The EB-5 visa program underwent significant changes with the implementation of the EB-5 Reform and Integrity Act of 2022 (RIA) in 2022, introducing new set-aside categories tailored to specific types of investments.
They apply to EB-5 projects located in high-unemployment areas (HUAs) in Targeted Employment Areas (TEAs), whether rural or urban; Rural TEAs; and, designated infrastructure initiatives in urban or rural TEAs.
The main feature and appeal of set-asides is that they offer priority visas for foreign investors seeking U.S. green cards through the EB-5 visa program and their reserved number of visas. The RIA has allocated 32% of the total annual EB-5 visa quota for set-asides, with 20% reserved for rural projects, 10% for HUAs, and 2% for infrastructure projects. The remaining 68% of annual EB-5 visas fall under the Unreserved category.
Because they have to be located in TEAs, EB-5 investors who choose set-aside projects can invest the minimum investment requirement of $800,000.
The set-asides aim to support the primary objective of the EB-5 visa program – to stimulate the U.S. economy by attracting foreign investment and creating job opportunities for U.S. workers in those reserved categories.
However, EB-5 specialists caution that set-asides should not be relied upon as the sole solution to obtain an EB-5 visa, despite offering more advantages compared with Unreserved projects.
How do the EB-5 set-asides compare?
There is consensus among EB-5 specialists that individuals already living in the U.S. under some visa and foreign investors from backlogged countries take the most advantage of these EB-5 visa classifications.
According to EB-5 broker-dealer Marko Issever, investors living in the U.S. are tapping into the set-aside opportunities using another benefit brought by RIA: the concurrent filing process. Particularly, F-1 and H1-B visa holders are “able to file their EB-5 petitions simultaneously with their adjustment of status, work permit, and travel permit applications. [It] has been a game-changer, enabling them to stay and work in the U.S. while their petitions are processed,” the CEO of America EB5 Visa adds.
Among the three set-aside options, Issever says these individuals prefer Rural projects because they have faster adjudications to date and more visas reserved compared with HUAs and infrastructure combined. This “means shorter overall processing time from filing to approval. We are seeing adjudications in less than a year and, in many instances, significantly shorter than that.”
Meanwhile, EB-5 attorney Dennis Tristani at Tristani Law said that before RIA, most of his clients invested in what today are known as HUA projects because the market didn’t have many rural projects. Since the law, “this has changed, and at least 50%-75% of my current clients are opting for Rural projects for a few reasons: priority I-526E processing mandated by the RIA and a higher likelihood of securing a visa given the 20% set aside (twice that of high-unemployment).”
Tristani adds that most of his EB-5 clients who have invested in Rural projects have experienced I-526E approvals within 10-14 months of applying, with some approvals taking as little as two months. Meanwhile, those who invested in projects located in HUA are experiencing I-526E approvals taking 15-18 months or even longer.
However, Winnie Ng, CEO and Chief Counsel of Manhattan Regional Center, says that the HUA set aside category initially attracted more attention from EB-5 investors than Rural and infrastructure projects. However, as time passed and rumors of imminent visa backlogs for HUAs spread, investors from China and India started to shift their focus to Rural projects.
“The value of HUA projects is usually a lot more than Rural projects. HUA projects located in major cities like New York City usually appreciate in value over time, while Rural projects’ value usually stay the same and drop more drastically in recession times,” she says.
However, Ng encourages EB-5 investors to study and compare rural and HUA alternatives beyond the advantages of their processing times.
“USCIS often processes some cases in a project quickly, but others in the same project may be stuck for years. There have been too many failures in rural projects for me to feel optimistic about the current trend for Chinese and Indian investors. I understand that there can be good rural projects, because we are preparing some very solid rural projects at the moment, but I know that they are hard to come by,” Ng insists.
EB-5 Unreserved projects are not less competitive than set aside ones
Non-TEA projects or Unreserved have never been the preferred project type for investors. Although this category reached its annual limit this fiscal year, it was due to clearing visa backlogs from previous years, and not because of new petitions coming in. Since investors have been able to start filing in the EB-5 set-aside categories since July 2022, the numbers in the Unreserved category seem to be declining to single digits only.
Ng from Manhattan Regional Center states, “This is understandable because why would investors pay $250,000 more when there are attractive projects available to them in major cities that qualify for the lower investment amount?”
She also cautions that EB-5 investors must look at the return on investment opportunities projects offer, whether Unreserved or set-asides, especially for investors from countries who face backlogs. ”Chinese and Indian investors seem to be in a rush and there are not enough supply for the demand. I am afraid that many of these investors will not see their money again. This has happened time and time again when investors rush into projects when the market is driving the demand. I have heard of many incentives given by Rural projects to migration agents that don’t make sense. This is similar to some of the major schemes in EB-5 history, where unprecedented incentives were given to agents, who would come up with brilliant marketing schemes to drive demand into a particular project. When things seem too good to be true, they usually are.”
Issever also asserts that investors should consider many criteria, not just the location when choosing projects. “Investors from countries not experiencing retrogression should not rule out rural projects simply because they do not need visa-set-asides. Similarly, investors from retrogressed countries should not invest in any rural project simply because of the visa-set-asides and faster adjudications.”
Tristani concludes that Department of State representatives have said they do not expect to impose cutoff dates on either set-aside categories in FY 2025. “This is particularly good news for potential EB-5 investors from India and China as it keeps the concurrent adjustment of status filing window open for the foreseeable future.”
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