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Nov 22, 2016

What Does Trump’s Election Mean for EB-5? Actually, Probably Not That Much

Matthew Galati

In continuing our post-election series, we come to the literal million-dollar question: What effect will a Trump Administration have on the EB-5 Immigrant Investor Visa? Some stakeholders and pundits have claimed that under the incoming administration, the Program will thrive. Some industry colleagues in private discussions have expressed great pessimism that Trump will take a more restrictionist policy given the dominance of Chinese nationals in the program and his tough talk on China. We respectfully disagree with both.

Our political crystal ball takes a more moderate approach: the EB-5 program will likely not experience great changes for the positive or the negative because of Trump. Indeed, changes to DACA, NAFTA, or the H-1B might be directly correlated with the election outcome. EB-5 won’t be. If there will be change, we don’t think such changes will be a result of the Trump Administration.

Here’s why:

  • EB-5’s problems are largely legislative, and they require legislative solutions. Congress must focus its attention on passing a budget and hopefully thereby extending the Regional Center Program. As we have discussed previously, the RC Program is scheduled to sunset on Dec. 9, and some legislators are eyeing a temporary extension to March 31, 2017. Whether this extension shall pass will be decided even before the Electoral College meets to cement Trump’s victory.

     

    Stakeholders, however, have been advocating for additional legislative solutions for years. These include in passing reforms similar to those proposed in the Integrity Act, more visas to be awarded to investors and their families, and mandating processing times to ensure predictability. Given our Constitutional separation of powers, there is not relatively much Trump could do to improve the program without legislative amendments, and there is no present evidence that he has any inclination to push for legislative EB-5 reform. 

  • Opinions on EB-5 do not cut across traditional political party lines. Trump will be a Republican President, working with a Republican-controlled Senate and House. He may be able to pass significant legislation regarding immigration issues such as mandatory E-Verify usage, given the like-minded attitude on the Right side of the political aisle. His attitudes on EB-5 are not known (even though he has used the program in his own business affairs).  In any event, EB-5 is unlikely to cleave along party lines.

     

    The upcoming Senate is instructive in this regard. Judiciary Committee Chair Chuck Grassley (R-IA) has been highly critical the Program. So too has been the incoming Ranking Member Dianne Feinstein (D-CA). Charles Schumer (D-NY) has been a staunch defender of EB-5, and he will become the Senate Minority Leader. Jeff Flake (R-AZ) and John Cornyn (R-TX) will remain on Judiciary and likely continue to be pro-EB-5.

    Party affiliation, in this particular instance, does not appear to be terribly relevant. In many respects, the political EB-5 status quo has not changed as a result of the elections.  Again, we’ve seen no signal that the future White House will leverage the “Bully Pulpit” and take a stance on EB-5.

  • The biggest problem facing the EB-5 industry is Chinese retrogression, and Trump appears to be opposed to awarding more immigrant visas. The availability of EB-5 visas presents a major challenge for the program, given that PRC-native investors and their families face a multi-year wait to assume conditional residency because of retrogression. Although the program has been historically underutilized, 10,000 visas for investors and their families simply is not sufficient to meet present demand. More visas could be allocated, either through increased legislative allocation or perhaps through administrative action that counted only the principal investor towards the preference quota.

     

    Such reforms however appear unlikely to find support from a Trump Administration. His 10-point plan promises to “keep[] immigration levels within historic norms,” an ambiguous platform that appears to be a nod to a more restrictionist policy. It may be a commitment to the status quo. How it will play out in the EB-5 realm remains to be seen. However, it appears reasonably clear that Trump is no fan of creating more visas, at least in the general sense.

  • A comprehensive revision to the EB-5 regulations might be one of the last achievements of a largely pro-EB-5 Obama Administration. Since President Obama took office in January 2009, the EB-5 program has experienced a renaissance. Some may argue whether this was due to economic conditions, or savvy businesspeople that saw potential in a historically underutilized program. We think a significant amount of credit is due to former USCIS head Alejandro Mayorkas, who leveraged considerable agency resources to commence stakeholder calls resulting in increased participation, transparency, and the crafting of comprehensive policy. Obama himself has addressed Select USA in an effort to augment foreign investment.

This past week, the Department of Homeland Security updated its Fall Unified Agenda to signal that EB-5 regulatory changes are anticipated to be proposed in January 2017. It remains to be seen whether these draft regulations will help the Program. Notably, however, the “Anticipated Benefits” of the anticipated rule reference key new benefits such as priority date retention, streamlining process, and improved adjudication times. Perhaps such revisions to the regulations, proposed by Obama and implemented by Trump, would help the program to thrive. We will keep you posted.

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