FACTORS OF RETROGRESSION
The root cause of the program’s visa numbers problem
reflects a combination of two factors: the unprecedented
success of the EB-5 program over the last five or so
years, and the way the U.S. Department of State counts
(and limits) employment-based immigration program
visas for certain countries. Regarding the first, the EB-5
program experienced unprecedented levels of interest
in the aftermath of the U.S. “Great Recession”—when
traditional sources of capital to fund projects dried up in
the aftermath of the national financial crisis. Over the
first roughly 20 years of the EB-5 program’s activities,
inves to r in te res t in th e E B - 5 P ro g r a m n eve r c a m e
anywhere near using the total number of visas available
to the program or to any single investor-sourcing country.
That all changed when interest in the program grew,
and EB-5 capital became an attractive source of capital
used as substitute
for ver y expensive,
mezzanine-type equity
capital. As a result, the
EB - 5 program is now
being impacted for its
record of success—
for ge ne rating multi -
billions of dollars
in job-creating
investment capital
for hundreds of
development projects.
Inde e d , ove r the las t
five years, EB - 5 has
become one of the U.S.’
most significant merit-
based immigration
programs, even against
the backdrop of well -
publicized stories of a
few “bad actors” in the
program.
Regarding the second
and in the opinion
of many, the U.S.
D e pa r t m e n t of S t a te
(DOS) has been adding “insult to injury” to the above
because of the way it has historically counted, and in
many ways unnecessarily limited, the visa numbers it
allows per country in the employment-based categories.
The EB-5 program is limited to just under 10,000 each
year. Fu r the r, for famil y - base d and e m ploy me n t-
based programs, the DOS has over the years allowed
no more than 7 percent of the total annual allotment to
go to any single country. Along with the DOS’ historical
interpretation that spouses and dependent children
mus t be counted agains t the per countr y cap, this
approach to counting visa caps has severely limited the
number of visas available to actual EB-5 investors to
only about one-third of the level that could otherwise
be possible if the visa numbers only applied to actual
EB-5 investors. Critics point out that the DOS’ visa
counting approach is nowhere to be found either in the
law or in any duly-adopted program regulation. They
suggest that the DOS’ way of counting visas is simply
a convention based on a flawed reading of the law and
legislative intent over the years.
This concern last July led to a widely-publicized class-
action lawsuit, filed by 450 mainland Chinese investors and
joined by at least one active regional center, challenging the
way the DOS counts the spouses and children of investors
(called derivatives) against the roughly 10,000 annual visa
quota. The lawsuit explains that because the DOS counts
each immediate family member of an investor against
the annual 10,000 visa quota, this severely restricts the
number of visas subject to the limits that actually go to
investors. This DOS interpretation significantly increases
visa wait times and thereby reduces the potential additional
positive economic
impact of the program
which could be more
effectively realized
by c ounting only the
investors’ visas against
the annual visa limit.
If the lawsuit prevails
(or perhaps compels a
policy change), instead
of discouraging foreign
investment by limiting
the number of investors
to only about a third of
the annual visa limit
total, a greater number
of visas would be
available for the project
investors themselves.
This would ideally
l ead to a sig nif ic a n t
reduction in the current
visa backlog that is
currently extending wait
times and discouraging
new foreign investment
under the EB-5 program.
THE PROGRAM’S ECONOMIC IMPACT
To understand the economic significance of having
an unconstrained EB -5 program, one peer- reviewed
study of the contribution to the U.S. economy by the
EB-5 program comes from the industr y group Invest
i n t h e U S A ( I I U S A ). T h e I I U S A s t u d y, w h i c h w a s
conducted by the Center of Economic and Business
Research at Wes te rn Washing ton U nive rsit y,
estimated that the EB-5 program over the 2014 -2015
time frame resul te d in more than $11.2 3 billion in
new investment and the creation of nearly 185,0 0 0
jobs for the U.S. economy. The 2014 -15 period was
a good one for the analysis of the EB - 5 program’s
economic potential, because it reflected a time when
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