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INS ISSUES REPORT TO CONGRESS ON EB-5 INVESTOR VISA PROGRAM
Pursuant to last year’s massive budget legislation, the INS is required to report to Congress on what actions Congress should consider taking in order to ensure that people utilizing the EB-5 investor visa program (the "million dollar visa") are actually making the investments, they are personally liable for their investments and are involved in the management of the business. The legislation stated that it was asking for the report because of allegations of fraud in acquiring the visas. The agency noted, however, that it does not keep accurate data on fraud in the EB-5 program. Nevertheless, the INS has now issued a report making recommendations for amending the Immigration and Nationality Act’s provisions on EB-5 programs. 
The EB-5 investor program was created in 1990 to allow up to 10,000 investors per year who invest at least $ 1,000,000 in a new commercial enterprise established by the immigrant investor that employs at least 10 US workers. The threshold drops to $ 500,000 for investments in rural or high unemployment areas.
The investors are admitted for a two year conditional period during which time the investor must invest the required capital and create the required employment. If the investment is properly made, the conditions will be removed. 
The investor visa program has never been widely used. In fact, the most visas that have ever been issued in a single years is a surprisingly low 290 out of a potential 10,000. Defenders of the program note that if enforcement were so lax, why are more people not using the program.
About half of the investors in recent years have been making investments in targeted rural or high unemployment areas at the 0,000 level. Most of the investors (81%) are Asian. 9% came from Europe and 5% came from South America. 
The INS blames low participation in the EB-5 program on five factors:
investor uncertainty over removal of conditions 
investor worldwide income subject to US taxation 
availability of alternative nonimmigrant classifications 
availability of attractive investor programs in other countries 
limited program information and outreach 
The INS credits modest increases in the use of the EB-5 program in 1996 and 1997 to the new Immigrant Investor Pilot Program. The IIPP includes a modified investment system where applicants invest their capital in approved regional centers established to promote economic growth. The other factor was the rise in private sector firms that marketed immigrant investor programs overseas.
The private sector programs mentioned above have come under fire from the INS. According to the INS report, many of these firms peddled investments in large, pooled funds carefully tailored to meet the statutory requirements. The investments, according to INS, often are passive, may be in the form of debt and are not genuinely at risk.
The INS has been greatly concerned with these investments and claims that they do not comport with the Immigration and Nationality Act. In 1998, the INS placed a hold on these types of applications and then issued several precedent decisions that clarified INS views on many EB-5 requirements. They included that 
the INS immigrant investor program is an equity investment program and debt and redemption agreements are unacceptable; 
only capital that is the investor’s own may be counted as capital; 
only capital placed at risk for purposes of job-creation within the two year period will be counted as part of the investment funds; fees and expenses paid to attorneys and funds in reserve funds or corporate accounts are not counted as investment capital; 
promissory notes must meet specific standards to be counted as capital; for example, the assets used to secure the note must be specifically identified and be the investor’s own; 
an investor must establish the job-creating new commercial enterprise; 
an investor’s business plan must be comprehensive, credible and detailed; and 
investments in regional, centers and targeted areas of high unemployment must be in job-creating businesses located within those specific, areas if the investor is to take advantage of the modified statutory provisions for those areas. 
The INS report recommends a number of specific statutory changes including the following:
immigrant investors should make an equity investment and debt investments should be barred 
the investment should be made prior to petition approval 
Congress should clarify whether it wants passive investors to participate and 
Congress should clarify that Section 275(d) which provides penalties for an individual who knowingly establishes a commercial enterprise in order to evade immigration laws should also apply to commercial promoters or other firms that use the EB-5 program to evade immigration laws 
No doubt these proposals will garner considerable criticism. For example, many investors will object to putting a million dollars into an investment where their money is at risk and which cannot be easily withdrawn if they then can be turned down by the INS. 
[Editor’s note: Interestingly, the report does not really address the core issue of why the EB-5 program exists in the first place. Congress wanted to help American businesses to attract needed investment capital while at the same time creating jobs for American workers. If an investment is achieving these purposes, why is the INS so bothered by details like whether the investment is passive or active, or whether the investment is in the form of debt or equity, or whether the investment is made before the visa is approved or before the conditions are removed. 
More fundamentally, if the program as it exists is only attracting a few hundred takers a year, then why would the INS recommend making it even stricter? The US already has one of the most restrictive immigrant investor programs in the world. The INS proposals would basically spell the death knell of the EB-5 program. Perhaps the INS should come clean and state that it basically thinks an immigrant investor program is a bad idea and Congress should scrap the program.]