EB-5 reserved categories are still current, but the limited data we have suggests that may change.
A major component of the EB-5 Reform and Integrity Act of 2022 (RIA) was the creation of set-aside visa categories. Rural projects (20%), high-unemployment TEA projects (10%), and infrastructure projects (2%) would receive a reserved portion of available EB-5 visas each year, and investor petitions would be granted priority processing.
This was great news for investors from retrogressed countries with long backlog and wait times, as investing in a reserved category could potentially allow investors to “skip the line” and make their way through the EB-5 process more quickly.
For investors to take full advantage of reserved categories, they must remain current. Slow adjudication by U.S. Citizenship and Immigration Services (USCIS) could cause these categories to fill up more quickly than anticipated and force backlogs just like those experienced by investors from retrogressed countries. A lack of information on the number of set-aside visas that may be awarded in the next year is making it difficult for EB-5 investors to assess the viability of these categories as we head into 2025. Based on what we do know, it appears some categories are filling up faster than others.
The Status of Unreserved Visas in 2024
On August 16th, 2024, the State Department announced “the issuance of all legally available visas in the Employment-Based Fifth Preference (EB-5) unreserved category for fiscal year (FY) 2024.” This means that the entire supply of EB-5 visas not set aside for reserved categories was issued for 2024.
While it’s true that the industry only had to wait 46 days until the start of FY2025 on October 1st, it is remarkable that USCIS was able to adjudicate enough petitions to issue that many visas. As Suzanne Lazicki notes on her blog, this demonstrates significant progress:
“It is likely that as of today, USCIS has already at least assigned nearly every pre-RIA I-526, except for I-526 from Chinese investors who don’t have visas available. If recent volumes continue, every I-526 and I-829 pending today will have been processed before June 2025,” says Lazicki.
While USCIS has shown surprising efficiency in visa issuance this year, it should be noted that this good news only applies to the unreserved category. “Processing activity for post-RIA investor petitions picked up slightly in Q3, but is still extremely low in context of the I-526E backlog and the number of reserved visas waiting for applicants,” said Lazicki.
In the USA (IIUSA) examined data from earlier in the year and concluded “all of EB-5 visa issuance via consular processing between October 1, 2023 and January 31, 2024 is for the unreserved category,” meaning no reserved visas had been processed during that time. This is unsurprising, as there has likely not been enough time since the RIA’s passage for EB-5 projects to apply for designation, fundraise, deploy capital, and create jobs in order for investor petitions to reach the visa stage.
But what happens once enough time has passed for petitions in reserved categories to reach the visa stage? Are we due for an avalanche of reserved visa petitions ready for adjudication, creating a bottleneck? We don’t know how many visas will be required to meet the demand created by the petitions that have been filed over the last 2+ years, or if that demand will be enough to eclipse the number of visas available. This is causing anxiety for EB-5 stakeholders who want to know where these categories stand.
What we know about availability for reserved visas
One thing we do know is that all reserved categories are current. Investors who filed I-526E applications in 2022 and 2023 aren’t likely to meet their EB-5 requirements during 2024, so the fact that the category is current is no surprise. But as time goes on, more investors will have met the two-year sustainment and job creation requirements, meaning they will become visa eligible. Just how many investors will that be in 2025?
USCIS doesn’t provide that information, so the best we can do is estimate based upon what we know about the number of I-526 and I-526E applications that have been filed. According to IIUSA, “3,444 EB-5 investors filed their I-526/E petitions between April 2022 and November 2023,” with 32% of those being rural projects and 63% being urban high-unemployment TEA projects.
There is, of course, the third category of infrastructure projects. However, there has been so little activity in this category, and its 2% allocation so small, that there is really nothing to report. The main categories of interest right now are rural and high-unemployment, as they have attracted enough investment to cause some to ask whether or not they’re in danger of filling up in the near future.
IIUSA estimates from the data that “the supply of EB-5 visa numbers in the rural area category seems to be sufficient to meet the current visa demand.” This is backed up by more recent data from WR Immigration that includes FY2024 through April 2024, which shows rural gaining on high-unemployment in terms of applications, though high-unemployment is still in the lead. Rural has more set-aside visas (20% of the total) than high-unemployment does (10%), meaning it will take more applicants for rural to have a backlog than it will for high-unemployment.
“Based on our estimates,” the IIUSA report continues, “the I-526/E petitions on file would require up to 2,951 visa numbers, while at least 4,345 visas are available in the rural area category between now and the end of FY2025.” That’s good news for rural applicants, but the report estimates the high-unemployment demand could potentially exhaust the visa supply in the next year.
“Petitions on file associated with the urban TEA category could demand 2,622-6,883 visa numbers, while less than 3,572 visa numbers are available in FY2024 and FY2025 based on our estimates,” says IIUSA.
Another report states that as of 3/31/24, there had been 1,694 rural I-526 & I-526E applications received, compared to 2,786 high-unemployment applications received. It’s important to note that the number of petitions filed is not the same as the number of visas ultimately awarded. Each investor files an I-526 or I-526E, but each application could include a number of visas for family members. The number of visas is also dependent on the approval rate.
Estimates may differ based on whether the author uses a conservative average family size estimate to err on the side of underestimation, or uses a larger average family size to estimate the earliest date the category could possibly fill up. As you can see from IIUSA’s figure of “2,622-6,883,” there is a large range of potential outcomes. That’s why these are only estimates, and aren’t a substitute for actual information from USCIS.
The American Immigrant Investor Alliance (AIIA) determined that “the latest data indicates a moderate growth in demand for the Rural TEA category, but still below the needed level to absorb the near-term annual visa supply, including visas carried over from the previous year. Conversely, demand for visas in Urban High Unemployment TEAs remained high and is on track to surpass annual availability.”
The number of available visas this year includes unused visas from FY2023 that have rolled over. Similarly, unused visas from FY2024 will roll over to FY2025. However, those rollover visas from FY2023 will not continue to be carried over to the reserved category in FY2025.
As explained by Green Card by Investment, “It’s crucial to note that carried-over reserved visas must be utilized within the year they are carried over, or they will be lost to that reserved category, and will then carry over into unreserved visas the following year. Furthermore, there’s no provision for carrying over unused unreserved visas.”
Unused reserved visas are carried over in their reserved category for one year. After that, they’re carried over to the unreserved category for Year Three. In Year Four, they’re made available to other employment-based visa categories. Because no investor petitions for reserved categories were adjudicated in 2022, the entire allotment rolled over to 2023. In 2024, they became unreserved visas.
The loss of these rollover visas is the subject of an IIUSA lawsuit that aims to restore these visas to their respective categories. Since there’s no way an investor in a rural project could possibly have completed their EB-5 requirements before mid-2024 at the earliest, reserved rural visas from 2022 are being denied to petitioners from that category, defeating the purpose of setting them aside in the first place.
This may seem like it’s not a problem because we still have so many unissued reserved visas. But if enough visas are required to adjudicate petitions at the visa stage in 2025, the loss of those unused rollover visas could lead to a backlog.
As AIIA puts it, “the pending inventory of I-526 and I-526E petitions represents an ‘invisible backlog’ that is not reflected in the visa bulletin because they have not yet reached the visa stage.”
Applicants in reserved categories may find out over the course of the next year that even though they made investments in projects for the express reason of accessing reserved visas, there might not be as many available as they expected.
So what does this mean for the future of EB-5?
There is a bright side to reserved categories remaining current even though, at least for TEA projects, there may already be enough applicants to use all the visas that will be available next year. Ron Klasko explains on this blog:
“These delays come with the silver lining that, as long as immigrant visas are not issued, the quota should remain current; and concurrent adjustment, which requires quota availability, will continue as an option.”
As long as the category is current, investors can file petitions and file for Adjustment of Status – something they might not be able to do once visas start getting issued for reserved categories.
How fast the categories fill up depends not only on how many petitions there are and how many visas are required for each petition, but on how many visas are available. If slow USCIS adjudication leads to a lack of visas being issued, some visas could be lost because they won’t carry over beyond the first year.
Despite priority processing, USCIS may not get to these reserved petitions in a timely manner. The IIUSA lawsuit aims to restore those visas because investors shouldn’t lose out on the opportunity for reserved visas due to slow processing times.
To prevent a backlog and unnecessary wait times, reserved categories need to be current, and more available visas could go a long way toward making that happen. But more than anything, investors need to know where the categories stand so they can make proper decisions about where to invest. If high-unemployment visas have a backlog and rural visas don’t, investors may want to reconsider investing in an urban TEA – but they can’t do that if they don’t have current information.
AIIA sums it up thusly: “With this information, prospective investors can assess what they are getting into, pending applicants can see where they are in line, and responsible EB-5 investment issuers can protect their investors by advocating for visa relief.”
The lack of clarity can be a problem for issuers. Should a Regional Center begin fundraising for an urban TEA project, only to find out in a few months that the category has filled up, resulting in a lack of interest? All we can do right now is wait and go by the estimates we have.
Based on the information we have at this stage, it seems the high-unemployment category could exhaust its visa supply in the near future, making rural projects even more attractive to investors. But rural projects have their own set of risks.
As we’ve covered before, there are issues that can cause problems for rural projects. Lower-population areas may have fewer potential tenants, and banks may be less likely to fund them, leading to a greater reliance on EB-5 capital. More EB-5 capital requires more job creation, meaning these projects might have less of a cushion for investors who don’t want to have to worry if the requisite amount of jobs is going to be created.
Investors also have to worry about whether the developer has experience in these rural areas. Experience is an important component of EB-5 due diligence, and investors need to be able to trust that the projects invest in won’t fail. And if the project can’t meet its raise, investors want to know they can get their money back and that their invested capital will be protected before it is deployed to the project.
That’s why JTC offers more than just its fund administration solution to EB-5 clients. By providing an independent escrow and banking solution, third-party oversight, and transparency through a secure online portal, JTC helps Regional Centers demonstrate to investors that they have processes in place to protect investor funds and adequately supply all required information.
For the time being, rural projects will be of great interest to investors who want to take advantage of set-aside visas while the category is current. If rural projects flood the market, Regional Centers will need to find ways to stand out by demonstrating that they’re a cut above, and JTC offers services that can be a differentiator for investors looking for someone they can trust.
To learn more about JTC’s EB-5 services, click here.
