By Suzanne Lazicki, Lucid Professional Writing EB-5 Blog
A small Employment Visa Engagement hosted at the US Patent and Trademark Office in San Jose on July 19, 2017 featured a delegation from the Investor Program Office. The IPO representatives discussed the EB-5 program, gave updates on recent initiatives to improve processing and program integrity, and provided advice for EB-5 submissions.
IPO Deputy Chief Julia Harrison noted that program integrity was a focus for FY2017, with the launch of the site visit and audit and I-829 interview programs, and she announced that FY2018 will specially focus on reducing processing times. She mentioned several initiatives that IPO hopes will improve processing times.
Improve the Quality of Submissions: Ms. Harrison noted two new resources designed to help stakeholders improve future filings and make them easier for IPO to review.
- In the March 2017 stakeholder meeting, IPO provided “Top 10 Tips for Submitting EB-5 Related Forms” – advice that should improve submissions and eventually reduce processing times, if followed
- Ms. Harrison announced the new “Suggested Order of Documentation” pages linked to the EB-5 Resources page. This standardized order of exhibits is not required, but is designed make EB-5 forms easier and faster for IPO to review. (The Resources page also provides Form Filing Tips and EB-5 Filing Tips.)
Increase Capacity: IPO plans to increase capacity by cross-training its economists and adjudicators so that a single staff person can handle a petition from start to finish. Previously, economists and adjudicators have each handled a distinct part of each petition. Hybrid teams have worked well for I-829 adjudications, and IPO is now implementing the same strategy for I-526 adjudications.
Other: The site inspection program that kicked off this year should facilitate I-829 processing by pre-emptively answering questions that might arise about actual use of investment and job creation.
Ms. Harrison pointed out that IPO does not have authority to offer premium processing (this would need to come from Congress), and also repeated, as has been said before, that IPO does not favor premium processing, anticipating that it would be unworkable because fees would probably not limit demand in the EB-5 context.
Advice for EB-5 Submissions
IPO Senior Advisor for Economics Jan Lyons introduced the EB-5 program from a business perspective and gave advice for EB-5 submissions.
- Invest in the business plan. Mr. Lyons noted that a majority of problems he sees in EB-5 submissions are not in the economic impact analysis but in the business plans, which are often disorganized, incomplete, and full of conjectural information without backup. “We adjudicate on a preponderance of the evidence, not a preponderance of wishful thinking.”
- A business plan should include financial information. Mr. Lyons estimated that only about 35% of business plans submitted to his office even contain a pro forma. This is problematic because forward-looking financial statements (pro formas) are significant evidence and also facilitate efficient review. Pro formas have an expositive value that complements a business plan’s written narrative of a project. IPO economists can plod through the hundreds of pages submitted with business plans and reach a conclusion without pro formas, most of the time. But those cases could be analyzed much faster with the inclusion of three simple financial tables: a sources and uses of funds, a cash flow statement, and an income statement. There are no specific requirements that the financial information be presented as pro forma statements, but pro formas are the most common type of financial information and are generally the most complete and the least expensive method of conveying a complete financial picture. While lack of such statements does not automatically result in an RFE or denial, it does make a plan relatively difficult to understand and assess. In reviewing pro proforms, IPO economists are not judging the quality of the investment. IPO economists are instructed that IPO is not a rating agency, nor is it within its purview to make judgements relating to the suitability of investments for individual investors. However, financial information is relevant to EB-5 requirements that IPO must consider, including business plan credibility and the requirement that EB-5 investment be placed at risk with the chance of gain.
- Do not interpret a Request for Evidence as an assault. Mr. Lyons emphasized that an RFE is not an attack on your intelligence or integrity, and not an indication that the requester is stupid. The requester simply does not have as much information about or familiarity with the petition as you do, and is asking for information.
- When preparing I-924, keep in mind that “In an initial application, what we’re really looking for in a regional center is evidence that they know what they’re doing.” Demonstrate grasp of EB-5 requirements and show the credible experience of the applicants.
- Limited geographic area is a legal rather than an economic requirement. In assessing geography requests, IPO is guided by Congressional intent that regional centers are literally “regional centers,” designed to create concentrated pools of investment to stimulate employment growth and economic activity within a defined and limited geographic area.
Site Visits and Audits:
IPO’s FDNS Division Chief Kurt Vicha explained how the EB-5 site visit process has worked so far, and how sites are selected. In 2016, FDNS selected the one state with the most projects in each of four regions, and conducted site visits to job-creating enterprises (JCEs) in those states (for a total of 50 site visits). In 2017, FDNS selected JCEs for site visits based on a “window of opportunity” defined as about one year after I-526 approvals for that JCE, but before I-829 adjudication. Mr. Vicha reported that about 225 JCEs fall within that window in 2017, and FDNS is on track to complete site visits at all of them. Inspectors are charged to observe and talk to people on-site about what is happening at the JCE address, and then write an informational report. This report is then assessed in Washington DC in context of petition filings, with opportunity for the regional center or project company to respond to any questions. Mr. Vicha noted a common complaint that some questions specific to stand-alone filings have been asked at regional center JCEs (such as about the role of EB-5 investors in the business), and he promises that training will address this issue for next year. FDNS inspectors were hired at a high grade and receive extensive training.
Julia Harrison once again reviewed the difference between site visits and regional center audits, and added commentary on the purpose of each. Site visits are unannounced inspections of job-creating enterprises that look at the JCE site and assess the progress of development and job creation. Audits examine regional centers to see where money is going and whether the regional center has proper oversight and controls in place. To date, one regional center audit has been completed.