Consequences of Raising EB-5 TEA Investment Amount
Now that the EB-5 program has been renewed in the United States, the issue appears to be what changes Congress intends to implement to the program. Today the EB-5 investment program has evolved into a full-fledged industry that revolves around the $500,000 figure, and yet still brings billions of dollars in foreign investment into the United States. Whether the TEA’s $500,000 minimum investment amount will be raised to the proposed $800,000 amount or eliminated entirely are concerns for all within this industry.
The TEA investment amount of $500,000 was set more than two decades ago. When adjusted based on the Consumer Price Index, 1990’s $500,000 has the purchasing power of only $275,235 in today’s dollars. In comparison to other immigrant investor programs, the United States’ EB-5 investment program requires the least amount of investor capital. The basic requirements of the EB-5 program – to create jobs and stimulate the economy — distinguish it from the other investment programs. In addition, while some argue that investing $500,000 in an entrepreneurial stand-alone project is unlikely to sustain a viable business creating 10 permanent jobs, the same amount pooled, either in a direct pooled or a regional center project certainly has proven success.
EB-5 attorneys, agents, brokers, and practitioners all agree that by raising the minimum investment amount, many investors are going to be priced out of the market, especially considering the “at risk” element of the EB-5 program, making the United States less attractive to potential investors. The $500,000 benchmark undoubtedly brings a higher volume of investors into the United States. The majority of investors infuse further bouts of fresh capital into the American economy by purchasing real estate, engaging professionals, paying taxes on their global income, paying for education, and making alternative investments into the stock market, as well as expanding their overseas businesses in the United States. In 2010, new immigrant business owners had a total net business income of $121.2 billion, which is 15 percent of all net business income in the country!
Furthermore, once the initial investment capital of $500,000 is returned, there is a far higher likelihood that this capital would be reinvested in the United States rather than being returned to the country of origin. Annually, the EB-5 Program accounts for less than 1% of the visas issued by the U.S. Thus, a reduction of the number of foreign investors in the EB-5 category is not in America’s best interest. Before the minimum amount is drastically increased, Congress must ensure that the overall domino effect on economic growth is assessed.
In conclusion, if Congress decides to either raise the minimum investment figure to acclimate with the Consumer Price Index or remove the TEA designation entirely, thereby raising the EB-5 investment capital amount to $800,000 or more, the change would make the EB-5 program unattractive in comparison to its international competitors, who may just prefer to spend a higher amount that is guaranteed as opposed to being at risk. The United States should not limit the number of potential investors it can attract to the EB-5 program. With over $20 billion at stake and thousands of jobs being created every year, the EB-5 program will continue to thrive as long as Congress does not stifle its growth.
Buda Law Group urges parties who are considering EB-5 visas to call us with any questions.
John B. Buda, Esq.
1201 W. Huntington Dr. Suite 209
Arcadia, CA 91007