In November of 2019, the Trump administration enacted several changes in the regulations that govern the EB-5 Immigrant Investor Program. Now a lawsuit pending in Federal Court in the Northern District of California is challenging those changes. The entire EB-5 industry is anxiously awaiting a decision that could make significant changes in the current status of the EB-5 program.
The changes being challenged
The changes to the EB-5 program made by the Trump administration were included in a regulation called the “EB-5 Modernization Rule.” The regulation was advertised as “updating procedures of the EB-5 program.” The major change, however, appears to have little to do with modernization of the EB-5 program. Instead, the major change wrought by the new rule was an increase in the minimum required capital investment from $500,000 to $900,000. Industry leaders criticized this change that the large increase in the minimum amount has made the program unattainable for the middle class, the group that was originally the intended beneficiaries of the rule. The federal lawsuit is challenging the increase in the minimum investment amount, the Targeted Employment Area (TEA designation process, and other features of the program.
The original minimum investment of $500,000 forced families to use their entire life savings, retirement annuities and other means to accumulate the required initial investment. Nevertheless, numerous immigrants were able to invest the required amount and obtain approved immigrant status in the United States. Under the revised regulation, many families were excluded from the program because they did not have the funds necessary to meet the minimum investment amount.
Will the plaintiffs succeed?
The main thrust of the plaintiffs’ case is the argument that the Department of Homeland Security officials who enacted the EB-5 Modernization Rule violated the Federal Administrative Procedure Act by failing to properly analyze and evaluate the adverse economic impact of the new rule. The outcome of the case depends heavily on the reaction of the judge who is hearing the case.
The future of the EB-5 program will depend heavily on how the court rules and the reasons that will be given to support the outcome. Anyone who is considering an investment under the EB-5 program may wish to consult and experienced business and immigration attorney for advice that is suited to their particular situation.