EB-5 Regulations

Floor Speech

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Mr. GRASSLEY. I promise the Presiding Officer I will not be too long.

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Mr. GRASSLEY. Mr. President, I come to talk to my colleagues today about the deeply flawed EB-5 green card program.

Several weeks ago, we learned that the Office of Management and Budget at the White House had completed its review of the new rules to update and reform the EB-5 Program. I have been an advocate for reforming this program for a long, long period of time. Several times I have even talked to the White House about moving these regulations along.

Now that they have been reviewed by OMB, for the rule to come into effect, it must now be published in the Federal Register. The rule was first proposed in January 2017. We have been waiting for it to be finished for 2\1/2\ years. I hope that President Trump now makes that happen as soon as possible.

The proposed rule would raise the minimum investment amounts required under the program. It also makes sure that investments are directed to rural areas and truly high-unemployment areas, as Congress intended when EB-5 was created in 1990.

Considering those points of where EB-5 ought to be concentrated and now looking at how they have been diverted from the original intent of Congress is the very best reason for these rules to be put in place--to get us back to square one, the original intent of the law.

Since the 1990s, rampant and abusive gerrymandering of the EB-5 Program's targeted employment areas has undermined that congressional intent, which was to direct it toward high-unemployment areas and rural areas. Instead of channeling investment to rural and high-unemployment areas, EB-5 has become a source of cheap foreign capital for big-city, big-moneyed interests. The targeted employment area reforms in the proposed rule would take a first step toward refocusing EB-5 investment in the way that Congress originally intended in that 1990s legislation.

In addition to channeling investment away from the areas of our country that need it the most, this is what has happened. The EB-5 Program has been plagued with other forms of fraud and abuse, and this has been going on for years and years. There are examples of EB-5 fraud from all over the country, and I am going to give just a few examples as a reminder to the President why these rules need to be put into the Federal Registry right away.

In Chicago, a businessman defrauded 290 investors of $150 million in funds that were supposed to be used for construction of a hotel and conference center near O'Hare Airport.

In Palm Beach, FL, a real estate developer and real estate attorney teamed up to defraud 60 Chinese and Iranian EB-5 investors of $50 million. Instead of that money being used to fund the construction of a proposed hotel, it was instead used to pay personal taxes and purchase a 151-foot yacht.

In Wisconsin, a businessman used over half of the $7.6 million in funds he had solicited from investors to pay for personal expenses, including Green Bay Packers tickets and the purchase of a Cadillac Escalade.

I could go on all day.

In May of 2017, U.S. Citizenship and Immigration Services conducted an internal fraud assessment and found 19 cases of national security concerns within the EB-5 Program. Those are national security concerns. The No. 1 responsibility of the Federal Government is to protect the American people, and that involves national security. These cases related to terrorism, espionage, and information and technology transfer.

Unfortunately, multiple bipartisan efforts in the Congress to modify the EB-5 Program have been consistently stymied by powerful special interest groups and big-moneyed interests. Because I have been in the middle of those battles--and they are bipartisan battles--over the years, I know exactly where these big-moneyed interests are coming from and the special interest groups that keep this program from being reformed.

Now we have an opportunity for one person--the President of the United States--through regulation, to reform this program in a way that would be very helpful. So that makes the publication of the EB-5 reform rules even more important. I applaud President Trump and the administration for getting the proposed rule to this point, but now it is time for the President and his team to finish the process and make sure the final rule goes into effect as soon as possible.

Iowans and all Americans who live in rural and high-unemployment areas deserve to have the investment that Congress intended when the EB-5 Program was created almost 30 years ago. President Trump and his administration now have a chance to finally address some of the very serious flaws in this program that have hurt rural America. We have been waiting for these reforms for over 2 years. It is time for this final rule to be published, and it needs to happen right now, if not sooner. Treaties

Mr. President, I rise today for the purpose of expressing my support for the passage of the resolutions of advice and consent that the Senate is considering this week with respect to the protocols to our tax treaties with Spain, Switzerland, Japan, and Luxembourg.

Tax treaties are a very integral part of the architecture of our tax system. For example, these treaties would help define the rules of the road for cross-border investment and trade for U.S. individuals and companies doing business in one of our treaty partner countries, like Spain, as an example, and for individuals and companies in those countries doing business in the United States.

The protocols before us today provide important updates to the tax treaties with these four countries. In general, several of them lower withholding taxes and include provisions to prevent double taxation. Several provide mechanisms for resolving disputes in a timely manner through mandatory binding arbitration. In addition, they provide important updates to the exchange of information provisions in the underlying treaties.

I am aware of the concerns that have been raised regarding the standard used to provide for such exchange of information. The standard provided for in these protocols is that relevant information shall be exchanged between the United States and its treaty partners. That relevant standard has been used throughout our treaty network for decades and is also the standard used in U.S. domestic tax laws.

This issue was raised last month in the Foreign Relations Committee, and an amendment was offered to the resolution regarding the protocol with Spain that would have required a narrower standard. That amendment was appropriately defeated. If the issue is raised again as an amendment here on the floor, I will urge my colleagues to vote no on the amendment.

These four protocols have been awaiting action by the Senate for many years. In some cases, it has been nearly a decade. It is important that the Senate fulfill its constitutional duty to provide its advice and consent on tax treaties and protocols. It is also important that our treaty partners know that the United States really values these agreements and negotiates these treaties and protocols in good faith, with the expectation that they will be implemented without lengthy delays.

Our actions on these protocols are also timely, given the international effort to address the effects of digitalization on the international tax system.

For the past several months, representatives from the Treasury Department have been actively engaged in negotiations at the Organisation for Economic Co-operation and Development. These talks are focused on finding a multilateral agreement to these issues and avoiding the regrettable unilateral approach that some countries have taken--most notably, France. Ultimately, if these negotiations are successful, there could be a need for the United States to update its bilateral income tax treaties.

It is important that the Senate take action on the pending protocols and send a strong signal to our treaty partners that the international tax agreements are a priority for our country.

In addition to moving forward on these four protocols, we have three new income tax treaties with Chile, Hungary, and Poland that are awaiting action by the Foreign Relations Committee. I urge Chairman Risch and Ranking Member Menendez to use the wave of momentum that is building this week to move forward on those three new treaties and send them to the floor of the Senate as soon as possible.

I thank the chairman and ranking member for moving these protocols to the floor. These treaties were reported favorably by the committee by voice vote without amendment, and their consideration is long overdue.

I thank Leader McConnell and Minority Leader Schumer for their efforts to bring these protocols up for consideration on the floor this week.

I urge all of my colleagues to vote yes on these resolutions of advice and consent.

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