Have you heard the good news? The extension of the EB-5 Regional Center program is welcome news for EB-5 stakeholders – and presents a rare opportunity for those who act now. As part of the Consolidated Appropriations Act of 2022 (HR 2471), Congress has reauthorized the EB-5 Regional Center program for five years, through September 30, 2027. The RC program’s renewal also comes with new integrity measures for EB-5, which will warrant further analysis in the coming weeks.
While this is a big win for EB-5, and both investors and issuers are undoubtedly excited for the program to get going again, there are some important changes that stakeholders will need to be aware of. Here are a few of the most notable changes from the EB-5 extension:
- Grandfathering. The bill preserves the eligibility of all investors who file I-526 Petitions on or before September 30 2026. This means investments made under the previous iteration of the Regional Center program are still valid for adjudication and that new petitioners will not have to fear future lapses of the program.
- Increased Investment Amounts. For all new filings, the minimum investment in a Targeted Employment Area is now $800,000. This applies to rural and high-unemployment areas as well as infrastructure projects. The minimum for projects outside of Targeted Employment Areas is now $1,050,000.
- Pooled Direct Investments Now Require a Regional Center. All I-526 filings for investments with two or more EB-5 investors must be sponsored by a Regional Center. Pooled direct investments are no longer possible without an RC, and individual direct investors cannot take advantage of indirect job creation even if sponsored by a Regional Center.
- Fund Administration Requirement. Regional Center projects, with few exceptions, must retain a third-party fund administrator, with specific guidelines for the functions tasked to the administrator. New Commercial Enterprises (NCEs) must maintain all EB-5 capital in insured separate accounts, and while redeployment is now possible throughout the US, violation of redeployment requirements can result in the termination of the RC.
- 60-day Freeze on New Applications. While some parts of the EB-5 Reform and Integrity Act take effect immediately, there is a 60-day hold before any new RC-sponsored I-526 filings can be filed.
There are many more changes that can be discussed in-depth as we come to understand their full ramifications. Some of these new rules will be welcome news for Regional Centers who already have an eye toward rigorous compliance. JTC is ready to help bring both existing and new clients up to speed on these key updates, and particular attention should be paid to some of the most time-sensitive issues:
- During the 60-day holding period, Regional Centers can sell securities, take in funds, and even help investors get started on their I-526’s by collecting source of funds documentation. To do this effectively and according to industry best practices, an escrow account should be established to hold the subscription funds. During the pandemic, JTC established its ability to act as Escrow Agent in addition to the Escrow Administration it has brought to the industry for years. This easy-to-set-up escrow solution helps our clients get to market in record time while leveraging the brand power of the industry’s leading administrator.
- If you already have a project in flight but need to accommodate all of the new rules, we have the perfect solution: while you navigate the structural complexities of the new rules we can deploy our innovative Reservation Escrow Account structure to keep your momentum going. This solution will enable prospective investors to reserve a spot in your offering and work on transferring their investment funds to the United States while you are building out the updated offering documents and fund structures.
- Unless your issuer is controlled by a registered broker-dealer or investment adviser, or you commit to undergoing an expensive annual audit, third-party fund administration will be required for your offerings. If you are not already engaged with JTC for EB-5 fund administration, now is the time. As the market leader in purpose-built EB-5 fund administration, our solutions will help your offering be both compliant and competitive.
Because the RC program had lapsed for so long, it may be a while before new projects get up and running, which means the market is wide open for those who have been waiting on EB-5 extension and can start fundraising now. To beat the competition to market and get that big first wave of investors, you’ll need JTC’s escrow solution to hold funds in a reservation or subscription escrow account until investors are able to subscribe and file their I-526’s, and JTC’s EB-5 fund administration solution for compliance, so don’t delay.
This is a golden opportunity, so talk to your JTC representative today to take advantage!
