Trump’s Impact on EB-5 Investors

February 28, 2017 by Kevin S. Kim, Esq.

The election campaigns, debates, and advertisements that consumed the public for the past year are finally over. Other countries, as never before, watched, analyzed, and voiced their opinions on what was on display for the world to see. Now, the world watches as President-elect Donald Trump selects those who will serve under his administration, anticipating the consequences for people both at home and abroad.

A topic that likely sparked the most controversy was Trump’s firm stance on immigration reform. He spoke about it often throughout his campaign, and although he would not back down completely, he did manage to soften the edges. However, many are asking Trump’s stance on the EB-5 Foreign Investor Program and Employment-Based Immigration? How will his administration affect EB-5 policy?

Congress created the EB-5 program in 1990 to encourage foreign investors to create U.S. jobs; thereby stimulating the economy. Per the U.S Citizenship and Immigration Services (USCIS), entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a green card as a permanent resident if they:

• Make the necessary investment in a commercial enterprise in the United States; and

• Plan to create or preserve ten permanent full-time jobs for qualified U.S. workers.

The rules surrounding what qualifies as an investment are quite extensive. A minimum investment can either be “General” or “Targeted Employment Area.” In a General investment, the minimum amount an EB-5 investor must invest in the U.S. is $1 million. For a Targeted Employment Area, defined as either rural or another area with very high unemployment, the amount must be at least $500K. In either case, the capital must come directly from the investor and cannot be borrowed.

For the time being, Donald Trump has been somewhat silent on the issue as he focuses on selecting the core components of his administration. We do know, however, that a company led by his son-in-law, Jared Kushner, has utilized EB-5 investors to help fund a prominent Trump-named project. Nearly 25% of the $50 million invested in the new 50-story Trump Bay Street luxury apartments in New York City has come from EB-5 investors, mostly from China. These are business people who are eager for the opportunity to not only invest in American projects but also purchase luxury homes, automobiles, and other goods and services, which further stimulates the local economy.

The projects formed through EB-5 participation create jobs through private investment and do not pose a burden to U.S. taxpayers. In fact, since those who were formerly unemployed now have jobs, tax revenue increases and the economy is stimulated. Trump frequently spoke about job creation, especially in the rural areas and the rust belt, and EB-5 seems to be the perfect stimulus to follow through on that promise. He expressed concern over jobs being farmed out to other countries for cheaper labor and vowed that he would close “loopholes” and relax regulatory burdens to keep those jobs in the U.S. The EB-5 program has not just stimulated urban economies on the East and West coasts. If promoted properly, the EB-5 program can play a vital role in driving investment into commercial endeavors throughout the country. During the period from between 2010 to 2013, the program saved or created over 2500 jobs in Ohio, and added nearly 3,000 jobs in South Dakota.

After the havoc the recent recession caused to the real estate markets, it was not easy for developers to obtain financing from traditional commercial lenders. The EB-5 program filled the void and provided needed capital to help get languishing projects completed. The program is also attractive to investors looking to participate in the U.S. residential property market. Strong economic indicators and a recognized stable real estate market will continue to drive investment from overseas, regardless of the election.

Attracting investors to America with the lure of permanent residency has already paid dividends. In FY2013, the amount EB-5 capital that was distributed among 29 states totaled nearly $2 billion. The largest investments were in California, New York, Texas, and Florida, with the number of state and local jobs created or supported by these investments being over 30,000. These jobs will increase the amount of federal and state tax revenue and provide many other positive economic contributions.

Since FY2013, the amount invested in the U.S. economy from EB-5 has increased sharply and in FY2015, was reported at $4.38 billion. Since 2008, over $15 billion of Foreign Direct Investment (FDI) entered the United States through the EB-5 investment program. If President-Elect Trump is serious about stimulating U.S. markets and ushering in new economic opportunity, there is reason to believe he will continue, and possibly even expand the EB-5 program.

Trump won the election in large part by selling his economic message to communities that were desperate for jobs. Many of these jobs can be supported by EB-5 investments. The types of jobs created from this program include construction, education, energy, real estate, healthcare, manufacturing, entertainment, and assisted-living, just to name a few. With the program expanding to include investors from different regions, opening up new regional centers around the country, and wealth of new infrastructure and energy projects on the horizon, the future of the program looks extremely bright.

Over the past several cycles, Chinese investors have made up the majority of the total EB-5 immigrant visas, although there is now growing interest from Great Britain, India, and Ireland. Other investors reported for FY2014-2015 hail from South Korea, Vietnam, Iran, Russia, Mexico, Nigeria, Egypt, and Japan. Homeland Security has some concerns about how quickly the visas are processed, yet with increased oversight from USCIS helping to drive out fraud and improve the integrity of the program, we could see some changes in order to streamline the visa and green card process.

The Trump administration is not likely to eliminate or even tinker too much with EB-5, a form of investment that people close to him have used in the past. The benefits of stimulating the economy and helping to fuel new job growth outweigh any reservations some may have regarding immigration fraud. All signs point to an expanded and more advantageous program under a Trump administration.

Now, with the recent announcement by Donald Trump that Japan’s SoftBank will invest $50 billion into American projects to create roughly 50,000 new U.S. jobs, all indicators are reassuring international investors that America is open for business.