The Impact of the New EB5 Law on Encouraging Investments in Rural Areas

The EB-5 Reform and Integrity Act, also known as the RIA, was passed by the U.S. Congress in 2022. It provides significant incentives to investors making investments in "rural areas," defined as locations outside a metropolitan statistical area (MSA) with a permanent population of less than 20,000.

Two senators from rural U.S. states, Patrick Leahy (D-Vermont) and Chuck Grassley (R-Iowa), led a bipartisan effort to establish the RIA. They determined that too much EB-5 capital was being invested in major metropolitan areas, which are more familiar to immigrant investors, and insufficient in rural areas.

With this significant change to the EB-5 law, investors in rural areas will have new opportunities. The minimum investment amount in rural areas is $800,000 instead of the new standard minimum of $1,050,000 is one of the most obvious advantages of investing in rural areas. Priority processing and set-aside visas are the most significant benefits a rural investment can offer, given that investors' primary objective is frequently a swift path to U.S. residency.

Prioritized Processing

The RIA mandates that investors who apply through rural projects receive priority processing over investors who apply through projects located within a metropolitan statistical area (MSA). The new law also states that priority qualifying I-526 (conditional green card) petitions must be adjudicated within 120 days for projects in rural areas and 240 days for non-priority projects in metropolitan statistical areas (MSAs).

These times should be taken with a grain of salt; the target stated in the new law is vastly different from the current times, as stated by the United States Citizenship and Immigration Services, the agency responsible for processing EB-5 applications (USCIS). In 2022, USCIS processing times averaged 47.5 months. There is reason to hope that I-526 processing times for typical non-rural projects will eventually return to their two-year historical average. Since the stated difference between what is in the law and what is on the USCIS website is close to a 1-to-2 ratio, it would be reasonable to assume that a priority processing case could take approximately one year (120 days vs. 240 days and 29 months vs. 62 months, respectively).

Visa Reservations: A Breath of Fresh Air for India- And China-Born Applicants

Through the EB-5 program, the U.S. government allocates 10,000 visas annually. It is a small number of visas considering that each investor typically brings two to three family members. Consequently, what occurs when the USCIS issues all EB-5 visas for a given year? The straightforward response is that a backlog is created, and investors with an approved EB 5 visa must wait until the following year to receive their visa from the consulate.

To ensure that investors from all countries can benefit from the program and to prevent one or two countries from consuming all the visas in a given year, the number of EB-5 visas allocated to each country is capped at 7% of the total number of visas available each year. It is excellent news for investors not born in India or China. The current USCIS bulletin lists China and India with respective backlogs of 3/22/15 and 11/8/19. The issuance of a green card is restricted to investors who have received approval before the posted dates. For all other countries, the letter "C" indicates that applicants can schedule an appointment to receive their green cards as soon as their initial petition is approved.

The RIA reduces delays for countries with a backlog by reserving 20% of all EB-5 visas for new investors in rural areas. It means that investors from India and China can bypass the line if they invest in a rural project that offers set-aside visas.

It should be noted that a backlog may eventually develop for rural area petitions, so investors from India and China should move swiftly. It would be prudent for offerors with a potential project in a rural area to focus their fundraising efforts on investors from these countries, as they stand to gain the most. It does not imply that investors from other nations would not be interested.

Additional Factors to Consider

Rapidly, EB-5 project offerors (known as "regional centers") are forming partnerships with developers to raise funds for new rural EB-5 projects. Following the onset of Covid-19, rural opportunities in the manufacturing, mining (including energy), and real estate industries have increased dramatically. High-interest rates have also strengthened the case for alternative financing such as EB-5.

With the new law passed by the U.S. Congress, achieving a quicker EB-5 processing time is now possible. However, being faster does not always indicate superiority. Investors must not disregard risky projects merely because they are given priority processing. Since the EB-5 program is a hybrid immigration-investment vehicle, investors must also evaluate the benefits and risks of each project. Due to the logistics involved in transporting materials and labor over hundreds of miles and complicated terrain, rural construction projects are frequently more expensive. Rural projects typically charge higher rents, sales prices, or rates to justify the higher construction costs to ensure profitability.

Also, by definition, rural areas have less demand or population than urban areas, so investors should consider whether a project is filling an unmet demand and can sustain its costs, or whether the market is saturated.

Unfortunately, bad actors have tainted the EB-5 industry in the past. Thanks to the RIA, the program now has a renewed sense of integrity, vigor, and standards. Due to new investor protections, priority-processing projects, and routes for investors to obtain residency in one of the quickest immigration vehicles, we believe now is the best time to begin the EB5 process.