In June, two United States senators—Republican Senator Chuck Grassley of Iowa and Democratic Senator Patrick Leahy of Vermont—introduced legislation to reauthorize and reform the EB-5 Regional Center Program, which is set to expire on September 30th. The Leahy-Grassley bill was actually the third bill to be introduced in Congress this year aimed at extending and reforming the program (A helpful chart comparing the content of the three bills can be found here).
The economic benefits of the EB-5 Regional Center Program have taken center stage in the Congressional and societal debate concerning its renewal and reform. Congress created the EB-5 Program in 1990 for the stated purpose of stimulating the U.S. economy via job creation and capital investment by foreign investors. In 1992, Congress established the Regional Center Pilot Program, which allocates EB-5 visas to foreigners who invest in job-promoting commercial enterprises associated with USCIS-approved regional centers.[1] Since this Program was a “Pilot Program”, it was not intended to be permanent in nature and, therefore, expires every three years. The Regional Center program has since been reauthorized six times, most recently in 2012 by unanimous consent in the U.S. Senate and a margin of 412 to 3 in the U.S. House of Representatives.[2]
Immediately following the introduction of the Leahy-Grassley Bill, the EB-5 Investment Coalition (EB-5IC)—a bipartisan organization of businesses, industry leaders, trade associations and elected officials mobilized around the shared mission of putting Americans to work by reauthorizing and strengthening the critical EB-5 Regional Center Program—released an economic analysis conducted by U.S. Policy Metrics and Hamilton Place Strategies, two public policy research firms. The EB-5IC report highlights the program’s impact as a net job creator and budget-neutral catalyst for efficiently bringing private investment into the U.S. at a time when other policy channels have fallen short. The report also cites EB-5 as an important tool for addressing both short- and long-term economic contractions.[3] The full text of the report can be found here.
In this blog post, we will discuss the two most obvious economic benefits of the EB-5 program, foreign investment and job creation, the foundations on which the program was created. In doing so, we draw from the analysis provided by the EB-5IC report in addition to economic estimates offered by other reputable organizations and research firms. In our next post, we will discuss a number of other unanticipated economic benefits that have been produced by the EB-5 program, particularly in the last seven years when its use skyrocketed.
Economic Benefit # 1: The EB-5 Program has injected billions of dollars into the American economy.
According to the EB5-IC report’s economic analysis, from 2005-2013, the EB-5 program generated at least $5.2 billion in private investment into the U.S. economy. In 2013 alone, the program realized in a minimum of $1.6 billion in private investment. These estimates may actually be low when compared to the conclusions of a 2012 peer-reviewed study commissioned by the Association to Invest in the USA (IIUSA)[4]—the national trade association representing EB-5 Regional Centers—which found that the EB-5 Program contributed $3.39 billion to U.S. GDP during fiscal year 2012. IIUSA’s larger estimate includes not just EB-investment capital, but also household spending of immigrant investors and other EB-5 related spending. Furthermore, during 2012, the IIUSA report estimates that spending by EB-5 investors contributed over $447 million to federal tax revenues and $265 million to state and local tax revenues.[5] The main takeaway from both of these studies is that the EB-5 program likely adds at least several billions of dollars to U.S. GDP per fiscal year.
Economic Benefit # 2: The EB-5 Program has created tens of thousands of jobs for Americans across the country.
Since 2008, when popularity of the program surged amidst the recession, the EB-5 program has shown consistent–and growing–annual yields of domestic investment and U.S. job creation. The majority of the growth in the EB-5 program has been through the Regional Center Program, which simplifies the investment process for applicants and has job creation requirements that can be easier to meet. According to EB-5IC’s report, assuming all minimum requirements are met for each investment, investments through the EB-5 program in 2013 should create 31,000 jobs.
Notably, the report finds the EB-5 program to be 500 percent more efficient at creating jobs than the 2009 American Recovery and Reinvestment Act, i.e. the “stimulus” bill. Whereas the stimulus bill created one job for every $100,000 to $400,000 in public spending, the EB-5 program has created tens of thousands of jobs at no cost to U.S. taxpayers.
It is worth mentioning that the “31,000 jobs” estimate is the outcome of a conservative analysis that only accounts for 10 jobs per investor, whereas in reality, many EB-5 investments create more. At a minimum, several other economic analyses conducted by respected analysts and research firms have produced even larger jobs-creation and investment figures. For instance, MB Consulting, LLC found that 83 regional center projects from across the United States and the Mariana Islands were able to produce $15 billion in foreign investment and create 103,685 jobs from 2011 to 2014.[6]
While the EB-5 industry waits anxiously to see what form the reauthorized Program will take, foreign investors looking to apply for an EB-5 visa should continue to submit their documentation in a timely fashion to avoid unnecessary delays. According to the Leahy-Grassley bill, pending investor applications should not be impacted if it is enacted into law.[7] Given the current processing times of over a year, interested investors should proceed with their applications as planned.
To inquire about our turnkey customized EB-5 services, such as our best-in-class Matter of Ho-compliant business plans, project assessment and ancillary services, please contact us at info@ecouncilinc.com.
e-Council Inc.’s website, newsletter and other forms of communication contain general information about legal matters. The information is not legal advice and should not be treated as such. You must not rely on the information on this website as an alternative to legal advice from an attorney or other professional legal services provider. For specific questions about any legal matter please consult with an attorney or other professional services provider.
[1] http://www.uscis.gov/eb-5
[2] EB-5IC, http://files.ctctcdn.com/53cbd932301/b3cc3104-3482-418f-b40e-3d909ee850f6.pdf
[3] http://eb5coalition.org/press-room/eb-5-report/
[4] The study was conducted by David Kay of IMPLAN Group, LLC and peer-reviewed by Professors Eric Thompson and Hart Hodges of Association for University Business Economic Research (AUBER).
[5] http://www.foxnews.com/us/2014/02/12/peer-reviewed-study-finds-dramatic-increase-in-economic-impact-us-eb-5/; https://iiusa.org/blog/research-analysis/iiusacommissioned-2012-eb5-economic-impact-report-set-publication-week/
[6] http://files.ctctcdn.com/53cbd932301/b3cc3104-3482-418f-b40e-3d909ee850f6.pdf; https://iiusa.org/blog/research-analysis/iiusacommissioned-2012-eb5-economic-impact-report-set-publication-week/
[7] https://iiusa.org/blog/wp-content/uploads/2015/06/American-Job-Creation-and-Investment-Promotion-Reform-Act-of-2015.pdf, page 48.