean it is rural.

For more details on the new TEA rules see EB-5 economist Michael Kester’s web page: https://impactdatasource.com/eb5/.

Please note that these rules will take effect on November 21, 2019.  Today one can still apply under the old rules.

Updated July 24, 2019

The new EB-5 rules, in addition to increasing the investment amount to $900,000 and changing the TEA rules, make some other changes that will take effect on November 21, 2019.

One change involves the “management” criteria.  The old rules were vague but do allow a Limited Partner (“LP”) to be a manager.

 The new rules clarify the requirement for those who are not LPs.  The new rules state:

 “. . . To show that the petitioner is or will be engaged in the new commercial enterprise, either through the exercise of day-to-day managerial control or through policy formulation, the petition must be accompanied by:

 (iii) Evidence that the petitioner is engaged in policy making activities.  For purposes of this section, a petitioner will be considered sufficiently engaged in policy making activities if the petitioner is an equity holder in the new commercial enterprise and the organizational documents of the new commercial enterprise provide the petitioner with certain rights, powers, and duties normally granted to equity holders of the new commercial enterprise’s type of entity in the jurisdiction in which the new commercial enterprise is organized.”

Projects not involving LPs, such as direct projects, should look at their agreements and operations, and may want to be sure they satisfy these new rules, which will take effect on November 21, 2019.

Updated July 23, 2019

On July 24, 2019, the government will publish new rules that will take effect on November 21, 2019. These rules will:

• Increase the EB-5 investment to $900,000 in a TEA (Targeted Employment Area – i.e., high unemployment or a rural area) and $1.8 million in other areas.
• Change how TEAs are calculated.
• Impose other technical (but nonetheless important) rules, including clarification on I-829 procedures for removal of conditional permanent resident status. 

These new rules are not retroactive.  Those who have already invested and filed an I-526 petition are not affected by these rules.  People can still file EB-5 applications at the $500,000 level until November 21, 2019.

In the future, the TEA rules will greatly limit the number of available EB-5 projects.

It is still possible that Congress will change the investment amount or a lawsuit may stop these regulations from taking effect.

For now, those interested in EB-5 immigration should consider filing their applications at the $500,000 investment amount.