This is a member perspective and the views of the author are their own and do not necessarily reflect the views or position of IIUSA.
By Robert Divine of Baker Donelson
USCIS has issued meaningful new guidance about some important topics: the new $20,000 or $10,000 per year regional center integrity fee, USCIS registration of investment “promoters”, written disclosures of promoter compensation, identification of persons “involved with” EB-5 related entities, and the period through which investors are required to sustain their investment before return of their capital. All of these topics provide a gloss on my original summary of the EB-5 Reform and Integrity Act of 2022 (“RIA”). The stakes for compliance with USCIS positions are high, as the consequences for noncompliance are severe. At least three of the topics are on the agenda for USCIS’ March 20, 2023 EB-5 stakeholder engagement.
The RIA requires each designated regional center (“RC”) to pay an annual “integrity fee” of $20,000 or, if the RC has “20 or fewer total investors in the preceding fiscal year in its new commercial enterprises,” $10,000. USCIS has issued a Federal Register notice, without soliciting any comment, interpreting this statutory language in the following ways:
1. Amount: The amount of the fee for a particular fiscal year just ended depends on the difference between the numbers of two kinds of filings by EB-5 investors filed anytime (including in prior years) up to the end of the latest fiscal year: I-526 filings minus I-829 filings (not including I-829 filings by family members separate from the investor’s filing). We had expected the calculation to be based only on new I-526E filings made during the latest fiscal year, and USCIS’ interpretation will require $20,000 payments far more often. Justifying the lower level fee will require complex historical analyses by longstanding RCs and even for new RCs will be possible far less often over time. USCIS stated that its adjudicators have discretion to evaluate the number of investors under “the totality of the circumstances,” which would seem to include evidence that post-RIA investors have been repaid their investment before I-829 filing (which USCIS implicitly recognized is possible). If a RC pays only $10,000 and then USCIS calculates more than 20 investors from its own records of I-526 and I-829 filings, it appears that USCIS may issue a notice of intent to terminate, making the stakes for miscalculation exceedingly high.
2. Mechanism: The fee must be paid at pay.gov either by credit card or ACH Debit transaction. Enter “USCIS” to find the option to pay the RC integrity fee. Note that U.S. Department of Treasury guidelines permit USCIS to accept a maximum payment amount of $24,999 from one credit card in one day, and a single obligation cannot be split into multiple credit card payments over multiple days in order to evade this limit. So to pay more than $20,000, ACH must be used.
3. Normal Timing: Starting October 1, 2023, the fee will be due October 1 to October 31, late fees will be due on payments made November 1 to December 31, and termination will result from nonpayment by January 1. Failure to pay within 90 days after the end of the fiscal year will result in termination, but USCIS will issue a notice to terminate allowing the RC to respond showing that it had paid the fee on time.
4. Last Year: Because USCIS was not ready to accept the fee in 2022, for the year ending September 30, 2022, the fee will be due by April 1, 2023, and nonpayment by May 31, 2023 will result in RC termination.
A regional center considering not complying with RIA requirements and winding down should consider attending the USCIS March 20, 2023 stakeholder engagement session, which is slated to address that topic.
RIA requires “direct and third-party promoters (including migration agents)” to register with USCIS, providing their identify and contact information and confirming the written agreements they are required to have with EB-5 securities issuers. The RIA did not define “promoters.”
USCIS initially proposed a new Form I-956K to be completed online, but in December it published in final form a revised Form I-956K that must be submitted on paper and must include a copy of all of the promoter’s written agreements with EB-5 securities issuers.
Public comments had requested clarity about whether the registration requirement really extended to sub-agents and their individual employees. In its attached 90-page response to the public comments on the various new EB-5 forms USCIS seems to have cast the broadest net imaginable as to who must register, stating:
Response: Any person acting as a direct or third-party promoter (including migration agents) of a regional center, any new commercial enterprise, an affiliated job-creating entity, or an issuer of securities intended to be offered to alien investors in connection with a particular capital investment project must submit Form I-956K before operating on behalf of any of the specified entities or promoting any offering under the EB-5 Regional Center Program. This includes employees of entities with agreements in place to promote a regional center, any new commercial enterprise, an affiliated job-creating entity, or an issuer of securities intended to be offered to alien investors. USCIS has added clarifications to the Form I-956K instructions regarding what evidence of written agreement should be submitted by employee or sub-agent promoters of a primary promoter.
USCIS also stated that a Form I-956K that gets rejected for being improperly completed does not count as registration. This new requirement could stifle EB-5 subscriptions for months while issuers amend their broker/agent agreements, promoters file registrations and wait for receipts, and regional centers require proof of compliance.
This is another of three topics to be addressed in USCIS’ March 20 stakeholder meeting.