California Changes Targeted Employment Area (TEA) Policy

A Targeted Employment Area is defined as an area that has 150% of the US national unemployment (approximately 13.4%). While the goal of the TEA is admirable, that is to motivate development in higher unemployment areas, the reality is that these areas are less desirable for real estate development.

In the EB-5 industry, the TEA has become the de-facto project criteria, with only 7 investors in 2013 choosing the higher $1 Million EB-5 investment, rather than the TEA-qualifying $500,000 investment, through a USCIS-approved Regional Center. Where projects are frequently marketed to foreign investors as "luxury", that is an uphill argument that high-wealth projects are located in high unemployment areas.

US Freedom Capital has the luxury of working in the business-friendly state of Texas, where Governor Rick Perry has authorized local mayors and judges to certify Targeted Employment Areas (TEA). Local mayors and judges create TEAs using current economic data around specific projects, giving more flexibility to TEA designation for desirable development locations.

Not true for California, where business restrictions and high taxes have caused a highly-publicized exodus of businesses. The state government of California, specifically the California Governor’s Office of Business and Economic Development (GO-Biz), has recently issued new TEAs to become effective May 1, 2014.

1. Projects approved prior to May 1, 2012 must be recertified demonstrating that the aggregate unemployment rate of those census tracts is still above the threshold based on the updated 2013 data.
2. GO-Biz is currently drafting new regulations for the State’s TEA designation and certification process for the EB-5 Program. The new regulations – once adopted, may have an impact on future re-certifications.
3. There will be no other method used and the state is not going to certify TEAs on the most recent 12-month basis.
4. This designation and certification of TEAs is an exhaustive list of TEAs by the State of California. There will be no other areas or subareas designated and certified as TEAs.
5. Investors who received special area designations in previous years may request a renewed certificate if it is for the same investment project, it covers the same sub-area, and the then-current unemployment data provides a high unemployment rate for the aggregated area. Such requests will be handled on a case-by-case basis and renewed certificates might be issued at the discretion of the State.