Kushner & Trump and the EB-5 Regional Center Extension

First things first, the EB-5 Regional Center program has been extended until September 30, 2017 as part of a larger federal budget extension.  And as we’ve pointed out previously (but bears repeating), the extension affects the Regional Center program.  The “regular” EB-5 program involving individuals who invest does _not_ need to be extended like the Regional Center program (which started as a “Pilot Program” and never escaped that designation).  However, portions of the regular/direct EB-5 program will be affected by provisions that overlap with the Regional Center program – see this (link to previous article about EB-5 changes that impending).

Secondly, the EB-5 program has gotten its biggest boost in publicity due to President Trump’s in-laws (the Kushners) being linked to an EB-5 Regional Center that was pitching mainland Chinese investors.  There has been a title wave of articles on this subject and the EB-5.  The previous stories of fraud and criminality in previous EB-5 Regional Center projects has not garnered this much publicity.  The tie in to Trump and his family is fueling this and rightfully so.

See the articles below.

Jared Kushner’s sister puts EB-5 visas back in the spotlight.

Kushner Family Stands to Gain From Visa Rules in Trump’s First Major Law

The biggest issue is that the promoters of the program essentially made a direct link between one of the Kushners to Donald Trump.  It was a blunt *wink**wink* to the potential customers that this project is guaranteed to do well – because it is expressly _forbidden_  to make guarantees of any sort on an EB-5 project.  The funds have to be “at risk” in the target business.

We are not big fans of the Regional Center program – while useful and a boost to the US economy when used correctly, the amassing of such capital can create numerous opportunities for abuse.  We prefer clients go the direct route of the EB-5 visa – where one invests into a business and oversees it to create the 10 direct jobs.  However, we understand that with certain investors, they would prefer a more hands off vehicle – which is where the Regional Centers are handy.

The entire affair will inject more urgency to the reform/abolish debate to the EB-5 program as it the sunset date for the temporary extension nears in September of this year.

EB-5 Impending Changes

 

PR_Visa_WP

Given all the turmoil with the new executive orders from the new administration in 2017 — along with the rumors of unsigned executive orders and proposed bills floating around — we’ve been trying to wait for some of the dust to settle before commenting on any of the substantive changes.

There is however, a proposed rule, which will change some aspects of the EB-5 Investment Immigrant Visa, some significantly.

Entitled, “EB-5 Immigrant Investor Program Modernization” — the main points are:

  1. The minimum investment amount in a Targeted Employment Area will increase from $500,000 USD to $1.35 million USD.
  2. All other areas will increase the investment amount from $1 million USD to $1.8 million USD.
  3. The ability to designate Targeted Employment Areas will be taken away from the individual state and be given to the Department of Homeland Security.

The proposals are significant, raising the capital amount to 80%.  This will affect the EB-5 market in the United States.

These are proposed rule changes, so unlike other rumors of unsigned executive orders and proposed legislation that have little chance of passing (the proposed bill to abolish the EB-5 visa altogether), so they will most likely go into effect.

The comment period for the proposed rules above ends April 11, 2017.  At which point, USCIS can propose amended rules OR publish the final rule at any point afterwards.  Then the rules go into effect in 30 days.  So the earliest the changes can take place are May 11, 2017, although realistically speaking it will be sometime afterward.

Keep in mind that this separate from the EB-5 Regional Center program expiration which is set for April 28, 2017.  A lot of things happening in April — it is the cruelest month.

For those who are interested, the full body of the proposed rule changes are on the official government website, the Federal Register.

News of these changes have hit the mainstream financial press:

Barron’s

Forbes

Worldwide Passports for Sale

 

We essentially focus on US based immigration.  People who want to come into the United States to invest and set up businesses primarily.

It’s interesting to see what other countries are doing in this regard.  The US is unique because it has its focus on job creating enterprises with no US guarantees.  Other countries (such as Canada) allow direct investment into the government and the government guarantees the investment.  Other places require investment into properties (the US specifically forbids “passive” investments, which covers a lot of real estate transactions).

NPR did a segment on the sale of passports that was interesting to say the least.

Check it out:  Passports for Sale

 

 

 

EB-5 Fraud Case Continues To Reverberate

 

In the past few years there have been a quite a number of EB-5 Regional Center related cases.   They are pretty well documented in the press — just google “Eb-5 Fraud” and one can get a good sense of the range of scams and fraud causes that can erupt from EB-5 cases.  In our opinion, the best way to minimize the risks involved in an EB-5 investor case (in terms of fraud) is to manage one’s own business enterprise.

In most of the uncovered fraud cases, there has been major litigation and government prosecution involved.  In many cases the investors were able to recover the funds.

Well it looks as if there is a new area where the the litigation is going and it’s towards the banks that are holders of the escrow accounts.  These banks are supposed to hold the EB-5 investment funds in an escrow account until a few agreed upon actions happen, such as approval of the investor’s EB-5 investment petition.  It looks as if in the allegations here, that did not happen.

Click on the link below for the article.

http://www.latimes.com/business/la-fi-wilshire-eb5-fraud-20160725-snap-story.html

 

EB-5 Proposals and What They Could Mean

cropped-losangeles-dtsunset.jpg

It’s that time of the year, where the EB-5 Regional Center program is going to sunset and there is a scramble (as usual) to renew it.  And it should be pointed out that this has no effect on the “original” EB-5 program, were an individual invests capital and creates 10 jobs.  That will always be there.

But the Regional Center portion of the EB-5 program has always been given a life for limited periods of time, possibly because of some of the controversy and issues surrounding this program.

There are a number of competing bills summarized here:

http://eb5coalition.org/resources/bill-comparison-chart/

Danger of Proposals : Sometimes They Never Become Law

Recently there was news from the Department of Homeland Security that there would be a proposal to allow spouses of certain H-1B workers to work.  See link for the actual release.

While this particular proposal seems likely to happen, it does raise the issue of when proposals are seen as actual “law”.  Not too long ago there was a proposal by US Senator Schumer to grant permanent residence visas to overseas investors who put in $500,000 US dollars into residential property.  The Wall Street Journal wrote about it as well as other national news outlets.  Overseas, especially in Asia, it received a lot of positive press.  It should be noted that several countries, such as Panama, have residential property investment visas.

However, this proposal did not get passed into law.  But we do get questions about this residential real estate property visa all the time.  Unfortunately, we have to tell them it doesn’t exist.  Some don’t believe us and presumably go to others trying to utilize this residential property visa.  What’s there not to like about this?  You buy a property that you would have normally and they throw in a green card in the process as a nice freebie.  Much better than having to create 10 jobs and putting one’s capital at risk (the current EB-5 scheme).

Other attorneys (US attorneys, I may add), ask about this as well.  That’s why it’s a bit problematic writing about proposals before they come law.