With the introduction of new EB-5 investor visa regulations in November of 2019 came changes to the way the United States government designates approved projects. If an EB-5 project was in a Targeted Employment Area (TEA), EB-5 visa petitioners were eligible to invest the previous minimum amount of $500,000USD. The new regulations have brought stricter qualifications for a possible TEA project, meaning that fewer projects will be able to classify as TEA. With the possibility of fewer TEA projects, it is likely that more EB-5 petitioners will be required to invest the current larger investment amount of USD$1.8 million.
Previous specifications and types of TEAs
There are two types of TEAs: high-unemployment and rural. Under the previous regulation, TEA was a term used to describe a project that was located in a rural area or one where the unemployment rate was at least 150% more than the national average.
The specifications for a TEA according to regulations before November 2019 were as follows:
- High-unemployment – An area can be deemed this type of TEA if the unemployment rate has reached or surpassed 150% of the national unemployment rate, determined by the Bureau of Statistics. As of 2018, the national unemployment rate was 3.9%. This means that in order to qualify as a TEA, an area must have an unemployment rate of 5.9% or higher (3.9 * 150%). Additionally, high-unemployment TEAs must be located in cities or towns with a population of over 20,000.
- Rural – Rural areas are considered as such as in one of two ways: 1.) If an area is not within a metropolitan statistical area (one with a high population density and adequate economic opportunities) or 2.) If it lies outside the outer boundary of a city with a population of 20,000 or more.
What are the new TEA specifications?
Under the old regulations, a state was allowed to classify an area as TEA or non-TEA without USCIS or government involvement. With the new regulation in place, only the Department of Homeland Security can classify TEAs, completely removing the state’s authority to do so. A TEA is also now restricted to the immediate area surrounding a project, such as a census tract and the connecting areas. A census tract is a geographic region that is designated for the purposes of taking a census. A TEA may consist of a census tract or adjacent census tracts in which the EB-5 project is chiefly doing business if the project is located in more than one census tract and the average unemployment rate for the tract(s) is at least 150% of the national average.
These new rules make may make it more difficult for new projects to qualify for TEA classification. Many states were able to access an area and certify it within a few weeks – the Department of Homeland Security will likely take much longer to review and approve these petition designations. To prevent these changes from affecting the status of any current applications, USCIS will retain the priority date of petitioners that must re-submit their applications. However, petitioners will only retain their priority dates if their applications were already approved for classification.
How does this affect a project’s TEA designation?
If you are working with an EB-5 regional center, they will be able to guide you as to whether your intended project is in a TEA or not. If you have already submitted an EB-5 petition, USCIS will evaluate the designation of your project based on whether the area it is in was classified as a TEA at the time of the submission.
Those interested in submitting petitions after the new regulations have taken effect should be prepared for the possibility of having to fund the larger of the investment amounts. Although these stricter rules may appear inconvenient, the Department of Homeland Security has stated that this decision was made to prevent manipulation of census tracts to create TEA designations. Using a regional center will help prevent you from having to research and compile the plethora of data needed, especially under these new regulations. Each project supported by a regional center will have already accessed and gathered the necessary information, including the extensive information regarding population, census tracts, and unemployment rates now required.
Under the new regulations, my intended project is now not in a TEA. How can I acquire additional funding?
The biggest question for many EB-5 petitioners will likely be tied to funding the larger EB-5 investment amount of USD1.8 million. Thankfully, EB-5 visa funding can be gathered from a number of sources – all of the funding does not have to originate from the same place. Funding options for the EB-5 visa include:
- Inheritance – Many petitioners use their inheritance as a means by which they fund their EB-5 investment. Once the monies from the inheritance are fulling released and held by the petitioner, it can be used as full or partial funding.
- Personal Loans – A personal loan is a loan taken out by the petitioner themself via a financial institution such as a bank, credit union, or insurance agency.
- Business Loans – A business loan is a loan taken out by the petitioner on behalf of a company or organization that the petitioner has full or part ownership of.
- Insurance – Petitioners sometimes choose to cash in insurance policies that have reached the end dates. Policies, especially life insurance or medical insurance, are often worth sums of money that can cover the entirety or vast majority of the EB-5 investment.
- Gifts – Petitioners are sometimes given monetary gifts by family or friends. These are also eligible for use for EB-5 funding.
Each of the above funding methods must be able to be proved to have been acquired (by the petitioner and the previous source) lawfully and legally.