Immigrant Investors:

Small Number of Participants Attributed to Pending Regulations and Other Factors

GAO-05-256: Published: Apr 1, 2005. Publicly Released: Apr 1, 2005.

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In 1990, Congress established an investor visa category, referred to as EB-5, whereby immigrants are granted conditional residence and after 2 years, permanent residence status in the United States if they invest in a commercial enterprise that will benefit the U.S. economy and create at least 10 full-time jobs. The Basic Pilot Program Extension and Expansion Act of 2003 (P.L. 108-156) mandates that GAO provide certain information regarding the EB-5 employment category. In response to the mandate, this report provides information on immigrant participation, including the number of participants, their countries of origin, and the number who sought U.S. citizenship. Also, this report includes information about the types of business established and where they were established.

The number of visas granted under the EB-5 category has been a small fraction of the approximately 10,000 allocated annually by the authorizing legislation. According to State Department records, a total of 6,024 visas have been issued to immigrant investors and their dependents since 1992. As of June 2004, 653 investors (not including dependents) had met this immigration category's requirements and received permanent legal resident status. The immigration officials and lawyers who represent immigrant investors that we interviewed attribute the low participation to the rigorous application process and the uncertainty of meeting the requirements that can result in the permanent residency benefit. They also cited, as a potentially negative impact on future applicants, the failure to issue implementing regulations to adjudicate hundreds of EB-5 permanent residence applications that have left investors in conditional resident status--some for as long as 10 years. In 2002, Congress mandated that the regulations be issued by March 2003. The regulations were initially drafted but continue to be under review by the Department of Homeland Security. DHS cited many difficult and competing demands associated with establishing the new department and meeting its mission challenges as reasons the regulations have not been completed. About 83 percent of investors and their dependents who were granted permanent resident status through the EB-5 category are from Asia. EB-5 participants have invested an estimated $1 billion in a variety of businesses (e.g., hotels/motels, manufacturing, restaurants, real estate, and farms). GAO estimates that 41 percent of the businesses were established in California.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: In fiscal year 2005, we analyzed information about the investor visa category-referred to as EB-5, whereby immigrants are granted conditional residence and after 2 years, permanent residence status in the United States if they invest in a commercial enterprise that will benefit the U.S. economy and create at least 10 full-time jobs. We reported that the number of visas granted under the program had been a small fraction of the approximately 10,000 allocated annually by the authorizing legislation. Immigration officials and lawyers who represent immigrant investors that we interviewed attributed the low program participation to DHS' failure to issue implementing regulations to adjudicate hundreds of EB-5 permanent residences applications, that left the investor in conditional resident status--some for as long as 10 years, among other things. It has now been 4 additional years since GAO recommended that the Secretary of the Department of Homeland Security finalize and issue these regulations and 7 years since Congress required DHS to issue regulations for adjudicating EB-5 applications. According to DHS, it has not promulgated these regulations because this action is a lower priority among other competing department and agency regulatory priorities. According to DHS, it has made some progress to mitigate the hardships imposed on some EB-5 applicants awaiting promulgation of implementing regulations based on a preliminary review. But it has nevertheless not issued the required implementing regulations for completing adjudication of most of EB-5 applications. According to DHS, upon completion of the preliminary review of the entire group of Special Class cases, USCIS will continue to hold all the still open cases that were determined to be "not-grantable" (about 564 cases), and upon promulgation of the special class regulations, will then proceed with a re-review of those and other open cases in accordance with any Special Class regulations that are eventually published and put into effect. As of July 2009, USCIS has not promulgated the regulations and can not provide an estimate of when the regulations will be issued. As such, we have decided to close this recommendation as not implemented.

    Recommendation: Given the undetermined status and potential hardships imposed on hundreds of EB-5 applicants awaiting the promulgation of implementing regulations and that 2 years have passed since Congress required DHS to issue regulations for adjudicating these EB-5 applications, and to better achieve the economic benefits of the EB-5 category, the Secretary of the Department of Homeland Security should finalize and issue these regulations.

    Agency Affected: Department of Homeland Security

 

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