By Lincoln Stone, Partner, Stone, Grzegorek & Gonzalez, LLP
The Obama Administration has sought fresh ideas from stakeholders on how to reduce existing burdens and uncertainties on the part of participants in the Immigrant Investor Program and ensure the Program is achieving the greatest impact in terms of job creation, economic growth, and investment in national priority projects that the capital markets would not otherwise competitively finance. Here’s one. In the interests of promoting economic growth, job creation, predictability and efficiency, and with-out compromising program integrity, USCIS should revise its template regional center (RC) approval letter for general proposals to promote economic development.
USCIS issues a letter of approval, the Charter letter, advising the nature and scope of the new RC authority. Over time these Charter letters had veered this way and that as Program policy evolved, see L. Stone, Trends in Approvals of Regional Centers in the EB-5 Investor Visa Program (RCBJ, May 2013), and S. Lazicki, 2013 Regional Center Approval Letters (RCBJ, June 2014), but nowadays USCIS has settled on two templates. Charter letters are of two kinds – a basic RC designation (Basic Approval), or a RC designation coupled with a specific approved project (Project Approval). This dichotomy follows the “hypothetical project” and “actual project” terminology that first surfaced with the USCIS adjudications memorandum of December 11, 2009 (note, not statutory), and has continued in practice and policy to the EB-5 Adjudications Policy Memorandum of May 30, 2013 (Policy Memo) and ever since. If the RC proposal merits approval but the proposed plans for EB-5 investment lack the specificity of the EB-5 precedent decision Matter of Ho, then USCIS frames the proposal as “hypothetical” and meriting no more than Basic Approval. But if the proposed EB-5 investment meets the high level of particularity in documentation required by Matter of Ho then the Project Approval will be given deference in later adjudications. The overall USCIS effort is laudable; it fosters predictability in adjudications by providing a pathway for the RC to get Project Approval for a specific project that is ready to go, and it allows a different pathway for the RC that is not so far along in its transactions or regional economic development efforts. Importantly, the Basic Approval pathway adheres to the 2002 statutory directive to facilitate RC designation based on a general proposal and general predictions about the kinds of jobs that will occur.
As reflected in Training Materials used by USCIS to train new EB-5 adjudicators, the Charter letter should outline all RC elements approved in the RC’s initial designation. The Training Materials (obtained by IIUSA via FOIA) further instruct that the Charter letter should indicate that the following are approved (italics supplied):
By comparison, here’s the essential content of the Basic Approval — acknowledging the underlying economic impact analysis, and having approved of that analysis, USCIS makes the following statements:
Focusing on the final item – “approval of the hypothetical job creation estimates” – it’s clear a more robust statement by USCIS would better comply with the instruction in the Training Materials to indicate the job creation forecasting tools have been approved. It’s not clear why the Basic Approval neglects this duty. Also, a clearer statement should advance the cause of predictability for stakeholders and thereby advance the mission of economic development and job creation. Rather than emphasize the negative (i.e., no deference in later adjudications) USCIS should unequivocally state in the Basic Approval that it has approved the job creation methodology proposed in the I-924 filing. In short, USCIS should revise its template language for the Basic Approval to state the following:
“USCIS approves the job creation methodology presented in the Form I-924 and the economic analysis dated ____, and the approval should be accorded deference in later adjudications. However, in view of the determination that the business plan for EB-5 investment presented in the Form I-924 lacks the specificity required by Matter of Ho, it is hypothetical. Therefore USCIS has not approved the application of the approved job creation methodology to a specific business plan for EB-5 investment, and in future adjudications of Form I-526 the business plan and related job creation estimates will receive a de novo review by USCIS.”
There is no doubt that approval of the job creation methodology is an essential part of the I-924 review process, even in the case of Basic Approval. For more than 20 years regional centers have received Charter letters advising that the job creation methodology has been approved. The current Policy Memo acknowledges the applicable regulations: 8 CFR 204.6(m)(3) requires the RC proposal, now the I-924 filing, to include a proposal that “provides in verifiable detail how jobs will be created indirectly… [and that] is supported by economically or statistically valid forecasting tools, including, but not limited to, feasibility studies, analyses of foreign and domestic markets for the goods or services to be exported, and/or multiplier tables.” This regulatory language mirrors the regulation at 8 CFR 204.6(m)(7)(ii) relating to the EB-5 investor’s obligation to demonstrate that ten or more jobs are created indirectly by the business using “reasonable methodologies” including “multiplier tables, feasibility studies, analyses of foreign and domestic markets for the goods or services to be exported, and other economically or statistically valid forecasting devices which indicate the likelihood that the business will result in increased employment.” The I-924 Instructions also note that a regional center application “must contain sufficient detail to provide valid and reasoned inputs into the economic forecasting tools.” In practice, therefore, in order to ensure that the proposed regional center will be using a job creation methodology that would satisfy the regulation for “verifiable detail” and is an economically or statistically valid forecasting device for estimating future job creation, USCIS requires all I-924 filings to include reference to a specific commercial enterprise or project that will receive EB-5 capital. The proposed EB-5 investment into a specific commercial enterprise or project – whether it leads to a Basic Approval or a Project Approval – provides an illustration of how the job creation will be estimated using the job creation methodology that is advanced in the I-924 filing. If USCIS disagrees with the proposed job creation methodology it will not approve the I-924 application. Consequently, in view of the fact that a central aspect of the I-924 review is USCIS consideration of the job creation methodology, the Training Materials require the RC approval letter to state that a particular job creation-forecasting tool has been approved. It would be utter waste of government resources to do anything less.
Considerable confusion persists in identifying exactly what is a job creation methodology. Given that all, or nearly all, EB-5 petitions for RC investors are grounded in input-output (I-O) models as a forecasting tool, limiting the following statement to cases involving I-O models is hardly a limitation. A job creation methodology for purposes of EB-5 practice is (i) a clear description of a specific process or method for arriving at the specific inputs that are to be used in connection with an I-O model, and (ii) identification of a specific I-O model that would be used to transform the input data into forecasts of job creation. For item (ii) above, RIMS II multiplier tables and IMPLAN are the most common forms of I-O devices used in EB-5 practice. They are based on data from the Bureau of Economic Analysis of the US Department of Commerce, and they are routinely if not always accepted by USCIS. But RIMS II and IMPLAN are not job creation methodologies. A complete job creation methodology also requires item (i) above, an explanation of the specific inputs that will be used in the I-O process. For a further explanation of I-O models, see P. Sommers & L. Stone, Regional Economics and Job Creation in EB-5 Practice, Inside Immigration (AILA 2012).
On the straightforward side of things, specific inputs might include – estimated and validated construction expenditures as input for estimating total job creation in the construction phase of a commercial enterprise; on-site workers as input for estimating total job creation in the operations phase of a commercial enterprise; or estimated and validated annual revenues as input for estimating total job creation in the operations phase of a commercial enterprise. These forms of input data, if the inputs are validated as commercially reasonable for the particular industry in the particular region, are routinely accepted by USCIS. There also can be variations or a few more steps in deriving the inputs for the I-O model. The construction expenditures input could be derived by an estimate grounded in industry data for a particular type and size of construction project, without reference to a specific or actual project. The number of estimated on-site workers could be derived by reference to studies indicating the number of workers-per-square foot for particular worker classifications. Or, the estimated future revenues of a particular kind of operating business could be derived by use of a capital-output ratio that effectively translates the amount of investment in hard capital assets into an estimated revenue figure. All of the above examples for deriving a set of inputs for use with the I-O model are legitimate and have been accepted as reasonable by USCIS in specific cases. When the process for deriving the input data is combined with a particular I-O model we then have a job creation methodology.
A comprehensive discussion of “what if” scenarios that USCIS might encounter is beyond the scope of this brief plea. Suffice to say, to clarify that the Basic Approval includes approval of the job creation methodology is not to green light even a single I-526 petition. It’s only the methodology that has been approved; the application of the methodology to a particular actual EB-5 investment is a different matter. Moreover, as in the case of Project Approval, USCIS has retained authority to change course in instances of fraud, mistake, and material change. For instance where due to passage of time a foundational research source is outdated and is no longer a reliable data set for a particular job creation methodology, there’s no continuing need to defer to the earlier approval of the methodology in the case of the particular commercial enterprise. If USCIS thinking about a particular methodology has evolved to a point that it has established certain pre-conditions for its use (e.g., as with Tenant Occupancy), it can pronounce its standards to stakeholders and apply those standards proactively in new cases.
By the time the Charter letter arrives, the newly-minted RC has been at it for about two years, half in preparation with very expensive consultants, advisors, economists, and lawyers of different stripes and half in anxious anticipation for USCIS review. The Charter letter should state that the job creation methodology has been approved. Without such clarity, the new RC is incapable of reasonably measuring its immigration risks with future EB-5 offerings. Inability to calculate immigration risks is a deterrent to RC activity and contributes to stifling inbound EB-5 investment. A revision to the Basic Approval is an easy step for USCIS to take, it could prove very beneficial for the Program, and it has no downside.
Lincoln Stone leads the Investor & Entrepreneur Practice Group at Stone Grzegorek & Gonzalez LLP, www.sggimmigration.com
RCBJ Retrospective articles are reprinted from IIUSA’s Regional Center Business Journal trade magazine. Opinions expressed within these articles do not necessarily represent the views of IIUSA and are provided for educational purposes.
By Robert C. Divine, Vice President, IIUSA, Shareholder, Baker, Donelson, Bearman, Caldwell, & Berkowitz, P.C.
Regional Centers are designated by USCIS to promote economic growth by fostering use of the EB-5 program in creation of direct and indirect jobs. USCIS has the authority to remove that designation, typically faulting the regional center for a wide range of sins that it categorizes under the broad heading of failing to promote economic growth. It has used that authority in waves over the years and is actively using it now. The consequences to sponsored investors could be unfairly severe.
USCIS first issues a Notice of Intent to Terminate (NOIT), giving the regional center 30 days to respond (well, 33 days from date of the notice if mailed, as they usually are). It is important to have kept USCIS up to date on the contact information for the principal and the current counsel for the regional center, because USCIS normally sends notices to both people. In the typical NOIT for lack of activity, 30 days can be plenty of time to respond. In a complex situation, it can be a very short time.
If the NOIT generates no response, USCIS typically issues a Notice of Termination quickly. If the regional center files a response, USCIS can take more time, and sometimes much more time. If USCIS is persuaded not to terminate, it issues a notice of “Reaffirmation of Designation.” If USCIS terminates, it gives notice of the right to appeal to the Administrative Appeals Office. Because of the absence of a regulation requiring exhaustion of administrative remedies, a terminated regional center could choose to go straight to court with claims of “arbitrary and capricious” decision or other reasons, but administrative appeal and supplementation of the record in the process might be wise.
Reasons for Termination
Most terminations have been for lack of activity. I know from experience that several regional centers have responded successfully to NOITs about inactivity. Even when no I-526 petitions have been filed or sponsored by the regional center, USCIS has been reasonable in accepting evidence of good faith activity seeking to develop viable projects.
Some NOITs have been for failure to file form I-924A (sometimes combined with inactivity). Again, USCIS has accepted some reasonable excuses for failure to file, especially if the failures have been cured with interim filings.
Some terminations have been based on USCIS rejection of the model used for project development, particularly Victorville and Lake Buena Vista. Other terminations have followed revelations of blatant securities violations associated with symbiotic developments, including Intercontinental Regional Center Trust of Chicago (Sethi), El Monte (California), Mamtek (Missouri), and USA Now (Texas). For a review of terminations, see R. Loughran, History of Risk in the EB-5 Regional Center Context, Regional Center Business Journal, Issue #4, Dec. 2013. A very recent termination against Midwest EB-5 Regional Center has reflected a more aggressive approach when USCIS cited accusations of mis-reporting and mis-management of the regional center and its related projects, and if not successfully appealed this termination could have effects on pending or approved petitions.
Consequences of Termination
The consequences of termination of a regional center could be brutal for an investor who was sponsored by that regional center. The regulations do not say what happens to investors who have not yet immigrated, but it appears that USCIS would deny or revoke an I-526 petition that depended on the regional center’s sponsorship. A USCIS representative stated in a recent stakeholder meeting that USCIS would find a change of regional center to be a material change requiring denial and re-filing to use a new regional center’s sponsorship.
8 CFR 204.6(m)(9) states that where there has been termination of a regional center, USCIS will send notice of termination of status to a conditional resident “within the regional center” (sponsored by the terminated center) who has not obtained I-829 petition approval unless the alien “can establish continued eligibility” under INA 203(b)(5). It is not clear whether USCIS would find an investor capable of eligibility to use indirect arrangements (i.e., investment in a single purpose financing entity rather than into the job creating enterprise) or to count indirect jobs without the original regional center’s sponsorship. USCIS’ relaxed approach to material change for investors filing I-829s could be argued to apply also to change of a regional center sponsorship. So far, USCIS terminations have been for inactivity or for problems integrally related to the sponsored projects, but if a regional center were terminated for wrongdoing or reporting failures unrelated to a viable project, it would seem quite unfair for the investors to lose status on that account alone.
Legislative proposals to change the EB-5 program have included giving USCIS broader authority to terminate regional centers for reasons not limited to failure to promote the regional economy. USCIS already interprets that concept broadly when it wants to terminate. But regulations should be revised to provide an opportunity for investors in good projects to cure the termination of a regional center that happened to be the sponsor the project, and any legislation should do the same.
RCBJ Retrospective articles are reprinted from IIUSA’s Regional Center Business Journal trade magazine. Opinions expressed within these articles do not necessarily represent the views of IIUSA and are provided for educational purposes.
By K. David Andersson, IIUSA President; President, Whatcom Opportunities Regional Center and Diane Butler, Shareholder, Lane Powell
The results of the December 2014 FOIA inquiry into Form I-924A filings provide a fascinating glimpse into the anti-fraud and national security toolbox of the Department of Homeland Security (DHS) as specifically applied to the EB 5 Regional Center Program (the “Program”). The annual rigorous screening of designated Regional Centers is in addition to the comprehensive USCIS, Department of State, CIA and FBI security and risk analysis of individual investors seeking immigration benefits through the Program and SEC oversight of investment offerings.
Contrary to the often unsubstantiated media speculation, an honest observer of the Program and its management cannot help but be impressed with the significant ability and commitment of USCIS to ensure that the Program is free of fraud and national security threats. Of course, there is always room for improvement, and therefore IIUSA is committed to legislative reform and continued productive cooperation with regulatory agencies and authorities to protect and maintain the integrity and effectiveness of the Program.
DHS uses the I-924A data to screen all participants in the Program, focusing primarily on Regional Center principals and the new commercial entities used for pooling funds. Inter-departmental cooperation, resources, and technology all work to carry out this mission. Based on information gathered through IIUSA FOIA requests and DHS published reports.
Each Regional Center must file an annual I-924A form. Failure to timely file will result in the issuance of a Notice of Intent to Terminate and possibly cause the revocation of the Regional Center designation. No immigration benefits can flow to petitioners filing affiliated I-526 or I-829 petitions through a terminated Regional Center. The I-924A form, as explained in pre-implementation industry stakeholder meetings and rulemaking publications , was developed to gather data to enable USCIS to manage three important Program functions:
1. Provide regular screening of principals and investment programs to detect and deter fraud;
2. Record and report job creation resulting from the Program; and
3. Ensure that the regional center is operated in furtherance of the economic development and job creation objectives of the Immigration and Naturalization Act, regulations and current Program policies.
USCIS use of Form I–924A as a tool for weighing fraud and national security concerns in the Program begins with the screening of program principals and investment entities through TECS.
“The TECS system (not an acronym) is the updated and modified version of the former Treasury Enforcement Communications System. TECS is owned and managed by DHS component US Customs and Border Protection (CBP). TECS is both an information–sharing platform, which allows users to access different databases that may be maintained on the platform or assessed through the platform, and the name of a system of records that indicate the temporary and permanent enforcement, inspection and operational records relevant to the anti-terrorism and law enforcement mission of CBP and numerous other federal agencies that it supports.”
The table below illustrates some of the databases that reside on the TECS platform or are otherwise available for subject screening.
Any information or “hits” detected on any of the TECS databases, based on the investment entity name and/or name and date of birth of a principal supplied on the I-924A, is recorded on a Record Of Inquiry TECS (ROIT) worksheet. These worksheets are classified Law Enforcement Sensitive and distributed internally on a “need-to-know” basis.
Any hit requires a “resolution memo” in order to be cleared. Resolution memos are prepared by USCS Fraud Detection and National Security (FDNS) officers for each hit generated by an I-924A filing. The FDNS officer reviews the databases and related records and must determine that the “case has no nexus to terrorism or national security”.
When the TECS screening is complete the Form I-924A Review Worksheet then mandates the following inquiries:
USCIS also uses its internal iCLAIMS database to ensure consideration of the following questions:
The annual analysis of data obtained from I-924A form is but one of the many tools DHS has at its disposal to help protect the integrity of the Program. In addition, the Immigrant Investor Program Office has skilled adjudicators and subject matter experts in economics, financial crimes, and corporate law who closely scrutinize investment offerings for compliance with Program objectives. Instances of fraud or misrepresentation are referred to the SEC for prosecution. Once a petitioner is classified as an EB5 Alien Entrepreneur he/she is then subject to security clearances, criminal and military background checks and medical examinations plus interviews by Department of State consular officers with knowledge of local country conditions. In short, the U.S. government’s capability to detect fraud and national security concerns is both significant and robust. Last but not least, all IIUSA members are encouraged to comply with industry best practices and to immediately report any instances of fraud or abuse.
K. David Andersson is the President of IIUSA and Diane Butler is the former Chair of AILA National Customs and Border Protection Committee. The USCIS information was obtained in December 2014 via Freedom of Information Requests by IIUSA. IIUSA is the national membership-based industry trade association for the EB-5 Regional Center Program and currently has 260 Regional Center members, 23 interim associate members, and 228 associate members.
 February 2012 DHS Office of Inspector General “Information Sharing on Foreign Nationals: Border Security” and December 2010 Privacy Impact Assessment for the TECS System.
 The I-924 form was first proposed in a fee rule in 2010, and USCIS then first discussed it in stakeholder meetings. The formal public comment process for the I-924 and A Supplement occurred throughout 2012.
 Page 2 December 2010 Privacy Impact Assessment for the TECS System
 Appendix at pages 25-28 December 2010 Privacy Impact Assessment for the TECS System
RCBJ Retrospective articles are reprinted from IIUSA’s Regional Center Business Journal trade magazine. Opinions expressed within these articles do not necessarily represent the views of IIUSA and are provided for educational purposes.
I. A NEW STANDARD, AND AN OLD PROBLEM
In the April 22 public engagement with the EB-5 stakeholder community, the Immigrant Investor Program Office (“IPO”) articulated a new adjudications standard that precludes the EB-5 investor’s use of loan proceeds as a source of investment capital unless the investor shows that the promise to repay the loan has been secured by assets the investor owns. As stated by IPO:
by Peter D. Joseph, IIUSA Executive Director
Supporters and stakeholders of the EB-5 Regional Center Program (the “Program”) often describe it as “win-win-win” proposition – American businesses secure financing for job-creating projects; local communities enjoy increased economic development and employment opportunities; and foreign investors gain the benefits of U.S. residency. These benefits are demonstrably true. According to IIUSA’s comprehensive peer-reviewed economic impact reports, the programcontributed $3.39 billion to U.S. GDP and supported over 42,000 U.S. jobs during fiscal year 2012. And projects are coming to fruition across the country, creating jobs and transforming neighborhoods.
Meanwhile, the Program’s critics claim it is an unregulated, fast-track to citizenship – false statements that ignore or misunderstand how the Program and the U.S. immigration system operate.
To continuing bringing jobs and economic benefits to American communities, we must do more to correct misinformation and increase understanding of how the EB-5 Program works and the policies and procedures that protect the integrity of the program.
Any discussion about EB-5 and program integrity must take into account significant changes that have been made in the last few years to how U.S. Citizenship & Immigration Services (USCIS) oversees the Program. There is no doubt that the Program is complex and that maintaining Program integrity requires commitment and resources. In the last two years, USCIS has demonstrated its commitment to strong oversight of the Program by creating a dedicated Investor Program Office (IPO) in Washington D.C., continually expanding its team of experts in immigration law, economics, business, national security and fraud detection, and appointing a Program chief who is a veteran opreviously served in the Treasury Department’s Financial Crime Enforcement Network.
USCIS has clarified its guidance for adjudicators with a comprehensive policy memorandum and has strengthened interagency relationships critical to Program oversight and implementation. At IIUSA’s Advocacy Conference in May 2014, Director Colucci said:“One of the reasons the program was relocated to Washington, DC is to facilitate greater interaction among the interagency community. Just as the EB-5 program cannot be successful without [IIUSA’s] support, we need to build strong partnerships with other federal agencies who are likewise stakeholders in the program.” This is particularly evident in new cooperation with the Department of Commerce as well as with enforcement and intelligence agencies including the Securities & Exchange Commission (SEC), Federal Bureau of Investigation (FBI), and the Fraud Detection and National Security Directorate (FDNS).
It is also important to recognize that EB-5 investors follow the same two-step immigration process – and are subject to the same series of background checks and national security screenings — as participants in any other visa category.
Consular affairs officers at the appropriate Embassy or Consulate then determine if the individual is admissible to the United States and whether or not a visa will be granted. The determinations is based on in-person interviews, a review of the entire application and petition file, and additional background checks and national security screenings that may include independent and/or in-country investigations conducted in coordination with other federal intelligence and national security agencies before or after the interview.
Both of these steps must be successfully completed for an EB-5 investor to receive a conditional visa that allows the applicant to reside in the United States for two years. Before the end of that two-year period, the immigrant investor must file a new petition documenting that their investment through the EB-5 program has satisfied Program requirements and created a minimum of 10 U.S. jobs. If USCIS approves the petition, the conditions on the visa will be lifted. However, removal proceedings can be initiated even at this stage if USCIS finds that the applicant should be have inadmissible originally. Once they become green card holders, EB-5 investors are subject to the same rules for maintaining residence and becoming eligible to apply for citizenship that apply to other permanent residents – and are taxed on their worldwide income.
From start to finish, this is a long process – not a “fast track.” Average processing times for EB-5 eligibility petitions (I-526) are currently 14 months, and visa application processing can take months or years depending on investigations conducted by the Department of State. The industry would like to see processing times lower and is willing to pay higher filing fees to achieve that objective, but we support the federal government doing what it takes to fully vet each EB-5 investor petition. In addition, while there may be longer wait times for other visa categories, each category has its own limits on the number of visas issued annually and the wait times for one category do not impact other categories. With the EB-5 program reaching maximum capacity for the first time in 2014, and the popularity of the program growing, it is likely that wait times will increase unless the visa cap is lifted.
Those are the facts. EB-5 is highly regulated and there are processes and procedures in place to screen immigrant investors the same way that all immigrants seeking visas are screened.
IIUSA and its members welcome working with Congress and federal agencies to continue strengthening the integrity of the EB-5 program. That is why we supported a number of integrity measures included in legislation that passed the U.S. Senate last Congress. Proper oversight, transparency, compliance with – and enforcement of – all applicable laws and regulations are essential to maintain the confidence of all stakeholders and ensure that the program continues bring capital and job creation to American communities.
Notes from 4/22/2015 U.S. Citizenship and Immigration Services (USCIS) EB-5 Stakeholder Engagement
By Robert C. Divine, Vice President, IIUSA; Shareholder Baker, Donelson, Bearman, Caldwell, & Berkowitz, P.C.
On April 22, 2015 USCIS held another EB-5 stakeholder meeting by telephone.
Mr. Nicholas Colucci, Director of the Investor Program Office (IPO), first provided some data about the office’s staffing and activity:
I-526: 5250 received 4236 completed
I-829: 1523 received 341 completed
I-924: 170 received 135 completed
I-526 – 14.2 months
I-829- 12.3 months
I-924 – 11.7 months
Mr. Colucci urged stakeholders to call or email USCIS about violations by parties involved in the EB-5 process.
Other representatives spoke on issues and answered some questions on the following topics:
Visa number retrogression: USCIS is aware of it and is coordinating with State Department.
USCIS is working through the internal agency clearance process on a draft policy memo relating to the implications of retrogression, including the effect of delayed immigration process on compliance with the I-829 requirements to maintain the investment and create the jobs. No further details on that.
Eligible investors can submit I-485 for adjustment of status within the U.S. as long as on the date of filing it a visa number is available. After such filing, if a visa number becomes unavailable, the USCIS field office will hold the I-485 in abeyance until number becomes available [and child’s adjusted age will not be affected].
[For a recent article about visa number retrogression and child status protection, particularly in the context of immigrant visa processing,click here.]
Contribution of “indebtedness” as capital: IPO reported that it persists in a hard line on its treatment of loan proceeds used for EB-5 investments. While some argue that the regulations’ reference to the contribution of “indebtedness” as capital relates only to situations where the investor puts in less than all of the minimum investment and provides a promissory note for the rest (see Matter of Hsuing), USCIS has been denying petitions by investors who used for their EB-5 investment the proceeds of loans that were not secured by the personal assets of the investors. Stakeholders asked if someone obtains a loan and then gifts the proceeds of that loan to the investor, would that be acceptable. A USCIS representative first avoided the question but then seemed to say that if the gift for the EB-5 investment comes down the chain from a loan not secured by the investor’s personal assets, it will not be approvable. USCIS also noted that if the written loan terms restrict use of the proceeds to purposes that could not include an EB-5 investment, USCIS will deny the petition because the funds were obtained through fraud on the lender. USCIS said it will post a policy statement on this topic on the USCIS Interactive web site. USCIS had discussed these issues internally in detail before the meeting and clearly stated that they would not engage in any debate about it but would only answer questions about the parameters of the policy.
SEC Investigations: IPO refused to comment on SEC investigations but clearly acknowledged that it is coordinating with the SEC.
IPO and AAO: IPO stated that IPO and the USCIS Administrative Appeals Office (AAO) are components of USCIS, with a duty to collaborate for consistency on policy issues, but when it comes to adjudication of cases, AAO is not involved in adjudication of cases at
IPO and IPO is not involved in appeals adjudication process and AAO.
Bridge financing: IPO clarified on its own initiative that bridge financing can used be both for RC-sponsored and for non-RC-sponsored (“direct”) deals according to the parameters in the May 30, 2013 policy memo.
I-924 Exemplar: IPO continued to promote the use of the I-924 exemplar, which it emphasized can resolve and eliminate project issues sooner than going directly to investor subscription and I-526 petitions, noting this results in reduced USCIS workload on duplicative RFEs, NOIDs, etc.
One stakeholder asked about filing a “John Doe I-526″ rather than an I-924 exemplar. USCIS said that is an exemplar, and it welcomes such. [But this answer could be misunderstood to have encouraged the filing of a “John Doe I-526,” with the expectation that USCIS would adjudicate it resulting in deference to subsequent I-526 petitions for the same project. But I think the USCIS representative only meant that a “John Doe I-526″ is the whole idea behind an I-924 exemplar, which is encouraged. I believe that a stand-alone John Doe I-526 would be rejected or denied by USCIS, and only a real investor can file an I-526, which could only result in an approval notice in the name of “John Doe” anyway with no reference to any regional center, capital investment project, or documents, as opposed to an I-924 exemplar that specifies all those things. The reason this matters is because only a regional center can file an I-924, which means that there is no way to seek project approval for a “direct” EB-5 investment (without RC sponsorship) in advance of the first real investor’s I-526. Another reason is that stakeholders continue to worry that USCIS will hold processing 526s for other projects while an exemplar petition for a new project is being reviewed, and in fact one stakeholder asked that question with reference to a specific situation and IPO unfortunately responded that they cannot answer case specific questions, although in previous engagements USCIS has stated that they only hold I-526s for the project that is the subject of the I-924 exemplar.]
Government seals: IPO emphasized that the use of government seals for EB-5 deal promotion is not allowed without prior written approval of DHS [which we know will not be forthcoming].
RFEs: IPO said that if it issues a request for evidence that clearly is not well grounded in USCIS policy (i.e., reflective of deficient training), the recipient could send it with a request for review and correction by email to the USCIS IPO mailbox, but the RFE recipient should plan to respond on time to the RFE as issued unless and until told otherwise.
Next engagement: IPO mentioned that on June 4 it will hold its second “EB-5 Interactive” engagement presenting IPO economists as panelists, with a focus on the types of costs that are eligible for deriving indirect job creation.
Anyone who attended the IIUSA conference in Washington, DC in April saw that there was confusion about the implications of a recent State Department “white paper” about the Child Status Protection Act (CSPA). It creates the impression that children of I-526-approved investors facing the coming retrogression can wait and do nothing until they receive from the National Visa Center (NVC) a bill for the immigrant visa fees. I did not think that was true, but upon further analysis I think it is, and I will explain. Nevertheless, an investor and child wanting to “leave no stone unturned” may want to take one or more steps to “seek to acquire” a visa before May 1, when the State Department publishes a cut-off date for China.
What’s going on with Visa Numbers?
There is a limit for EB-5 investors and their family of almost 10,000 visa numbers for each federal fiscal year from October 1 to September 30. Right at the end of last year it was hit for the first time, so the State Department had to stop giving out numbers in September but removed the cutoff in October with the new annual allocation. Now the State Department sees I-526 approvals and visa applications coming at a pace that will use up this year’s allocation much earlier in the fiscal year. So the State Department seeks to slow down the use of those visa numbers to an orderly pace by posting in the monthly Visa Bulletin effective May 1, 2015 a cutoff date for EB-5 investors born in mainland China. The cutoff date is May 1, 2013, which means that as of May 1, 2015 only investors who filed their I-526 before May 1, 2013 can move forward to the next step (immigrant visa via the National Visa Center and U.S. consulates abroad, or adjustment of status in the U.S.).
What kind of trends do you see?
Each month the State Department will publish another Visa Bulletin on its web site at http://travel.state.gov/content/visas/english/law-and-policy/bulletin.html. Ideally the cutoff date for mainland China will progress at a regular pace, but if the number of visa applicants starts outpacing the available numbers the State Department can slow the progression or even move backward. Whenever the cutoff date moves backward in time, we call that “retrogression,” so this is essentially the ultimate retrogression, from no limit to some limit. It is very hard to predict how this will go. USCIS currently has in its pipeline about 15,000 I-526 petitions. Because family members count against the annual allocation, I think about 3,500 I-526 petitions can lead to using up about 10,000 numbers. Even with some I-526 denials it could take about four years to allocate visas to all those investors and their family members. So the cutoff dates might not move forward by one month every month.
Why Mainland China only?
The law says visa numbers are given out in the order in which the I-526 petitions were filed on a worldwide basis, but persons born in any one country only have the right in that system to use up to 7% of the total. Beyond that they can use more visas only to the extent not used by other countries. In recent years investors from mainland China have been using 85% of the numbers, but the total did not add up to the limit, so it did not matter. Now it matters. By the way, if the investor or the investor’s spouse immigrating with the investor was born outside of mainland China (and outside includes Taiwan, Macau, and Hong Kong), then the cutoff date will not have any effect.
How does visa number retrogression affect children immigrating with their parent investors?
After I-526 approval the delay in processing caused by retrogression can cause some children to become too old to immigrate with their parents. The Child Status Protection Act (CSPA) reduces the number of situations in which a child who was under age 21 at the time of I-526 filing could fail to derive permanent residence from the investor parent’s processing, but it does not eliminate the problem.
Without the Child Status Protection Act (CSPA), a child would need to be actually under age 21 until being admitted to the United States as a conditional permanent resident. If the child turns 21 after becoming a conditional permanent resident, it has no effect because the child already immigrated and only needs to remove conditions on that residence.
Under the CSPA, the age of a child is deemed “frozen” from the time the I-526 petition for the parent as investor is filed until the time the petition is approved, so that the child is not penalized for the time it takes USCIS to adjudicate the I-526 petition.
Once the I-526 petition is approved, what happens next with the child’s age and the CSPA depends on whether there is a visa number immediately available and remains available until the child takes steps to acquire permanent residence.
(1) paying the immigrant visa fee to the National Visa Center (NVC) as the first step in the process for an immigrant visa outside the U.S. or submitting the old application form DS-230 [not clear how in the absence of a fee bill].
(2) submitting Form I-485 to USCIS if the parent and child are within the U.S. and eligible for “adjustment of status,” or
(3) having the principal EB-5 petitioning parent who files for adjustment within the U.S. also file Form I-824 with USCIS (asking that the NVC be notified of the parent’s adjustment so that the child can then process for an immigrant visa).
Even if visa numbers become unavailable (we say that the category “retrogresses” or “regresses”) after one of those steps is taken, according to USCIS and State Department policy the child’s age remains frozen, and the child can resume processing as soon as the visa number is available again.
What if the Child Marries?
No matter what the child’s adjusted age, if the child marries before becoming a conditional permanent resident, he or she will be unable to derive permanent residence from the parent’s immigration.
What if the I-526 petition has not been approved before retrogression?
Because a child can only “seek to acquire” a visa and thus freeze his or her age permanently until the I-526 petition is approved, there is nothing a child can do before-526 approval to protect against retrogression except try to get the I-526 expedited and approved. [We have requested expediting for our investor clients with older children. We are told the cases are “with an officer” for decision and therefore no further expediting will be provided. We can only hope approvals will pour in later this week or early next week.]
What if the I-526 is approved but NVC has not sent the fee bill?
Of course, if the investor and child are both in the U.S. and otherwise eligible, they can file I-485 and related papers for adjustment of status. If the investor is in the U.S. but the child is not, the investor can simultaneously file I-485 for his own adjustment and I-824 requesting notification to the National Visa Center of the adjustment decision once it is made. Either would lock in the age.
Beyond that, the State Department’s guidance released at IIUSA, and now posted at an obscure location on the Department’s web site, was confusing to me. First, I thought the representative said that the NVC is going to quickly issue fee bills for all outstanding I-526 approved petitions received at NVC, which would be nice and helpful, but we have not seen it happen yet, and I am not sure that’s what he said. [If we get a fee bill before May 1, we will immediately pay the bill electronically, and the child’s adjusted age is locked in.]
Second, the Department’s white paper made it sound like it would be good enough to take “seek to acquire” steps within one year of visa availability even if a retrogression occurred before the step was taken. I did not think that’s true, because normally such steps cannot be taken if the visa number is not available. The USCIS policy (in the memo linked above) where this comes from says this:
If the visa regresses before the alien has had a full and continuous year in which to seek to acquire, the full one year clock will start again when the visa once again becomes available and the age will be calculated from the more recent date on which the visa became available (Note: if the alien seeks to acquire within one calendar year of the actual first date on which the visa became available, despite a regression, use the earlier date for purposes of the age calculation).
I think USCIS meant the parenthetical to convey that if a regression occurred before the first year was up, and then the regression ended so that the child could take “seek to acquire” steps before the first year was up, then the child still gets to lock in on the adjusted age as of the I-526 filing. This makes sense at least on the USCIS side of relevant processes, because someone cannot file for adjustment of status with USCIS if a visa number is not available — USCIS will reject the application.
The State Department applied the USCIS policy in its white paper saying this:
Do you have an example?
This only makes sense if an applicant can pay a fee bill during a time when a visa number is not available. But it has occurred to me that nothing prohibits this. I think normally the State Department would not send out a fee bill if the category has experienced retrogression and further progress for the applicant to visa number availability is not expected within the near future. But I think the white paper and the representative said that the State Department will send out a fee bill even after May 1 for petitions that were approved before May 1, despite the retrogression, just so that the children will get a chance to pay the bill and lock in their age. The NVC and consulate will not schedule an interview before the visa number becomes available to the applicant, but the child’s “age out” of derivative eligibility will have been prevented.
So, in summary, the State Department white paper seems to establish three things:
Can we trust that, and do nothing, waiting on a fee bill to arrive after May 1?
I have become paranoid watching government agencies shift their positions in EB-5 matters. The State Department document is not on its letterhead– just white paper. I just don’t feel sure I can trust it or my revised understanding of it. So I have continued to offer clients to take before May 1 any or all of the following steps if they have an I-526 approval and no NVC fee bill:
And if in light of retrogression the fee bill does not come from NVC within one year of the I-526 approval, the child later can argue– in federal court if necessary– that the NVC never sent a fee bill and that a confusing State Department white paper delivered at a conference made the investor and child think to expect the fee bill even after retrogression occurred. I would argue that this constitutes “extraordinary circumstances” excusing a late effort to “seek to acquire” under the Matter of O. Vasquez case discussed in the USCIS policy memorandum linked above.
 For confirmation of this, see footnote 2 in the USCIS policy found at http://www.uscis.gov/sites/default/files/USCIS/Outreach/Interim%20Guidance%20for%20Comment/PM-602-0097_Extraordinary_Circumstances.pdf and in the State Department white paper linked below.
Opinions expressed within this article do not necessarily represent the views of IIUSA and are provided for educational purposes.
1. Please provide the most recent quarterly statistics for:
a. Form I-526 received/approved/denied/
b. Form I-829 received/approved/denied/
c. Form I-924 Regional Center proposals received/approved/denied?
d. Form I-924 Regional Center amendments received/approved/denied?
e. How do these statistics compare to the preceding four quarters?
f. How many Regional Center proposals are pending?
g. How many Regional Center amendments are pending?
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The IIUSA Blog is maintained by Invest In the USA (IIUSA) staff, with guest contributors from time to time. We launched the blog in 2010 as part of our commitment to industry development and public education on the EB-5 Regional Center Program (the “Program”). Four years later, a wealth of industry archives can be found exploring this website. We welcome your feedback and thank you for reading!
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