by Michael Kester, Economist, Impact DataSource
On January 13th, 2017, the Department of Homeland Security (DHS) issued a Notice of Proposed Rulemaking to amend certain regulations governing the EB-5 Immigrant Investor Program.
A significant portion of the proposed rules are related to TEAs, and these amendments, if enacted, would drastically alter the way high-unemployment TEAs are both calculated and certified (rural TEAs would not be impacted). The following discussion addresses each of the proposed changes related to TEAs.
Removal of state involvement – DHS would take over
DHS proposes to eliminate the ability of a state to designate high-unemployment areas, and instead, DHS would make such designations. Petitioners would submit a description of the boundaries of the geographic or political subdivision and the unemployment statistics in the area for which designation is sought as set forth in proposed 8 CFR § 204.6(i), and the method or methods by which the unemployment statistics were obtained. Investors would be required to provide sufficient evidence demonstrating the location would qualify for the reduced investment threshold.
Due to adjudication processing times for I-924 applications and I-526 and I-829 petitions that are already exceedingly long, the prospect of DHS taking over TEA designation requests and the perhaps scant likelihood of their processing such applications in an efficient and timely manner is of great concern for EB-5 stakeholders. As TEA-eligibility is, at least currently, a make-or-break issue for most projects when deciding to venture down the EB-5 path, not having an efficient or predictable adjudication timeframe for TEA designation requests would be concerning for most EB-5 stakeholders, and would add another layer of unpredictability to an already complex program.
Under the current TEA regulations, states have the authority to designate high-unemployment areas. While this state-dependent process has led to some ambiguity and inconsistency in the calculation and designation of high unemployment areas, most states are relatively efficient, and will provide a TEA designation letter (or respond with a rejection) within two to three weeks (and some much sooner). This efficient aspect of the EB-5 program has been essential for EB-5 stakeholders.
The prospect of DHS taking over the TEA designation process would therefore seem to give rise to two key questions for EB-5 stakeholders: 1) how long would it take DHS to actually process the requests, and 2) since investors would be required to provide sufficient evidence of TEA eligibility, would DHS provide clear guidance regarding the required evidence of data and methodologies used to make these determinations?
The proposed rules do not provide clear guidance on either of these two key questions. Regarding the length of time required for USCIS to provide a Notice of Decision designating a TEA, the DHS proposed rule notes only that the “cost savings” to states in eliminating them from the TEA process would mean some “additional costs for DHS in adjudication review time in order to evaluate TEA submissions.” But USCIS declines to estimate the impact on processing times, stating only “DHS cannot accurately predict such added time burden to the Government at this time.” It is unclear also whether the DHS TEA adjudication process would result in a TEA designation only when USCIS adjudicates an I-526 petition (currently a period of over 15 months), or if a Notice of Decision for a TEA designation would be issued before the I-526 petition is adjudicated. It should be noted that some previous legislative bills that also proposed transferring authority to designate TEAs from the states to DHS explicitly stated that DHS would respond to a TEA designation request within 60 days.
Regarding the data and methodologies to be utilized, again DHS does not provide any additional guidance beyond the limited information gleaned from current policy and practice. For example, the recently published USCIS Policy Manual chapter on EB-5 states only the following:
Acceptable data sources for calculating unemployment include U.S. Census Bureau data (including data from the American Community Survey) and data from the Bureau of Labor Statistics (including data from Local Area Unemployment Statistics).
The main justification DHS points to in proposing to eliminate state involvement in the TEA process is that the current state-driven system has “resulted in the application of inconsistent rules by different states.” One would think then that DHS would elaborate on the TEA standards it would like to see adhered to, and provide clear-cut guidance on the data and methodologies that should be utilized. Without further guidance, however, it seems inconsistencies in the designation of high unemployment areas will persist, and I-526 petitions will continue to be filed with supporting evidence comprising a variety of methodologies and data.