approve, new TEAs. Put simply, given the uncertainty
that defines USCIS, in investors’ minds there is simply
no certainty that urban projects are going to recapture
TEA status, even if they have an economist’s letter to
support them.
HOW DO REGULATIONS IMPACT RURAL
TEAS?
The only exception for EB - 5 investors that want
TE A cer taint y without having to wait on USCIS are
rural projects - as they “automatically” qualify under
th e re g ula tio ns. Re g ula tio ns d ef in e p roje c ts tha t
automatically qualify as a TEA as located in a city with a
population of less than 20,000 people, and also located
outside of a Metropolitan Statistical Area. Both these
requirements must be fulfilled to have TE A approval
without USCIS involvement.
WHAT ABOUT PROPOSED
LEGISLATION?
An additional significant risk to urban TE A status is
legislative changes. Each legislative bill proposal
during the past 2 years has stated that TEA status will
be defined as rural and Opportunity Zone (OZ) projects.
Due to this uncertainty, until legislation, rural offerings
are the best practice moving forward in providing TEA
certainty to investors.
HOW DO PRICE INCREASES IMPACT
THE INDUSTRY?
change in the definition of a
Targeted Employment Area (TEA).
Under the regulations, urban
p r o j e c t s a r e n o l o n g e r a b l e to
assemble, or gerr ymander, large
numbers of census tracts to justify
a TE A , which were previously
approved on a state level. Now,
urban projects must qualify under
the federal regulatory definition,
which outlines that the individual
projects must qualify by just using
individual census tracts where the
project is located, or those directly
ad jac e n t to th e m . I n ad di tio n ,
urban TEAs need to be approved or re-adjudicated by
USCIS, even if they had prior exemplar approval.
The price difference between
TEA qualified projects for
$90 0,0 0 0 and non -TE A projects
f o r $ 1. 8 m i l l i o n i s s i g n i f i c a n t ,
and correspondingly will reduce
the total number of investors
w o r l d w i d e . F u r t h e r, t h e t o t a l
number of investors the industry
can quantify will likely not stabilize
u n t i l 2 0 2 1, a s t h e m a j o r i t y o f
investors who planned to do EB-5
by early 2020 fast tracked their
EB -5 submit tal to capture the
$500,000 price point prior to the
regulatory changes. It is expected
that the number of EB-5 investors will be less than half
of the 2019 numbers for the foreseeable future until
backlogs and waiting times are reduced in retrogressed
c o u n tr ies like C hina , I n dia an d V ie tnam . S o u rc in g
investors will become more difficult and take more
expense/effort with multiple retrogressed countries and
a higher price point.
"Under the regulations,
urban projects are no
longer able to assemble,
or gerrymander, large
numbers of census
tracts to justify a TEA."
Moving forward, EB-5 investors will have a much more
limi te d se l e c tio n of p roje c ts tha t qualif y fo r E B - 5
financing. This doesn’t only impact future projects, but
as stated above, the overwhelming majority of exemplar
approved projects prior to Nov. 21, 2019 will lose their
TEA status. Additionally, the change of TEA designation
power from the individual state to the federal level
provides another significant uncertainty risk, as we have
no idea how long USCIS will take to re -adjudicate, or
A legislative bill could drastically change all of these
predictions, as the number of investors after legislation
could increase significantly depending on the final
terms in the bill.
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