by Allison Bearman, General Counsel, Greystone EB-5 Holdings Group; Ronald Fieldstone, Partner, Saul Ewing Arnstein & Lehr, LLP; Brad Stedem, Managing Director, CapUnited
Retrogression, the buzzword in EB-5 for the last couple of years, has now given birth to a new buzzword – Redeployment. This article will explore the evolving and interconnected concepts of retrogression and redeployment, including how we got here, the pros and cons of several potential solutions to satisfy U.S. Citizenship & Immigration Services (“USCIS”) requirements for redeployment and new possibilities for deal structuring.
How we got here
The demand for EB-5 visas from Chinese petitioners has far exceeded the available supply. The monthly Visa Bulletin published by the Department of State sets an I-526 filing cutoff date of September 1, 2014 for Mainland China-born investors that can commence the final stage of the permanent residence immigration process by either filing for an Adjustment of Status or for Consular Processing. This delay is referred to as retrogression.
Under current policies of USCIS, as stated in its Policy Manual updated on June 14, 2017 (the “Policy Manual”), every EB-5 investor is required to retain their investment capital “at risk” in the New Commercial Enterprise (“NCE”) until such time as that EB-5 investor has been in the U.S. for two years on conditional resident status. The two years commences on the date the EB-5 investor entered the U.S. after the consular interview or obtained a change of status if the EB-5 investor was already in the U.S. under a different visa (the “Sustainment Period”).
According to the Citizenship and Immigration Services (CIS) Ombudsman’s office, currently it may take a Mainland Chinese-born investor ten years or more to obtain permanent residency under the EB-5 program. As the typical EB-5 loan in today’s market has a five year term with two one-year extension options, there is a precarious gap during which EB-5 funds are essentially in limbo. If the EB-5 capital is repaid to the EB-5 investor, that EB-5 investor will no longer fulfill USCIS’ requirement for the Sustainment Period, thus disqualifying the investor from approval at the I-829 stage to obtain a permanent green card.
In the Policy Manual, USCIS confirmed that redeployment of EB-5 funds is permitted and will not, in many cases, result in a material change. USCIS also indicated that the redeployment of EB-5 funds must be “within the scope…of the business” of the original NCE and the funds must be redeployed in a manner “related to engagement in commerce,” which apparently precludes any purely passive investment, such as an investment in marketable securities. For this reason, if the NCE simply holds the money in a bank or securities account after the repayment of the EB-5 loan, the EB-5 investor will not have met the sustainment requirement and presumably would be unable to obtain his or her conditional immigrant visa or, if already a conditional resident, will be unable to remove conditions on residency.