History of the EB-5 Investment Program.

Congress created the employment-based fifth preference category (EB-5) visa program in 1990 to "create jobs for U.S. workers and to infuse new capital into the U.S. economy".^[1]:528 At that time the program was directed towards "alien entrepreneurs" who would not only invest $1 million or $500,000 in a "new commercial enterprise" but would also "engage in the management of the new enterprise" creating ten full-time jobs for U.S. citizens or lawful permanent residents.^[1]:528 In order to make the program more investor-friendly, Congress enacted the 1993 Appropriations Act which amended the EB-5 program to create the "Pilot Immigration Program" — the Immigrant Investor Pilot Program (IIPP).^[1]:528[18] Under the IIPP, foreign nationals could invest in a pre-approved regional center, or "economic unit [referred to as regional centers], public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment".^[18][1]:529 Investments within a regional center provide foreign nationals the added benefit of allowing them to count jobs created both directly and indirectly for purposes of meeting 10-job creation requirement.^[18] This was intended to help potential investors to meet "the program’s stringent requirements" through passive investment.^[1]:529 With the IIPP, the EB-5 visa became an investors visa as opposed to an entrepreneur's visa.^[1]:530

In c.1995 former Immigration and Naturalization Service (INS) officials formed a company called AIS that acted as intermediaries between INS and immigrant entrepreneurs in the EB-5 program. Whereas EB-5 required an investment of 500,000 AIS only required $125,000 cash with the rest — $375,000 in the form of a promissory note. AIS claimed the promissory note would "be forgiven once the immigrant’s permanent residency application was approved". The U.S. immigration agency, which was then known as the Immigration and Naturalization Service (INS), had interpreted the regulations regarding financial qualifications in a way that accepted this arrangement until c. 1998 when they were under investigation by the Government Accountability Office (GAO). There were allegations that the INS was giving preferential treatment to AIS in EB-5 matters. The INS (now USCIS) changed their "interpretation of regulations regarding financial qualifications"^[19] as a result of the probe. In 1997 and 1998 two owner-operators of Interbank, Herndon, Virginia had "filed 320 false [EB-5] applications on behalf of 270 EB-5 immigrant investors.^[20] The INS raided Interbank in August 1998.^[20] The EB-5 program was temporarily suspended.^[3]:11 Although no one in AIS or INS were charged, in 2000 the two Interbank operators were arrested, then convicted and imprisoned on dozens of counts of "money-laundering and fraud" in the largest case of EB-5 fraud.^[3]:11 INS District Director Warren A. Lewis said, "Visa fraud whether done on the streets by selling fraudulent cards or through an elaborate financial scheme is against the law and will be investigated and prosecuted." Hundreds of the immigrant investors "lured" to the United States had their permanent residency applications denied.^[21] Because of the INS investigation, the processing of 900 EB-5 cases was suspended, leaving immigrant families in limbo for years.^[21][1]:527 When the GAO tabled their report in 2005 they concluded that immigrant investors were not utilizing the program because of the 900 EB-5 suspended files—some of which dated to 1995—as well as the "onerous application process" and "lengthy adjudication periods".^[19]

According to a Brookings Institution and Rockefeller Foundation 2014 report, starting in 2008 there was a renewed interest in the "under-utilized" EB-5 visa program as the number of "wealthy investors" and "ultra-wealthy individuals" in emerging markets abroad increased and the access to "traditional domestic financing" in the United States had decreased because of the Great Recession.^[3]:2

By 2010, foreign investors' use of the EB-5 program was far less than Congress had originally anticipated.^[22] In 2011, USCIS began making a number of changes to the program in hopes of increasing the number of applicants.^[23] By the end of the 2011 fiscal year, more than 3,800 EB-5 applications had been filed, compared to fewer than 800 applications in 2007.^[24]

Initially, under the first EB-5 program, the foreign investor was required to create an entirely new commercial enterprise; however, under the Pilot Program investments can be made directly in a job-generating commercial enterprise (new, or existing - "Troubled Business"^[15]), or into a regional center - a 3rd party-managed investment vehicle (private or public), which assumes the responsibility of creating the requisite jobs. Regional centers may charge an administration fee for managing the investor's investment and a "percentage of what they raise from the developers" which amounts to millions on large projects.^[9]

The program reached capacity for the first time in August 2014 when the State Department stopped issuing EB-5 visas until the beginning of the next fiscal year, October 2014.^[25] By 2014, the number of EB-5 visas granted had more than doubled since 2009.^[9]

Increased interest from Chinese millionaire families[edit]

According to the Savills Studley 2015 report, in 2011 out of a total of 3,463 EB-5 Visas granted, 2,408 of them — representing 69.5% — were from Chinese nationals. By 2014 out of a total of 10,692 EB-5 Visas granted, 9,128 of them — representing 85.4% — were from Chinese nationals.^[6]:4[13] The authors of the report conclude that the "increase in the number of applicants to the EB-5 program has stemmed from an increase in interest from mainland Chinese".^[6]:6 As China's economy flourished, there was an increase in the number of millionaire families in China. In 2012 there were 1.5 million, by 2013 there were 2.4 million which is more than the number of millionaire families in Japan.^[6]:6