August 03, 2017
On August 1, 2017, Senators Tom Cotton (R-Arkansas) and David Perdue (R-Georgia) introduced a bill to significantly cut legal immigration. The bill is called the RAISE Act and it stands for Reforming American Immigration for a Strong Economy Act. The bill has President Trump’s support.
However, the EB-5 community understandably has questions about how this bill would treat EB-5. The below is a quick summary including general and specific EB-5 related highlights:
- The RAISE Act significantly reduces legal immigration.
- All employment based categories, including EB-5, are eliminated and replaced with a points system.
- Applicants need 30 points or higher to immigrate to the US.
- Investors get 6 points if they invest $1.35 million in a US new commercial enterprise.
- Investors get 12 points if they invest $1.8 million in a US new commercial enterprise.
- In both cases, $1.35 million or $1.8 million, investors must maintain the investment for at least 3 years.
- In both cases, $1.35 million or $1.8 million, investors must *actively manage the commercial enterprise as their primary occupation*.
- Eliminates Diversity Visas, currently allocated 55,000 visas per year.
The points system is used in other countries, ex: Canada, UK, and Australia.
A major barrier presented in the RAISE Act relating to EB-5 investors is the “active management” aspect. One of the key factors contributing to the EB-5 program’s growth as a significant source of development capital is the minimal management requirement. Investors cannot be entirely passive, but they are not required to have an active management role. Without question, an active management requirement would significantly curtail the EB-5 program’s use and usefulness by limiting the program to entrepreneurs as opposed to including investors.
Again, the bill is not likely to move forward, although Republicans favor the points system generally. The Federalist, a conservative publication, states that if the “RAISE Act were made law as it stands now, the consequences would be dire as advanced companies faced new barriers in hiring workers, making it easier for our competitors in China, India, and Europe to beat us in trade. … Total immigration would be reduced, but illegal immigration would probably rise. Overall, the American economy would suffer, even its blue-collar workers.”
In the meantime, there is a critical need for long-term EB-5 program reauthorization and visa capacity to support demand and reduce backlog.
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