Perspective on reauthorization and S.831

This week IIUSA held a Leaders Advocacy Summit to help explain and build support for efforts to reauthorize the regional center program in advance of its June 30, 2021 sunset date. Particularly, the summit focused on the only active reauthorization legislation to date: Senator Grassley and Senator Leahy’s S.831 – A bill to reauthorize the EB-5 Regional Center Program in order to prevent fraud and to promote and reform foreign capital investment and job creation in American communities.

The IIUSA Leaders Advocacy Summit recordings are available for free. I recommend them for extensive primary-source information about what’s happening now with EB-5 legislation, and what we can do.

• The panel “Capitol Hill Update and IIUSA Advocacy Strategy” features commentary from IIUSA’s lobbyists. They discuss the process that resulted in the currently-proposed Grassley/Leahy bill, potential hurdles, milestone goals for the coming weeks, and influencing key decision-makers in Congress. The lobbyists acknowledged that EB-5 legislation is unlikely to get floor time as a stand-alone bill, but will depend on getting sufficient endorsements, co-sponsors, and attention that key decision-makers can recognize its importance and popularity and agree to attach the EB-5 bill to other legislation.
• The panel “Congressional Staff Roundtable” allows us to hear directly from the staff at Senator Grassley and Senator Leahy’s offices responsible for the proposed EB-5 legislation. They give interesting insights into their senator’s priorities and hopes for the bill, and practical considerations as the bill moves forward in the legislative process.
• The panel “EB-5 Legislation Review” gives an expert-guided tour of the text of S.831. I was interested to hear the panelists’ insight on what is and isn’t an actual change from current practice/existing law, and what resulted from IIUSA negotiation or remains in place despite negotiation. At least, S.831 is an improvement on previous iterations of Grassley/Leahy EB-5 legislation. For people struggling for reasons to support S.831 for what it contains, not just what it represents, this panel’s in-depth analysis offers some help.
• Other panels discuss media strategies and regional center reactions to the bill.

Hearing the IIUSA speakers struggle to present S.831 as a good bill reminds me of us last year trying to feel good about our presidential votes. S.831 is the Joe Biden and Donald Trump of legislation. Whatever happened that the choice came down to this? How many of us voted in last year’s election with a bitter taste, not for our candidate so much as from a calculation of alternatives? And that’s where I am with S.831. The bill is not well designed to accomplish its objective “to prevent fraud and to promote and reform foreign capital investment and job creation in American communities.” It does not address the factors that have depressed investment and stymied job creation. Its impractical reforms would help deter good use of the program (by making it exclusive to the few who can afford all the fees and red tape) and undermine USCIS accountability (by deferring judicial review) as much as deter fraud. S.831 will not make the regional center program work as intended — the truly needed changes will have to come in another bill after S.831 addresses the immediate reauthorization crisis. S.831 is only a stopgap, since a mere five-year authorization will not even cover the existing regional center backlog through the visa stage, much less provide needed stability for new investment in an environment of multi-year processing and visa waits. But I support S.831 because I must have some vote against the alternative, which is to allow the regional center program to lose authorization after June 2021. Supporting S.831 appears to be my only chance to vote against betraying the in-process EB-5 investor applicants who depend on on-going regional center program authorization to get visas, and to avoid undermining the projects deploying their billions in investment. And the negative way Grassley and Leahy frame S.831 – as a bill to solve problems and reduce risks, not as a bill to support immigrant investment – is plausibly the best way to make it uncontroversial in Congress and get reform+reauthorization a chance at passage.

Last Fall, I spent a moment with pen hovering over my presidential ballot, wondering if I could make myself feel better by writing in Joe Neguse. But I admitted that would be false comfort. And now too in the EB-5 legislation context, supporting a positive but nonviable option could be counterproductive. Consider the low probability of a significantly renegotiated S.831 (what we’ve got is already the fruit of six years of industry negotiation with Senators Grassley and Leahy), a bill that gives visa relief (who thinks that Schumer and Pelosi would dare be seen to help immigrant investors right now, while kids at the border, DACA, etc. remain unresolved?), a bill with investment amount/TEA changes (such a bill doesn’t exist yet, and would be a long shot if it did since the Biden Administration just ratified the regulations, and reducing the TEA incentive would look controversial to Congress), or another indefinite series of short-term extensions (an option that was already tenuous over the past six years, and which Congress apparently intentionally took off the table when it gave the RC program a new mid-year sunset date). I would love for someone to give me reason to hope for and way to support one of these alternatives. From my armchair, I do not see the realistic path around S.831 to get to reauthorization. But IIUSA, at least, sees alternatives in the path after S.831.

If my future business would be dead without RC program authorization, but equally dead if S.831 passes, why not gamble on holding out for a third alternative, however improbable? But gamblers must remember that someone else does have something to lose: tens of thousands of EB-5 investor families whose future immigration hopes depend on on-going regional center program authorization. S.831 is a bird in the hand that could protect them in the near-term, at least (and protect the projects that don’t want to be abruptly besieged now by tens of thousands of anxious/disappointed investors). We have a responsibility to these constituents — and should recognize that their public future success or failure affects our interest as well. Therefore, I have added my name to  https://www.saveandcreatejobs.org/members, where it can be used by lobbyists to help create the impression of support and enthusiasm that the Grassley/Leahy reauthorization bill will need to pass. And I encourage other industry stakeholders to do the same. Ah, democracy.

Note that I continue to update my Reauthorization page and Washington Updates page on an on-going basis, to avoid cluttering the blog feed.

I shall end this post with a bit of history, as context for how we got where we are today: My log of EB-5 legislative proposals 2015 to 2019, and my chart of regional center program authorization history.

And finally, because this reminder can’t come too often, the last count (from Charles Oppenheim in November 2020) of EB-5 investors and family still at NVC or USCIS without visas yet. The tens of thousands of regional center investors in this count will not be a happy constituency if the regional center category becomes “unavailable” in the Visa Bulletin — which will happen automatically starting July 1, 2021 unless and until the regional center program is reauthorized.

What indirect job creation means in EB-5

I have planned a series of educational articles to help support efforts to reauthorize the regional center program. Each article will tackle an area of misconception about what the regional center program involves and how it works. To begin: what does “indirect job creation” mean?

Key Features of Indirect Job Creation

Please note these critical and oft-misunderstood features of “indirect job creation” in the EB-5 context:

1. Indirect job creation is a defining characteristic of the regional center program, as distinct from the permanent “direct EB-5” program. (See Point 1 below for quotes from the statute and policy.)
2. The EB-5 definition of “indirect job” is NOT THE SAME as the economic model/common usage definition of “indirect job.”  In its EB-5 definition, an indirect job is a job that resulted from an EB-5 investment, yet not a W-2 employee of the particular entity in which the EB-5 investor is an equity member. This definition comprises jobs that would be considered both direct and indirect from an economic perspective. For example, for an EB-5 investor in a hotel development, all construction workers and hotel employees at the hotel site are EB-5-defined “indirect jobs,” assuming that they’re on the payroll of various contractors and a hotel management company, not on the payroll of the investor-owned entity. By contrast, in the economic model definition, those construction workers and hotel employees would be defined as direct jobs for the hotel project, while indirect jobs would have a different meaning: employment in supplier industries. (See Point 2 below for additional discussion drawn from policy and a training for USCIS adjudicators.)
3. EB-5 indirect job creation explains why regional center and direct EB-5 are not interchangeable, such that over $20 billion dollars and over 80,000 in-process EB-5 applicants currently depend on the regional center program being reauthorized into the future. Nearly 100% of regional center investments are structured with an EB-5 new commercial enterprise (NCE) that invests in a job-creating entity (JCE). That degree of separation makes all verifiable JCE direct employees and other job creation by the investment project structurally “indirect” by the EB-5 definition, and thus only countable by investors with a regional center sponsor, under the regional center program. It doesn’t matter if you can go and talk to the employees at your project, or if an economist would count direct job creation by the project. Those jobs are still “indirect” by EB-5 definition and for EB-5 purposes, except as on the payroll of the NCE. (See Point 3 below for an example from an AAO decision, discussing why an investor who lost regional center sponsorship could not go on to qualify under the direct EB-5 program.)    

Misconceptions about Indirect Job Creation

I’ve written this post before (for example back in 2015, when we were in the same square we’re still in today, facing a reauthorization deadline, a Grassley reform bill, and popular misconception about how EB-5 works). But here’s to trying again.

Senator Grassley has apparently remained under the mistaken impression that “indirect job” means an unreal and unverifiable job. (He worries that “None of the jobs created have to be ‘direct’ or verifiable jobs but rather are ‘indirect’ and based on estimates or economic modeling. Again, not knowing for sure if jobs are created.”) The Congressional Research Service report “EB-5 Immigrant Investor Visa” (January 26, 2021) appears to conflate the EB-5 definition and economic model definitions of “indirect job.” (Footnote 25: “Indirect jobs are held outside of the NCE but are created as a result of it. For example, they can include persons employed by the producers of materials/inputs for the immigrant investor’s enterprise.” The first sentence gives the EB-5 definition of an indirect job. The second sentence gives an example from the economic model definition of an indirect job.) Our Congressional representatives need to understand that “jobs created indirectly” in the EB-5 context indeed include the real people employed on site at projects receiving EB-5 investment, not just economic fictions or tangential impacts in supply industries.

And people may believe incorrectly: couldn’t regional center investors who have yet to get visas still go on to qualify under the permanent EB-5 program based on direct job creation? The investor might assume that a job should count as “direct” so long as it’s a real and verifiable employee on site at the project she funded – but that’s not how it works. In the EB-5 definition, the direct/indirect distinction is a matter of investment structure, not just of economic fact. The typical regional center investment structure (new commercial enterprise investing in a separate job-creating entity) makes all job creation “indirect” according to the EB-5 definition. Thus, loss of regional center program sponsorship would not only prevent regional center investors from counting economic model “indirect jobs,” but from any counting any jobs at all based on how regional center investments were structured. (This problem specifically applies to past investors who have not yet been admitted to conditional permanent residence. The regional center statute specifies that people who were already admitted under the regional center program (i.e. at the CPR or I-829 stage) can go on to count jobs created indirectly. If by chance the regional center program were allowed to expire, it’s possible that Congress would agree to pass new protections that would also cover past regional center investors who do not yet have conditional permanent residence.)

More Detail

Point 1: EB-5-defined indirect job creation is a defining characteristic of the regional center program.

The law that established the regional center program provides that:

the Attorney General shall permit aliens admitted under the pilot program described in this section to establish reasonable methodologies for determining the number of jobs created by the pilot program, including such jobs which are estimated to have been created indirectly…

(Public Law 102-395, Section 610(b), p. 47)

USCIS Policy Manual Vol. 6 Part G Chapter 1(B)2:

The Regional Center Program is different from the direct job creation (stand-alone) model because it allows for the use of reasonable economic or statistical methodologies to demonstrate job creation. Reasonable methodologies are used, for example, to credit indirect (including induced) jobs to immigrant investors. Indirect jobs are jobs held outside the enterprise that receives immigrant investor capital. 

Point 2: EB-5-defined “indirect job creation” is not the same as “indirect jobs” as defined by economists.

The special EB-5 definition of “direct” and “indirect” can be found in the USCIS Policy Manual Vol. 6 Part G Chapter 2(D)5:

Direct jobs are those jobs that establish an employer-employee relationship between the new commercial enterprise and the persons it employs. Indirect jobs are those that are held outside of the new commercial enterprise but are created as a result of the new commercial enterprise. For example, indirect jobs can include, but are not limited to, those held by employees of the job-creating entity (when the job-creating entity is not the new commercial enterprise) as well as employees of producers of materials, equipment, or services used by the new commercial enterprise or job-creating entity. 

By contrast, in the context of economic analysis, direct jobs are related to the specific industry, indirect jobs support that industry, and induced jobs result from employee spending in the community.

USCIS training for EB-5 adjudicators uses the words “legally direct” vs “economically direct” and “legally indirect” vs “economically indirect” to emphasize the distinction between terms as used by EB-5 legal authorities vs. economic models. (See “USCIS EB-5 Training Materials (Pre-Nov 2019)” p. 82-85 and 153)

Point 3: The structural nature of EB-5-defined indirect job creation makes regional center and direct EB-5 non-interchangeable.

In AUG032016_01B7203 Matter of J-C-, AAO explains why a petition filed as a regional center investment could not practically qualify as a direct investment. Without regional center sponsorship, the investor would lose the chance to count economically indirect jobs (which were needed in her case to reach the total job requirement) and also could not count economically direct jobs (which were created by a JCE not wholly owned by the NCE, and thus still “legally indirect” for EB-5 purposes.)

The Petitioner maintains that she should be able to pursue her immigrant investor visa even without being part a regional center that formed the basis of her initial Form I-526 petition. Specifically, she states a lack of the Regional Center involvement does not impact her eligibility because the project continues and will create a sufficient number of direct jobs within the two-year period.

…As explained below, for the Petitioner to continue to pursue an EB-5 visa as an individual investor independent of the prior Regional Center, she would need to demonstrate both the requisite direct job creation and that the JCE is a wholly-owned subsidiary of the NCE. The record does not currently reflect these conditions. Meeting these conditions would necessitate material changes and thus a new petition.

First, different rules apply to individual and regional center investments with respect to how qualifying jobs are tallied. The former Regional Center’s business plan included indirect job creation figures, which are not available to an individual investor without a regional center’s involvement. The Regional Center’s final business plan claimed 256.9 jobs, of which 202 were direct jobs. But, for the 24 foreign national investors to be able to proceed independently of the since-terminated Regional Center, the project(s) must create a minimum of 240 direct positions (10 per investor). The now defunct Regional Center’s business plan is short 38 direct jobs to support 24 independent foreign investors. As a result, the record does not establish that the Petitioner and her co-investors have met the direct job creation requirements.

Second, different rules apply to individual and regional center investments with respect to which entity must create the new jobs. For individual investors (not associated with a regional center), job creation must occur within a new commercial enterprise or within a wholly-owned subsidiary. The new commercial enterprise’s employees must provide “services or labor for the new commercial enterprise and [must receive] wages or other remuneration directly from the new commercial enterprise.” The Petitioner has not offered evidence that the JCE in this case is a wholly-owned subsidiary of the NCE. Thus, the Petitioner has not shown that the job creation will occur within the NCE or that the employees of the JCE meet the regulatory definition of employees.  Proceeding without regional center involvement would require the NCE to absorb the JCE and make it a wholly-owned subsidiary. This activity would constitute a material change to the original petition.

Misc updates (USCIS processing, consulates, visa bulletin, litigation, reauthorization)

This post briefly reviews a list of important EB-5 updates and resources that I’ve been collecting to highlight for you on this blog, but haven’t had time to address in detail.

USCIS Processing Updates

Ombudsman Meeting EB-5: On February 17, IIUSA met with the CIS Ombudsman’s Office to discuss issues and concerns with USCIS administration of the EB-5 program. The Ombusdman apparently did not tell IIUSA anything, but IIUSA delivered a very detailed and helpful document detailing EB-5 processing problems and policy issues (particularly with the recent Policy Manual update on redeployment). We hope that the Ombudsman will convey these concerns to USCIS.

USCIS Processing Times Report: I continue to log regular updates to the USCIS processing times report, and note that the reported times are increasing. I-526 has stayed about the same, but the latest report added 8 months to the median I-829 time, and 22 months to median I-924 time. That sadly does not signal the processing improvement I’ve been hoping for at IPO. But it’s possible that USCIS is not actually slowing down, but just backing up to deal with some older cases that had been left behind.

Actual I-526 processing times: As we know, the USCIS processing times report with its awkward methodology does not give a good sense of how far USCIS has actually progressed with form processing. I’m personally receiving individual reports of I-526 approvals for people who filed I-526 in September and October 2018. A clever reader with a program for mining the USCIS Case Status tool recently sent me his case status log as of February 16, 2021 for all I-526 filed in October, November, and December 2018. According to this interesting log, USCIS had taken at least some action as of 2/16/2021 on 63% of I-526 filed in September 2018, 23% of I-526 filed in October 2018, and 15% of I-526 filed in November 2018. Of the 1,577 I-526 receipt numbers my reader logged from this three-month period, 354 had been approved by 2/16/2021, 180 had an RFE pending, and 45 were waiting on decision after receipt of RFE response. The case status notes 15 petitions from this period that were voluntarily withdrawn, and a number that were rejected for a variety of reasons (no signature, incorrect fee, etc.) This three-month log does not suggest that USCIS is currently close to providing first-come-first-serve service for I-526 petitions.

I-829 Receipt Delays: A lawsuit is being prepared that will challenge the current months-long delay in the issuance of I-829 receipts. The representing law firm is currently seeking investors who want to be a part of this lawsuit.

USCIS issues from COVID-19 and budget problems: Two FOIA documents posted in the USCIS Electronic Reading Room give insight into processing issues at USCIS.

• The file Employment Authorization Documents (EADs) and Permanent Resident Cards – Representative Spanberger shows correspondence from December 2020/January 2021 between USCIS and a Congressional representative regarding I-485 delays. The Congresswoman noted a backlog of 75,000 Employment Authorization Documents (EAD) and 50,000 green cards that built up at USCIS during the pandemic. She asked about the plan and resources needed to reduce this backlog, and to mitigate its effects. The USCIS  response does not answer any of the Congresswoman’s three good questions. It mentions no plan beyond reusing biometrics in some cases. But I’m glad to see the questions being asked.  
• The file USCIS budget shortfall – Senator Cassidy includes correspondence from November/December 2020 between USCIS and two Senators who asked about the USCIS funding situation and adverse impacts on contracts and staffing. The correspondence reveals that even though the USCIS funding situation has improved, USCIS is still implementing cost-cutting measures that hamper operations. Specifically “USCIS implemented a 32% reduction to non-payroll expenses in FY 2021.” This cut meant reductions to contract scope and contractor resource/personnel levels (explaining why administrative and customer support functions are even worse than usual). USCIS anticipates that these cuts “will carry over into the next fiscal year and beyond, until enough resources are available to fully fund all necessary expenses.“ USCIS is a fee-funded agency responsible to plan for and set fees sufficient to cover resource requirements to provide acceptable service. And yet the USCIS letter seems to accept no responsibility for resource problems and resulting service failures. The Senators remind USCIS that the law has “language instructing the agency to submit a five-year plan for establishing electronic methods for acceptance, processing, and communication systems to eliminate bureaucracy and fraud.” In response, USCIS helplessly notes that it “expects delay in the adoption of new technologies and increased digitization” due to “the termination of some contracts and the restructuring of others” in connection with cost-cutting.  There’s no mention of planning, except this sentence that passively treats resource constraints as a given: “USCIS is in the process of developing its five-year plan, which will consider resource constraints and their impact on each phase of the plan.” I look forward to when Secretary Mayorkas has time to look at what’s happening at USCIS. Ye have not because ye ask not, USCIS. (Or in the case of the last fee rule: Ye ask, and receive not, because ye ask amiss.)

Consulate and visa updates

Visa Bulletin Update: Note that the end of the February 2021 Visa Bulletin has a Section E “Visa Availability in the Coming Months” (i.e. through May 2021). This section indicates that “Employment Fifth” (EB-5) is expected to remain “Current” for most countries, with “no forward movement” for China and “up to three weeks” of forward movement for Vietnam final action dates.

Consular Processing Update: The Department of State Newsroom updated their post on Phased Resumption of Routine Visa Services as of February 24, 2021 – but no good news for EB-5 yet. The post notes that “As post-specific conditions permit, and after meeting demand for services to U.S. citizens, our missions will phase in processing some routine immigrant and nonimmigrant visa cases.  Posts that process immigrant visa applications will prioritize Immediate Relative family members of U.S. citizens including intercountry adoptions, fiancé(e)s of U.S. citizens, and certain Special Immigrant Visa applications.” For whatever reason, EB-5 is not a priority. (Update: See also Briefing with Consular Affairs Acting Deputy Assistant Secretary for Visa Services Julie M. Stufft on the Current Status of Immigrant Visa Processing at Embassies and Consulates March 1, 2021)

The Monthly Immigrant Visa Issuance Statistics page on the DOS website shows just how few EB-5 visas have been issued at consulates this year. (For EB-5, search the PDF file for codes with “5” as the second digit.) From October 2020 through January 2021, I count this number of EB-5 visas issued through consular processing to countries at/near the limit: 0 to Chinese, 7 to Indians, and 32 to Vietnamese.

Visa Waiting List Update: The Annual Immigrant Visa Waiting List Report as of November 1, 2020 basically matches what we heard from Charles Oppenheim last November about the EB-5 backlog, but with one surprise for me. Hong Kong has a large number of pending EB-5 visa applicants: 767 applicants to be exact. In a normal year, that number would put Hong Kong up against the per-country visa limit and at risk of visa bulletin cut-off and wait times. The numerical limits are higher than usual this year, and consulates are constrained even without the visa bulletin, which averts the problem. But I wonder if, for the future, Hong Kong should go on Mr. Oppenheim’s watch list of countries poised to exceed the annual visa limit.

Litigation updates

In good news, my file of litigation wins by and for EB-5 investors is growing. Recent entries:

• Our Delayed I-526 Plaintiffs Notch Their Biggest Win Yet in Gutta (February 16, 2021) Matt Galati discusses a 22-plaintiff mandamus action over I-526 adjudication delay. Once again, the court found that USCIS can’t just hide behind the USCIS processing times report as defense against charges of unreasonable delay.
• Six months after Liu: The SEC and disgorgement (January 28, 2021) Clarifies the SEC’s ability to seek remedies for the benefit of victims of wrongdoing.
• Litigation Success Story – Mirror Lake Village, LLC v. Wolf (Fall 2020 RCBJ) A victory for EB-5 investors at the D.C. Circuit court in the question of whether a “put option” predicated on available cash flow counts as a debt arrangement (it doesn’t).  See also Successful litigation challenging USCIS Interpretation of Guaranteed Redemptions (September 1, 2020) on Klasko Law.
• DC Circuit Court Decision Holds that EB-5 Loan Proceeds Qualify as Cash (October 29, 2020) IIUSA Blog. Regarding Zhang v. USCIS, a victory for EB-5 investors at the D.C. Circuit court confirming that cash obtained from a loan is cash. See also U.S. Court of Appeals Holds that Loan Proceeds Qualify as Cash, not Indebtedness, for EB-5 Purposes (November 5, 2020) at Saul Ewing

Reauthorization

I have started a new blog page Reauthorization to collect resources and updates for the effort to reauthorize the regional center program in advance of the June 30, 2021 deadline. I will update this page regularly as I hear of more events, advocacy opportunities, and (please soon I hope) legislation.

Analyzing potential changes to EB-5 visa availability

Last week, President Biden sent his immigration bill to Congress. The proposed U.S. Citizenship Act serves to open negotiations on immigration reform. Apparently no one thinks this bill will pass as-is, but it signals the administration’s priorities and presents a large collection of reform ideas that might go somewhere individually, if not together. While I wait for more lawyers to comment on the legislation, I read it myself and tried to think about EB-5 implications. I get the impression that the drafters have these priorities in this order: DACA, the southern border, family-based immigration, employment-based immigration for tech and health care workers, and a few thoughts for asylum seekers, refugees, students, and farm-workers. The bill hardly notes the existence of EB-5 immigrant investment (and doesn’t mention regional center program authorization). It does include provisions that would reshuffle visa numbers and visa availability, with positive and negative implications for EB-5 wait times. To assist in thinking about these legislative proposals, I’ve done two things.

1. I made a table that lists out in one column all the ideas I’ve heard of for statutory or administrative changes that could change EB-5 visa wait times. Then I searched the U.S. Citizenship Act for those provisions, and on finding them noted the detail and page number. This table helps to give an overview of what could conceivably change, and which specific changes the Administration is actively promoting now. See the base of this post.
2. I made an Excel sheet designed to help model the wait time impact of various possible legislative changes. (Link to download the file.) The model starts with the most recent Charles Oppenheim wait time analysis, which addresses the wait time outlook under status quo conditions for an EB-5 investor with a priority date of October 1, 2020. I took that analysis and broke it into component parts, which then facilitates switching out the values for various components and seeing what happens to the calculated wait time. The model shows that the single change with most EB-5 wait time relief for all countries and all priority dates would be to recognize that only EB-5 investors, not family members, get counted against the EB-5 visa quota. All EB-5 investors should unite to advocate for that change. (I can’t positively identify this provision in the U.S. Citizenship Act, but hear it is there.) The bill’s proposed increase to the EB visa limit combined with decreased EB-5 share of the EB limit would have net zero EB-5 effect together, but could be very good or very bad if pursued separately. Removing the country caps on EB visas would reorganize the backlog without shortening it, meaning decreased wait times for some and increased times for others. Recaptured past EB visas would probably be cold comfort for EB-5, considering that EB-5 has only one year to try to get a share, and constrained by limited consulate and USCIS capacity to actually issue extra visas. My Excel model has limitations: it can only visualize the situation for a single priority date, and the backlog detail for that one date is limited to what Charles Oppenheim shared last November. But I think the model is still useful to model differences, and to help visualize how much or little wait time impact various changes could have.

Preparing for the Regional Center deadline June 30, 2021

2/17/2021 Update: Please visit my new Reauthorization Page, which collects resources and information for the advocacy effort.

The EB-5 regional center program is currently authorized through June 30, 2021. Reauthorization happened almost by default in recent years but cannot happen by default this year, since unexpectedly separated from the appropriations process. Reauthorization will require extraordinary action by industry (in education and advocacy) and Congress (in managing to act on EB-5 legislation).  

If the regional center program permanently loses authorization, then the U.S. economy will lose a major engine for economic development and job creation, and all past regional center investors plus family who do not yet have conditional permanent residence (over 80,000 people) risk losing the chance for EB-5 visas, even as their funds were already taken and spent in the U.S. economy. Congress and the public are not well educated in either of these consequences. There is urgent work to do.

IIUSA has hosted a helpful webinar and published articles that addressed many of my EB-5 advocacy questions from last month.  If you have a stake in the regional center program and questions about what’s going on with reauthorization and what you can do before June 2021, review this information:

•  “State of the EB-5 Industry and Its Path Forward” IIUSA Blog (January 20, 2021)
• “Will the EB5 Investor Immigration Program Survive Beyond June 2021” Forbes and IIUSA Blog (February 2, 2021).
• IIUSA Q1 2021 Government Affairs and Association Update Webinar Recording (February 3, 2021). Note that this webinar goes into detail on the practical consequences of an authorization lapse or permanent loss of authorization.

According to IIUSA, the likely only path to reauthorization is a forthcoming “EB5 Reform and Integrity Act” to be introduced by Senator Grassley and Senator Leahy. Apparently we have a tiny window before this introduction to suggest “technical changes” to the language that a few people negotiated in secret last year. (With the secrecy being at Grassley/Leahy staff request, IIUSA leadership says.) Here is the language of the EB-5 Reform and Integrity Act disclosed last December, and a section by section summary of the bill. If you have a constructive suggestion for change to that language, be quick to make it known. (I assume it’s too late to address the overall weakness: that the bill targets the regional center program of 2015/2016, not the entirely different landscape that exists today. But the bill could be worse, and some detail fixes might make it more workable.)

I believe the message that supporting Grassley/Leahy’s ill-informed but at least motivated effort for “EB-5 reform” is simply the only option to get to regional center program authorization within the next few months. Back when billions of dollars were at stake in on-going/future raises, more people got involved with competing advocacy. Those motivating new dollars aren’t there anymore, in the post-regulations and post-retrogression landscape. Now lingering advocacy has to be mainly motivated by good faith — including good faith with past investors whose funds were already spent but who don’t have visas yet. It’s hard for me to imagine the old New York EB-5 advocacy faction hustling now just for the sake of good faith. And even if they did, it would be solitarily behind closed doors, judging by history, and not a factor in community efforts to make reauthorization happen. Once Grassley and Leahy introduce their EB-5 reform bill, I will support it as the only choice for the near-term reauthorization objective. If I become aware of any other choices, I will report on them. In the meantime, I have added my name to a new advocacy group that IIUSA has created: Coalition to Save and Create Jobs. Take a look at the site, and consider signing up. It’s a good concept, and anyone can join for free. (Paying to join IIUSA is also an option of course.) I will be delighted if this coalition succeeds in informing and organizing stakeholders for positive action. Time to compensate for the sad failures in association-building, education, and advocacy that lead us to today’s challenges.

I foresee a lot of volunteer labor in the coming weeks. (For the dire state of current Congressional education about EB-5, see this 2021 Congressional Research Service report. ) I am currently working on a white paper designed to highlight an overlooked talking point: the past responsibility implicated in regional center program authorization. Most people in Congress, including Senator Grassley, have not understood that EB-5 investments do not in fact “buy” green cards, and thus have not in fact resulted in visas yet for tens of thousands of people whose money was already invested and spent long ago, but who are still in-process immigration-wise and dependent on regional center program authorization to prove job creation. Surely Congress wants to avoid finding itself guilty of a fraud scheme that dangled possible visas as bait to invest in U.S. businesses and create U.S. jobs, only to — after successfully attracting billions of dollars and helping U.S. project finance and job creation through a recession – change the law to prevent the visa incentive from ever being granted. I will do my best to shine a light on that pitfall, to help Congress avoid it.

It’s also important to highlight the positive: what EB-5 has done and can do for future economic development and job creation. A dozen flashy old scandals still dominate EB-5 news and the program’s image – the boring reality about the majority of EB-5 projects is not told, and must be told. EB5 Investors Magazine started work last year on an EB5 Projects page, and I look forward to additional efforts in this vein.

Stabilizing the EB-5 Program

The Consolidated Appropriations Act, 2021 passed the House and Senate yesterday (House amendment to the Senate amendment to H.R. 133). [Update: Finally signed by the President 12/27.] The EB-5 industry will note three significant points in this 5,593-page “Omnibus”:

• No country cap change: The Omnibus does not include any version of the Fairness for High-skilled Immigrants Act, or any language that would change EB visa allocation or country caps. This was a close call. The next Congress will provide renewed opportunities to tackle the issue of excessive backlogs – hopefully with improved solutions that truly involve fairness for immigrants and wouldn’t simply retroactively reorder the visa wait lines.  For now, we have more time to educate Congress and the industry on unintended EB-5 consequences, and how they might be mitigated. I’m preparing a quantitative analysis that looks at issue from the perspective of different countries at various points in the EB-5 wait line (not only considering timing for the end of the line, as others have done).  
• No EB-5 legislation: The Omnibus does not include the EB-5 Reform and Integrity Act of 2020, a belated and sadly little-noted attempt at EB-5 legislation. Neither of the co-sponsors, Senator Grassley and Senator Leahy, wrote about the legislative amendment on their websites. (So far I just found a nice mention from Rep. Brian Fitzpatrick.) I guess that few people in the EB-5 industry heeded the call to ask their Congressional reps to support the measure, considering that most of us didn’t even know it existed until a couple weeks ago and had no input into the content or process. The IIUSA Board of Directors had opportunity to deliberate on and decide to support the legislation, and made a brave but belated attempt to explain and sell the hard compromises to IIUSA members and other stakeholders. This bill was indeed an improvement on previous versions, but would have benefited from more broad-based involvement translating into wider buy-in and stronger support when opportunity arose for passage.
• Change to regional center program authorization: The Omnibus extends regional center program authorization to June 30, 2021 – significantly, not to September 30, 2021, when the funding expires. (The extension is in Division O Title I Section 104, page 2,468: “Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note) shall be applied by substituting ‘‘June 30, 2021’’ for ‘‘September 30, 2015.’’ ) This move finally decouples regional center program authorization from government funding. That can be good, considering how fraught the appropriations process has been, and also bad, since RC program authorization loses the benefit of inertia. Now the continued authorization of the regional center program will apparently depend on managing standalone EB-5 legislation. If you’re a regional center, pause to eat some cookies and watch the kids open presents, and then talk to your trade association/lobbyists.  Find out how you can support accomplishing legislation that will work for you, because the time is short and the stakes high. We now have a few months to do what we’ve been trying to do since 2015: get EB-5 legislation with long-term regional center program authorization and reforms that help protect and don’t kill the program. And assuming you are one of the majority of EB-5 users who’s not a fat cat and not a fraud, please also seek publicity.  Good legislation depends on changes to the popular perception of EB-5, and a better understanding by Congress of who’s using the program and how.

In order to maintain credibility, the EB-5 program needs stability. U.S. business people using immigrant investment make business decisions and execute contracts that rely on dependable estimates for cost of capital and the time horizon and rules for deploying capital. Potential immigrants invest hundreds of thousands of dollars in reliance on dependable estimates for the potential return on that investment.  EB-5 program costs, timeline, visa availability, eligibility rules, and very existence cannot be shrouded in uncertainty or subject to major volatility.  2020 has been tough, between no-notice retroactive Policy Manual updates and threatened retroactive legislative changes. The program requires better.  I look forward to changes in USCIS, Congressional, and industry leadership in 2021 and a path to more stable footing for the EB-5 program.

Fairness for High-Skilled Immigrants Act

Update: As I hear additional news on the Fairness Act, I add notes to my Washington Updates page.

Yesterday, the Fairness for High-Skilled Immigrants Act came a step closer to becoming law, passing the Senate by Unanimous Consent. (Meaning that Senator Mike Lee, after many previous attempts, finally managed to slip the bill through at a time when no one was in the room who knew to object. See yesterday’s Congressional Record p. 49 for this smooth move, and p. 62-65 for the amended bill text.)  IIUSA says “Having been amended in the Senate, the bill now returns to the House of Representatives for review and vote on the amended text.” Rep. Zoe Lofgren in the House says “While I recognize the sincerity of all Members and Senators struggling to find solutions, unfortunately the provisions sent to the House by the Senate yesterday most likely make matters worse, not better,” but also “I plan to swiftly and thoughtfully work with my colleagues to resolve outstanding issues and get a measure across the finish line that can pass both Houses of Congress.”

This legislation has been in Congress for a long time (since 2011), primarily thanks to the efforts of companies who depend on H1-B workers. The bill’s backers care about EB-2 and EB-3; the bill’s EB-5 impact is apparently an almost accidental and little-noticed side effect. But the EB-5 impact would indeed be earthshaking, since the bill proposes to eliminate the country caps that limit high-demand countries and protect EB visa availability for minority countries. This would change how green cards get allocated for conditional permanent residence, and affect all current and prospective investors who do not get CPR before the bill’s effective date. I’ve written about it several times previously, including last year when the House version H.R. 1044 got action.

I’m out of the advocacy loop, and not clear on the prospects from here, either under President Trump (whose base as represented by Brietbart slams the bill as an “outsourcing giveaway,” but who might be forced to sign if the House embeds this in other must-sign legislation) or President Biden (whose VP is the original co-sponsor to S.386 Fairness for High-Skilled Immigrants Act, but who might be open to better solutions). I’m not clear who is advocating or how for various EB-5 interests. But knowing the composition of the EB-5 backlog, I can once again remind the industry of the impact, if the Fairness for High-Skilled Immigrants Act were to become law as currently drafted.

The version of the FFHSIA in last night’s Congressional Record has these significant points for EB-5:

• Removes the per-country limitation for all Employment Based visas (by amending 8 U.S.C 1152 202(a)(2) to strike reference to Employment Based visas and subsection b)
• Includes transition rules and some savings provisions for EB-2 and EB-3 (“visas made available under each of paragraphs (2) and (3) of Section 203(b)”), but no transition rules or other modifications or protections for EB-5 (visas available under paragraph (5) of Section 203(b))
• The effective date is “the first day of the second fiscal year beginning after the date of enactment of this Act.” I understand that to mean October 1, 2022, if the act passed now.  
• There’s some language regarding status adjustment that might help EB-5, but I’m not sure how to interpret it.
• There’s a “prohibition on admission or adjustment of status of aliens affiliated with the military forces of the People’s Republic of China or the Chinese Community Party.” I don’t know how much this differs from existing rules, and whether it would result in reducing the EB-5 queue any more than it gets reduced already by denials. Potentially, this provision could be very harmful because negatives are notoriously hard to prove. If it came to that, how would I, Suzanne Lazicki, prove that I have no affiliation with the CCP? I have no evidence to prove my lack of affiliation.

How would the Fairness for High-Skilled Immigrants Act recognize the EB-5 backlog?

I have granular analysis that I’ve discussed in previous posts, but I fear that the detail made people’s eyes glaze over and lost attention for this important topic. So this time, I’ll just take a simple approach.

Consider the following table from IIUSA’s Discussion with Charles Oppenheim (November 19, 2020), which estimates the total current size of the EB-5 wait line.

With country caps under current law, the average 10,000 visas annually available to EB-5 get allocated in this order: no more than 7% to each country demanding visas, and any visas remaining to the oldest applicants regardless of country. Practically, this means no visa wait and no backlogs for people from countries that demand fewer than 7% of available visas, but backlogs and wait times for countries that demand more than 7%.

If country caps were eliminated, then visas just get issued in order to the oldest applicants first, regardless of country. So to estimate the “wait time for an EB-5 applicant filing today” you’d ignore all those country rows and just divide the grand total applicants by the annual visa quota. 83,000/10,000=8.3. When ignoring country of origin, the current EB-5 queue is 8-9 years long. If the FFHSIA were passed, then anyone filing a new I-526 today, regardless of country of origin, could expect to wait 8-9 years just for conditional permanent residence.

For people already in the EB-5 process, your visa wait time would be less than nine years if FFSHIA passed, with how much less depending on how long ago you filed I-526. If you filed I-526 in 2018 or 2019 from any country, you could expect to wait at least over five years for conditional permanent residence, since we know that most Chinese in the queue filed earlier than that (their filing surge occurred 2014-2017), and thus at least most of the China backlog recorded in the above chart (57,000 people) would move ahead of you in line. The FFHIA change would have most benefit for those oldest Chinese applicants–those with filing dates from 2015 to early 2017–who could expect most available visas for the coming five years, based on their early filing dates. The wait line gets more diverse from mid 2017 on, so wait times would become long for everyone then.

What difference would a October 1, 2022 effective date make? That delayed effective date would help anyone who is not from China and who does have enough time to push through the I-526/visa process and get green cards under current rules before October 2022. Otherwise, the delayed date doesn’t change much since new wait time estimates mainly depend on the number of China-born people in line, and that number may not get a chance to change very significantly in the coming 1.5 years under the current visa process.

If the FFHSIA would help you or hurt you, act at once. Contact your advocacy group/Congressional representative/advisors and let them know how you feel about the possibility that S.396/H.R.1044 Fairness for High-Skilled Immigrants Act could become law. If you’re from China and filed I-526 before 2017 (or a regional center with such investors), you are probably in favor of FFHSIA, unless that Community Party provision is a problem (though notice that you’d benefit even more from advocating for the visa quota to get applied to principals only, not family members). If you’re anyone else in EB-5, you probably want to advocate against FFHSIA, or at least advocate for savings provisions to protect investors and projects who already committed to and depend on the EB-5 process/timing outlook as defined by existing rules.

The EB-5 backlog and wait times are definitely too long, and that hurts everyone. FFHSIA proposes changes that would improve the wait time situation for some at cost of making it much worse for others. I hope that we’ll eventually have chance to unite as an industry in support of legislation that would improve the backlog and wait time situation for everyone. For example, by interpreting the EB-5 quota as Congress originally intended to apply to investors, not diluted by counting spouses and children.