Lately, there has been a lot of talk about redeployment of EB-5 capital. What does it all mean?
Redeployment of EB-5 capital has become a popular topic when the number of EB-5 applicants from Mainland China began substantially exceeding the number of available visas. This resulted in a backlog and a "cut-off date" for applicants from China. Currently, the cut-off date is June 8th, 2014.
Applicants from China cannot progress in the EB-5 process until their priority date, or the date they filed their application, is earlier than the cut-off date. This has caused major delays in the process and unfortunately, applicants from China may have to wait as long as six years from the date they filed their Form I-526 to start their conditional residency process. While these applicants wait, their investments must remain "at-risk" until their I-829 petitions are adjudicated.
What does this mean for their investment?
Typically, an EB-5 investor places his or her capital into a new commercial enterprise that then loans the money to a job creating entity. This loan usually matures after five years. If an applicant from China is delayed by six years, then after the loan matures, there needs to be a strategy to keep the capital "at-risk" for one or more years while so that the applicant is still fulfilling the EB-5 Program requirements.
Where should the new commercial enterprise redeploy funds?
The Policy Memorandum, "Guidance on the Job Requirement and Sustainment of the Investment for EB-5 Adjudication of Form I-526 and Form I-829" issued by USCIS, is vague on specific requirements for redeployment of funds. While this redeployment in an investment must remain "at-risk," it fortunately does not need to create any additional jobs.
Some suggestions from the EB-5 industry include investments in:
Real estate
Publicly traded securities
Another similar new commercial enterprise
This new policy is concerning as it places many EB-5 investor's capital at risk for a second time. The EB-5 industry expects more clarification on redeployment issues in the upcoming months.
