EB-5 Immigrant Investor Visa
Released: 2016-04-22T00:00:00

Overview

Congress created several nonimmigrant and immigrant visa categories as a way to increase investment and job creation in the United States. There are two nonimmigrant investor visa categories, the E-1 visa for treaty traders and the E-2 visa for treaty investors. For immigrants, there is one investor visa category, the EB-5 visa, which is the fifth employment preference immigrant visa category. The EB-5 visa was created through the Immigration Act of 1990 ( P.L. 101-649 ). The goal of the EB-5 category is to attract new foreign capital investment to the United States and generate employment. The category provides individual foreign national investors and their derivatives lawful permanent residence (LPR) in the United States when they invest a specified amount of capital in a new commercial enterprise that creates at least 10 jobs.

In general, individuals receiving EB-5 visas are granted a conditional residence status. After approximately two years they must apply to remove the conditionality from their residency status. If they have met the visa requirements (i.e., invested and sustained the required money and created the required jobs), the foreign national receives full LPR status. If the foreign national investor has not met the requirements or does not apply to have the conditional status removed, his or her conditional LPR status is terminated, and, generally, the foreign national is required to leave the United States, or will be placed in removal proceedings.

Some Members of Congress contended during discussions around the creation of the visa that potential immigrants would be "buying their way in" to the United States. Others maintained that the program's requirements would protect its integrity. The Senate Judiciary Committee report on the originating legislation stated that it "is intended to provide new employment for U.S. workers and to infuse new capital into the country, not to provide immigrant visas to wealthy individuals."

In 1992, Congress created the Regional Center Program, an additional pathway for foreign national investors to obtain an EB-5 visa. Unlike the EB-5 visa category, which does not expire, the Regional Center Program is temporary and is scheduled to expire on September 30, 2016. By investing through a regional center, foreign national investors are subject to different requirements pertaining to the measure of job creation, and are unlikely to be involved in the management of the commercial enterprise. For each fiscal year, approximately 7.1% (roughly 10,000) of the total employment-based visas (140,000) are available for EB-5 investors and their derivatives, of which 3,000 are reserved for entrepreneurs investing in "targeted employment areas" (TEA), and 3,000 are reserved for those participating in the Regional Center Program.

The upcoming expiration date of the Regional Center Program has renewed congressional focus on the EB-5 visa category. Questions include whether the Regional Center Program should be extended or made permanent, and if so should it be modified, or should it be allowed to expire.

There are additional concerns that Congress may consider with respect to the EB-5 visa category as a whole. For example, the required amounts of capital have not changed since the program was created in 1990. This has raised questions about whether the amounts should be adjusted, and what effect increasing the amounts would have on the number of applicants. Some have also raised concerns about fraud in the program, including possible national security concerns. Thus, Congress may choose to evaluate the oversight of the EB-5 category and the fraud detection mechanisms used during EB-5 adjudications. Other issues that have been raised include the capacity of U.S. Citizenship and Immigration Service (USCIS, part of the Department of Homeland Security (DHS)) to handle the complexity of regional center designations and EB-5 petition adjudications, the need for more data collection, the measurement of the visa's economic impacts, and state determinations of targeted employment areas.

This report begins with a discussion of the EB-5 visa's requirements and an overview of the Regional Center Program. It then provides information on the EB-5 application (petition) process, admissions, and the economic impacts of the visa. Next, the report reviews policy issues surrounding the visa and the Regional Center Program, specifically application processing, USCIS expertise, the measurement of economic impacts, fraud and security risks, data collection, and the determination of targeted employment areas. The report concludes with a summary of current legislation on the EB-5 visa and the Regional Center Program in the 114 th Congress. The Appendix provides additional data on the visa.

EB-5 Classification Requirements

The EB-5 visa classification for foreign investors is based on three components: (1) investment of capital, (2) a new commercial enterprise, and (3) job creation. Currently, there are two different pathways for lawful permanent resident (LPR) status through the EB-5 visa category, the standard visa and the Regional Center Program. The overwhelming majority of investors invest through the Regional Center Program. Both pathways have the same requirements with respect to the amount of capital required to be invested and the minimum number of jobs to be created, but they differ in the measure of job creation. In addition, the role of the investor in the enterprise tends to differ between the two pathways.

Investment of Capital

A foreign national must invest at least $1,000,000 in a new commercial enterprise to qualify for the EB-5 visa. If the immigrant decides to invest in a designated "targeted employment area," (TEA) the required minimum is $500,000. For both investment pathways, capital can include non-cash contributions, but the immigrant investor must establish that he/she is the legal owner of the capital and that it was obtained through lawful means. Additionally, the entire investment must be "at risk" for the purpose of generating a return.

A New Commercial Enterprise

A commercial enterprise is "any for-profit activity formed for the ongoing conduct of lawful business," such as a sole proprietorship, partnership, holding company, joint venture, corporation, business trust, or other publicly or privately owned entity. A new commercial enterprise is one established after November 29, 1990. If the commercial enterprise was established before November 29, 1990, the immigrant investor's capital must have been used to expand or restructure/reorganize the enterprise. Applicants are also allowed to invest funds in "troubled businesses." The immigrant investor must be engaged in the management of the commercial enterprise through policy formation, daily managerial responsibilities, or direct management.

Job Creation

In order to meet the requirements for the EB-5 visa, the foreign national's investment capital must create a minimum of 10 jobs in the new commercial enterprise. The EB-5 visa has three different measures of job creation.

1. If an immigrant invests in a troubled business, directly or through a regional center, rather than creating new jobs, he/she can show that they have preserved jobs for at least two years, in lieu of creating new jobs. 2. Investments made in a new commercial enterprise in a non-regional center context must create 10 jobs within the commercial enterprise. (Such jobs are called direct or payroll jobs.) 3. For new commercial enterprises located within a regional center, the 10 new jobs required can be created directly or indirectly (i.e., employees not working directly for the commercial enterprise).

Regional Center Program

The Regional Center Program was originally authorized in the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act in 1992. Since its creation, the program has been reauthorized several times and is set to expire on September 30, 2016. The program was established as a pilot to achieve the economic growth and job creation goals of the immigrant investor statute by encouraging immigrants to invest in commercial enterprises located within economic units known as "regional centers." In order to receive investment from foreign nationals wishing to obtain EB-5 status, a regional center must be designated as such by USCIS. Regional centers are intended to provide a coordinated focus of foreign investment toward specific geographic regions (see section entitled " What is a Regional Center? " for a detailed discussion). In other words, regional centers pool the investments of multiple EB-5 investors.

The Regional Center Program differs from the standard EB-5 visa in three ways ( Table 1 ). First, although both pathways require individual investors to create at least 10 jobs, in the regional center context indirect job creation may be counted instead of or in addition to direct job creation. Second, unlike the standard EB-5 visa, foreign nationals investing in a regional center are unlikely to be involved in the management and daily activities of the commercial enterprise. Third, the EB-5 visa category is permanent, while the Regional Center Program is temporary. As previously mentioned, the program is set to expire on September 30, 2016.

Foreign nationals may invest in any of the regional centers that are currently approved to qualify for their conditional LPR status. Also, investments may be both within a regional center and a TEA. Although a regional center does not have to be in a TEA, almost all foreign nationals applying for EB-5 status invest with regional centers whose defined boundaries constitute a TEA. (See Figure 1 .)

What is a Regional Center?

Regional centers are defined as "any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment." More simply, the term "regional center" refers to an entity (often a limited partnership or a limited liability corporation) where investment from multiple foreign nationals can be pooled to fund a broad range of projects within a specific geographic area. Regional centers can be privately owned, publicly owned (operated by a city, county, state, or economic development agency), or a public-private partnership. There are many different models for regional centers, such as the lending model, where the new commercial enterprise is a lending entity that provides loans to those (e.g., U.S. citizens) seeking funding for business activities, such as new construction or expansions of their operations. Regional centers can also use an equity model, where pooled EB-5 investments are used to purchase equity stakes in a project company (i.e., job-creating entity). In addition, regional centers have been created for direct investment to build a variety of projects, such as hotels, a ski resort, convention centers, arenas, and retail and mixed use developments. Certain state (e.g., Hawaii) and local governments have also established their own regional centers.

Since the inception of the Regional Center Program in 1992, the number of USCIS-approved regional centers has increased substantially. From FY2007 to FY2009, it rose more than three-fold, from 11 to 72. As of January 4, 2016, there were 790 approved regional centers across the United States. However, not all regional centers have received investment from foreign nationals wishing to immigrate under the EB-5 visa category. Additionally, as of January 5, 2016, USCIS had terminated the participation of 39 regional centers from the Regional Center Program.

In the last decade, the use of regional centers among immigrant investors has also grown substantially. Figure 1 displays the distribution of EB-5 grantees investing through (1) the standard program in a non-TEA, (2) the standard program in a TEA, and (3) through a regional center. The proportion of immigrant investors using regional centers, specifically those in a TEA, has been increasing, especially since FY2007. In FY2006, investments in regional centers in a TEA were responsible for approximately 12% of the visas used; by FY2014 they represented 97% of the visas used.

The EB-5 Petition Process

The EB-5 petition/application process, which is largely administered by USCIS, requires various steps before an individual can obtain his/her full (i.e., unconditional) LPR status. Individuals who are admitted to the United States on the basis of EB-5 visas are granted a conditional resident status. After approximately two years they can apply to remove the conditionality if they have met the visa requirements (i.e., invested and sustained the required investment and created the required jobs).

For a foreign national investor, the first step of the process consists of filing USCIS Form I-526, Immigrant Petition by Alien Entrepreneur . At this point, a foreign national has to prove that he/she meets the requirements for EB-5 classification, including that the capital being invested came from a legitimate source, and that he/she has presented a valid business plan or showed that the investment will go to a USCIS-certified regional center. Once the I-526 is approved, the foreign national would need to obtain a visa from the Department of State (DOS) to enter the United States if he/she is not currently in the country, or adjust status with USCIS if he/she is. Individuals not in the United States file Form DS-260 Application for Immigrant Visa and Alien Registration with DOS and individuals within the United States file Form I-485 Application to Register Permanent Residence or Adjust Status with USCIS. At this stage, DOS and USCIS also check that the foreign national is not inadmissible under the grounds of inadmissibility of the Immigration and Nationality Act (INA). Those who adjust status within the United States receive their conditional residence once the I-485 is approved. Those who receive a visa from DOS receive their conditional residence once they are admitted into the United States.

In FY2004, the number of EB-5 visas granted to new arrivals (60) and the number granted to those who adjusted their status (69) were roughly equal. This ratio has shifted as the growth in visas granted to new arrivals outpaced the number granted to those who adjusted their status, as seen in Figure 2 . As a result, by FY2014 visas to new arrivals accounted for 86% of EB-5 admissions.

An investor can petition to remove the conditional status after approximately two years by filing Form I-829 Petition by Entrepreneur to Remove Conditions on Permanent Resident Status . If the I-829 is approved, the conditionality on the residency of the immigrant investor and his/her derivative family members is removed. If the investor did not meet the requirements to adjust to full LPR status, the investor (and his/her family members who immigrated together) must depart from the United States or adjust to another immigration status. USCIS will issue a notice-to-appear (NTA) to foreign nationals who do not apply to have the conditional status removed or who are denied adjustment to full LPR status.

Petition denial rates have fallen significantly since the early 2000s, as displayed in Figure 3 . For the I-526, the denial rate fell from 82% in FY2001 to 11% in FY2015. For the I-829, the rate fell from 52% in FY2000 to 1% in FY2015. It is likely that the large increase and then decrease in denials is due in part to the altered i nterpretations by the former Immigra tion and Naturalization Service (INS) of the EB-5 require ments that took place in late 1997 and 1998 . In December 1997, the INS General Counsel's office issued a legal opinion discussing the legality of certain business arrangements for EB-5 purposes. Then during 1998, INS issued four precedential decisions that restricted eligibility for the EB-5 category overall . Among other changes, these decisions barred previously acceptable investment mechanisms (e.g ., pooled investment), increased the documentation required to show lawful source s of funds, and changed the rules for determining that investment occurs in a TEA . The INS applied these decisions retroactively. In 2002, t he 21 st Century Department of Jus tice Appropriations Act ( P.L. 107-273 ) provided remedies f or those affected by INS' 1998 decision s by allowing investors affected by the retroactive changes to apply to re-establish eligibility for an EB-5 visa.

At the end of FY2015, there were 17,367 pending I-526 petitions and 4,049 pending I-829 petitions. As of January 31, 2016, the processing times were 16.3 months for the I-526 and 16.9 months for the I-829.

EB-5 Admissions

E ach year approximately 10,000 EB-5 visas are available for investors and their derivatives . In the program's early years only a small percentage of available EB-5 visas were being utilized , with the exception of a rise in FY 1997 . Although numerous possible explanations for the overall low admis sion levels in earlier years exist, the notable drop in admissions in FY1998 and FY1999 is due in part to the altered i nterpretations by the former INS of the qualifying requirements that took place in 1998. In 2002, in addition to providing remedies f or some of those affecte d by INS' 1998 decision s , P.L. 107-273 provided some clarification of the requirements in order to pr omote an increase in petitions. P ossibly as a result, after FY2003 there were substantial increases in EB-5 visa admissions. From FY2003 to FY2005, the number of EB-5 visas issued grew five-fold (from 64 to 346), and then increased by seven-fold by FY2010 (to 2,480). From FY2010 to FY2013, the number of EB-5 visas issued increased again by nearly three-fold (to 8,543) ( Figure 4 ).

As the allotment for EB-5 visas includes derivatives, the total number of immigrants admitted through the investor visa program does not reflect the actual number of investors. On average, individual immigrant investors (principal investors) accounted for approximately one-third of all those granted EB-5 visas. On average, each investor has had approximately two derivatives granted conditional LPR status along with them over the time period examined.

Table 2 lists the top 10 EB-5 visa receiving countries in FY2014. China ranks at the top of investor visa recipient countries, with its citizens accounting for approximately 84% (8,156) of all EB-5 visas granted in FY2015. With respect to other EB-5 visa recipient countries in FY2015, Vietnam had the second largest number of EB-5 visas granted, at approximately 3% (280), and Taiwan had the third largest amount of visas at approximately 1% (139).

From FY2009 to FY2014, China has experienced the greatest growth in EB-5 visas issued, as illustrated in Figure 5 . China was granted 1,970 in FY2009 and 9,128 in FY2014 (though the number decreased to 8,156 visas in FY2015). In addition, for FY2014 the maximum number of visas available for Chinese applicants was reached in August 2014. Furthermore, there is a backlog in processing EB-5 visas. As of April 2016, the Department of State was processing visas for Chinese applicants whose petitions had been approved in February 2014.

Economic Impact

Measurement of the EB-5's economic impact on the U.S. economy has resulted in a wide variety of estimates. The EB-5 visa category was created as a way to increase investment and job creation in the U.S. economy. In 2010, USCIS commissioned ICF International, a private consulting firm, to estimate the impact of EB-5 investments on the U.S. economy. The study used a sample of immigrants whose initial investment occurred between 2001 and 2006. It found that EB-5 investments and the economic activity that resulted from them added $700 million to the U.S. gross domestic product (GDP), with the real estate industry sector experiencing the largest impact. This study also found that the visa helped create an estimated 12,000 annual jobs in the United States. The study also estimated that the EB-5 visa classification allowed the federal government to accrue an additional $100 million, and state and local governments, an additional $62 million in tax revenue. Additionally, USCIS commissioned the U.S. Department of Commerce to conduct a new study on the visa's economic impacts.

USCIS has also reported its estimates of the visa's creation of investment and jobs. The agency stated that from FY1990 to FY2014, the EB-5 visa has generated more than $11.2 billion in investments and at least 73,730 jobs. Additionally, USCIS reported in February 2016, that as of October 1, 2012, at least $8.7 billion was invested in the U.S. economy and an estimated 35,140 jobs were created through EB-5 visa investments.

Other non-federal organizations, some of which were commissioned by advocacy organizations, have conducted their own economic analysis of the visa's economic impacts. In 2014, the Brookings Institution estimated that the EB-5 visa created 85,500 full-time jobs and contributed $5 billion in direct investment to the United States since its inception. A 2015 report by U.S. Policy Metrics/Hamilton Place Strategies, commissioned by the EB-5 Investment Coalition (an advocacy organization for EB-5), estimated that from 2005 to 2013 the EB-5 visa generated a minimum of $5.2 billion in investment. The study also noted that in 2013 alone, the visa brought in at least $1.6 billion in investment and, assuming each investment's minimum requirement was met, created 31,000 jobs. Invest in the USA (an EB-5 trade association) commissioned the Alward Institute for Collaborative Science to conduct a peer reviewed study on the impacts of the EB-5 visa. They estimated that EB-5 associated regional center spending contributed $3.58 billion to the U.S. GDP and created over 41,000 jobs in FY2013. These 2013 estimates of EB-5 investments into the economy represent less than 0.1% of the U.S.'s $16.7 trillion GDP.

Policy Issues

In recent years, efforts have been made by USCIS to promote investment by foreigners in the United States economy and to close perceived loopholes for visa exploitation. Some of the issues that have been discussed are the processing of applications, USCIS' expertise and ability to oversee the EB-5 visa, the need for accurate measurement of the visa's economic impact, fraud and security concerns, and TEA determinations. The following sections review these issues and, where applicable, discuss changes USCIS has made to address them.

Application and Petition Processing

An on-going issue within the EB-5 program is the processing times for EB-5 applications (both for the regional center designation and the petitions for foreign national investors), and the impact of these potential delays on the investors and project developers. As of January 31, 2016, the application adjudication times were 13.6 months to apply for EB-5 status (Form I-526), 16.9 months to remove conditionality from LPR status (Form I-829), and 9 months to apply to become a regional center (Form I-924). Stakeholders have complained that the time period from applying for a regional center designation to actually receiving investment (currently approximately 22.6 months) is too long which can negatively impact investment projects. EB-5 stakeholders have also stated that USCIS needs to adjudicate EB-5 and regional center applications in a more predictable manner, noting that the EB-5 program faces competition from other countries with more predictable and speedy immigrant investor program. The USCIS Ombudsman has made recommendations make the EB-5 adjudication process more transparent, consistent, and timely.

USCIS Expertise

In drawing attention to some of the issues with the EB-5 visa, some have called into question whether USCIS is the right agency to manage the visa classification or whether USCIS should be required to consult or partner with other agencies regarding its EB-5 responsibilities. In taking on the EB-5 program and the Regional Center Program, the INS mission of providing immigration and naturalization services was extended. Notably, the EB-5 program involves complexities including analysis of business plans and economic forecasting models which require specialized expertise. Some lawmakers were aware while creating the EB-5 program that the INS did not have all the expertise needed to implement the visa category and recommended the agency work with other agencies that have the necessary skills. Even after the creation of USCIS in 2003, there were still concerns about whether that agency had the expertise to adjudicate EB-5 petitions. For example, in 2013, the Department of Homeland Security Office of Inspector General (DHS OIG) suggested that USCIS improve its coordination with the Department of Commerce, the Department of Labor's Bureau of Labor Statistics, and the Securities and Exchange Commission in order to leverage their expertise to its advantage during the adjudication process.

The Government Accountability Office (GAO) reported improvements in USCIS's economic analysis of EB-5 applications that resulted from its hiring of an additional 22 economists to review business plans, economic analysis, and organizational documents for regional center projects. As of February 2016, the Immigrant Investor Program Office (IPO) was staffed with 110 employees, which included 60 adjudication officers, 28 economists, and 22 additional staff responsible for the direct support and management of the program. USCIS also updated and enhanced its employee training curriculum, which currently includes ongoing training, in order to improve consistency in adjudication process and compliance with statutes, regulations, and policies.

Measuring Economic Impacts

In the past, USCIS has estimated the EB-5's impact through calculating total job creation and foreign investment. This was done by multiplying the number of EB-5 visas granted by the visa category's minimum requirements ($500,000 investment and 10 jobs created). DHS OIG and GAO reported that these estimates of the program's impact could lead to either understatement or overstatement of certain economic benefits. For example, some investors create more than 10 jobs and/or invest over $500,000. Using visa minimums would therefore underestimate their impact and would not accurately capture the investors' true contribution to the economy. Additionally, the underlying assumptions in these estimations are that each approved visa was actually used and that all foreign investors fulfilled their capital and job creation requirements. If that assumption does not hold, USCIS could therefore be overestimating the impact of the program. USCIS' lack of comprehensive, longitudinal studies on the economic impact of regional centers could also limit its ability to measure impact over time or any impacts that may manifest later. Though such research would be beneficial to understanding the program's impact, USCIS is not mandated by statute to develop comprehensive assessments of the overall benefits of the investor visa program.

In 2013, a DHS OIG report stated that "USCIS is unable to demonstrate the benefits of foreign investment into the U.S. economy." The report identified how USCIS' limited authority had played a part in the agency's inability to accurately measure the impact of the EB-5 visa. For example, in a regional center context, where foreign funds contribute to an investment pool that also contains funds from non-EB-5 investors (e.g. U.S. citizens), EB-5 investors can take credit for all jobs created, regardless of the proportion of the investment pool that was actually contributed by EB-5 investors or which investment in the pool was primarily responsible for the job creation. In other words, all the jobs created by the project funded by EB-5 and non-EB-5 investors are credited to EB-5 investors, not only the pro-rated portion that represents the amount of EB-5 investment. Therefore, in these situations USCIS does not have the ability to determine if EB-5 investors were responsible for the creation of jobs, making it difficult for the agency to fully capture the economic impact of the program.

Since FY2013, USCIS economists have been provided with data from the Regional Input-Output Modeling System (RIMS II) to estimate job creation. USCIS and Department of Commerce economists and industry and academic experts consider RIMS II to be a valid method to verify job creation estimates. GAO noted that "RIMS II data is a reasonable methodology to verify job creation as permitted in law and program regulation." As of FY2015, Immigrant Investor Program Office (IPO) managers estimate that 95% of EB-5 program petitioners used economic models to estimate job creation and 90% of them used RIMS II in their applications to USCIS. However, RIMS II cannot determine the location of jobs created, therefore making it difficult to know whether jobs are created in TEAs.

Fraud and Security Risks

In comparison to other immigration visas, GAO found that EB-5 faces the risk of fraud in three unique respects that stem from its investment components. First, immigrant investors must provide evidence that their investment funds were obtained through lawful means. It can be difficult, however, for USCIS to verify the sources, especially with the use of overseas counterfeit documentation or self-reporting that cannot always be verified with foreign banks.

Second, the potential for large financial gains through the EB-5 visa may motivate regional center operators and intermediaries to take advantage of foreign investors. Some immigrant investors primarily interested in the immigration benefits of EB-5 may accept lower rates of return or may not adequately research an investment decision. U.S. Securities and Exchange Commission (SEC) officials reported over 100 tips, complaints, and referrals on possible security fraud violations concerning the EB-5 visa from January 2013 to January 2015, and just over half were referred for further investigation. Furthermore, from February 2013 to December 2015, SEC filed 19 cases involving EB-5 offerings, of which almost half involved fraud allegations.

Lastly, the EB-5 visa classification is susceptible to the appearance of favoritism and special access. A DHS OIG report identified the risk of internal and external influence on the EB-5 visa, listing USCIS' lack of protocols to document inquiries, decision making, and responses to external parties who inquired about EB-5 activities as a key issue. In March 2015, DHS OIG released a report prompted by USCIS employee complaints on the management of the EB-5 visa. After the report's issuance, the DHS Secretary asked Congress to help increase the security and integrity of the visa. USCIS subsequently issued a new ethics and integrity protocol for EB-5 that addresses application processing and stakeholder communication.

With respect to regional centers, when there is a risk to national security or fraud is found, USCIS opines that it lacks explicit statutory authority to deny or terminate centers. For example, USCIS can deny immigration benefits to individual immigrants who are considered to be a national security threat, but the agency has interpreted the Immigration and Nationality Act (INA) as not being applicable to regional centers because they are pooling funds from investors rather than seeking an immigrant benefit or visa. Furthermore, USCIS lacks the authority to deny or terminate a regional center's participation in EB-5 based solely on fraud or national security concerns. Such participation can only be terminated if the regional center fails to submit required information or it is no longer promoting economic growth. USCIS officials have noted that this statutory limitation is a "major challenge and requires a significant amount of time to link findings [of fraud or national security concerns] to the statutory criteria," for terminating a regional center.

USCIS has conducted risk assessments to identify, analyze, and establish solutions for issues surrounding fraud. In 2015, in response to congressional and USCIS requests, the DHS Office of Intelligence and Analysis updated the EB-5 visa's 2012 risk assessment in a classified report. In addition to conducting risk assessments on an "as needed" basis, USCIS reported to GAO that it conducts regular oversight work and collaborates with other enforcement agencies that may uncover fraud, such as the Federal Bureau of Investigation (FBI), Securities and Exchange Commission (SEC), and Immigration and Customs Enforcement's (ICE's) Homeland Security Investigations (HSI). EB-5 fraud risks are always evolving, and more opportunities for fraud exist with increasing numbers of visas being granted. GAO noted that "planned regular or updated future risk assessments could help better position USCIS to identify, evaluate, and address fraud risks given the potential for changing conditions." DHS officials have stated that they plan to complete a risk assessment by September 2016 and to continue to conduct at least one annually.

A 2013 Homeland Security Investigations (HSI) memorandum requested by DHS assessed EB-5's vulnerabilities, specifically "concerns that this particular visa program [EB-5] may be abused by Iranian operatives to infiltrate the United States." The memo, which used data from 2012, identified seven main areas of vulnerability with the visa: export of sensitive technology and economic espionage, use of force by foreign government agents and espionage, use by terrorists, investment fraud by regional centers, investment fraud by investors, fraud conspiracies by investors and regional centers, and illicit finance and money laundering. The memo noted EB-5 petitioners are not required to "establish significant and verifiable background for program eligibility," creating a national security risk. It found there are "no safeguards that can be put in place that will ensure the integrity of the program." Nonetheless, this memo was written before the creation of the Immigrant Investor Program Office (IPO), and these risks may have been addressed.

GAO noted that USCIS restructured and centralized the EB-5 visa by moving its California operations to Washington, DC, in an effort to increase the agency's fraud detection and response capabilities. This has also allowed USCIS to expand the scope of its background checks and increase the number of databases against which it checks petitioners and applicants. In that same year, USCIS also established a fraud specialist unit within its Fraud Detection and National Security (FDNS) unit specifically for the EB-5 visa. FDNS also reported hiring more fraud specialists with skillsets particularly critical to fraud prevention. FDNS has also begun to provide specialized fraud training for employees and has implemented an "EB-5 University" that provides monthly presentations on different fraud-related topics relevant to the adjudication process. USCIS has improved its communication and collaboration with law enforcement agencies such as the SEC, ICE, HSI, and the FBI, to whom it refers cases of potential fraud, criminal activity, or national security threats. The SEC has also worked to educate EB-5 investors through its Office of Investor Education and Advocacy (OIEA).

Data Collection

GAO has identified limitations in USCIS' collection of information. Addressing these could assist in its assessment and detection of fraud. For example, USCIS relies heavily on paper-based documentation and does not fully transfer information into their electronic databases or do so in a standardized manner. These practices can make it difficult to search for certain information, especially when attempting to identify fraud through the tracking of irregularities or trends. USCIS expects to implement a new program, the Electronic Immigration System (USCIS ELIS), which aims to improve the collection of applicant information through electronic forms. However, as of March 2016, only two of approximately 90 types of immigration forms were available for on-line filing, and it is estimated that the system will be completed in 2019 (over four years later than expected).

Though they are limited in number and scope, FDNS does currently conduct site visits to projects that IPO staff has found to be of material concern. GAO reported that USCIS, SEC, and HSI officials and members of the national industry association representing regional centers agreed that expanding site visits would increase the program's integrity. USCIS reports that they plan on expanding their random site visit program to the EB-5 program in FY2016.

Moreover, USCIS is required by statute to interview immigrant investors within 90 days of submitting Form I-829, but the agency also has the authority to waive that requirement. Interviews can be a method to collect corroborating information on whether investors meet program requirements and whether the project may involve fraud. GAO reported that USCIS believes that interviews at the I-829 stage could provide important information and expects to begin conducting them in the near future. At this time, USCIS has not conducted any interviews with immigrant investors submitting the I-829 petition. However, reportedly USCIS is finalizing its I-829 interview process and plans to begin conducting interviews in the third quarter of FY2016.

Targeted Employment Area (TEA) Determinations

As noted above, a majority of investments made in the EB-5 program are being directed to targeted employment areas (TEA). The reduced capital investment minimum required for immigrant investors in TEAs was meant to increase investment in areas of greater need. State governments may designate a TEA by identifying a particular geographic or political subdivision as an area of high unemployment (at least 150% of the national average rate). USCIS defers to the state to determine a high unemployment TEA's geographical or political subdivision boundaries but can review the state's methodologies and data.

State designation of TEAs due to high unemployment has been criticized as lenient, without clear direction, and inconsistent across states. For instance, USCIS' deference to states' determinations of the boundaries for high unemployment TEAs has allowed for variation across states in how they designate such an area. Furthermore, TEAs can be created through the linking of several census tracts, therefore allowing wealthier tracts linked to tracts with high unemployment to form a TEA. Some believe that this practice can accommodate commuting patterns and provide states with the choice as to what area fits their economic needs. Others have contended that this allows for gerrymandering and permits developers to obtain the TEA designation without actually developing and directly investing in the neediest areas.

Legislation in the 114th Congress

As previously mentioned, in December 2015 the Regional Center Program was reauthorized through September 30, 2016, by the Consolidated Appropriations Act of 2016 ( P.L. 114-113 ). The pending expiration of the program renewed attention on it and legislation has been introduced in the 114 th Congress related to the EB-5 visa category. The following bills would modify the Regional Center Program and the EB-5 visa in general: the American Entrepreneurship and Investment Act ( H.R. 616 ), the EB-JOBS Act ( H.R. 3370 ), the EB-5 Integrity Act ( H.R. 4530 / S. 2415 ), and American Job Creation and Investment Promotion Reform Act of 2015 ( S. 1501 ). In addition, H.R. 3370 and the Jobs in America Act ( H.R. 3987 ) would create a new visa category, similar to the EB-5 category, for foreign national entrepreneurs. On February 2, 2016, the Senate Judiciary Committee held a hearing on the Regional Center Program and S. 1501 ; however, none of the other bills have received action.

Proposed Changes to the Regional Center Program

Several of the bills ( H.R. 4530 / S. 2415 , H.R. 3370 , S. 1501 ) would seek to place more controls and requirements on regional centers, including delineating application requirements, establishing a sanction system, expanding reporting requirements, and prohibiting persons who have been convicted of certain crimes from participating in a regional center. In addition, H.R. 4530 / S. 2415 and S. 1501 would create an EB-5 Integrity Fund in the Treasury, from fees on regional centers and those applying for a regional center designation to fund oversight of regional centers. Similarly, H.R. 3370 would create an EB-5 fund to administer and operate the program. H.R. 3370 , H.R. 4560 / S. 2415 , and S. 1501 would also expand DHS's authority to terminate a regional center designation.

H.R. 4530 / S. 2415 and S. 1501 would create rules and mandate the establishment of channels through which applicants (or their representatives) for a regional center designation or LPR status could discuss case-specific information. S. 1501 would require USCIS to set fees for the applications at a level so that they would be adjudicated in a statutorily specified period of time, establish premium processing for regional center designation applications, and allow DHS to prioritize petitions filed under the Regional Center Program over all other immigrant petitions. H.R. 616 would set maximum processing times of 180 days for regional center application determinations and immigrant investor petitions. H.R. 3370 would establish premium processing for foreign national investors applying for EB-5 status.

H.R. 4530 / S. 2415 and S. 1501 would specify how an investor demonstrates that the investment capital was obtained from a "lawful source through lawful means," and set procedures for how foreign national investors are to be treated if the regional center in which they were investing lost its designation. Lastly, H.R. 616 , H.R. 3370 , H.R. 4560 , and S. 2415 would permanently authorize the Regional Center Program, while S. 1501 would extend its authorization to September 30, 2020.

Proposed General Changes

H.R. 3370 and S. 1501 would increase capital investment minimums and tie the investment minimum amounts to the Consumer Price Index (CPI-U). S. 1501 would allow a foreign national who has invested the requisite capital for at least 24 months before being admitted to the United States to receive full LPR status (i.e., not conditional status). H.R. 616 and H.R. 3370 would allow the Secretary of DHS to delegate some authority for the administration of the EB-5 category to the Department of Commerce. In addition, H.R. 616 would remove derivatives from the numerical limitations imposed on the EB-5 visa and eliminate the visa category's per-country quotas.

Target Employment Areas

With respect to TEAs, H.R. 3370 would expand the definition of a TEA to include a county that has had at least a 20% decrease in population since 1970, an area established for the purpose of a state or federal economic development incentive program, and an area within the geographic boundaries of any military installation closed pursuant to a base closure law. The bill would also provide an allocation of visas for the different types of TEAs. S. 1501 would change the manner in which a TEA is defined, including providing a methodology for determining high unemployment areas for the purposes of designating a TEA. Like S. 1501 , H.R. 616 would increase the number of visas set aside for TEAs from 3,000 to 5,000; but it would specify that TEA designations by the states are to be granted deference by DHS.

Potential New Programs

H.R. 3370 would create a new visa category (EB-6) similar to the EB-5 category for foreign nationals who (1) wish to start a new commercial enterprise with a specified amount of money from qualified investors or venture capital funds; or (2) have already started and are managing a new commercial enterprise that employs a specified number of persons. H.R. 3987 would create a new visa category (EB-6) for foreign nationals who have received investment to start a new commercial enterprise, and for foreign nationals on H-1B visas who have an advanced degree in science, technology, engineering, or math (STEM) and meet other requirements. Similar to the EB-5 category, under H.R. 3370 and H.R. 3987 , the entrepreneurs would initially receive conditional LPR status, and after two years they would need to have created a certain number of jobs to be converted to full LPR status. Under H.R. 3370 , the EB-5 visa would be exempt from the numerical limits.

Appendix. Additional EB-5 Visa Data