After nearly three years of starts and stops, substantial EB-5 program reform now seems imminent. As noted by attorney David Hirson in our featured article two weeks ago, legislative reform will almost certainly bring an increase in the minimum investment amounts required to access program benefits, as well as a change in how targeted employment areas (TEAs) are designated.

This week, in an article titled “Reflections on EB-5 Reform — Fall 2017,” economist and EB-5 industry veteran Jeff Carr offers his analysis of the potential reforms currently on the table.

In addition to TEA and minimum investment amount changes, Carr describes the approaches under consideration to properly incentivize development in rural and economically distressed urban areas, noting that progress toward one potential solution — visa limit relief — appears to have stalled for the time being.

He also explains that security and compliance requirements are likely to become much more stringent under a reformed EB-5 program, potentially driving regional center operating costs higher (and strengthening the case for third-party fund administration, such as that offered by NES Financial).

Furthermore, Carr notes that the first wave of reform may not be legislative: The Department of Homeland Security proposed updated EB-5 regulations in January of this year — including huge increases in investment minimums, as discussed by Scott Barnhart in last week’s article. Such regulations, though they would likely eventually be superseded by actual legislation, could be brought into effect at any time, given a 30-day notice period.

On this, Carr has an interesting perspective: “While such a prospective period of EB-5 program volatility, should that occur, would be less than desirable,” he writes, “a long-term program reauthorization — or perhaps even a permanent EB-5 program … would likely in the long run be worth any short-term setback.

Read the article: “Reflections on EB-5 Reform — Fall 2017”

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NES Financial, in collaboration with more than 20 EB-5 industry experts, has released the 2017 edition of its EB-5 eBook series, EB-5 Insider: Medallion Partners Share Insights on Industry Trends.

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