Last week, USCIS issued a policy alert clarifying policy guidance in the USCIS Policy Manual regarding redeployment of investment capital, including further deployment after the job creation requirement is satisfied. The updated guidance is now available online in Volume 6, Part G of the USCIS Policy Manual. A redline of the changes to the Policy Manual prepared by IIUSA member Robert Divine can be found here.
IIUSA is collecting questions from the industry and preparing a letter to USCIS in response to this new policy as we look to seek clarification on this important issue. As the EB-5 industry trade association, we always work towards increasing industry transparency and we look forward to engaging with USCIS on important policy matters such as this one.
IIUSA Member Perspectives:
The below articles are IIUSA member perspectives. The views of the authors are their own and do not necessarily reflect the views or position of IIUSA.
EB-5 Capital Redeployment Guidance Arrives in Time to be Used for COVID-19 Recovery Projects
By Mona Shah, Esq., Attorney, Mona Shah & Associates Global & Rebecca Singh, Esq. Attorney, Mona Shah & Associates Global
Capital redeployment in EB-5 has been and continues to be one of the most important topics for the industry today. There is an estimated $15 billion invested into projects all over the US, that could potentially be redeployed. Furthermore, although the full effect of the Coronavirus pandemic on the US economy cannot yet be accurately assessed, what is evident is that the longer the pandemic rages, projections for growth and employment will remain bleak. The second quarter of 2020 has seen increased business closures and layoffs. Federal Reserve Chair Jerome Powell warned in a speech that the economic effects of COVID-19 are severe and that the “depth and the duration of the economic downturn are extraordinarily uncertain…” Capital redeployment guidance although arriving extremely late may have come in time to be put to use in repairing a damaged economy.
Redeployment involves the reinvestment of capital following the repayment or disposition of the original EB-5 investment made through a qualifying new commercial enterprise (“NCE”). The requirement that immigrant investors maintain their capital investment “at-risk” over the two years of conditional lawful permanent residence (LPR) has always been an essential requirement of the EB-5 Program.1 The redeployment of capital can only occur (i) after the original purpose for the capital has been achieved as outlined in the business plan, (ii) the jobs have been created and (iii) the capital has been repaid. In the absence of these three steps, the capital is not considered to be eligible for redeployment…Continue Reading
EB-5 Redeployment Policy “Clarified” Retroactively
by Robert Divine, Shareholder, Baker Donelson
USCIS has updated its Policy Manual to retroactively “clarify” its policy on the parameters for “new commercial enterprises” (NCEs) to “redeploy” capital of EB-5 investors after the capital is returned from the original job creating enterprise (JCE). Most restrictive and problematically retroactive are the requirements that the redeployment be made within the jurisdiction of the sponsoring regional center and the prohibition on purchasing financial instruments in secondary markets. These positions will generate worthy litigation on the part of investors whose capital already was reinvested.
Developers receiving EB-5 capital have tended to negotiate the ability to repay the capital as early as 5 years, while investors born in mainland China have piled up for waits of more than a decade for visa numbers. Happily, in 2017 USCIS recognized that investors only needed to “sustain the investment” (avoiding getting repaid by the NCE) to the due date for filing the I-829 petition rather than years later when USCIS has adjudicated the I-829. USCIS also recognized that the NCE could receive return of its EB-5 capital from the JCE before that and as soon as the point when all the necessary new jobs had been created by the project. But USCIS said that capital returned to the NCE before the investor could receive it needs to be redeployed in other “commercial activity” with no clarification what that meant and whether the redeployment needs to be within the regional center’s jurisdiction or within a Targeted Employment Area. With tens of billions of repayments to NCEs becoming repaid and needing redeployment, the lack of guidance left NCEs and investors groping for sensible approaches and sometimes at odds with each other…Continue Reading
USCIS Takes a Swing at EB-5 “Redeployment”
by Bernard Wolfsdorf, Partner, Wolfsdrof Rosenthal LLP and Joseph Barnett, Partner, Wolfsdorf Rosenthal LLP
On July 24, 2020, U.S. Citizenship and Immigration Services (“USCIS”) missed a huge opportunity to clarify its poorly written guidance from three years earlier regarding “redeployment” of EB-5 investment capital to meet the “at risk” requirement.
USCIS blatantly reversed it policy regarding the ability of a new commercial enterprise to “deploy the repaid capital into certain new issue municipal bonds,” despite three years of stakeholder reliance and possibly one of the safest investment options that could be provided to EB-5 investors once the job creation requirements have been satisfied.
USCIS now requires the redeployment to “occur within the regional center’s geographic area, including any amendments to its geographic area approved before the further deployment” “to meet all applicable eligibility requirements within the framework of the initial bases of eligibility.” Yet, the redeployment does not need to be within a targeted employment area, another initial basis of eligibility…Continue Reading
After Years of Waiting, USCIS Finally Clarifies EB-5 Redeployment Requirements
by Daniel B. Lundy, Partner, Klasko Immigration Law Partners, LLP
The updated guidance provides that EB-5 capital may be redeployed through the original New Commercial Enterprise (NCE), the entity that the investors originally invested in, within the territory of the regional center, as long as it is redeployed “in commerce,” and consistent with the NCE’s ongoing purpose of conducting lawful business activity. Redeployment does not have to be within a TEA, even if the original investment was in a TEA. Further, USCIS considers one year as a reasonable time to redeploy the capital.
Redeployment has become necessary in EB-5 due to increasing visa wait times, retrogression, and USCIS processing times in order to meet the USCIS policy requirement that EB-5 funds must be invested at-risk throughout an investor’s two-year conditional residence period. Typical EB-5 regional center investments are structured as a loan or investment by the NCE into another job creating entity (“JCE”). Those loans or investments typically had a 5-year term which was initially based, in part, on an estimate of how long an investor would take to get through the immigration process. An investor cannot get his or her money back before the end of his or her two-year conditional residence period, which does not begin until he or she obtains a conditional green card. Because of visa backlogs and long USCIS processing times, this can occur anywhere from three to fifteen years after the investment. USCIS policy states that it is not enough for the money to be invested into the NCE. It must remain deployed- at risk- for the whole time. This means if a loan is repaid to the NCE after 5 years, but investors still have years to go before the end of their conditional residence period, the money cannot sit in an account. It must be placed back at risk…Continue Reading