RCBJ Perspectives: How Times Have Changed – EB-5 Offering Workflow Under the RIA
By Charles S. Kaufman | Lexcuity
This article originally appeared in the April 2025 edition of IIUSA’s Regional Center Business Journal.
READ THE FULL SPRING 2025 EDITION OF THE RCBJ
When the 2022 EB-5 Reform and Integrity Act (“RIA”) changed the approval process for EB-5 financings and placed increased compliance responsibility on regional centers, it also changed the way EB-5 financings move from conception to completion. The accompanying flow chart is a way for EB-5 developers, regional centers, advisors and other stakeholders to take a step back and appreciate how the typical process of launching an EB-5 financing has changed, and for those new to EB-5 to understand how they will collaborate with partners and professionals to complete their deals.
Key factors that have reshaped the offering process are the new application for project approval on Form I-956F, the increased compliance and oversight role of regional centers, increased concern about avoiding “material changes” after approval of an EB-5 project, and the virtual disappearance of direct (i.e., non-regional center) projects.
Project Approval under Form I-956F. Prior to RIA, USCIS “project approval” was a vague concept. Based on the first USCIS approvals of investor applications on Form I 526, and the USCIS’s policy of deference to prior decisions, at some point after an EB-5 offering was launched (often two years or more), the EB-5 project was considered approved and any later rejections of investor petitions would likely result only from individual investor factors and not agency objections to the project. Post-RIA, every project[1] must be submitted for approval by its regional center on form I‑956F, and approvals have been received in a matter of months. I-956F approval is definitive and assures that later-submitted investor petitions will be rejected based only on individual investor concerns.
Because approved EB-5 projects are more marketable to investors, and approval comes relatively early in the offering cycle, structuring and documenting an EB-5 project now focuses on preparing a winning I-956F application. The application itself, with all material transaction documents required as exhibits, can easily run to 1,000 pages or more. Transaction documents that might previously have been completed after an offering launch now must be fully negotiated, finalized and attached as exhibits. The submission date for the I-956F application has become the goal line for all of the parties working to bring an EB-5 project to market.
EB-5 investments cannot be received until the Form I-956F application has been submitted (but may be received before the application is approved). Because preparation of Form I-956F increases the time before an offering can launch, premarketing has assumed a greater role. Premarketing must be conducted carefully to comply with securities laws, and any advance deposits must be escrowed until the I-956F application has been submitted and other conditions are met.
The Regional Center’s Compliance Role. Pre-RIA, the role of regional centers was passive to the point that non-affiliated regional centers were referred to as “rent-a-centers” and sometimes contracted to simply license their name and official designation to a project. Post-RIA, regional centers must play a greater role, among other things certifying that their projects comply with all state and federal securities laws and ensuring that anti-fraud elements of RIA are observed.
The new compliance role has had the greatest effect on independent regional centers working with unaffiliated projects. The emerging best practice for these regional centers is to engage their own securities and immigration compliance counsel and to carefully review all offering and transaction documents. While the developer side typically prepares the Form I-956F application, it is closely reviewed by the regional center’s advisors.
Regional centers that are affiliated with project developers may not have a need to engage independent counsel, but they too have had to ramp up their review and oversight role or risk loss of their USCIS designation. Well advised project developers are also working harder to anticipate scrutiny on their projects and avoid regional center objections.
Some project developers have encountered regional centers that would not review an I-956F application until ostensibly complete and ready for submission to USCIS, but then issued lengthy comment letters requiring significant rework and repetition of internal quality controls and reviews to produce a revised application. Earlier review by the regional center can avoid the need to produce two fully finalized applications.
Avoiding Material Changes. Pre-RIA, offerings could be rushed to market based on a project developer’s ideal terms, in reliance on the ability to adjust or modify the project in response to market feedback (i.e., investor resistance) or USCIS examiners’ requests. Post-RIA, these mid-course corrections can be much more difficult. If USCIS considers a project to have undergone a “material modification,” the project will need to resubmit its I‑956F application and go through a new approval cycle. The risk of triggering the ill-defined material modification rule and setting back the approval clock for investors long predates RIA. However, RIA has magnified the risk because losing project approval under I-956F presents a severe disadvantage in attracting investors. With the current regional center program expiring in 2027 if not renewed, and the threat of program termination through the proposed “Gold Card” program or other initiatives, there is a race to get projects approved, investors on board, and their applications on file. Few EB‑5 developers would cavalierly launch an offering that might need mid-course corrections when those corrections could be a material modification that takes their project out of the race.
The need to avoid material modification has only intensified the focus on getting the deal right at the time the I-956F application is submitted. That has meant early dialogue with agents and marketers to avoid having to fix an unmarketable deal, and more advice from advisors to avoid potential hot-button issues with regulators.
Disappearance of Direct Projects. While the RIA still permits projects that do not rely on indirect or induced job creation to avoid using a regional center, it effectively limits this “direct” method to projects having only one investor. Direct projects do not submit Form I-956F and may avoid some of the processes in the accompanying flow chart, but the limit of one investor has eliminated the direct approach for projects of any significant size.
The accompanying chart shows, left to right, the typical workflow to launch an EB-5 offering in the current environment. Beyond the overall focus on preparing and submitting Form I-956F, the following are worth noting:
- The issuer cannot receive EB-5 investments until the Form I-956F application is submitted to USCIS (but can received them before the application is approved). Pre-marketing can take place before submission.
- Early interaction with the marketing partner allows early feedback from pre-marketing efforts to help shape the deal terms and avoid having to make later corrections.
- The business plan writer and economist continue to provide essential groundwork; delivery of the business plan and economic report are necessary milestones before offering documents are drafted.
- All elements of the deal from all participants must be in place to finalize the I-956F submission.
- A key milestone is the Regional Center’s review and approval of Form I‑956F before they submit it. To launch an offering on schedule, the project developer and regional center should reach an understanding early in the process as to when the regional center will review documents (i.e., will they review drafts, or only a final and polished application for submission) and how quickly they will provide comments.
[1] Non-regional center projects (“direct” projects) do not submit From I-956F and are responsible for their own compliance, but as discussed below these projects have become rare.
