One of the major controversies with the re-authorization of
the EB-5 regional center is whether current projects should be grandfathered
under the existing EB-5 laws. The proposed legislation change to EB-5 regional
center program will reform the EB-5 program and brings up the issue of
grandfathering. One side of the argument is from existing project developers
and regional centers who are currently promoting their projects overseas. They
feel they should be grandfathered at the existing EB-5 laws as they have spent
large capital to market the project and meeting the current requirements. Many
EB-5 projects spend months and years promoting their EB-5 project to investors
overseas. Would it be fair to change the rules in the middle of their project
causing them to have to spend additional money to update their existing
offering documents and marketing strategies? For example, a project may have
recruited 40 of the 100 investors needed in their project at the existing
$500,000 (assuming it increases). Is it fair for the remaining 60 investors to
follow different rules than the first 40 investors?
The other side of the argument expresses the concern of
grandfathering all projects and any projects who may have filed a project
exemplar or I-526 petition before September 30th expiration date. Under
this argument, the new EB-5 regional center laws would keep the investment
level at the $500,000 for hundreds of projects. The new EB-5 laws would not
affect EB-5 marketing for years to come as all older projects would have a huge
advantage against any new project launched in the market. Congress is trying to
pass a new EB-5 law to transform the program now, not 3-5 years from now.
The issue of grandfathering will dramatically impact the
marketing of projects. Investors are going to look to invest in the lower
capital amount projects and essentially make it impossible for any new projects
to find EB-5 capital. This is a tremendous issue in the EB-5 industry and we
will continue to monitor updates. We hope Congress can come up with a fair and
practical policy on this most important issue.
