A federal judge has indicated she may block the further implementation of Trump administration changes to the EB-5 immigrant investor program based on the alleged illegitimate appointments of former Trump administration Homeland Security officials.
This is the result of a lawsuit currently being pursued by Behring Regional Center, a USCIS accredited EB-5 regional center. The suit is seeking to block the EB-5 Modernization Rule that came into effect in November 2019, which raised the minimum investment amount from $1m to $1.8m, and from $500,000 to $900,000 for targeted employment areas (TEAs). The rule also give the Department of Homeland Security (DHS) complete authority to designate TEAs, without state authority involvement in deciding where investments should be focused within their borders.
Critics say the rules make it more difficult to attract foreign investment to urban areas, because they aren’t eligible for TEA designation.
Behring Regional Center is claiming the DHS “violated federal law by issuing an arbitrary and capricious rule, failed to examine a regulatory flexibility analysis, and exceeded statutory authority,” according to court documents.
Overseeing the court hearing, U.S. Magistrate Judge Jacqueline Scott Corley, signalled she will likely abolish those change, based on illegitimate appointments. “If I were to vacate it because I find it was invalid, it goes back to the secretary who could reimpose it if he agrees with it.”
The rule was first issued in July 2019 under acting DHS secretary Kevin McAleenan, and the final rule was issued in November 2019 under acting DHS secretary Chad Wolf, who took over after McAleenan’s resignation.
If the rule is blocked it would result in the restoration of $500,000 EB-5 minimum investments and an ease in TEA designation rules.
“This is precisely the action we need to reinvigorate the EB-5 program, which has been withering since these devastatingly restrictive rules were adopted,” said Bernard Wolfsdorf, managing partner of WR Immigration and former president of the American Immigration Lawyers Association. “If overturned, the judge needs to provide guidance on what to do with those who invested at the higher amounts.”
“This is a positive development for the industry,” added Jennifer Hermansky, shareholder at Greenberg Traurig, LLP. “It hopefully will give the DHS time to consider whether the agency gave due consideration to public comments on important issues, such as TEA designation procedures. Hopefully extending the program long-term, reducing overall visa backlogs, increasing investor immigration protections, adjusting the investment amount properly for inflation and providing workable TEA procedures.”
Behring is seeking a preliminary injunction to undo the changes. It says its EB-5 investments have dwindled to zero since the new rule took effect and that it will go out of business unless these changes are reversed.
The government says changes to TEA designation are intended to make the process more transparent and less subject to “political whims” and “political pressures” in each state – in response to the gerrymandering that DHS found where states were designating TEA areas. The government also says the rule did not eliminate TEAs in urban areas. It simply limited the size of TEAs to smaller plots of land established as “tracts” by the U.S. Census Bureau.
The Biden administration has defended the Trump administration policy. The U.S. Department of Justice said that the “de facto officer doctrine”, established for 144 years, should keep McAleenan’s EB-5 rules in place even if he was invalidly appointed.
The judge has set another tentative hearing date for the 6th May.