EB-5 investor visa usa allows foreign investors to invest capital in the United States to attain permanent residence or green card for themselves and their qualifying family members. Most of the EB-5 visa applications are filed through a USCIS designated EB-5 Regional Centers. Under normal circumstances the EB-5 capitalis returned to the EB-5 investors in 5 to 7 years depending on their eligibility to receive their EB-5 capital back and remove conditions on their conditional green card. In order to be eligible to receive the capital back EB-5 investors are required to spend minimum of two years as a conditional permanent resident or as a conditional green card holder. Often times due to processing delays or retrogression (delay caused by oversubscription of EB-5 visas by nationals of a particular country) there is a delay in issuance of conditional green card which triggers the requirement of redeployment of funds i.e. the funds of the EB5 investors are required to be re-invested till the EB5 investors spend at least 2 years as a conditional permanent residence in order to be eligible for removal of conditions on their conditional green card.
USCIS issued an update to the policy manual on June 14, 2017 addressing the issue of redeployment of funds. On July 20, 2020 USCIS issued another policy update for redeployment of EB5 funds. Here are the highlights of the most recent EB-5 Redeployment Policy Alert:”
1. Provides that further deployment must be through the same new commercial enterprise.
2. Provides that further deployment must be within the geographic area of the same regional center, including any amendments to the regional center’s geographic area approved before the further deployment.
3. Clarifies that purchase of financial instruments on the secondary market will generally not satisfy such requirements. “The purchase of financial instruments traded on secondary markets generally does not satisfy these requirements because such secondary market purchases generally:
• Are not related to the actual undertaking of business activity;
• Do not make capital available to the job-creating business; and
• Represent an activity that is solely or primarily financial rather than commercial in nature.”
4. Clarifies that capital may be further deployed into any commercial activity that is consistent with the purpose of the new commercial enterprise
5. USCIS generally considers 12 months as a reasonable amount of time to further deploy capital, but will consider evidence showing that a longer period was reasonable. “
There a few questions that remain to be answered:
1. Will the policy be applied retroactively?What happens to investors who are already redeployed in a manner inconsistent with the recent policy update?
2. Do securities purchased as initial public offering or new issue municipal bonds meet the requirements of redeployment?
3. For investors who meet the conditional residency requirements between receipt of funds from the borrower and prior to redeployment, do their funds need to be redeployed at all?
The immediate impact on the EB5 industry is that the geographical scope for the redeployment has suddenly shrunk as most stakeholders were of the opinion that the funds could be redeployed anywhere in the United States. There is a positive take away from the update with respect to the redeployment timeline. USCIS considers one year as reasonable to redeploy capital which makes it easier for regional centers to seek opportunities to redeploy EB5 capital.
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