Proposed Changes to EB-5 Program Unlikely to Affect Puerto RicoDecember 24, 2015 – In The News
Rogelio "Roy" J. Carrasquillo was featured in the Caribbean Business article, “Proposed Changes to EB-5 Program Unlikely to Affect Puerto Rico.” Full text can be found in the December 24, 2015, issue, but a synopsis is below.
Congress has decided to extend the EB-5 program until September 30, of next year at which time they will revisit the matter and discuss if any reform is necessary.
Despite Congress pushing off the program’s extension, the move has given much-needed stability to projects that depend on EB-5 as a source of capital, said Fox Rothschild’s Roy Carrasquillo.
The program’s proposed changes, although due for discussion next year, are nevertheless unlikely to affect EB-5 projects in Puerto Rico, Carrasquillo said. He expects an increased number of EB-5 applications on the island during the first quarter of next year as a result of the extension.
“Now that there’s some stability in the program, and we know the rules of the game in the medium term, we’ll see movement on some projects that the Puerto Rico regional centers were looking at,” Carrasquillo noted. “We’ll see a lot of projects in advanced stages filing for EB-5 soon.”
One of the issues that Congress has uncovered in the EB-5 program is the designation of Target Employment Areas (TEAs). Specific states have come up with stricter definitions of TEAs in an effort to close loopholes while some have pushed to expand it nationally.
Carrasquillo believes that even with more stringent TEA definitions, Puerto Rico would not be affected by the change. “Unfortunately, the island has a very high unemployment rate,” he said.
There was also an amendment proposed to raise the minimal investment in TEAs from $500,000 to $800,000 which may have a stronger effect on Puerto Rico and other U.S. jurisdictions.
“It would have made it more difficult to raise projects,” Carrasquillo explained. “There were also problems in the way the bill was drafted because it didn’t establish any kind of transition for the process; the hike in minimum investment would have taken place overnight.”
The U.S. Immigration & Customs Service issues 10,000 visas each year under the EB-5 program but certain procedures may impact the overall number of investors.
“We’ve lobbied to increase or relax the concept of defining what constitutes an investor under EB-5,” the Fox Rothschild partner explained. “For example, if an investor brings a wife and two children, those are four visas against a 10,000 limit [overall]. Lobbying for that person qualifies as one visa against 10,000, so we can increase the number of investors”
About 85% of investors taking advantage of the benefits associated with the EB-5 program are Chinese, Carrasquillo said.
“Now there’s been a refocus due to immigration issues and the fact that China maximized its quota of visas,” he said. “There’s now an increase from Latin America, Europe and other areas, and that gives Puerto Rico an advantage partly due to its geographical and cultural proximity to those regions.”