Senate Panel Examines EB-5 Targeted Employment Areas
On Wednesday, April 13, 2016, the Senate Judiciary Committee held a hearing titled “The Distortion of EB-5 Targeted Employment Areas: Time to End the Abuse.” The EB-5 program is designed to bolster the U.S. economy by incentivizing investment from foreigners in exchange for legal permanent residence. Targeted Employment Areas (TEAs) are rural or high unemployment areas meeting specific criteria in order to lower the threshold of investment required under the program from $1 million to $500,000. Supporters of TEAs argue the lowered threshold is a critical incentive for investment. Some critics believe the current system allows developers to “gerrymander” census tracts to use a TEA designation to benefit projects in more affluent areas.
Throughout the hearing, Members repeated a call to “amend, not end” the EB-5 program, which is scheduled to expire on September 30. Committee Chairman Charles Grassley (R-IA) challenged TEA designations that link lesser affluent census tracts with those that may not otherwise qualify for TEA designation. Ranking Member Patrick Leahy (D-VT) pledged that he would not support reauthorization of the program with mere “window dressing” reform that does not require transparency and accountability.
The Senate Judiciary Committee heard from two panels. During the first panel, several House Members provided their thoughts on TEA reform. Congressman Bob Goodlatte (R-VA), Chairman of the House Judiciary Committee, voiced support for the EB-5 program, but believes it has strayed from Congress’ original intent. He also criticized the fact that when a project is jointly financed by EB-5 and conventional capital, EB-5 investors get the benefit of counting all the jobs created. His colleague, Ranking Member John Conyers (D-MI), voiced his confidence that Congress will reform the EB-5 program, noting that investors can already seek out projects outside of TEAs at the $1 million investment threshold. Congressman Mark Amodei (R-NV) described the EB-5 program as a car in need of new tires, but emphasized it has created jobs at basically no cost to the US taxpayer. He suggested lawmakers not make the perfect the enemy of the good and emphasized that economic activity ultimately goes where there is opportunity. Congressman Amodei also cautioned that piecemeal extensions lead to uncertainty and unpredictability and called on his colleagues to find a path forward, suggesting that they increase investment limits if they believe necessary, but arguing the program has on balance been successful over time.
Next, lawmakers heard from a panel of private sector witnesses who discussed a variety of suggestions for potential TEA reform, including : tightening criteria for priority urban and rural areas; encouraging investments beyond popular commercial real estate projects; creating new incentives for projects in rural areas; increasing oversight by federal agencies over state-led TEA designations; considering whether to continue allowing EB-5 programs to count 100 percent of jobs created even if accounting for only a portion of total investment; and limiting the use of census tracts and commuter traffic patterns.
This Week’s Hearings:
- Wednesday, April 27: The House Homeland Security Subcommittee on Counterterrorism and Intelligence will hold a hearing titled “ISIS in the Pacific: Assessing Terrorism in Southeast Asia and the Threat to the Homeland.”
- Thursday, April 28: The House Homeland Security Subcommittee on Oversight and Management Efficiency will hold a hearing titled “Transferring Guantanamo Bay Detainees to the Homeland: Implications for States and Local Communities.”
- Thursday, April 28: The Senate Judiciary Committee will hold a meeting to consider legislation.