Info from 1/23 Stakeholder Engagement

January 25, 2012 2 Comments

Thepresentation from the 1/23 Stakeholder Engagement did not, this time, contain the written Q&A, so I’ve written up my notes on note-worthy points that emerged at this meeting. In case you’d like to review the entire conversation, I’ve also embedded my recording at the base of this post.

TEA Issues

  • Kevin of the Office of Policy and Strategy announced that, as indicated in the draft EB-5 guidance memo, “we are going to defer to the state agencies in regards to the geographic area of TEA designation.” However, USCIS is not yet saying whether it will allow a single census tract to qualify as a geographic area. Kevin specifically declined to state a position, saying that it “is a question that we’ll cover in the written questions/issues.”
  • Sasha Haskell said that they have consulted with the Bureau of Labor Statistics and determined that yes, it is appropriate to use newly-available five-year American Community Survey data from the U.S. Census Bureau as a base for estimates for TEA designation. (As an alternative to Census 2010 data.)
  • Question: When determining 150% of the national average for unemployment rate, which national unemployment rate should we use? Just the most current one? Sasha Haskell: In general the recommendations that we have received from the Bureau of Labor Statistics involve the analysis of 12-month or an annualized set of data. So I think in general that’s what we are looking for.

“Hold at headquarters” Issue for I-924 Regional Center applications

  • Sasha Haskell: “If I understood the question correctly, there is a concern raised about an issue that’s being examined across a number of applications and the question focuses on when there will be resolution, is that correct?… Okay, well, actually this is an issue that we’re dealing with regarding the economic analysis. We’ve had our contract economists online with us for several months now and we’ll be talking more about that in the staffing section of these presentation. They’ve been invaluable in terms of presenting their expertise in approaching these cases. This is all a growing period for us, incorporating their expertise into our adjudications. We want to make sure that we proceed very carefully. This is being discussed at the highest level in the agency. We expect to have some better clarity within the next couple of weeks on this issue. We appreciate all the patience that the applicants have displayed on this issue, but we’re really trying to proceed carefully.”
  • The leadership reiterated the hope (but not certainty) that a resolution on questions regarding the econ analysis would be reached in the next couple weeks, and that applicants would have the opportunity to provide supplemental information if needed.

Issues with I-924 applications generally

  • Common reasons for denial will be discussed at the next stakeholder meeting
  • A new I-924 Form is currently being prepared that will describe more fully what USCIS is looking for at the Regional Center application stage, and will that lay out standards for “shovel ready projects.” According to Sasha Haskell, generally “what we have found is the greater the specificity the better prepared the package is.”

Customer Service Issues

  • Email Communication: Sasha Haskell conceded that USCIS has had some growing pains with its EB-5 email-box, but assured stakeholders that the EB-5 mailbox is now administered full time by an EB-5 administrator and has a goal to respond to inquiries within 2-3 days.
  • CSC Staffing: It was reported that the CSC now has four teams of adjudicators working on EB-5 cases (versus one team in Summer 2010) and that the most recent training was conducted 12/2011.  The agency is working to incorporate economists into the review process. Each team has a supervisor and there is one supervisor in charge of work flow issues. They are trying to bundle filings for single Regional Centers for the sake of consistency while still adhering to the “first in first out” principle.
  • Processing Times: The leadership was not able to provide any current estimate on I-924 processing times, but said that time estimates will be available soon on the EB-5 page of the USCIS website.

Regional Center program sunset question

  • A stakeholder asked what procedures might be employed in the event that Congress does not extend the EB-5 Regional Center program past its current sunset date of 09/30/2012. Rachel Ellis quickly responded that this as a question that will just have to be addressed when and if it occurs, and that the Service does not have a response at this time.

Questions regarding amendments

  • Sasha Haskell and Kevin discussed at length the requirements for various types of Regional Center amendments (e.g. to industry code, geographic area, or economic impact modeling). To summarize, the applicant needs to follow I-924 relevant instructions and submit evidence that the change is warranted and appropriate, which usually involves submission of a business plan and economic analysis. Concurrent filing of an amendment and I-526 petitions dependent on approval of the amendment is not okay.

Questions regarding investment in real estate

Recording:

Filed under EB-5 Events, EB-5 Law & Policy, Updates from USCIS

Acquiring Real Estate as EB-5 Investment?

January 23, 2012 1 Comment

As a follow-up to my post on the recent denial of a Regional Center investment proposal involving real estate purchase, here is transcription of a couple interesting exchanges from today’s 1/23 EB-5 Stakeholder Meeting with USCIS. The speakers are Rachel Ellis (USCIS Office of Public Engagement), Kevin ____  (Office of Policy and Strategy), Sasha Haskell (Service Center Operations), and Marty Cummins (an EB-5 stakeholder). The numbers in brackets refer to the time according to my recording.

[01:23:30] Rachel: In addition we’ve also had a request to confirm whether EB-5 Investors can acquire existing residential real estate as part of a diversified investment plan and rent it to the public as an EB-5 qualified enterprise as long as adequate full-time jobs are created by all the diversified investments combined.
[01:23:50] Kevin: I’ll answer that question, too. No, this is counter to the requirement that 100 percent of an EB-5 investment be put at risk through an investment into a job-creating commercial enterprise. Although the requisite number of jobs might be created, the total investment would not be available to the job-creating enterprise.
—
[01:36:55] Marty Cummins: Yes, I’m a little confused on the answer in EB-5 Basic Direct about investing in real estate. If a couple investors invest 2 million dollars (a million dollars each), and if some the jobs are created in, let’s say, a restaurant they own, and some of the jobs are created in rental real estate (they buy real estate that’s unoccupied, renovate it, manage it, maintain and lease it out), and let’s assume that they have 5 full-time employees they can verify and 15 employees that are working in the restaurant: is there any reason why that real estate would not qualify as a business?
[01:37:42] Sasha: Well, I think what you’ve presented is very case-specific, and we will take a look at any application that’s presented to us to determine if it’s qualifying, but I don’t think we’re really prepared to say, you know, in a stake-holders meeting, “thumbs-up” or “thumbs-down” on whether that particular strategy you’re presenting would be acceptable.
[01:38:08] Marty: But would it be fair to say that buying real estate and renting it out would not be *excluded*, as long as we satisfy the rest of the requirements?
[01:38:18] Sasha: Well, it is our understanding that all of the EB-5 capital must be dedicated to the job-creating process. So, you know, it’s really hard to say based on what you’re presenting. It’s like you’re talking about doing a “passive investment” with lots of the money, and then putting some of the money in something else. And we really can’t comment beyond that. Thank you.
[01:38:42] Marty: Alright, thank you.

Filed under EB-5 Law & Policy

New AAO Decision (RC application denial)

January 19, 2012 2 Comments

The AAO has published another EB-5-related decision (04/26/2011), this one affirming denial of a Regional Center application filed on behalf of The Statesman Group and its Pleasant Harbor Marina and Golf Resort project in the North Olympic Peninsula. The decision is interesting, if unsurprising. To quote a portion of the analysis:

… the AAO finds that the applicant’s proposal is a marketing strategy to attract buyers for vacation suites rather than investors of capital in a new commercial enterprise. Specifically, the evidence incontrovertibly establishes that the applicant proposes that “investors” would purchase a vacation suite as either a “primary residence,” “second home” or “investment property.” For the reasons discussed below, the AAO affirms the director’s determination that such a real estate purchase of a private residence, even if still under construction, is not an at-risk investment of capital that can be credited with direct or indirect job creation under the employment creation program set forth at section 203(b)(5) of the Act and the implementing regulation at 8 C.F.R. § 204.6. The purchase of individual residential suites by alien “investors,” even if concentrated in one resort complex, is also not the type of “pooled investment” concept Congress envisioned for the regional center program. In addition, the offer in the record indicates an alien “investor’s” funds would be returned should the residence not be completed on time, even if the alien has already adjusted to conditional permanent resident status. Thus, the alien’s funds would not be at risk if the project failed or construction was delayed. Furthermore, the record does not identify a new commercial enterprise, such as a limited partnership, in which alien investors invest capital. Rather, their full involvement would be to purchase residential units from the regional center. Finally, the applicant asserts that membership in the resort’s Homeowner’s Association will constitute management in a new commercial enterprise. As the Homeowner’s Association is not the new commercial enterprise in which the alien investors will invest, this assertion lacks credibility. As the described proposal does not contemplate an investment of capital in a new commercial enterprise, the job creation at a proposed resort is immaterial.

According to the Peninsula Daily News, The Statesman Group is planning to try again with its Regional Center application, this time “expecting better luck… because he hired a professional writer to pen the application.”  (Hooray for professional writers!) I trust that the writer in question will take care to keep in tune with “the letter and spirit” of the EB-5 regulations, as the AAO’s summary requests. To be fair to The Statesman Group, this is surely not the only RC application denied for trying to frame purchase of residential real estate as an EB-5 investment.

For all EB-5-related AAO decisions, see my AAO Decision summary page.

Filed under EB-5 Law & Policy

Insights from Conversation with Director Mayorkas

January 18, 2012 1 Comment

And now a guest post from Joseph McCarthy, an immigration attorney and EB-5 expert who was one of the select few in-person participants at both “Conversations with the Director” in Washington DC on 1/12/2012 and 9/14/2011. I’m one of the hundreds who struggled to follow by phone what exactly was going on in the lively discussion with USCIS Director Alejandro Mayorkas, so I prevailed on Mr. McCarthy to share his first-hand experience and highlight key topics and notifications from the session. I don’t know how he found time to write this, but thank you Joe for this generous and useful report from the front. We look forward to hearing more from you.

For the second time in sixth months, USCIS Director Ali Mayorkas offered a small-audience EB-5 “conversation” as part of his ongoing outreach efforts to EB-5 stakeholders.  Much like the first event last fall, the meeting took place in an intimate conference room located within USCIS headquarters in Washington DC.  This time, however, the audience was noticeably smaller and primarily composed of veteran immigration attorneys and senior USCIS staff (accompanied by 350 passive participants who listened-in via teleconference).  The events also differed in tone and format.  The first event introduced the beginning of a new EB-5 policy memo, but the meeting as a whole might fairly be characterized as a “listening session” in which Director Mayorkas invited audience topics and concerns.  This most recent event largely focused on the content of the revised memo wherein USCIS more vocally espoused positions on policy topics.

While one could devote many pages to analyzing the new memo, perhaps the biggest conceptual change added to the most recent draft is related to what many EB-5 practitioners refer to as the “venture capital model.”  USCIS inserted several paragraphs discussing how an immigrant investor may diversify their total EB-5 investment across a portfolio of wholly-owned businesses, so long as the minimum required investment and number of jobs occur within a new commercial enterprise.  The language chosen by USCIS clearly contemplates a traditional, or non-Regional Center, investment, which quickly led to a discussion as to how the model might apply to Regional Center projects, how job creation could be verified (the ongoing debate between tracing an individual’s investment to job creation versus the creation of jobs by the commercial enterprise (8 CFR §204.6(j))), and the effect of multiple projects with varying TEA status.  While discussion was provocative, as one might anticipate, no resolution resulted.  Nonetheless, Director Mayorkas acknowledged that USCIS would further drill down into the topic and the Agency on the whole appeared receptive.

In subsequent topics, there appeared to be less agreement between the Agency and stakeholders.  In truth, not all debate may have been over closely held policy positions, but rather informed discussion of how certain hypothetical fact patterns play out given proposed ideas.  The topics varied and reached beyond the content of the memo, including:

  • Timing of job creation with respect to the two-year provisional residency period:  What is considered to be a “reasonable” period of time following the two year timeframe if the full number of jobs hasn’t been created?  USCIS appeared committed to the idea that idea of a reasonable timeframe only contemplated a “short tail” following the initial two years.
  • The extent to which USCIS should scrutinize the legitimacy of petitioner’s funds:  Again, USCIS appeared unapologetic about hyper-technical examination of source of funds, perhaps even addressing compliance with foreign laws.
  • The source and necessity of the delay in adjudications pending the resolution of unknown policy issues at USCIS headquarters:  Frustratingly, USCIS appeared unwilling to identify either the source of the delay, or the expected timeline when adjudications would renew.

At times the debate appeared to get fairly contentious; the Agency seemed highly resistant to particular stakeholder positions or interpretations of law, at times even conveying their own frustrations.  Yet overall, Director Mayorkas maintained a professional meeting posture in the spirit of fostering dialogue.  An amateur poll of attendees indicated that most participants felt encouraged and appreciative of the increased dialogue with the Agency, but reserved their final impressions until after the January 23rd quarterly stakeholder call.

Two small, yet highly important notifications were made at the meeting.  Director Mayorkas stated that three contract economists and/or business analysts (the distinction was blurred, so it was unclear) have already been hired by USCIS, and the Agency is interviewing for three more contract positions and one full time federal economist.  The Director implied that the Agency may be vetting for a corporate or securities attorney, which seemed curious, given that this is within the purview and available expertise of other federal agencies.  And certainly the question that is on every client’s mind: there currently is no available timeline for the advent of premium processing, but Director Mayorkas renewed his commitment to the idea.  Many EB-5 practitioners continue to wonder if premium processing will manifest as originally proposed – strictly for the I-924 Regional Center petitions – or if some other alternative can be explored that will result in getting money to projects faster.  My guess is that will be the topic of conversations with Mayorkas to come…

Filed under EB-5 Events, EB-5 Law & Policy, Updates from USCIS

“On hold at USCIS headquarters”

January 17, 2012 5 Comments

[1/23 update: In the 1/23 EB-5 Stakeholder meeting, Sasha Haskell confirmed that the hold at headquarters indeed resulted from questions about the economic analyses that were raised by USCIS's contract economists and currently under review by the senior leadership.]

[2/6 update: I recommend this article on the issue by Bernard Wolfsdorf , an attorney who works with EB-5: "Transitions and Predictions for the EB-5 Program"]

A number of Regional Center applicants, including a few who filed over a year ago, have been told that their applications are currently “on hold at USCIS headquarters pending resolution of an issue.”

This hold hasn’t affected all I-924s (the CSC has issued recent Regional Center approvals and RFEs), but it’s a significant phenomenon. I’ve heard several personal reports from attorneys and applicants in the last couple months, and the audience at the 1/12/2012 EB-5 engagement asked USCIS Director Mayorkas about it.

So far as I’ve heard, communications from USCIS to the affected applicants haven’t disclosed the nature of the hold-up(s) or when resolution might be expected, and Director Mayorkas didn’t give much more information at last week’s meeting. He agreed that USCIS should be able to identify the issues and provide a timetable for resolution, and he suggested that the matter will be treated at the up-coming January 23 EB-5 stakeholder meeting. (He didn’t agree that it was unfair for applications filed many months ago to be judged according to current standards. He also noted that the unusual volume of new RC applications has been naturally accompanied by an unusual volume of unprecedented issues requiring judgment calls, thus the need for evolving guidance.)

While we wait for the 1/23 meeting, can we guess what might be the unresolved issue(s) holding up some Regional Center applications? Let’s review a few questionable/questioned areas that we know of:

1)     Econometric Studies
As a layman I’ve struggled to make sense of the economic impact reports and job counts that get filed with Regional Center applications, and I’ve wondered what to conclude when different professional economists working with EB-5 criticize each other’s approaches. How do the adjudicators at the CSC interpret and assess these reports? What do they make of the widely varying length, level of detail, and use of methodologies? And now that USCIS has just hired three new economists, do they disagree among themselves as much as the economists preparing the reports do? Perhaps most adjudicators used to rubber stamp the econometric studies, not being qualified to critique them, but now the new team of USCIS economists is providing more oversight and raising questions? I’ve heard several people (including Joseph McCarthy, who asked about holds at the in-person meeting with Director Mayorkas) speculate that issues raised by the newly hired economists may explain the “hold at headquarters” phenomenon.  I expect that the 1/23 stakeholder meeting will include new guidance for econometric studies.

2)     Targeted Employment Area Designation
Even the New York Times recently joined the clamor pointing out “rule-stretching” to allow projects with apparently prosperous surroundings to take advantage of the $500,000 EB-5 investment threshold that Congress intended to benefit areas of high unemployment. Surely USCIS has also noticed the negative press, and is struggling to create guidelines that will limit applicants’ self-serving creativity and the states’ inconsistent practice in TEA designation. For in-depth analysis of the issues at stake, see two excellent articles by EB5info.com (New York Times, EB-5 Visa, TEAS, and Gerrymandering Part I and Part II). I particularly note the issue of whether a census tract per se is an allowable building block for a TEA. Census tracts were the common building block until questions started to be raised last year, and apparently the jury is still out on whether a single census tract or census tract group can qualify as a geographic area or political subdivision for TEA designation purposes. As recently as the 1/12/2012 meeting, Director Mayorkas said that he couldn’t say for sure and would huddle with his team to consider the matter. The conclusion could affect a lot of pending applications.

3)     Project Detail
An unresolved issue that I notice is the question of how much and what kind of project detail needs to be included with a Regional Center application. The I-924 instructions say “The job creation analysis for each economic activity must be supported by a copy of a business plan for an actual or exemplar capital investment project for that category.” The EB-5 community tends to pull one way, taking that “or exemplar” option to allow filing applications based on briefly sketched hypothetical projects, while USCIS tugs the other way, issuing RFEs that request extensive real-world project information, often quoting the further I-924 instruction that: “A business plan provided in support of a regional center application must contain sufficient detail to provide valid and reasoned inputs into the economic forecasting tools and must demonstrate that the proposed project is feasible given current market and economic conditions.”  Official guidance (notably the 2009 Neufeld memo) specifically allows for “hypothetical” projects in RC applications, but I get the sense that the adjudicators currently don’t like them very much and may be debating what to do with initial RC applications not grounded in actual projects.

Anyone else have first hand evidence or guesses about the reasons for the hold on some I-924s at USCIS headquarters? I’m not happy that we have to speculate about this, but also thankful that USCIS is trying to be vigilant. I hope that eventually the new standards will be honed so that the many good proposals aren’t delayed and the many faulty applicants/projects are cut off before they go live and disgrace the EB-5 program. (But if I had to choose delays or disgrace, I’d choose delays.)

Filed under EB-5 in the News, EB-5 Law & Policy

Revised EB-5 Policy Memo

January 11, 2012 Leave a Comment

The USCIS Office of Public Engagement has emailed a revised draft of the EB-5 policy memorandum and a red line version of the memo for our review in advance of the 1/12 call with Director Mayorkas.

Note that this memo is still in the draft stage not to be taken as  final policy. The most interesting additions include new language on diversified investment on page 6 and an additional paragraph related to consistency in adjudications on page 19 of the redline version.

Filed under EB-5 Law & Policy

11/9 call with Director Mayorkas

November 9, 2011 Leave a Comment

In today’s conference call Director Mayorkas introduced  the document “A Work in Progress: Towards A New Draft Policy Memorandum Guiding EB-5 Adjudications” and fielded stakeholder questions. Many of the questions asked were irrelevant to the topic at hand so I won’t bore you with my recording, but there are a few tidbits of interest:

  • Premium Processing for EB-5: Director Mayorkas reported that the goal is to have premium processing available for initial I-924 applications only by Spring of next year. He also reiterated that the service is working hard to speed up processing times across the board for all petitions, independent of premium processing.
  • TEA Issues: Director Mayorkas said that the statement on TEA designation in the draft memo represents guidance that is effective immediately. See page 6-7 of the memo. (“….Consistent with the regulation, USCIS is to give deference to the state’s designation of the boundaries of the geographic or political subdivision that will be the targeted employment area. However, USCIS must ensure compliance with the statutory requirement that the proposed area has an unemployment rate of at least 150 percent of the national average rate.” To me this statement looks consistent with recent guidance and as if it still gives USCIS leeway to reject gerrymandering.)
  • Oversight: Director Mayorkas said that the agency is concerned about fraud and misrepresentation in EB-5 marketing and practices, and that examples should be brought to the agency’s attention.

I recommend those active and knowledgeable in the EB-5 field to review and comment on the draft memo between now and Nov 25, when the comment period closes. Those looking for practical guidance now can skip this document because the content is incomplete and will change. People also shouldn’t look to this memo for new policy. The purpose of the memo is apparently just to collect all existing EB-5 guidance in one handy location with headings — unexciting but useful and appropriate.

Filed under EB-5 Events, EB-5 Law & Policy, Updates from USCIS

Diversified Investment / Fund Model for EB-5

October 28, 2011 3 Comments

I’ve been getting a lot of calls recently from people planning EB-5 offerings that involve a diversified investment strategy. Investors of course like to see their eggs going into more than one basket, so that the chances for profit and job creation aren’t entirely dependent on the success of a single business or project. But what investment mechanisms will USCIS accept? May investors’ money be divided among multiple projects? Must these projects all be identified in advance? If one project fails, can all investors share credit for job creation at the project that succeeded? May an EB-5 investment vehicle act as a mutual fund?

There are two ways to approach the question of “what works for EB-5”: through the law or through the lore. The lore includes things like USCIS answers to questions at stakeholder meetings and the “what happened to my case” stories one hears from attorneys and Regional Center people. Tracking the lore will give you a sense of the interpretations and preferences current at USCIS. Just keep in mind that this guidance is unofficial, may change, and isn’t binding. The other approach is to go to the law – the statutes, regulations, and precedents that must form the basis for all interpretations – and carefully build your own argument for “what works for EB-5.” If the lore suggests you’d better not do something, but you have a smart case solidly based in the rules to show that you can, you should be safe.

For the law most relevant to the question of diversified investment, I recommend you to the precedent decision Matter of Izummi. This decision treats an I-526 filed for a Regional Center investor, and goes into detail about what is and isn’t wrong with this picture:

Significantly, the decision doesn’t say that it was impermissible for the new commercial enterprise (AELP) to invest in a credit company which then made loans to multiple export companies. Rather the AAO details several problems with the way the scheme was implemented, including 1) location (investment and job creation outside TEAs and Regional Center geographic area) and 2) use of capital (investor funds not all reaching the companies most associated with job creation). So if you’re considering a structure similar to that involved in the Izummi case, carefully consider how you’ll avoid the problems identified in the Izummi example. (By the way, the Izummi fact pattern picture is from the EB-5 training materials released by USCIS.)

The most useful published lore that I have relevant to the question of diversified investment is this Q&A from the 3/17/2011 stakeholder meeting with USCIS (see slides 52-58).

Question: Please explain your current thinking and practice concerning evaluation of petitions that involve investments in enterprises that pool multiple investors’ money and allocate the capital to multiple job-creating projects/entities at the same time. In the past USCIS has reacted with ambivalence to these notions, and some adjudications of the past have reflected opposition to them. Investors would like to spread their risk of loss among multiple projects, and it seems reasonable to allow them to spread their risk of any one project’s ability to create the target number of jobs by letting the investors allocate the job creation from the total of the jobs created by multiple projects (using some method of allocation agreed to among the investors, such as “first to invest, first jobs allocated,” though other methods might work).

Answer: A regional center may opt to structure EB-5 capital investment projects that involve multiple investment vehicles. However, USCIS has consistently maintained that a regional center must transparently show at the Form I-526 stage the specific job creating entities/projects in which the investor’s capital will be invested, supported by comprehensive business plans and an economic analysis that provides a reasonable methodology for estimating the job creation that will occur as a result of these complex investments.
Some recently-reviewed RC applications have put forth capital investment structures that seem to presume that the EB-5 immigration process allows for a Regional Center to recruit EB-5 investors, who then file Form I-526 petitions in order to invest in an enterprise without identifying the specific capital investment projects that will receive the immigrant investor’s capital.
This same presumption is reflected in some of the questions regarding capital investment structures as follows:

  • Our Regional Center is approved to include Florida businesses in many RIMS II “sectors”. If in a I-526, we submit a generic business plan (and legal documents) for a business that falls within one of the sectors, then, after the I-526 is approved, the business affiliate gets the investor’s funds and selects the specific business. Is that permissible?
  • I would like the Service to comment on the desired legal structure for multiple asset investments. How must an RC structure the limited partnership investments when there are sub-assets to a project? The push for fund of funds regulations is significant—will the USCIS allow all Regional Centers the same flexibility to not specifically identify the jobs creation project at the I-526 and allow them to let the USCIS know what we did sometime before the I-829?

I-526 petitions may not be approved for investments (or loans) to businesses that will not be identified or selected until after the approval of the petition. Such a strategy is not EB-5 compliant as the EB-5 program is not an attestation-based program. Prospective job creation must be demonstrated at the Form I-526 petition through USCIS review and approval of the business plan and associated economic analysis for the actual capital investment projects that will receive the immigrant investor’s capital. This documentation provides the foundation for the adjudication of the I-829 petition to determine if the investor has met the requirements for removal of conditions pursuant to INA 216A and 8 CFR 216.6. The Ninth Circuit has held that USCIS may not “de-couple” I-526 petition approval from I-829 approval. See Chang v. U.S., 327 F.3d 911, 927 (9th Cir. 2003). This means that, using Form I-829, alien investors must demonstrate compliance with the EB-5 program rules by confirming the fulfillment of the investment scheme and business plan that USCIS approved at the I-526 petition stage. See id.

Most if not all RCs generally seek to limit their capital investment offerings to those that may qualify for the reduced capital investment threshold of $500,000 through investments in a TEA. Additionally, a large percentage of RC-affiliated capital investment vehicles involve investments in NCEs which ultimately loan capital to third parties who use the capital in the ultimate job-creating project. There are other requirements for eligibility for the approval of EB-5 petitions which prohibit an I-526 attestation-based process, to include:

  • INA 203(b)(5)(B)(i) which provides that a certain number of visas made available under the EB-5 category “be reserved for qualified immigrants who invest in a new commercial enterprise …which will create employment ina targeted employment area”(emphasis added).

Matter of Izumii, 22 I&N Dec. 169(Comm. 1998) provides significant guidance in making TEA determinations and RC capital investment projects, to include the following:

  • Regardless of its location, a new commercial enterprise that is engaged directly or indirectly in lending money to job-creating businesses may only lend money to businesses located within targeted areas in order for a petitioner to be eligible for the reduced minimum capital requirement.
  • Under the Immigrant Investor Pilot Program, if a new commercial enterprise is engaged directly or indirectly in lending money to job- creating businesses, such job-creating businesses must all be located within the geographic limits of the regional center. The location of the new commercial enterprise is not controlling.

Other facets regarding I-526 eligibility are predicated on a review and analysis of the actual capital investment project, to include the identification of the ultimate recipient of capital investment funds, such as:

  • Determining job creation, generally: In order to demonstrate that the new commercial enterprise will create not fewer than 10 full-time positions, the petitioner must either provide evidence that the new commercial enterprise has created such positions or furnish a comprehensive, detailed,and credible business plan…See Matter of Ho, 22 I&N Dec. 206 (Comm. 1998), 206.
  • Determining job creation as a result of investments into pre-existing business..SeeMatter of Soffici, 22 I&N Dec. 158 (Comm. 1998), 158. See also Matter of Hsiung, 22 I&N Dec. 206 (Comm.. 1998), 201.
  • Determining whether the job creation may be met through the preservations of jobs in a “troubled business”. See INA section 203(b)(5)(A)(ii) and 8 CFR 204.6(j)(4)(ii).

Filed under EB-5 Law & Policy

Published RC Decisions

October 19, 2011 Leave a Comment

As another in my series of “handy reference” additions to this blog, I’ve created a page summarizing and linking to  AAO decisions on Regional Center cases, including Regional Center investor petitions (I-526 and I-829)  and Regional Center applications (I-924).  These cases aren’t new and I’ve commented on each before, but I refer back to them often enough that it’s useful for me to link them in one place. For all of you out there searching for “sample EB-5 petition” or “example Regional Center application,” here’s your chance to look behind the scenes at how someone else assembled a petition and how USCIS judged it.

Filed under EB-5 Law & Policy

What is a “direct” job?

October 13, 2011 Leave a Comment

Now for a confession. After all this time working with EB-5 I’m still confused about how to use the word “direct job” in the Regional Center context. Here are the issues to reconcile:

  1. Most regional center investments do not count job creation at the level of the “commercial enterprise” but at the level of an “investment project” (Where the commercial enterprise collects capital from EB-5 investors and then invests in a project that creates jobs.)
  2. In discussing “direct” and “indirect” jobs, USCIS sources use “direct” to mean a job at the commercial enterprise level and “indirect” to indicate a job at the project level.  USCIS sources also use “direct” to mean an identifiable job that’s verified by payroll records and subject to 8 CFR requirements and “indirect” to mean a job that’s based on calculations by the economist. For example:

    “Direct jobs are those jobs that establish an employer-employee relationship between the commercial enterprise and the persons that they employ. Regional centers typically use the RIMS II or IMPLAN economic models to determine the number of indirect jobs that will be created through investments in the regional center’s investment projects.” Adjudicator’s Field Manual Chapter 22.4 (2)(A)

    “Direct jobs are actual identifiable jobs for qualified employees located within the commercial enterprise into which the EB-5 investor has directly invested his or her capital.
    Indirect jobs are those jobs shown to have been created collaterally or as a result of capital invested in a commercial enterprise affiliated with a regional center by an EB-5 investor.”
    June 16, 2010 Stakeholder Meeting Presentation

    The concept of what qualifies as a “direct” job for EB-5 purposes can be complicated. 1. For non-RC affiliated capital investments, job creation may only be credited through the creation or preservation of jobs that are directly within the commercial enterprise in which the EB-5 Investor made his or her investment. 2. For RC-affiliated capital investments, job creation may be credited through the creation of jobs directly within the commercial enterprise in which the EB-5 investor made his or her investment, but can also be credited with indirect job creation through equity investments or loans to other organizations, or through indirect job creation based upon an econometric model supported by a detailed business plan and associated economic analysis.3. The concept of a what a direct job is within econometric modeling differs slightly from a direct job described in #1 or #2 above, as a direct job in this context is a job that can be directly attributed to the economic impact of the capital investment in order to derive estimates of indirect job creation.
    Dec. 16, 2010 Stakeholder Meeting Presentation

  3. I regularly see USCIS approving economic analyses that treat the Regional Center “investment project” only and use economic methodologies to calculate direct as well as indirect jobs created at the project level. In these analyses, “direct” jobs are part of a total calculation based various methodologies and don’t indicate jobs to be verified by payroll records.

It appears that in practice USCIS accepts that economists have a specialized definition of “direct,” and that the economist’s “direct job” is a subset of USCIS’s “indirect job.” Is this the solution, and does anyone have a clearer statement from USCIS on the issue? Do I dare use the word “direct” in my Regional Center business plans? How can the adjudicators tell when the word “direct job” means “ask for payroll records” and when it doesn’t? Several questions at stakeholder meetings have addressed the question (see particularly the 3/17/2011 meeting), but the published answers are not conclusive. And we need clarity because a lot of Regional Centers out there are counting on theoretical “direct jobs” for their projects, and don’t want to be hit with requests for W-2s and I-9s at the I-829 stage. Can anyone untangle this for me?

UPDATE: Perspectives from other EB-5 commentators.

Joseph Whalen, who has experience as a USCIS adjudicator, writes in his essay on The Business Plan and the Economic Analysis in Support Of the Form I-924:

When the Economic Analysis bases and ties its projection as to indirect job creation on a base level of newly created jobs attributable to the alien’s investment in a particular commercial enterprise rather than simply to the dollar amount of the investment, it is critical to differentiate between “direct employees” on the alien’s payroll vs. “direct employees” of a third party who are “indirect employees” for EB-5 purposes. Third party direct employees used as “direct jobs” in terms of input into the Econometric Model may be termed as “hypothetical” or “base jobs” or some other terminology that clearly distinguishes them as not on the alien’s payroll. This is critical at the I-829 stage as to the evidence that will be required to lift conditions on residence. The classic and easiest example that illustrates this is “mall tenants’ employees” while another could be “factory workers” when the alien is loaning money to an industrialist in order to let that other person or entity build, convert, or expand a factory.

And attorney H. Ronald Klasko includes the following among his Top 10 Lessons Experience Has Taught Me about EB-5:

9. There is a difference between a direct job as defined by USCIS and a direct job as defined by an economist.
–USCIS defines a direct job as being a W-2 employee of the new commercial enterprise in which the investor invests. Economists define direct jobs as direct employees of the job creating enterprise or the construction company, as opposed to indirect or induced employment.
10. It is better to rely on indirect and induced jobs, rather than direct jobs.
–reliance on direct jobs could result in condition removal denial if there are less direct jobs than projected or if some of the employees can’t be proven to be U.S. citizens or permanent residents. Relying on indirect or induced jobs, such as through an economic model that relies on expenditures, may result in the regional center having more control over proving the required facts for condition removal.

Filed under EB-5 Law & Policy

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