BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 826 Hearing Date: June 6,
2016
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|Author: |Chau |
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|Version: |February 26, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Nicole Billington |
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Subject: Economic development: foreign trade: foreign and
domestic investors
SUMMARY: Requires the Governor's Office of Business and Economic
Development (GO-Biz) official website to include links to
federally-approved regional centers of the EB-5 visa program
operating in California. Defines regional center. Expands the
role of the California Business Investment Services Program
within GO-Biz.
Existing law:
1)Establishes the EB-5 visa category of the Immigration and
Nationality Act. (8 U.S.C. §1153(b)(5))
2)Establishes GO-Biz within the Governor's Office to serve as
the lead state entity for economic strategy on issues relating
to business development, private sector investment, and
economic growth. (Government Code (GC) §§ 12096 - 12098.5)
3)Establishes the California Business Investment Services
Program within GO-Biz to serve employers, corporate
executives, business owners, and site location consultants
considering California for business investment and expansion.
(GC § 12096.5)
4)Establishes the International Trade and Investment Program
AB 826 (Chau) Page 2
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under GO-Biz to attract employment-producing direct foreign
investment to the state and provide support for California
businesses in accessing international markets and increasing
exports. (GC § 13996.41)
This bill:
1) Expands the role of the California Business Investment
Services Program, which is administered through GO-Biz, to
include attracting foreign and domestic investors.
2) Defines a "regional center" as an entity designated by the
United States Citizenship and Immigration Services (USCIS)
for the purpose of pooling EB-5 capital from multiple foreign
investors in economic development projects in a defined
geographic region.
3) Requires GO-Biz to include a web link to regional centers
operating within the state on its official website.
FISCAL
EFFECT: None. This bill is not keyed "fiscal" by Legislative
Counsel.
COMMENTS:
1. Purpose. The Author is the sponsor of this bill. According
to the Author, "In recent years, there has been a national
growth of EB-5 investment as a source of investment capital
for economic development. EB-5 investment accounted for $6.5
billion in capital investment and contributed to over 131,000
U.S. jobs from fiscal years 2005-2013. With current efforts
on Capitol Hill to make the EB-5 program permanent, state and
local efforts to attract EB-5 investment are sure to grow as
well. [GO-Biz] has laid out a clear vision in their
International Trade and Investment Strategy (2014) to 'expand
international trade and foreign investment'. The Strategy
noted that while California is leading the nation in
attracting foreign investment, we are at risk to losing this
investment to other states. The EB-5 program as a tool to
induce foreign investment is no exception. States like
Vermont, Michigan, Washington, and others are actively
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seeking to attract EB-5 investment. The significance of the
EB-5 program merits further exploration, analysis, and
investment on the part of the legislature and state to
realize this opportunity for the future of all Californians.
AB 826 would specifically include attracting foreign and
domestic investors within the duties and responsibilities
California Business Investment Services Program, under
[GO-Biz]. It would also define an EB-5 regional center. As
such, AB 826 would further prioritize the state's seeking of
out of state capital for the purposes of economic development
and job creation that are consistent with the goals of the
federal EB-5 program."
2. EB-5 Program. The EB-5 visa category, which was created by
Congress in 1990, is available to immigrants seeking to enter
the United States in order to invest in a business or company
that will benefit the economy. This federal program is
administered by the USCIS. The name "EB-5" is derived from
the fact that it is the fifth category of the
employment-based visa. USCIS makes available 10,000 EB-5
visas per year. According to a Visa Office Report by the
U.S. Department of State, over 9,700 EB-5 visas were issued
in Fiscal Year 2015.
Permanent resident status through an EB-5 visa is available
to foreign investors who have invested - or are actively in
the process of investing - at least $1 million into a new
commercial enterprise. The investment in a new commercial
enterprise can entail: the creation of an original business;
the purchase of an existing business and restructuring or
reorganizing the business to the extent that a new commercial
enterprise results; or a significant expansion of an existing
business. If the investment in a new commercial enterprise
is made in a targeted employment area (TEA), the required
investment is decreased to $500,000. A TEA is either a rural
area or a high-unemployment area that has experienced an
unemployment rate of at least 150 percent of the national
average rate. An applicant seeking status as an immigrant
investor must demonstrate that his or her investment will
benefit the U.S. economy and create full-time employment for
at least ten qualified individuals or maintain that number of
existing employees in a troubled business.
Applicants to the EB-5 visa program must demonstrate that
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they meet all requirements of the program prior to filing
with USCIS. If it is determined that the investment criteria
is met and properly documented, any investor may be granted
conditional permanent residence status for a period of two
years by USCIS. A permanent Green Card may be issued at the
end of the conditional period.
In addition to individual investors, the federal government
can also recognize regional centers that allow for a pooling
of investor money. There are over 200 federally recognized
regional centers currently operating across California,
significantly more than any other state. Their focuses vary
widely and include commercial real estate development,
agricultural products, film project, and high-tech ventures.
3. California's Role in EB-5. The EB-5 visa program is
administered by USCIS and is therefore governed by federal
laws and regulations. Federal regulation authorizes the
minimal involvement by state government in Title 8, Code of
Federal Regulations 204.6(i). This section authorizes state
governments to delegate an agency, board, or appropriate
governmental body to certify high unemployment areas that
qualify for the $500,000 minimum investment threshold as TEAs
for EB-5 program purposes. In 2013, AB 1067 (Medina, Chapter
535, Statutes of 2013) transferred TEA certification
authority from the California Employment Development
Department to GO-Biz. The International Trade and Investment
Program under GO-Biz is currently responsible for this
certification.
Upon the request of the applicant or an alternative
representative body, International Trade and Investment
Program staff at GO-Biz may determine that a specific
metropolitan statistical area, a county within a metropolitan
statistical area, or a county in which a city or town with a
population of 20,000 or more is located is a TEA. In order
to make such a determination, the county, city, or census
tract in question must experience an average unemployment
rate of 150 percent of the national average. Unemployment
rates for cities, counties, and census tracts are published
annually; the state uses the most recent calendar year labor
force and unemployment estimates to establish high
unemployment rates and high unemployment areas.
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For TEA projects that do not meet the existing, standard,
pre-calculated certification category, GO-Biz can certify
"Special TEA applications" under the following criteria:
Projects are located within an area of twelve or
fewer contiguous census tracts with a total average
unemployment rate of 150 percent the national average.
Requests include a table listing of each census
tract with its corresponding unemployment rate and a map
showing the project address.
A supporting letter from the local Economic
Development Corporation (EDC) or County or City in which
the project is to be located is provided indicating
concurrence that the proposed census tract will
reasonably be a source of workforce for the project.
Neither GO-Biz nor any other agency of state government has a
role in approving or overseeing regional centers. All other
aspects of the EB-5 program administration including approval
of EB-5 visa applications occur at the federal level.
1. Policy Concerns. This bill presents several policy concerns
that the Committee may wish to consider.
a) Timing. Overall, as the EB-5 program requires federal
reauthorization by September 30, 2016, the timing of this
bill may be problematic. Conversations being held at the
federal level suggest that policy changes to the EB-5
program are likely upon reauthorization of EB-5. On April
13, 2016, for example, the U.S. Senate Judiciary Committee
held a hearing titled The Distortion of EB-5 Targeted
Employment Areas: Time to End the Abuse. On April 25,
2016, USCIS held an "Idea Community" Listening Session on
EB-5 regulatory and policy changes. In the Listening
Session, four topics were specifically targeted: minimum
investment amounts, the TEA designation process, the
regional center designation process, and indirect job
creation methodologies. Discussions are expected to
continue through EB-5 reauthorization as many stakeholders
are advocating for a long-term reauthorization and reform
package.
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The more detail about the EB-5 program added in state law,
the greater the chance that reforms arising from federal
reauthorization could result in inconsistencies that will
need to be rectified via a bill next year. If the Author
wishes to increase state prioritization of EB-5 foreign
investment, it may be more effective to do so after the
program has been reauthorized and any programmatic changes
are finalized.
b) Regional Center Definition. Whether it is necessary to
provide such a definition in state law is questionable, as
GO-Biz has no approval or oversight authority over regional
centers. The statutory definition that serves as
eligibility criteria for the EB-5 program is contained in
federal regulation and states are not authorized to create
more stringent requirements for eligibility. Providing a
state definition, which may differ from the federal
definition, without a programmatic purpose could create
confusion. The proposed definition is inconsistent with
the current definition of regional center that is used in
federal regulation. Even if the current federal definition
is amended into this bill, it may change upon the
reauthorization and policy revisions to EB-5 mentioned
above. In that case, this bill is setting up the state
code for inconsistency with federal regulation, which would
then necessitate clean up next year.
The Committee suggests the following amendment, deleting
the definition of regional center, to address this issue:
6315.(b)(5) "Regional center" means an entity
designated by the United States Citizenship and
Immigration Services for the purpose of pooling EB-5
capital from multiple foreign investors in economic
development projects in a defined geographic region,
pursuant to a program approved in Public Law 112-176,
dated September 28, 2012.
c) Expanded Authority Granted to an Incorrect Program. In
an attempt to ensure EB-5 investment is a prioritized goal
of GO-Biz, Section 3 of the bill seeks to expand the
authority of the California Business Investment Services
Program to include "attracting foreign and domestic
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investors."
However, it is the International Trade and Investment
Program under GO-Biz, not the California Business
Investment Services Program, that handles the state's
participation in the EB-5 visa program via TEA
certification. Providing a directive to the California
Business Investment Services Program, which currently does
not have a connection to EB-5, splinters GO-Biz efforts
related to the EB-5 program and is unlikely to achieve the
Author's stated goal.
The statute that establishes the International Trade and
Investment Program already includes similar directives; the
addition of this language to the International Trade and
Investment Program statute appears unnecessary.
2. Prior Related Legislation. AB 1067 (Medina, Chapter 535,
Statutes of 2013) established the California Foreign
Investment Program within the GO-Biz as the lead entity for
overseeing the state's participation in the federal the EB-5
visa program.
AB 2012 (Perez, Chapter 294, Statutes of 2012) transferred
the authority for undertaking international trade and foreign
investment activities from the Business Transportation and
Housing Agency (BT&H) to GO-Biz, including establishing any
international trade and investment office.
SCR 33 (Price, Resolution Chapter 60, Statutes of 2011)
expressed the sentiment of the Legislature that the EB-5 visa
program is beneficial to the state's economic development and
provides important opportunities for foreign direct
investment to California.
SB 460 (Price, 2011) required the Secretary of BT&H to
convene a statewide business partnership for international
trade marketing and promotion including representatives of
public airports, land ports of entry, seaports, ocean
carriers, marine terminal operators, air carriers, warehouse
operators, railroads, trucking companies, foreign trade
zones, and shippers, specifically including agricultural
exporters, manufacturers, post-consumer secondary material
handlers, and retailers. Required the partnership to advise
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the Secretary of the BT&H on what role the state should play
in international trade marketing and promotion, as specified.
( Status : The bill was held in the Assembly Committee on
Appropriations.)
AB 1137 (V. Manuel Pérez, 2011) would have facilitated local
economic development and job creation by assisting small
businesses in accessing new export markets for their goods
and services, codifying the EB-5 investment visa program,
updating the law relating to free trade zones, and
authorizing the use of new federal funds under the Small
Business Jobs Act of 2010. ( Status : The bill was held in
Senate Committee on Appropriations in 2012.)
AB 1558 (Assembly Committee on Jobs, 2009) aimed to recodify
and reorganize sections of the Government Code to create one
comprehensive code for the state's international trade
activities and programs. The measure was amended to deal
with reorganization of the state's economic development
programs. ( Status : The bill was held in the Senate Committee
on Appropriations in 2010.)
SB 1513 (Romero, Chapter 663, Statutes of 2006) provided new
authority for BT&H to undertake international trade and
investment activities and, as a condition of that new
authority, directed the development of a comprehensive
international trade and investment policy for California.
3. Arguments in Support. CalAsian is in support of the bill.
They write, "It is important to have a specific entity in
California to work with these EB-5 investors. AB 826 would
provide the necessary framework for that oversight."
SUPPORT AND OPPOSITION:
Support:
California Asian Pacific Chamber of Commerce (CalAsian)
Opposition:
None on file as of May 31, 2016.
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