No Legislative Reform, Now What? A Roundtable with EB-5 Experts

05.27.16 | Archived

Roundtabel HeadshotAs the recent legislative efforts by EB-5 stakeholders have yet to bring the lasting predictability that the EB-5 program needs, let alone the reform that is desired, left standing is the Investor Program Office (IPO) at USCIS and its numerous recent statements about implementing change even without action by Congress. These IPO statements are found in recent congressional testimony, stakeholder sessions, and liaison meetings. Depending on which of the varying pronouncements one credits, IPO’s program change would be instituted via new regulations, revised Forms, and/or policy memoranda. In order to gain a better handle on what is reasonably likely in terms of USCIS action in the near future, RCBJ polled three EB-5 expert lawyers on the American Immigration Lawyers Association National EB-5 Committee – Michele Franchett, Carolyn Lee, and David Morris.

Question 1:

In various public statements USCIS has indicated it is drafting new regulations, working on policy memos, and revising EB-5 practice Forms. Any one of these, if ever finalized and implemented, could have substantial substantive impact on EB-5 practice. How would you rate the likelihood of these initiatives becoming a reality this calendar year?

Carolyn:

It seems USCIS is actively working on all three initiatives, though, the real question is when we’re likely to see any fruit. As among the three, revising the Form I-924A is a priority to collect more accurate job creation data as the GAO report recommended.

Michele:

There is a reasonable likelihood we will see a final version of the August 10, 2015 draft policy memorandum concerning I-829 petition adjudications and sustainment of investments.

David:

As for new regulations before the end of the year, I handicap this at less than one percent. The process of making regulatory changes can be measured in years and not months.

Question 2: 

What specifically is USCIS working on in terms of revising I-526 and I-829 forms? IPO Chief Colucci mentioned more disclosures from regional centers, what do you expect in a revised I-924A?

David:

Revising current USCIS forms and the attendant instructions provides IPO with a second vehicle for implementing EB-5 program policy changes. This process, however, requires a notice and comment period. IPO recently pursued program changes via forms/instructions in December 2015 to Form I-924 and Form I-924A, and in September 2014 to Form I-829. The time may be ripe for IPO to attempt a change in the Form I-526 by the end of the year – so be on the lookout.

Carolyn:

Over the past few years, USCIS has requested public comments on all these forms. So it seems the agency is keen on revising all these forms. USCIS recently revised the Form I-829, soliciting pages of additional data as well as controversial attorney attestations. It’s not entirely clear to me, however, that the revisions to that form do more to deter/detect fraud or to solicit more accurate job counting. On the Forms I-526, I-924 and I-924A, we have yet to see any revision, despite – somewhat mysteriously – USCIS soliciting comments on these forms more than once without interim revision. That tells me that revisions are “in the works,” but the agency appears to be encumbered by numerous factors.

Michele:

USCIS intends to require greater disclosures by regional centers in the annual filing of Form I-924A, without further action from Congress. Stakeholders, including both IIUSA and AILA’s EB-5 Committee, have already provided comments to USCIS. Absent new legislation, however, it is not clear what authority USCIS would have to terminate regional centers for reasons other than the failure to file Form I-924A or the failure to promote economic growth. Based on public comments, USCIS may expand the scope of inquiry in Forms I-924 and I-924A to track the integrity provisions in the Flake Bill (H.R. 4530). The new forms may request details about fees the regional center will pay to agents, finders, and broker/dealers. Revised forms might also inquire about any changes in the regional center management or ownership, and require disclosures from principals concerning any criminal or civil violations involving fraud or deceit, convictions resulting in a sentence of 1 year or more of imprisonment, and final orders pertaining to securities law violations, etc. Revised forms might even inquire about foreign ownership interests. However, based on the comments of IPO Chief Colucci at the February 2, 2016 Judiciary Committee hearing, I would not expect the revised forms to require a certification of compliance with securities laws, since he stated that USCIS believes it lacks authority to require such certification.

Carolyn:

As for revising the Form I-924A specifically, it is a priority to collect more accurate job creation data as the GAO report recommended. In recent stakeholder guidance, USCIS expressed strong interest in gathering more robust reporting on job creation. The current Form I-924A is quite limited and some of the requests are vague, which USCIS recognizes. The job creation reporting will need to be more mathematical in the vein of requiring mini economic impact analyses for each reported project.

Question 3: 

What specifically would you expect to see from USCIS in terms of actual final (not draft) policy memos? What further policy memo topics, not already included in the August 2015 draft memo, would you expect to see in the near future?

David:

The issuance of a new policy memorandum is likely the easiest and the fastest option for IPO to implement EB-5 program change. Note the May 2013 policy memorandum was accomplished without regulation. I expect that by October 2016 USCIS will issue a final version of its draft August 2015 policy memorandum. Given the political climate and pressures for program integrity enhancements, I would not be surprised if IPO attempts to issue further draft policy memos before the end of the year.

Michele:

It does seem likely USCIS will issue a final version of its August 10, 2015 draft policy memorandum concerning I-829 petition adjudications and sustainment of investments. Clarifying guidance in this regard would be helpful to the EB-5 industry as it grapples with a visa backlog in the China EB-5 category. In particular, many will welcome a final form of the draft memo’s ameliorative provisions indicating there will be no need to present evidence the jobs still exist at the time of the I-829 petition filing, so long as the jobs were created. A key question also is whether USCIS will clarify its statements in the draft memo regarding the re-deployment of capital after the JCE has repaid a loan from the NCE.

Question 4: 

What is your sense of the USCIS focus in its writing of new regulations? Is the regulation writing by USCIS a mirror image of its technical assistance to congressional committees? IPO Chief Colucci testified to potential new regulations concerning the minimum capital requirement as well as TEA standards, what are your expectations?

Carolyn:

I don’t think the regulations will be an exact mirror image of USCIS’s technical assistance to Congress because USCIS appears to have set beliefs about the limits of its authority under current statute. The technical assistance, we may infer from the draft legislation, reflected USCIS’s “wish list.” That wish list is expressed in DHS Secretary Jeh Johnson’s April 2015 letter to Senators Grassley and Leahy. USCIS appears to have concluded that it cannot execute all the items on the wish list on its own – for example, regulation of individuals involved with regional center operations.

Michele:

As for new regulations, USCIS has stated publicly – most recently at the February 2, 2016 hearing before the full Judiciary Committee – that it is contemplating new regulations pertaining to the designation of targeted employment areas, and that it intends to raise the minimum required investment amount. The government may well publish proposed regulations for comment this calendar year, but my view is it is highly unlikely final regulations will be published this year. The Johnson letter states that USCIS proposes limiting TEAs to a specified number of contiguous census tracts, providing for closed military bases, raising the minimum investment amount, and linking the minimum investment thresholds to widely accepted inflation indices.

Carolyn:

Promulgating more “objective” TEA guidance is a priority for USCIS. Given the significant pressure the Judiciary Committees of both chambers of Congress are now applying to USCIS, perhaps these regulations will be fast-tracked.

David: 

I suspect IPO will propose regulations raising the minimum investment. This objective was raised by the DHS Secretary, by various legislators, and by the GAO. I suspect IPO would propose tracking the investment language set forth in S.1501 seeking to increase investments from $500,000 to $800,000 for TEAs, and from $1 million to $1.2 million in non-TEA areas. Also, I anticipate regulations proposing to transfer TEA authority from the states back to USCIS.

Carolyn: 

We may see regulations concerning regional center termination and impact on investors at various stages in their immigration process. Revised regulations may also elaborate on the bases for regional center termination – that is, they may provide more guidance on the level and kind of economic activity required for maintaining designation. The current regulations are unclear on the impact of termination and we need greater clarity as USCIS is poised to terminate more regional centers. If USCIS moves in that direction, I hope we will see reasonable treatment of good faith innocent investors. I’m not talking about risk of a project’s economic failure, which is a part the framework, but risk of fraud or poor regional center governance. Investors should be reasonably protected.

David:

USCIS will make it a regulatory priority to expand or clarify its authority to terminate regional centers. IPO claims they have restrictions on RC termination actions. They also claim the need for greater powers with respect to enforcing integrity provisions. I would expect both of these would be incorporated into new regulations.

Michele: 

Secretary Johnson also stated that USCIS intends to draft new regulations “to require regional centers to file investment proposals with business plans and other organizational documents in advance of individual investor filings”.

David: 

My own wish list for regulations includes: Removal of conditions for EB-5 investors who acted in good faith where the RC was terminated or where the NCE failed to create all jobs within a reasonable time; retention of priority date for EB-5 investors who are required to file a new I-526 petition because of material change or other project-based reasons; elimination of “material change” objections, allowing for petitions to remain valid if they were bona fide at time of filing; and enhanced CSPA protections in light of China backlog issues.

Question 5: 

Will we see electronic filing of any of the EB-5 related petitions any time soon?

David:

The USCIS Office of Transformation Coordination (OTC) is responsible for the agency’s move from paper to electronic filings. In 2014, OTC worked with IPO to develop the ELIS program as a means of electronic filing of I-526 petitions and to establish “document libraries” for regional centers. While I was very hopeful this system would create enormous efficiencies, the program was a bust. OTC eventually announced the decommissioning of EB-5/ ELIS programs. Recently, OTC unofficially advised that a new electronic I-526 filing option is scheduled for release in mid-2017.

Question 6: 

Do the processing times posted by USCIS for EB-5 cases appear to be accurate? While USCIS appears to focus on the need for more staffing, and they are in hiring mode, when in the future do you believe USCIS would be significantly reducing their processing times?

David: 

IPO reported processing times for I-526 and I-829 cases do appear to be generally accurate. However, the reported time for I-924 processing continues to be dramatically different from the actual times we are experiencing. In February 2016, IPO reported I-924 processing time at 7.6 months. In my experience, that time should be doubled, at minimum. Accuracy in reporting processing times is important due to the impacts on all stakeholders. Inaccuracy undermines confidence in the system, and also triggers unnecessary USCIS Ombudsman and U.S. Congressional liaison inquiries.

Michele: 

As of February 3, 2016, Mr. Colucci reported that IPO has 113 staff members, and its approved staffing level for FY 2016 has been increased to 171 – a 51% increase. At the same time, USCIS statistics on I-526 filings, for example, reflect a 31% increase from 2014 to 2015. Once IPO hires and trains additional staff to bring its staffing up to 171 it should be in a position to begin reducing processing times, but I would not expect a rapid improvement in processing times.

Carolyn:

Given the approximately 22,000 I-526 petitions in the pipeline, and given that there are just about 100+ examiners currently, AND given that USCIS plans to hire and train an additional 70 or so by the year’s end, we will see longer processing times before we see them shorten. As for when we’ll see “significant” reduction of processing times, I think this solution will require much more than just staffing up. We need “blanket L” style adjudication of common project elements, stored preferably electronically, and not redundant paper filings of voluminous project documents. We need expert, highly skilled adjudicators dedicated to examining project eligibility. We need a separate corps of adjudicators who then come on line to just adjudicate the investor side of the case, lawful source of funds and background checks. We need much better coordination of I-924s and associated I-526 filings in the interim; it’s clear that one hand of IPO doesn’t necessarily track what the other hand is doing and much efficiency is lost this way. Finally, we need USCIS to hold to its deference policy. The failure to do so raises both serious due process and efficiency concerns. There will be faster processing with confidence in deference.

Question 7: 

USCIS remarks about consequences for EB-5 investors who are invested in a commercial enterprise tied to a terminated regional center have suggested some flexibility in later I-829 adjudications, but these remarks remain vague. What do you expect to see in terms of a USCIS standard?

Michele:

This is a burning question for many in the industry, and guidance from USCIS would help reduce what many perceive as an area of unpredictability in the program. Hopefully USCIS will take some action this year, and issue a draft policy memorandum that adopts a balanced and reasonable approach – one that minimizes the collateral damage of regional center terminations. Regional center investors in particular have little if any control over the conduct of and business relationships between NCEs and regional centers. If USCIS were to engage in traditional liaison activities with the Bar, this would be one of the items at the top of our agenda.

David:

The recent Congressional efforts to extend the program have showed stakeholders and the USCIS that integrity reform is a top priority. Every integrity bill focuses on the conduct of regional centers and their operators, with the most severe consequence of non-compliance being termination. Not waiting for legislation, IPO has commenced its own efforts to sanction bad actor regional centers. Such efforts include termination through the I-924A process, or by making referrals to other agencies such as the SEC and FBI for investigations. As a result, stakeholders will continue to see a rise in the number of terminated regional centers. What remains critical and largely missing, however, is clarity from IPO on impacts to EB-5 investors associated with a terminated regional center. My hope is that IPO will issue policies that track “good faith” themes found in S.1501, which proposed to allow these innocent EB-5 investors to move from a terminated regional center to another in good standing, without a loss in their immigration status. Like in marriage-based cases for removal of conditions, USCIS should allow EB-5 investors an opportunity to win lifting of conditions in instances where they followed the rules, invested and otherwise acted in good faith. That should be the basis for new EB-5 policy on terminated RCs but also in the larger context of I-829 adjudication.

Question 8: 

Absent congressional mandates concerning site visits for the EB-5 industry, what are your expectations about the level or frequency of site visits under ASVVP in the immediate future?

David: 

I expect IPO will commence site visits in the coming months. The USCIS already is well acquainted with the site inspection process and procedures from the H-1B and L-1 visa programs. Expanding this to the EB-5 visa program is an easy move for IPO. All regional centers should be prepared for a site visit, although it is very unclear what the auditor would want or expect to see.

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