Chairman Goodlatte Statement at Hearing on the Investor Visa Program

Chairman Goodlatte: In 1990, Congress created the investor visa program -- EB-5 for short.  About 10,000 green cards each year go to aliens who invest in a business and will create 10 jobs. Congress’s goal was to “create new employment for U.S. workers and to infuse new capital into the country” and to “target investments to rural America and areas with particularly high unemployment – areas that can use the job creation the most.”  Finally, Congress was clear that the goal was “not to provide immigrant visas to wealthy individuals.” I am a supporter of the investor visa program and believe that it has contributed in real ways to economic development.  Unfortunately, over the years the program has strayed further and further away from what Congress envisioned.  It is thus not performing at the high level that we deserve. The Immigration Act of 1990 provided that aliens investors must invest $1,000,000.  However, DHS may, in the case of investments made in a targeted employment area -- rural or with high unemployment -- specify a lower amount.  Since 1990, this has been $500,000.  Finally, DHS has the authority to increase the minimum investment amounts. Over the last quarter century, the minimum investment amounts have never been adjusted for inflation.  As a result, the real value of each investment has fallen by almost 50%, depriving the U.S. economy of billions of dollars a year.  DHS now plans to take the long overdue step of adjusting the levels to account for inflation. Congress wanted to incentivize investments through a lower investment amount in areas with a scarcity of jobs that find it hard to attract capital.  As DHS has stated, Congress did this “in order to spur immigrants to invest in [firms] that are principally doing business in, and creating jobs in, areas of greatest need.” Congress’s expectation was that the vast majority of EB-5 investors would invest $1,000,000.  Yet, last year, almost all investor visas went for $500,000. Why?  Well, as one EB-5 attorney has put it, “most [investors] are interested in realizing [permanent residency] for a lower price tag - the logic being why pay $1,000,000 for a green card when I can get it for $500,000?”  Not surprisingly, this has led to rampant gerrymandering. As DHS Deputy Secretary Alejandro Mayorkas has stated, this involves the “deliberate[] drawing [of TEAs] to include prosperous areas that should not be subject to the reduced capital requirements . . . .” Let me give one example. A proposed hotel and conference center in Laredo, Texas was located in a census tract with 1.4% unemployment – far less than the 12.5% required to be a TEA.  So, what did the project do?  Here is a map of the project stretching 200 miles, all the way to the high-unemployment area of Brownsville, Texas, in order to make the numbers work. And, here is the vaulted conservatory with baby grand piano at the 926 foot Four Seasons Hotel and Private Residences at 30 Park Place in Tribeca, which describes itself as “perfectly pitched luxury” that will “introduce a new caliber of luxury living.”  Beverly Hills Magazine says it is “[p]oised to be one of Manhattan’s most prestigious addresses” and “a new paradigm in sophisticated living.”  Prices vary from $2.6 million to over $60 million for one condo in that building. 30 Park Place wanted to market EB-5 visas for $500,000. However, since the unemployment rate there was only 3.8%, New York State developed a project map that went upstream along the East River in order to lasso in enough high unemployment areas to qualify. Unfortunately, DHS has facilitated such abusive gerrymandering. USCIS accepts as binding maps approved by state agencies, even though, as the Wall Street Journal points out, they are “eager for economic development and [have] little stake in federal immigration policy . . . ." Projects in affluent areas will always get the lion’s share of EB-5 investments. Even if immigrants have to invest more, they prefer the higher degree of safety and the prestige.  However, we want to ensure that a healthy percentage of projects locate in rural and depressed areas.  Even if we could determine that a project’s workers commute from high unemployment areas, which generally can’t be done, that is not enough.  We want to revitalize distressed areas, and to do that, projects actually have to be located in those areas. Let me mention two other issues. First, in instances where a project is financed by EB-5 and conventional capital, DHS allows foreign investors to receive credit for all the jobs to be created – even those paid for by other people’s money. DHS’s Inspector General has concluded that DHS regulations “allow[] foreign investors to take credit for jobs created with U.S. funds . . . .” -- in one case, even though EB-5 funds accounted for only 18% of the capital.  This practice makes a mockery of the job creation goal of the EB-5 program. Finally, as I stated, visas for the wealthy was not a goal of the EB-5 program.  It was to attract investors with entrepreneurial talent.  As Phil Gramm stated during Senate consideration: “if people have been successful in business . . . they can bring that talent and the fruits of that talent, a million dollars to this country . . . . " However, currently, aliens can acquire investment funds through inheritance or gift and there is no real regulatory requirement that they be entrepreneurs.  They can simply be limited partners with no role in management.  It is not surprising that the vast majority of EB-5 investors now are limited partners. If the EB-5 program is reformed, it can become a turbo-charged engine for economic growth.  I look forward to today’s hearing.

For more on today’s hearing, click here.