Support HR 5992, the American Job Creation and Investment Promotion Reform Act of 2016
Recipient: House Judiciary Committee
Dear Member of the House Judiciary Committee:
On behalf of The Leadership Conference on Civil and Human Rights, a coalition charged by its diverse membership of more than 200 national organizations to promote and protect the rights of all persons in the United States, we write to express our support for HR 5992, the American Job Creation and Investment Promotion Reform Act of 2016. We applaud Chairman Goodlatte and Ranking Member Conyers for their leadership in co-sponsoring this bipartisan legislation, and urge you and your colleagues to vote in favor of the bill during the Committee markup tomorrow. The Leadership Conference views HR 5992 as a reform vehicle for the EB-5 regional center program that picks up where negotiations on reforms to the program failed in December 2015. A vote against this bill in Committee is a vote for maintaining the status quo of a scandal-ridden program, and against progress towards much-needed reforms.
Congress originally created the EB-5 regional center program to promote capital investment and job creation in rural and high unemployment urban communities. The EB-5 immigration investor program currently gives foreign investors the opportunity to get U.S. residence status when they invest $1 million in a business in the United States that creates ten American jobs. When the project is in a rural or high unemployment area (a so-called Targeted Employment Area, or “TEA”), the investment threshold is cut in half, to $500,000, in order to incentivize capital investment in these communities. Reports however indicate that the program has been egregiously misused, with almost all projects qualifying at the lower investment level regardless of the location of the project.
One such project is Hudson Yards in Lower Manhattan, which in reality is located in a low unemployment and affluent part of Manhattan, and is marketed as such. The multi-page spread advertising the development in the September 2016 issue of Vogue speaks for itself (attached). Under the current guidelines for the EB-5 regional center program, Hudson Yards qualifies as a high unemployment area and at the lower investment level, making a mockery of a program that was intended to incentivize investment in poor urban areas. Hudson Yards is emblematic of why the EB-5 regional center program is so desperately in need of reform without further delay.
Not only are the investments not going generally to the communities as intended, the EB-5 program has been plagued by widespread fraud. For example, in California, the SEC filed suit in 2014 against Suncor Care Inc. In Vermont, federal prosecutors charged two developers with Jay Peak, Ariel Quiros and William Stenger, with defrauding investors from at least 74 countries. Federal and state officials said the two raised $350 million through the EB-5 program for an array of projects including a ski resort.1 In Washington, a local developer raised more than $125 million from immigrant investors, but federal securities regulators allege that he siphoned off $17.6 million for his own use.2
The Leadership Conference strongly believes that the lodestar for the reauthorization of the EB-5 regional center program must be job creation and investment in rural and high unemployment urban areas, along with program integrity measures. HR 5992 is a much-needed vehicle for reform. In addition, it would move the program back towards the original intent of the program.
We would like to highlight several draft proposals in the bill that are of particular interest to the civil and human rights community:
- TEA Reform: The bill would redefine “Targeted Employment Area” (TEA) so that the original intent of Congress is honored and EB-5 regional center investments are targeted toward the rural and high unemployment urban neighborhoods that need them the most. The draft definition for “Priority Urban Investment Area” tracks the qualifications already employed for New Market Tax Credits [Sec. 4(e)(1)(Q)(ix)], and only four areas qualify as TEAs, including priority urban investment areas, rural areas, and closed military installations [Sec. 4(e)(1)(Q)(xi)].
- Visa set-asides: HR 5992 would incentivize investment and job creation in priority urban investment and rural areas through the creation of visa set-asides. Annually, priority urban and rural areas would each be allocated 2,000 visas, leaving 6,000 visas in the non-reserved category annually. [Sec. 4(b)(B)(i)]. Should there be any unused visas in either set-aside category, they would rollover for use in the same category in subsequent years. We believe that a rollover for a sufficient number of years is needed in order to provide projects in rural and high priority urban areas with time to attract capital investment from foreign investors who may be more unfamiliar with and require more education about developments in areas outside of affluent metropolitan communities.
- Responsibility for TEA designation: Under the draft legislation, the Secretary of the Department of Homeland Security rather than local or state officials shall determine eligibility for the lower investment level, ensuring that the rampant misuse of TEA definitions that have characterized the program is eliminated. [Sec. 4(b)(B)(ii)]. We applaud this provision, and believe it is critical to any final legislation on the EB-5 program.
- Adjustment of minimum investment amounts: Since its inception, the minimum investment amounts for EB-5 visas has never increased, to the detriment of the American economy. The draft bill proposes increasing the regular investment level from $1 million to $1.2 million, and increasing the lower TEA investment level from $500,000 to $800,000 [Sec. 4(c)(1)(B)(i)]. In order to incentivize investment in priority urban investment and rural areas, there must be a sufficient spread between the lower investment amount and the regular investment amount.
- Infrastructure and manufacturing projects: HR 5992 would incentivize infrastructure and manufacturing projects, which would qualify for the lower investment level but not be eligible for the visa set-asides unless they were also physically located in a priority urban investment or rural area as defined in the draft bill [Sec. 4(c)(1)(B)(i)(II)]. The Leadership Conference strongly supports this provision. Congress should be incentivizing these kinds of projects because they are the source of good paying jobs in the long-term.
We believe that the final bill should also include the following:
- Additional data collection requirements so that that there is a clear picture of the economic impact of EB-5 investments on job creation. The public should have access to more information regarding the implementation and economic impact of the program.
- EB-5 investments must be subject to high labor and employment standards. At its heart, this is both an investment and jobs creation program, and Congress should ensure that the jobs created by the program are good quality jobs.
Last year, negotiations over reforms to the EB-5 regional center program were extensive but ultimately stalled. We support efforts like HR 5992 to jumpstart serious movement toward a final reform bill in 2016. Another clean, long-term extension to the program is unfathomable. We look forward to working with all parties to arrive at a final bill this year that will provide meaningful reforms to a much-maligned program that has the potential to significantly help our most vulnerable communities.
Thank you for your consideration. If you have any questions, please contact Emily Chatterjee, Senior Counsel at (202) 466-3648.
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