EB-5 Investment Decrease Appears Imminent

Yesterday, May 13, 2021, a federal judge in the Northern District of California heard oral arguments in a case that will likely result in a decrease in the minimum investment amount for investors in the EB-5 Regional Center Program. The hearing was publicly available through Zoom, and we listened to the entire oral argument.

The judge’s position in this case could not have been clearer. She was squarely on the side of the plaintiffs who seek to roll back the minimum investment amount required for EB-5 from $900,000 to the original $500,000 level.

The issue at hand was whether regulations that the Department of Homeland Security (DHS) promulgated in 2019 are void because the then-Acting Secretary who signed them into law did not have proper authority under the Federal Vacancies Reform Act (FVRA). Government attorneys representing DHS argued that no, the 2019 regulations should not be set aside, because recently appointed and confirmed DHS Secretary Alejandro Mayorkas has “ratified” the 2019 rules. Attorneys for the plaintiffs argued that the FVRA does not allow a new, properly appointed DHS Secretary to “cure” the prior administrative error.

During the hearing, the judge effectively made the plaintiffs’ argument for them. She pointedly questioned DHS’ argument regarding the scope of the FVRA. At one point the attorney arguing the case for DHS that the judge’s position was “elevating form over substance,” and the judge responded that this was precisely the issue: Congress passed the FVRA because it cared about the procedure for succession at leadership levels in federal agencies.

The attorney representing the plaintiffs made a brief argument, reiterating many of the points that the judge had already made. The plaintiffs’ attorney also indicated that the judge had “hit the nail on the head, repeatedly,” and urged the judge to rule in favor of the plaintiffs. The hearing was quick, lasting less than thirty minutes.

A written decision from the judge is expected within the next week, with the result likely being that the 2019 rules increasing the minimum investment amounts for EB-5 are set aside through a nationwide injunction. Minimum investment amounts for EB-5 would drop back to $500,000, at least for a time. The federal government will likely rush to the U.S. Court of Appeals for the Ninth Circuit and request that the judge’s injunction be set aside. Additionally, the Regional Center Program must be renewed by Congress on or before June 30, 2021, and Congress could write an increase in investment amounts directly into law.

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