Washington, D.C. – On Wednesday, March 8, 2017, the House Judiciary Committee held a hearing to examine proposed reforms to the EB-5 investor visa program. This immigration program – while intended to create jobs, inject capital into the U.S. economy and steer needed capital to rural and distressed areas – is currently plagued with fraud and abuse and needs to be reformed.
Under the current EB-5 program, foreign nationals, as well as their spouses and unmarried children under the age of 21, are eligible to apply for a green card if they invest at least $1,000,000 in American businesses ($500,000 if they invest in projects in rural or depressed high-unemployment “Targeted Employment Areas”) and create or preserve 10 jobs for U.S. workers.
Problems with the EB-5 program abound. For example, the minimum investment amounts have not been increased since the program’s creation in 1990 – a quarter century ago – which has limited the program’s ability to meet its mission of boosting the U.S. economy. Additionally, regional centers gerrymander most of their projects in order for them to qualify for the lower investment amount intended for distressed areas even when they consist of ultra-luxury condos in the country’s richest zip codes. This frustrates Congress’s goal of incentivizing investments in rural and distressed areas.
At the urging of House Judiciary Committee Chairman Bob Goodlatte, Ranking Member John Conyers, and Senators Chuck Grassley and Patrick Leahy, in January 2017 the Department of Homeland Security issued proposed changes to reform the EB-5 program, such as increasing the required investment amount and restricting gerrymandering.
Witness Panel I
- The Honorable Charles E. Grassley, U.S. Senator
- The Honorable Patrick J. Leahy, U.S. Senator
Witness Panel II
- Ms. Rebecca Gambler, Director, Homeland Security and Justice Team, U.S. Government Accountability Office
- Mr. Sam Walls, III, Managing Director, Pine State Regional Center
- Ms. Angelique Brunner, Founder and President, EB5 Capital
- Ms. Dekonti Mends-Cole, Director of Policy, Center for Community Progress
- Mr. David North, Fellow, Center for Immigration Studies
Most of the witnesses agreed that the investor visa program is very troubled and that the Department of Homeland Security’s proposed regulations are a valuable first step that would curtail abuse and bolster job creation and economic growth in rural and distressed areas of the United States. Chairman Goodlatte urged the Trump Administration to finalize and publish the regulations and indicated that if the regional center program cannot be reformed, it should be allowed to expire.
Congress should remedy other problems in the program, such as its vulnerabilities to fraud and the risks it poses to national security.
House Judiciary Committee Chairman Bob Goodlatte (R-Va.) questions a witness about how EB-5 investments in rural areas can create good paying jobs for American workers and how it has impacted his community.
Goodlatte: “Big River Steel is going to pay it’s mostly non-college educated workers in rural Arkansas $75,000 a year or more. How do you think this compares with the wages non-college educated workers will make at the high-end hotels and condos that are being built with EB-5 funds?”
Wall: “… It would be much higher.”
Senator Chuck Grassley (R-Iowa) calls for the Department of Homeland Security’s proposed reforms to be finalized in his testimony:
“Earlier this year, former Homeland Security Secretary Jeh Johnson published proposed rule changes to the regional center program that would stop gerrymandering and increase investment levels. I strongly support these changes. They are a vital first step to returning the program to its original intent: creating new employment for American workers and infusing capitol into distressed or rural areas … it appears the Trump Administration will move forward with them.”
Senator Patrick Leahy (D-Vt.) testifies how the EB-5 program is not helping rural and high unemployment areas:
“Only three percent of EB-5 investors now invest in rural areas. Three percent. Less than 10 percent invest in true high unemployment areas. Almost every other EB-5 project uses gerrymandering to qualify as distressed, despite many being located in the most affluent parts of the country. The fact that a luxury hotel in Beverly Hills can use gerrymandering to claim it is located in a distressed community is troubling. But the fact that this type of abuse now represents almost 90 percent of the entire EB-5 program is appalling. And an untold number of these luxury developments would be pursued regardless of EB-5 financing, casting doubt on whether the program is creating any jobs at all.”
Congressman Darrell Issa (R-Calif.) asks a witness if the program should only be used for investments in distressed areas:
“For such a small program that is so over-subscribed … why would we have two tiers of investment at all? … We wouldn’t we require that you invest in underserved areas?”