What is GAO and why it did this study
The United States Government Accountability Office (GAO), is an agency that provides auditing and evaluative services for the U.S. Congress and helps improve the performance and accountability of the federal government.
GAO conducted a comprehensive study on the EB-5 Immigrant Investor Program. The study examines the characteristics of EB-5 investors and investments, the data collection efforts of USCIS to monitor fraud and national security concerns, and USCIS's initiatives to address fraud and national security risks in the program.
The study analyzed data from fiscal years 2016 to 2021, reviewed USCIS procedures and assessments, and interviewed USCIS officials and a sample of staff responsible for adjudicating and investigating EB-5 petitions. This report is a public version of a sensitive report issued in December 2022.
The following is a summary of the report’s review of program investor filings, USCIS adjudications and visa issuance, and regional center activity.
I-526 total filings, top countries, and the decline driven by the dropout of Chinese investors
From fiscal years 2016 to 2021, USCIS received around 40,000 investor I-526 petitions.
Chinese petitioners accounted for 58%, followed by the Indians with 11%, Vietnamese with 6%, and South Koreans with 5%.
However, there was a significant decline in the number of I-526 petitions received by USCIS during this period. The GAO report’s graphs don’t provide exact numbers but indicate over 13,000 filing in FY 2016, under 12,000 in FY 2017, under 7,000 in FY 2018, over 4,000 in FY 2019, over 4,000 in FY 2020, and then a precipitous drop to only about 800 in FY 2021.
The overall decline was primarily driven by a decrease in petitions from Chinese investors who comprised 83% of total petitions in FY 2016, 38% in FY 2018, 11% in FY 2020, and only 4% in FY 2021.
Reasons for the decline in filings
According to USCIS documents, IPO officials, and EB-5 investor associations, the reasons for the steep drop in flings include:
the impact of the COVID-19 pandemic
significantly longer visa wait times for potential Chinese investors due to the country’s oversubscription to the program
decreased interest due to recent”overfishing” of investors markets
the Modernization Rule (in effect Nov. 19, 2019 until June 22, 2021) increased minimum investment levels from $500,000 to $900,000
the year-and-a-half lapse in authorization for the Regional Center Program, from July 2021 to March 2022
The GAO report does not provide a specific ranking of the reasons for the drop in program popularity. However, filing statistics reveal that Chinese petitioners in earlier years drove the overall program popularity; thus, when Chinese filings dramatically plummeted (due to exorbitant Chinese wait times for available visas), the overall number of EB-5 filings did the same.
Petitions from some countries more than doubled
During the period studied, Chinese activity in EB-5 dropped to a small fraction of what it once was. But this was not a reflection of global interest in the program. The number of investors from India, South Korea, and Mexico more than doubled during fiscal years 2016 through 2020.
I-526 adjudication total & approval rate
During the period of fiscal years 2016 through 2021, USCIS reviewed approximately 46,000 I-526 petitions and approved approximately 87%.
I-526 adjudications & approval rate by country
Rest of world
The countries with the most filings tended to have better approval/denial rates, with the most active country, China, having a denial rate of just 74% of the rest-of-world average.
IPO officials surmised that investors from countries that are very active in EB-5 generally work with attorneys with greater knowledge of the EB-5 program, thus leading to higher approval rates in those countries.
Visa issuance: consular processing vs. adjustment of status
EB-5 investors with approved I-526 petitions outside the U.S. must undergo consular processing and file a Form DS-260 to receive their conditional visas; investors within the U.S. must adjust their status by filing a Form I-485 to receive conditional Green Cards.
Between fiscal years 2016 through 2021, the State Department issued visas for approximately 37,000 DS-260 applicants. During the same period, USCIS approved around 8,600 I-485 applicants. Thus, more than four times the number of applicants from abroad received EB-5 visas compared with applicants from within the U.S.
During that period, the State Department and USCIS issued denials for approximately 4,800 DS-260 and I-485 applications. Thus, the denial rate for these two applications appears to be a little over 11%.
2020 and 2021 saw limited use of available visas
Between fiscal years 2016 and 2019, the Department of State and USCIS approved nearly the entire annual cap of approximately 10,000 EB-5 visas per year.
But in 2020 and 2021, only about one-third of the available EB-5 visas were used. This decrease in visa issuance aligns with the decline in Form I-526 filings and the impact of COVID-19 on visa services.
I-829 total receipts
During fiscal years 2016 through 2021, 84,946 I-829 petitions were filed by investors and family members who wished to remove conditions on their permanent residency status. Chinese investors and dependents comprised 51% of these filings.
I-829 approvals & breakdown of investor vs. family members
During that period, USCIS approved 31,197 I-829 petitions and denied 1,646 petitions, resulting in an overall approval rate of approximately 95%. Of the approved petitions, 46% were from primary investors, with the remaining 54% from dependent family members.
From fiscal years 2016 to 2018, the ratio of approved I-829 petitions between investors and family members was roughly equal or slightly tilted in favor of investors. However, in fiscal year 2019, the balance started to shift in favor of dependent family members, who comprised approximately 60% to 65% of the I-829 approvals.
I-829 approvals by country of birth
From fiscal years 2016 through 2021, Chinese petitioners accounted for at least 72% of all I-829 approvals.
Regional center vs. direct investing numbers and the reason why
The report states that during the period of fiscal years 2016 through 2021, 93% of all EB-5 petitions were from investors associated with a regional center, rather than from direct investors.
More investors chose the regional center path because it typically involves less involvement and offers job-creation advantages (being able to count indirect and induced jobs).
EB-5 activity by state
As of June 30, 2021, 630 approved regional centers existed in 47 states and five territories. During the period of fiscal years 2016 through 2021, new commercial enterprises received approval in at least 41 states and the District of Columbia.
In that period, at least nine states had a minimum of 1,000 investors: New York, California, Florida, New Jersey, Pennsylvania, Texas, Maryland, Washington, and Delaware.
EB-5 job-creating industry is not always the same as the industry of the finished project
Between fiscal years 2016 through 2021, approximately half of all EB-5 investments were reported to be in the construction sector.
Other sectors that used EB-5 capital included finance, insurance, accommodation and food services, real estate leasing, and manufacturing.
However, IPO officials noted that the industry listed by applicants for initial job creation will often differ from the industry of the completed project. For instance, an applicant may cite construction as the industry for a project that builds a hotel, as the EB-5 investment created construction jobs.
GAO report conclusions
The GAO report notes that from fiscal years 2016 through 2021, EB-5 granted lawful permanent resident status to approximately 31,000 immigrant investors and their family members. This has benefited the U.S. economy through investments in job-creating activity.
Our conclusions: EB-5 is changing but still attractive to many investors and businesses throughout the U.S.
This report assesses EB-5 before the RIA; while the new regulations will further evolve the industry in terms of overall and by-country activity, we can gather some trends that likely still apply to EB-5 today.
The overall I-526 filing numbers dropped drastically, but this is almost certainly tied to the drop in activity by Chinese investors. We can infer that once visa availability times become onerous for specific countries, EB-5 participation will decline significantly.
The fact that three countries doubled their filing number over the same period that China’s number dried up confirms that EB-5 still appeals to many foreign nationals.
A global 87% I-526 approval rate speaks to the relative confidence most investors can have regarding their chances for immigration benefits. And investors from countries active in EB-5 are more likely to have a better chance of approval, likely due to the experience of immigration lawyers in that country.
As more than four times the number of petitioners received Green Cards from consular processing rather than adjustment of status, we see the majority of investors and family members come from outside the U.S.
The I-829 approval rate of 95% suggests that most EB-5 Green Card holders have an excellent chance of removing conditions on their permanent residency and continuing to live and build their lives in the U.S.
Numbers are trending towards more dependent family members than primary investors.
630 approved regional centers in 47 states and five territories confirm that the EB-5 program is attractive and active for businesses throughout most of the U.S.