Recession Breathes New Life into US Immigrant Investor Visa Program
The number of approved visas for the EB-5 visa program has nearly tripled between fiscal year (FY) 2008 and FY 2009, from 1,443 to 4,218 visas, according to the US State Department. Created as part of the Immigration Act of 1990, the EB-5 visa program grants lawful permanent residence to foreign nationals who invest $500,000 or $1 million in US businesses and create or preserve at least 10 US jobs.
The number of "regional centers" established to facilitate EB-5 investment projects has also tripled over the last year, from 23 to 74 as of December 2009; 23 centers are in California.
US Citizenship and Immigration Services (USCIS) authorizes certain private corporations or government agencies to become regional centers, which can pool investor money to make large investments in specific geographic areas. The centers have used EB-5 investor capital in a wide variety of projects, including hotels, manufacturing enterprises, farms, restaurants, and technology companies.
The new surge in interest is clearly a reversal of fortunes for the EB-5 program, which came under strong scrutiny in the late 1990s. The program's increased popularity now could prompt further debate over the impact of immigration on the US economy.
Various congressional leaders, including Senators Patrick Leahy (D-VT) and Jeff Sessions (R-AL), have begun to actively promote the EB-5 program as an economic stimulus tool, especially in rural areas and places with high levels of unemployment.
Because experts estimate that up to 90 percent of EB-5 investors choose to invest in industries in rural or "targeted employment areas " — defined as parts of the country where the unemployment rate is at least 150 percent of the national average — political leaders see the program as one way to revitalize ailing local economies.
When Congress created the EB-5 visa category in 1990, its goal was to attract immigrant entrepreneurs to invest in the US economy. The program is based on similar visa programs in Australia and Canada.
Each year, 10,000 EB-5 visas are available for immigrant investors who are willing to invest $1 million in a US business and who can show that their investments will result in the creation or preservation of at least 10 US jobs. Investors who put their money into businesses in targeted employment areas only have to invest $500,000.
Participants in the program receive two-year "conditional residence" in the United States after USCIS approves their initial visa petitions. After two years, these visas can be converted into permanent residency if the business investment and the recruitment of employees are sustained. The spouses and unmarried children of EB-5 investors are also eligible to receive permanent residence through the program.
Because the EB-5 program was greatly underused early on, Congress created the Regional Center Pilot Program in 1993. To meet this program's qualifying criteria, participating investors are permitted to count both "indirect" and "direct" jobs that were created as a result of their investment.
As a pilot program, however, the regional centers model has congressionally limited authorization. The program has received several temporary extensions since 1993.
While USCIS statistics do not differentiate between investors participating in the regional centers, and those setting up their businesses independently, officials estimate that roughly 91 percent of the visas go to investors using the regional centers.
The surge in EB-5 interest this year has been especially pronounced among nationals of Asian countries. According to the State Department, 3,340 of the 4,218 EB-5 visas issued in 2009 (79 percent) were issued to applicants from Asia, and 1,979 of these to Chinese nationals. This trend may indicate that the EB-5 investor visa program is becoming an especially attractive option for wealthy foreign nationals who might otherwise face long backlogs in family- or employment-based visa categories.
Supporters of the EB-5 program have emphasized the program's potential as an economic recovery tool, an aspect of the program that has also caught the attention of various federal government agencies and several members of Congress. In a recent hearing before the Senate Judiciary Committee, senators stressed using the EB-5 program to create jobs.
The USCIS Ombudsman expressed similar sentiments in a March 2009 report on EB-5, emphasizing that "in recognition of the present turmoil in the US economy," it was imperative that USCIS facilitate a well-run EB-5 program.
Several aspects of the program make it particularly inviting to foreign-born investors. Unlike other visa categories, the EB-5 program allows applicants to self-petition for visas; they do not need a family member or employer to serve as an immigration "sponsor." Immigrants with approved EB-5 visa petitions can also enter the United States immediately, as there is no backlog in the EB-5 visa category, at least for now.
But despite a dramatic increase in the program's popularity, the number of visas issued in 2009 was still less than half of the 10,000 annual allocation.
Experts have generally attributed underuse of EB-5 visas to a number of factors, including an onerous application process, easier and more inviting investor visa programs in other countries, such as Canada, and investor uncertainty about the stability of the program. They also highlight the fact that many potential investors shied away from the program in late 1990s, after the US immigration agency claimed to have found fraud in a number of EB-5 applications and temporarily suspended processing.
Proponents of the EB-5 program — among them some state governments, local government development agencies, and chambers of commerce — believe that participation would increase if the regional center program was converted from a temporary to a permanent model. Several government agencies have also recommended a permanent version, stressing that doing so would further reassure potential investors of the program's stability.
Recent attempts to make the regional center model permanent have not succeeded. Earlier this year, senators Leahy and Sessions introduced an amendment to the Department of Homeland Security Appropriations bill that would have made the regional center program permanent. The amendment was excluded from the final version Congress passed in October. Instead, the regional center program was extended for an additional three years.
Given that much of the surge in EB-5 interest seems to be tied to the current economic climate, it is unclear whether state and local governments will remain as interested in promoting the program in the future. Their involvement will certainly play a role in determining whether the full potential of the EB-5 program is realized in years to come.
ICE Audits. Immigration and Customs Enforcement (ICE) plans to audit 1,000 US businesses suspected of hiring unauthorized immigrants, targeting businesses connected to "public safety and national security." Assistant Secretary John Morton made the announcement just four months after the government audited 654 businesses suspected of immigration violations, resulting in 61 "Notices of Intent to Fine" (NIFs), the first step in charging an employer for immigration violations. In April 2009, Homeland Security Secretary Janet Napolitano announced that ICE would shift the focus of its immigration enforcement program to target employers who hire unauthorized immigrants.
Arizona Immigration Enforcement Provisions. The Arizona Supreme Court dismissed a lawsuit challenging the constitutionality of a new law that makes it a misdemeanor offense for a local government employee to fail to report an unauthorized immigrant while administering a public benefit or service. The League of Arizona Cities and Towns had argued that the new law violated a prohibition against including regulations on multiple subjects in a single bill.
By Muzaffar Chishti and Claire Bergeron
Migration Policy Institute
December 15, 2009
As state and local governments look for new ways to revitalize their recession-hit economies and spur job creation, an increasing number of them are turning to a historically underused visa program for immigrant investors.
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State and Local Policy Beat in Brief
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