U.S. investment program: migration and EB-5 changes | Garant in
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U.S. investment program: migration and EB-5 changes

September 20, 2024

U.S. investment program: migration and EB-5 changes

Record number of Americans renounce citizenship: pandemic had nothing to do with it

About four times a year, the U.S. media writes a stream of articles about the latest “Emigrant List” (known simply as “the List”). The List is often mischaracterized as the number of Americans who renounced U.S. citizenship in the last quarter. Since the U.S. is the only major country with citizenship-based taxation, these lists are seen as an indication of Americans' attitudes toward the current generation of politicians.

Press reports of expatriation from the U.S. are accurate in number but meaningless in terms of their causality.

The most recent publication of the List was quickly followed by a press release from a self-proclaimed “expert” who stated that: ” The huge increase in U.S. emigrants refusing, in our experience, is that the current pandemic has given people time to reconsider their ties to the U.S. and decide that the current political climate and annual U.S. tax returns are intolerable.

In short, the pandemic and the U.S. government's response to the accompanying crisis has directly caused a significant increase in listings over the past few quarters.

Such a statement exposed the “expert's” complete ignorance of the subject matter in two obvious and indisputable ways. First, it takes approximately 12 to 18 months from the time of renunciation of citizenship before the renunciation appears on the List (a delay of four to six quarters) because of what must occur between those two events:

Information is sent to the Stare Department to confirm that the renunciation was properly accomplished by issuing a Certificate of Loss of Citizenship;

IRS 8854 must be filed with the IRS;

Both the State Department and IRS send their information to the Office of the Federal Register; and finally

OFR refers the information to and publishes the most recent edition of the List. In other words, the August 6, 2020 List was a reflection of events that occurred when no one had yet heard of Covid-19.

Second, because of Covid-19, nearly all U.S. Citizen Services (ACS) at U.S. missions abroad were closed for most of the spring. U.S. law requires physical presence at an ACS office to renounce citizenship. As a result of a significant increase in the number of Americans renouncing their citizenship over the past decade, ACS offices now conduct renunciation interviews by appointment only.

This has resulted in huge backlogs at some ACS offices, with wait times for interviews exceeding a year. Thus, because of Covid-19, there have been no waivers in the last few months, as all interviews have been canceled. Most ACS offices have not yet opened reservations or rescheduled interviews.

In mid-to-late 2021, the number of migrants will drop by a few quarters - but not because of who now occupies the White House.

Not only is the increase in denials not the result of the US government's response to Covid-19, but I will take the not-so-subtle step of predicting that in about 12-18 months there will be a massive addition of names to the List.

This will not be the result of a positive reaction to the winners of the upcoming November 2020 US election. Rather, it will be a reflection of the current problems created in 2020 as a result of Covid-19.

The number of immigrants will increase in the future - exactly how much will depend on the outcome of the upcoming election.

Wealthy Americans are well aware that the pandemic required additional spending by the U.S. government. They also realize that additional tax revenue must be found to service this additional debt. Finally, they recognize the reality that the vast majority of the U.S. population does not have any additional surplus income to contribute to this need for tax revenue, and that the burden will - and should - fall on them. They accept this future tax obligation as a reality.

However, what they don't accept or appreciate is the growing rhetoric, moving from “getting money to pay for basic necessities” to “squeezing money from bad people.” This is the kind of negative commentary you get from Bernie Sanders and Anand Giridradas.

The reality for many wealthy American families is that come November, they will be choosing between:

Four more years of Trump's chaos;

or Democratic tax policies that will at least result in a doubling of capital gains.

So it's not surprising that many of these families have chosen to react as they would if they discovered their home was in the path of a wildfire. Specifically, implementing fire prevention techniques (e.g., tax collection and property freezes); fire insurance (i.e., alternative citizenship and residency); and developing a fire evacuation plan (i.e., a personal and financial plan to exit the U.S. tax system).

The most important takeaway from this latest Expatriate List is that for every wealthy American who is effectively banished, 10 to 20 have a backup plan “just in case.” Future numbers on the List will be based entirely on how many wealthy Americans decide to “vote off their heads, impulsively.

” Since the U.S. government relies on the top 1% of U.S. taxpayers for more than 1/3 of total individual tax revenues, the loss of even a small number of these “golden geese” will have an asymmetrical and permanent negative impact on the monies available for payment. for pandemic compensation and recovery programs. Food for thought as the world focuses on the rapidly approaching U.S. elections!

Significant expansion of EB-5 and migration programs in Western countries after Covid-19

This article focuses on examining the direction of the market after Covid-19. As part of the analysis, we answer questions such as:

How will the pandemic and economic crisis affect demand?

Which programs will be the most profitable?

How will the programs themselves react and will they reduce prices?

Can we expect new RCBI programs to open up when governments are taking every opportunity to fund their operations?

I believe the crisis will provide a stimulus to the RCBI industry as the pandemic makes it more likely that supply and demand will expand. I think the demand for investment migration will increase because people have now witnessed how far governments are willing to go, and for many people this reason alone is enough to start looking for options. The recent border closures have made investors rethink what options they want to have in future crises.

Demand will rise even more due to increased supply, which will also drive prices down. We will see more countries that do not have CIPs today, they will be created and legislated. Accordingly there will be more competition and this will lead to lower prices. For example, we could see contributions of $50,000 and investment options of $100,000-$150,000. I think this is quite possible.

Regarding the question of where we are most likely to see new programs or price reductions for existing programs, we would emphasize that this question will be different for CIP than the response to residency programs. It is in the Caribbean and the South Pacific where we will first notice a strong response. After the hurricanes in 2017, they put in big discounts because they needed to increase revenue, and now they really need to increase revenue because most of them are so dependent on tourism, which is now zeroed out. So they're going to struggle for any revenue.

The economy after the crash

We also expect larger, more developed countries to play a larger role in supply growth. We will see a significant expansion of the EB-5 program in the United States, especially if Trump leaves the White House in November, while Western, developed countries will radically expand residency programs to attract wealthy investors and entrepreneurs.

Thus, introducing or strengthening such programs in the world of the wealthy will pave the way for countries that are in even more dire financial straits to follow suit.

The real question is to look at countries where economies have been particularly affected by COVID-19. In the Caribbean, in the South Pacific, etc. There are a lot of those out there that are heavily dependent on tourism. But also heavily indebted countries that have nowhere else to turn. For example, it wouldn't come as a surprise that Argentina would try to spin something like this because they really need the money. And they don't just need money; they need foreign currency.

This perfect storm of growing demand (more investors seeing a dire need for RCBI) and growing supply (governments introducing, expanding or reducing programs) will mean profits for the market, a great opportunity for price-sensitive investors, but also a dangerous balancing act for the agencies that regulate the programs.

What jeopardizes these programs is that the government is handing out passports to anyone who gives money. This will lead to a reduction in visa-free travel and it will cast a big shadow over the entire program.

Investors want to know that CIP can stand the test of time, that the quality of due diligence is such that there is no risk that visa-free travel could be lost in the future. Countries need to differentiate themselves because if they compete on price alone, they will never win.

On this issue, the best solution is to position themselves as in terms of the highest quality, and develop their brand in that direction.

Reforms to the U.S. immigration system that will affect the EB-5 program

The number of foreigners seeking a visa to the United States has remained consistently high for many years.

The United States government used the situation with the growing number of immigrants in the early 90's in the national interest. In 1990, Congress passed the EB-5 immigrant visa program, the main instrument of which was investment.

The simple and favorable conditions were appreciated by wealthy foreigners. By investing their capital in the U.S. economy, they acquired the right to legal residence in the country. The funds received were used to develop the national economy and create new jobs.

In 1992, Regional Centers (RCs) were created to improve the efficiency of financial distribution.

This scheme proved to be very successful. The conditions for participation in the program and the procedure for processing the EB-5 immigrant visa remained unchanged for almost 30 years. In 2019, for the first time, amendments were made to the amount of investments and the order of their indexation.

The EB-5 visa provides foreign investors the opportunity to receive a conditional or temporary two-year green card in exchange for investing $900,000 in projects located in high unemployment areas or $1800,000 in projects outside of those areas that create at least ten permanent jobs for local residents.

A bill to change the operation of the EB-5 program and the operation of Regional Centers (RCs)

In March 2021, there was information about reforming the EB-5 program and extending RC work in the long term. The official website of the U.S. government has published a bill that, if passed, would address issues such as:

extending the EB-5 immigrant visa program until 2026;

increasing the level of investor protection;

strengthening controls over RCs and eliminating the need to renew them every six months;

protecting the program from fraud; reducing processing times for visa applications. 

Investor protection

Despite the conscientious work of most RCs, which respect the interests of investors, cases of fraud are quite common.

The bill includes provisions that would regulate the right of investors who are not involved in fraud to continue participating in the program after third parties are found to have violated the law.

Investors will also be given the right to appeal a number of decisions made during the review of their petition.

Control over the work of Regional Centers

There are increasing cases of misuse of investments: instead of developing projects in areas with high unemployment, funds are used to finance the construction of luxury residential complexes. This demonstrates an insufficient level of control over the work of Regional Centers.

The draft law provides for regular audits and requires the RCs to submit annual reports.

Reducing petition processing times

In order to speed up the processing of EB-5 immigrant visa petitions, funding for the program must be increased. This is also addressed in the bill.

For more information about the possibility of obtaining a U.S. EB-5 visa, please contact the specialists of GARANT.in.

 As a reminder, the EB-5 visa is the fastest way to get a green card for the whole family.

The program:

does not require the applicant to know the language;

allows the use of credit funds for investment;

entitles the applicant and his/her dependents to free public education, social security;

provides access to the U.S. labor market without limiting the employment rights of the applicant and his/her family members;

has no restrictions on nationality, education, or qualifications.

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