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New EB-5 Law


EB-5 Reform & Integrity Act, 2022
Signed by President Biden on March 15, 2022




On 15th March, 2022, President Biden signed into law the long-awaited H.R. 2471 – Consolidated Appropriations Act, 2022, which also contains the EB-5 Reform & Integrity Act, 2022. We have curated content in FAQ style after going through word by word of the reforms announced.

  1. What is the EB-5 Reform & Integrity Act, 2022?

    On June 30, 2021, the Regional Centre program expired without receiving an extension. This was just a week after the Court’s verdict which came on June 22, 2021, restoring the investment limit from US$ 900,000 to US$ 500,000. Accordingly, starting July 1, 2022, only direct petitions were allowed under the EB-5 program. Even those RC investors who had filed prior (irrespective of when they had applied), had their petitions in abeyance as there was persistent failure in RC reauthorization. The introduction of EB-5 Reform & Integrity Act, 2022, has reauthorized the RC program (which had otherwise gone into a long hibernation) with a new investment limit, offered indemnity to investors from future program expiries, & introduced various transparency & integrity measures to benefit the EB5 investor community.
  2. Where can I read the H.R. 2471 - Consolidated Appropriations Act, 2022?

    You can download a copy of the signed bill here.
  3. Where can I read the entire EB-5 Reform & Integrity Act, 2022?

    Refer page 1022 to 1061 of the signed bill here.
  4. What is the revised EB5 investment amount?

    The new eb5 investment amount is US$ 800,000 for TEA projects & US$ 1,050,000 for the rest. Below is a tabular summary to address all the possible permutation – combinations (applicants often ask the same question through multiple ways, hence all combinations are listed here):

    EB-5 Investor investing in a DIRECT Project, located in a Rural Area US$ 800,000
    (INR 6 crores approximately)
    EB-5 Investor investing in a DIRECT Project, located in a High Unemployment Area US$ 800,000
    (INR 6 crores approximately)
    EB-5 Investor investing in a RC Project, located in a Rural Area US$ 800,000
    (INR 6 crores approximately)
    EB-5 Investor investing in a RC Project, located in a High Unemployment Area US$ 800,000
    (INR 6 crores approximately)
    EB-5 Investor investing in a RC Project (which is neither certified as a rural area nor as a high unemployment area) US$ 1,050,000
    (INR 8 crores approximately)
    EB-5 Investor investing in a DIRECT Project, located in a High Unemployment Area (which is neither certified as a rural area nor as a high unemployment area) US$ 1,050,000
    (INR 8 crores approximately)
  5. What qualifies as a TEA under the new regulations?

    Following are the two possibilities under which an area (project) could enjoy the TEA status:

    1. Project is located in a rural area, i.e. an area with a population of less than 20,000
    2. Project is located in a high unemployment area, i.e. a census tract with an unemployment rate which is not less than 150% of the national average unemployment rate

    Under the new regulations, DHS has been empowered to classify an area as “high unemployment area”. This means for a project to fall under sr. no. ii. above, the authority to grant the status is the Secretary of Homeland Security.
  6. How do I verify if the project is TEA certified under the new law?

    You can ask for a copy of TEA certificate from your shortlisted project. Under the previous regulation, TEA was issued without involvement of DHS (Department of Homeland Security). The new law has strengthened and formalized this process by permitting only the Secretary of the Homeland Security or a designee of the Secretary to issue a TEA. The said is valid for a period of two years from the date of application. Do not invest into a project that doesn’t have a valid TEA certificate or a rural area confirmation.
  7. I have identified a few projects which are seeking a US$ 800,000 investment. What things do I need to check before committing?

    This can not be answered in a few lines. Due diligence is a comprehensive exercise. If you believe you can conduct an audit on the project by yourself, then following are the minimum:

    1. TEA Certificate
    2. Capital Stack
    3. Lower-rate bank debt
    4. Level of charge (first, second or third) which the EB-5 investors have in case of a foreclosure
    5. Relationship & level of independence between the RC and the Developer
    6. Existence of prior approved I-526s in the same project (the word same is important here, because approval of I-526s in other projects by the same RC has zero relevance)
    7. Cash flow modeling with financial projections
    8. MIS system followed by the Regional Centre to give project update to its investors
    9. Proportion of money infused by the Promoters
    10. Whether promoters can take out their capital (basically cash-in the eb-5 capital – this is legally allowed and often followed; such a project should never be chosen)
    11. Job creation report & a certificate confirming jobs already created
    12. Direct job component (this is a new requirement & is covered with a FAQ below)
    13. Exit strategy
    14. Refund possibilities in case of I-526 denial
    15. Association of brand name (good brand per se doesn’t mean anything, this particular item should never be considered in segregation without verifying facts)
    16. Pre-sales (i.e. revenue booked or anticipated with full surety prior to completion)

    Above list is indicative by nature. Auditing a project takes several weeks. Also, documenting the audit is very important. E.g. – if a project claims to be paying 2% interest, then as auditors, we would immediately ask for proof of interest payment in the past to RC’s other investors (copies of redacted bank statement can be taken for this). There are any number of such check-points which ought to be validated (with a proof), and as shocking as it may sound, not even half of them pass when we audit most of the projects. The one that fulfills most criteria should be cherry-picked; this is the essence of an EB5 Audit.
  8. How does the new regulation enhance safety for an EB-5 investor?

    At the foremost, and given the fact that most of our company’s team-members are auditors by profession, we love the fact that henceforth every Regional Center must have to go through AUDITS once every 5 years, or more frequently as deemed fit, by the Secretary. As a firm, we have a policy of auditing projects and lifting the veil on all sides so that the investor’s interest is safeguarded. We are glad to learn that the new reforms are in line with our ethos.

    Other than the above, various checks and balances have been enforced that embraces & supports eb-5 investors. For instance, projects could earlier solicit funds without filing an exemplar approval. We have always advocated that the project must be exemplar approved. There have been segments of the fraternity which didn’t advocate that because of reasons best known to all. Now on, the project would have to at the least file an exemplar (they need not be approved, but the homework of putting the things together would at least be done) before they can seek funds from any EB-5 investor. Those who questioned “why does one need to do the exemplar process” should have got the answer now. We have and will continue to advocate the importance of exemplar filings. To put our reasoning in just one line, “We want the project to do their homework, be organized and have all the perspectives in place with needed attachments instead of addressing them as a part of a RFE to an investor’s I-526”.

    The new lawhas also provided for a mandatory SITE VISIT by the Secretary at the place where the NCE or the business location is situated.

    Certain procedural aspects are also simplified making the life for an investor easy. An example to this is the validity of the TEA certificate which has now been expressly specified as two years. Previously, it was often witnessed in our due-diligence that Regional Centers would obtain a TEA, but not get it updated annually. This led to RFEs. This anomaly has now been sorted with a crystal-clear validity of two years. As a prospective EB-5 investor, you must ask for a copy of TEA from the project that you wish to invest into, & check its date.

    Finally, yet importantly, every investor who invests in the Regional Centre program on or before Sept 30, 2026, will be indemnified from any future expiration of the program. This grandfathering has won hearts of prior investors and is sure to give immense comfort to incoming investors.
  9. Can I know the most critical differences in the new rule vs the old rule?

    11 important differences in the new eb-5 law vs old eb-5 rules are given below:

    1. Investment Amount: Investment of US$ 800,000 in a TEA as against US$ 500,000 in the old rule
    2. Issuance of TEA: Issuance of TEA certificate by DHS as against by the domestic bodies in the old rule
    3. Validity of TEA: Sustenance of TEA certificate for two years as against more frequent renewals in the old rule
    4. Expiry Protection: Grandfathering privilege to investors as against the risk of program expiration in the old rule
    5. Government Audits: Mandatoryaudit by the Secretary once every 5 years as against voluntary inspections
    6. Redeployment: Flexibility in redeployment of capital anywhere in the United States as against limitation to invest in the specific territory for which the RC is licensed
    7. Removal of TEA uncertainty: Clear rule in black & white which indemnifies an investor from change of TEA status as against lack of clear wordings in the old rule
    8. Exemplar: Mandatory filing of exemplar before EB-5 funds can be raised as against flexibility to raise funds from investors without filing an exemplar
    9. Concurrent filing: Absolute flexibility offered to petitioners on H1B, F1, and a few other visa categories to freely work, study & live in the USA as against no such option existing in the previous program structure
    10. Job creation: Mandatory creation of jobs under the direct category as against flexibility to use indirect & induced jobs without placing any reliance on direct jobs
    11. Governance: Introduction ofseveral governance measures like site visits, EB-5 Integrity Fund, Penalties & mandatory audits as against minimal monitoring measures
  10. I am an investor who had filed under the old law (let’s say in October 2019). Can I benefit from the provisions of new law?

    EB-5 applicants are, & are not, in a situation where we have “Applicants under the New Rule” “Applicants under the Old Rule”. Everyone is under the same umbrella though the applicabilitymay not be verbatim to all.

    For example, the new rule requires the project to have its exemplar filedbefore raising funds. Needless to mention, if you had invested in a project which didn’t have the exemplar filing in place (at the time of your investment), then that shouldn’t jeopardize your I-526 adjudication.

    In our opinion, the benefits extended under the new rule are applicable mutatis mutandis to the erstwhile investors as well. For example, grandfathering. Another example is the freedom to redeploy. Obviously, the Regional Center is not going to separate the dollars and then redeploy differently for “dollars received in the old rule” “dollars received in the new rule”. Any regional center is likely to redeploy in toto.

    There are examples on the flip side as well. Under the old rules, TEA was not valid for a period of 2 years. So, if USCIS issues an RFE to an investor who invested in November 2019 (&who had attached the TEA certificate, let’s say, dated March 2018), then the RC may fail in taking the defense that the March 2018 certificate be treated as valid. Such a provision didn’t exist at that time, hence the investor who invested in November 2019 ought to have attached a valid certificate.

    To some extent, this means that the officers will have to eventually have two versions of minds running in tandem as we delve into the years of 2023 & 2024 (wherein USCIS would be adjudicating petitions under different regulations at the same time).
  11. I wish to do a direct filing but with the help of renting a Regional Centre. Is it possible?

    This was possible under the old law. It is explicitly prohibited under the new law.
  12. My friend & I wish to do an investment by pooling funds into a common project (direct)? Is it possible?

    This was possible under the old law. It is explicitly prohibited under the new law.
  13. Will the processing times speed up after establishment of EB-5 Reform & Integrity Act?

    Processing efficiency, at every stage,is one of the key themes under the new law. USCIS is laying a roadmap through which inefficiencies can be discovered, and speed can be achieved.
  14. What is the EB-5 Integrity Fund?

    EB-5 Integrity Fund is a special fund established in the United States Treasury for effective monitoring of the various parties involved in the scheme. This is a classic step taken, for the first time, since 30+ years of formation of the program. A dedicated fund has been proposed which will have monies streaming from the following:

    1. Fee of US$ 10,000 paid by Regional Centre (having more than 20 investors)
    2. Fee of US$ 20,000 paid by Regional Centre (having 20 or fewer investors)
    3. Fine up to 10% of the capital collected by the Regional Centre
    4. Fee of US$ 1,000 from each applicant / petitioner at the time of filing I-526

    The fund will be put in effect from October 1, 2022. One of the things our firm has admired here is that there is lot of clarity as far as the functioning of EB-5 Integrity Fund is concerned. Fees have been clearly defined, the date of the fund becoming operational has also been confirmed, and most importantly, the avenues for which the sum collected can be used including but not limited to overseeing marketing and promotional activities by RCs & migration agents have also been prescribed. We believe that this is a classic step taken to weed off the bad players from the industry.
  15. What is the escrow account mechanism introduced under the new EB-5 law?

    The new law requires regional centers to maintain an escrow account apropos each applicant (investor). Under the erstwhile regime, RCs would have a single escrow account (& which was also optional although most RCs utilized an escrow agent). Under the new law, escrow account has been made mandatory; there will be a dedicated escrow account for each individual investor. Moreover, a fund administrator shall be appointed to oversee the fund movement in each escrow account. This fund administrator must be an independent entity, & not related to the NCE or the JCE or any of the principals or managers thereto. This independence will bring lot of confidence to investors as there will be a real-time watchdog.
  16. What are the changes apropos sources of funds under the new EB-5 law?

    There are a few minor tweaks. One fact that has been reiterated is that gifts continue to remain a valid source of fund, with an emphasis on such gits being good in faith, bona fide. In terms of using borrowed funds, there is a specific mention that the onus to prove legitimacy of funds, including providing the financial strength & creditworthiness, will shift to the “lender” who has lent the funds to the applicant. However, this would not be required where the lender is a “Bank”.
  17. Is the use of unsecured loans as a source of fund made clear under the new EB-5 law?

    There is no specific mention of unsecured loans being a valid source of funds, neither under the erstwhile regulation nor under the riders added by way of the reforms act. In our opinion, whether unsecured loans can be used or not still continues to remain unclear from a regulatory point of view. One can obviously take defense on the back of Zhang Vs USCIS but do note that such a stand would be litigative by nature. There is nothing that suggests or confirms whether what was hold true in the Zhang case would continue to be held true in the future as well. In fact, there is no guideline or clarification issued by USCIS, neither vide the Act nor by way of a circular, that confirms usage of unsecured loan as a valid source of fund.

    In India, it is very common for an individual to take unsecured loans from their family & friends, in business or otherwise, at nominal or nil interest rate. This is commonly followed (not as ab EB-5 requirement, but even otherwise in day to day life). We frequently get this question and we will continue to hold our opinion that unsecured loan must not be used for pursuing an EB-5 investment. There are better ways to navigate then open yourself to the pains of a litigation.
  18. Do I have to source administrative fee & attorney fee as a part of source of funds exercise?

    The old rules didn’t mandate an eb-5 applicant to document sources of funds for the administrative fees (RC project fee) or for attorney fees. However, as a best practice, most petitioners did document the processing fee in the SOF documentation. We have always done that and many other consultants have adopted the same approach under the erstwhile law.

    The new law has made it outrightly mandatory to document for all costs. Accordingly, any & all dollars incurred over & above the investment amount also have to be sourced &documented as a part of SOF work. This would primarily include the following (i) Admin fee, (ii) Attorney fee, (iii) USCIS filing fee, (iv) Additional filing fee introduced by USCIS, (v) TCS @ 5% collected by banks in India, & (vi) Forex charges including exchange differences.
  19. How will FEMA rules work as the current LRS limit is US$ 250,000 only?

    Liberalized Remittance Scheme (LRS), as governed by the Reserve Bank of India (RBI), permit an individual resident to remit US$ 250,000 per person, per financial year. The financial year in India starts on 1st April & ends on 31st March of the succeeding year. This is unlike USA which has its fiscal year starting from 1st October and ending on 30th September of the following year.

    Remitting US$ 800,000 is going to be a major challenge. One way to navigate this issue is by wiring first tranche into the Regional Center’s escrow account prior to March end, and then follow it up other tranches subsequently. However, this is possible only where the applicant is investing around the financial year end.

    One can also open a bank account in United States of America, sitting in India, virtually & without the need to travel to USA, but there are reporting requirements that must be met under the Income Tax return filing. There is a specific schedule which requires foreign assets, including temporary foreign bank account balances, to be reported in India. Failure to do this can attract attention of not only income tax authorities, but also ED (enforcement directorate) given the large sum of money involved in these foreign remittances.
  20. Is there an increase in USCIS fee for an EB-5 applicant?

    Yes, w.e.f. October 1, 2022, all petitions are subject to an additional flat fee of US$ 1,000, payable by the eb5 applicant.
  21. How will the 5% TCS charge on EB-5 remittances work?

    Previously, banks charged 5% on the INR equivalent of US$ 500,000. Now it will be charged as 5% on the INR equivalent of US$ 800,000. On an average, an investor would end up paying INR 30,00,000. Do note that TCS is not applicable on the remittances up to INR 7,00,000, beyond that it would be applicable @5%.

    When you file your tax return, this TCS can be claimed as a refund or adjusted against the tax liability. So, to that extent, it is merely blocking your liquidity; in essence, this is not an expense though one would need to document this in the source of fund exercise.

This article is being published on 21st March, 2022 (i.e. less than a week after the bill was signed) and hence does not contain analysis on clarifications, if any, brought in effect after the date of publication of this article. Please do not replicate any content.

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10th Floor,
Solitaire, S G Highway,
Ahmedabad - 380015

EB5 India Advisory Pvt. Ltd.

L-2A,
Block L,
Hauz Khas Enclave,
New Delhi - 110016

EB5 India Advisory Pvt. Ltd.

Level 16, D-Wing,
Tradeworld,
Lower Parel,
Mumbai, Maharashtra 400013

EB5 India Advisory Pvt. Ltd.

2nd Floor, No. 2B,
Subhodaya Building,
Near Fernandez Hospital,
Hyderabad, Telangana 500001

EB5 India Advisory Pvt. Ltd.

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Near Utkarsh Shool,
End of Akshar Marg,
Rajkot, Gujarat 360001

EB5 India Advisory Pvt. Ltd.

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7th floor,
27 Brabourne Road,
Kolkata, West Bengal 700001

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