On April 13th, 2016, Senator Chuck Grassley of Iowa prepared a statement for the EB-5 hearing titled, The Distortion of EB-5 Targeted Employment Areas: Time to End the Abuse.

In his statement, during this EB-5 hearing, Senator Grassley expressed concern for the status quo and proposed reforms. Senator Grassley described the trouble he saw with EB-5 Program’s Targeted Employment Areas (TEAs).

Targeted Employment Areas have been a part of the EB-5 Program since Congress established the program in 1990. It is a term that refers to rural areas or areas of high unemployment. The major benefit of investing in a TEA for EB-5 investors is the reduced investment amount from $1 million to $500,000.

Senator Grassley spoke of when the EB-5 Program was first envisioned, the Senators supporting TEAs believed TEAs would encourage investors to invest in rural areas and areas of high unemployment; they did not take gerrymandering TEA boundaries into account. By combining various census tracts together, project developers have successfully linked affluent areas with low-income areas, thereby successfully developing EB-5 projects in cities such as Manhattan with all the benefits of a TEA.

As a result, according to Senator Grassley’s statement, EB-5 investors had, “little incentive to invest EB-5 funds in distressed or rural areas.” He stated that, “…cities in Georgia, North Carolina and Minnesota compete with Beverly Hills, Miami and New York City. It’s hard for smaller states and cities to compete with the glitzy hotels and luxurious condo projects. In Iowa, we’re trying to create jobs through value-added agriculture, biofuels, and ag-based manufacturing. Wealthy investors understand that the real estate market is booming, and see the dollar signs, big returns, and the green card that comes with it.”

Senator Grassley urged the Obama administration to take action to challenge the Targeted Employment Area designations. He would also like to see more reforms passed that would incentivize EB-5 investments in infrastructure in TEAs in the Midwest U.S., as he believes this would “reduce the burden on taxpayers.” He also proposed a reallocation of the visas; some would go to rural and high unemployment areas, but more than half of all the visa would be set aside for investments at the $1 million dollar level.