EB-5 Timing Issues and Visa Wait: Process and Data

How long does it take to get an EB-5 visa? Before we look at numbers, consider this picture illustrating variables in the EB-5 process from initial application to conditional permanent residence.

The investor files an I-526 and receives a priority date, goes through I-526 adjudication, and proceeds along with family members to I-485 status adjustment (if already in the US) or consular processing (if outside the US) in order to get EB-5 visas. The system has two major constraints: USCIS capacity to process petitions, and the annual quota on EB-5 visa numbers. These constraints have produced pile-ups of pending petitions and applications, illustrated by the green bins in the picture.

We have data for many parts of this picture, such as how many people are in each of the pending bins, the historical rate of receipts and approvals and denials, and the annual visa quota. The simplest way to estimate the visa wait line (the time from priority date to green card) is to add up the pending bins and divide that number by the annual quota. As there are currently 90,000+ people associated with the pending bins, and the annual EB-5 visa quota is about 10,000, the current total waiting line is 9+ years long. (Maybe longer, depending on assumptions about the other variables). As recently as mid-2014, the line was only about three years long (as we know from the Visa Bulletin, which indicates that China-born investors with June 2014 priority dates started getting visas in May 2017).

Calculating the actual visa wait time for any given person is complicated. Where is that person in line, relative to other pending petitioners and applicants? Is that person from China (which is oversubscribed and subject to a per-country limit) or from an undersubscribed country that’s free to take the first available visas? How have/will other process variables such as per-country receipts and approval rates change over time and affect calculations?

If I were someone born outside China considering EB-5 now, I’d feel good about the per-country limit that allows me to skip ahead of most China-born applicants in line (i.e. about 87% of the line). For me, the time IPO takes to process I-526 is the major factor in my total wait time. If I were a China-born prospective investor, I’d look at everyone in line ahead of me, and also try to estimate how many queue-jumping non-Chinese may enter from behind in the time I have to wait. That calculation could add years to the potential wait time, if the number of non-Chinese investors increases dramatically in the future and IPO processing speeds up. Or future circumstances could quell new EB-5 demand, encourage existing applicants to drop out, or apply the per-country limit to other countries, improving the wait time for China-born investors who stay in the system.

All past investors should consider the significance of the visa quota constraint and the possibility that it will change. Indeed, it could change for the better. For example, if the State Department recognizes that Congress intended the 10,000 visa quota to apply to 10,000 investors, not investors plus family members, this would loosen the constraint and cut about six years from the current visa wait time. Unfortunately, quota reduction is also a live possibility. Industry lobbyists are reportedly considering legislation with visa set-asides that would reduce the generally-available annual EB-5 quota from 10,000 to 7,000. This could be disastrous for past EB-5 applicants, adding about four years to the wait time. Visa set-asides have emerged as a compromise between the Senator Grassley camp, which wants to incentivize rural/urban-distressed investment somehow, and certain regional centers, who resist an incentive based on a significant investment differential that would make their future prosperous urban projects uncompetitive.  Tying the TEA incentive to visa set-asides rather than reduced investment would allow regional centers to keep attractive terms and options for future investors. Their past investors would suffer, but that cost seems not much counted. (My impression of the current legislation discussion comes from this webinar and this article.) Of course, maybe protections for past investors will be added to the legislation, or maybe there won’t be any deal and we’ll get new regulations instead. The regulations could significantly reduce new EB-5 demand, which would hurt the industry but benefit people who stay in the current visa queue.

And now, let’s get to the numbers. I’ve expanded and improved my backlog calculation spreadsheet, which now has multiple tabs that compile all the data I can find on each variable influencing the visa wait time for an EB-5 conditional green card. Keep the spreadsheet link, as I will update it whenever new inputs become available. (For example, I expect some fresh data and an updated wait time estimate from Charlie Oppenheim on October 24 at the IIUSA conference in Miami.)

Summary of EB-5 Visa Wait Time Variables

  1. I-526 petition variables
    • Number of petitions currently pending
    • Future petition filings
    • Number of petitions by country (how many China-born, how many born outside China)
    • Percent of petitions that will be denied or withdrawn
    • Number of family members to be associated with each petition
    • Time USCIS takes to adjudicate petitions
    • Investor’s priority date relative to others with pending petitions
    • The extent to which USCIS follows its first-in-first-out policy when adjudicating petitions
  2. Visa application variables
    • Number of I-485 adjustment of status applications for EB-5 pending at USCIS
    • Number of EB-5 visa applications pending at the National Visa Center
    • Number of pending applications by country (how many China-born, how many other)
    • Percent of applications that will be denied or withdrawn
  3. Political factors
    • Whether the rules and interpretation for the EB-5 visa quota remain unchanged
    • Whether new legislation introduces visa-set-asides that would reduce the annual visa quota generally available
    • Whether the regional center program remains authorized, and the impact of a sunset on investors in line for a visa
    • Whether new regulations or legislation include features that would change demand and/or affect past applications

Direct EB-5 FAQ, White House Immigration Principles

Direct EB-5 FAQ
The regional center program dominates EB-5, but the alternate direct EB-5 track remains significant. 846 EB-5 visas went to direct EB-5 investors plus family in FY2016, and this number will likely climb as petitions from the past couple years finally reach the visa stage. Direct EB-5 can be an attractive option for foreign investors and U.S. business owners who wish to avoid the uncertainty surrounding the regional center program. About half the business plans I write these days are for direct EB-5.

There remain, however, lingering misunderstandings about how EB-5 works outside the regional center program. I’ve prepared a new page, Direct EB-5 FAQ, that addresses questions about the nature and practical uses of direct EB-5.

Test your direct EB-5 knowledge.

  1. True or False? The direct EB-5 program will sunset unless re-authorized by Congress.
  2. True or False? A direct EB-5 investor must invest at the $1 million level.
  3. True or False? Real estate developments are the most common direct EB-5 project type.
  4. True or False? A majority of direct EB-5 investors have come from China.
  5. True or False? The direct EB-5 investor must majority-own the enterprise receiving investment.
  6. True or False? The direct EB-5 investor must have day-to-day managerial responsibilities in the enterprise receiving investment.
  7. True or False? If a direct EB-5 investor buys a business, that business and its employees will qualify as new for EB-5 by virtue of the new ownership.
  8. True or False? A new commercial enterprise can use direct EB-5 capital to invest in a separate job-creating enterprise.
  9. True or False? A direct EB-5 investor can count full-time equivalent jobs created by the enterprise.

Each of these statements is false. If you were surprised, then check out the Direct EB-5 FAQ page for direct EB-5 information, policy references, and case citations.

White House Immigration Principles & Policies

Just in time for Columbus Day, President Trump has sent Congress a list of Immigration Principles & Policies that 15th-century Americans could wish they’d had. The White House principles focus on border security and interior enforcement, and repeat the idea that legal immigration should feature a skills-based points system while reducing admissions for relatives, asylum seekers, and refugees. We shall see how Congress reacts to this guidance from the White House. The White House principles look positive for immigrant investment, but the points system would be fatal (at least in the scenario proposed by Tom Cotton, which would eliminate EB-5 and would not allow immigrant investment to support US entrepreneurs, but only immigrant-controlled business).

In the meantime, in honor of voyagers who continue to build our great nation as they bridge continents and pursue their dreams in face of doubt and adversity, I will quote the first paragraph of President Trump’s Columbus Day proclamation.

Five hundred and twenty-five years ago, Christopher Columbus completed an ambitious and daring voyage across the Atlantic Ocean to the Americas.  The voyage was a remarkable and then-unparalleled feat that helped launch the age of exploration and discovery.  The permanent arrival of Europeans to the Americas was a transformative event that undeniably and fundamentally changed the course of human history and set the stage for the development of our great Nation.  Therefore, on Columbus Day, we honor the skilled navigator and man of faith, whose courageous feat brought together continents and has inspired countless others to pursue their dreams and convictions — even in the face of extreme doubt and tremendous adversity.

Washington Updates, Articles, SEC Actions, RC List Changes

Washington Updates
We’re entering FY2018 with another RC program sunset date coming up on December 8, 2017, and new EB-5 regulations waiting for final clearance by the Office of Management and Budget. In a September 28 podcast with Mona Shah, Peter Joseph of IIUSA reports that “Congressional leadership including Senator Cornyn, Majority Leader McConnell, and Speaker Ryan has spent time working with judiciary committee leadership in coming to an agreement. The fact that these parties continue to dedicate time to a legislative solution is a very good sign.” However, “We don’t know the details of what might come out of a Congressional agreement. Investment amounts and other key issues are part of a fluid conversation, and negotiation will continue until there is enough agreement to move to the next stage.” I’m glad to hear that conversations are on-going, with IIUSA taking an active part. I’m also inclined to agree with Mintz Levin’s conclusions in the thoughtful article Lawmakers May Not Spend Political Capital on Standalone EB-5 Bill (September 28, 2017). It’s hard to imagine that Congress will prioritize EB-5 legislation when issues like health care and tax reform are pending, and easy to imagine them deferring responsibility with another content-free short-term RC program extension, or waiting for regulations. If DHS finalizes new EB-5 regulations before Congress gets around to legislation, then Congress doesn’t have to touch donation-losing issues like investment amount increases and TEA reform. Congress must act eventually, because only Congress can authorize the RC program and deal with visa numbers, but we’ll see. Prior to the last couple sunsets I heard whispers that certain lobbyists had secured a gentleman’s agreement with staffers for new legislation that would protect the status quo. (Senator Grassley heard the whispers too, and was not pleased). I’m hearing similar reports this time around, together with protests from other people in communication with the same offices who say no, Congressional leadership is not on board with the status quo proposals (to minimize the investment differential, protect the natural advantage of big-city projects, and generally avoid painful disruption). I’m not sure what to expect. I look forward to listening in to EB-5 Legislation: Where Are We? a free webinar to be hosted on October 4 by Kurt Reuss of EB5 Diligence, with an all-star cast including Stephen Yale-Loehr, Robert Divine, Robert Cornish, Laura Reiff, H. Ronald Klasko, Carolyn Lee, and Douglas Hauer. (10/12 Update: Mona Shah reports on a possible new legislative compromise.)

Interesting Articles

  • NES Financial has published another white paper with EB-5 Trends & Insights based on data from the many regional center transactions they facilitate. NES comments on 2017 trends in EB-5 capital structure, investor markets, escrow terms, and size and location of EB-5 projects.
  • Bloomberg Businessweek recently featured EB-5 in How Rich Chinese Use Visa Fixers to Move to the U.S. (September 14, 2017). I appreciate the article for its clever graphic, and for its old-fashioned vision of Chinese flocking to the smooth path of EB-5, not sweating at home over backlog calculations and the question of whether an EB-5 green card is worth a decade wait on top of investment risk and political uncertainty and capital control complications. CNN Money seems closer to the current situation with its article America’s ‘golden visa’ is losing its luster in China (September 29, 2017). The changing role of Chinese investors in EB-5 will likely define our experience in 2018. Unless, of course, we get good news on legislation and visa numbers.
  • Those involved with EB-5 investors from Iran, and people of conscience generally, will want to keep an eye on the emerging situation with President Trump’s new Presidential Proclamation on Visas. The State Department summarizes the revised travel ban, and how it affects nationals of Chad (?), Iran, Libya, North Korea, Syria, Venezuela, Yemen, and Somalia. (10/18 update: now this ban has also been blocked.)

SEC Actions
The Securities and Exchange Commission continues to highlight the need for investor vigilance. This month brought two new complaints, against Ronald Van Den Heuvel and Green Box NA Detroit (filed September 19, 2017) and Edward and Jean Chen and Home Paradise Investment Center LLC (filed September 20, 2017). I’ve added select details to my log of all SEC actions in EB-5. If we believe the SEC’s version of events, these cases did not involve complex or sophisticated schemes, just daylight theft and open lies enabled by related-party transactions and weak diligence. USCIS wasn’t necessarily taken in (the briefly-posted list of I-526 and I-829 adjudications by RC showed 0 petition approvals for Home Paradise), but quite a few investors were. The market needs to be more careful. The good actors who account for a majority of EB-5 players need to go the extra mile with transparency and account controls to demonstrate their good faith. Meanwhile, we appreciate the SEC putting bad actors on notice that EB-5 is not a free lunch.

Regional Center List Changes
Additions to the USCIS Regional Center List, 8/28/2017 to 10/02/2017

  • American Real Estate Regional Center, LLC (Connecticut, New Jersey, New York)
  • American Stone Energy EB5, LLC (Texas)
  • Broadway Regional Center, LLC (California)

(Additionally Live in America – Carolinas Regional Center LLC, previously removed in error, has been restored to the list of approved regional centers)

New Terminations

  • California Blue Sky Regional Center, LLC (California) Terminated August 29, 2017
  • Arundel Capital Partners (Massachusetts) Terminated August 29, 2017
  • California Economic Development Fund, LLC (California) Terminated September 25, 2017
  • Global Medical Center of Southern California (California) Terminated September 25, 2017

Q3 2017 EB-5 Petition Processing Data

The USCIS Immigration and Citizenship Data page has been updated with data from FY2017 Q3 (April to June 2017) for petitions including I-526 and I-829.

In the third quarter we see IPO making wonderful improvement to I-829 processing volume (likely thanks to the new I-829 team announced in March). Meanwhile, I-526 processing fell another step back (possibly due to resources diverted to I-829). We see another pre-sunset-date filing surge, though less dramatic than previous surges. The total number of pending EB-5 petitions increased again in Q3.

Here’s a bonus chart for people involved in advocacy. Notice how I-526 receipt numbers reflect the destabilizing effect of frequent regional center program sunset dates, with each threatened sunset preceded by a surge of EB-5 investors rushing to file. Notice also how much EB-5 demand has exceeded the EB-5 visa quota as currently interpreted. If about 10,000 EB-5 visas need to be divided by four quarters and three visas per investor, then the program can only afford about 800 new I-526 per quarter on average before facing a backlog situation. If Congress intended to accommodate 10,000 EB-5 investments annually, then an average of 2,500 investor I-526 per quarter would sustainable — and reasonable considering actual demonstrated demand.

EB-5 investors watching processing times should also keep the I-526 receipts chart in mind. IPO has spent a whole year processing I-526 petitions filed from July to December 2015, and is still stuck on November 22, 2015 as of the last two IPO processing time reports. But that’s no wonder considering the huge number of petitions filed July-December 2015. Once IPO finishes that mouthful, dates should advance quickly through the next two relatively light quarters.

For China-born investors trying to figure out what the I-526 numbers mean for the visa backlog, here are bonus charts with historical approvals and receipts by country in recent years. These numbers can help you guess how many non-China investors are among the currently-reported pending I-526 petitions, and how many of recent approvals went to non-China investors. (In other words, guess how many people will get priority in the visa queue.) I summarized these numbers from a complete dataset of I-526 receipts, approvals, and denials by country for every year since 1991 — a dataset you can purchase from IIUSA for the full detail. (For whatever reason these figures released in response to FOIA request don’t exactly match the totals published on the USCIS website, but still  meaningful I think.)

 

11/7 EB-5 Engagement Invite

EB-5 Immigrant Investor Program: Stakeholder Engagement from New York City
U.S. Citizenship and Immigration Services (USCIS) invites you to participate in a stakeholder engagement on Tuesday, November 7, from 1 to 2:30 p.m. Eastern to discuss the Immigrant Investor Program, also known as the EB-5 program.

RC reauthorization to 12/8/2017, I-924A tips, SEC request denied (Kameli)

Regional Center Program Reauthorization

The EB-5 Regional Center Program authorization is now extended to December 8, 2017 thanks to H.R.601, which the President signed into law yesterday. Washington worked with admirable dispatch this time, cutting and finalizing the deal all within one week and nearly a month ahead of the September 30th deadline.

The law is hard to read, but for those who like to confirm things personally here’s the relevant language for regional center program extension. H.R. 601 “Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017”  Division D Section 101 (PDF page 11) provides appropriations for “continuing projects or activities…for which appropriations, funds, or other authority were made available in the following appropriations Acts: … (6) The Department of Homeland Security Appropriations Act, 2017 (division F of Public Law 115–31), except section 310.” The previous regional center program authorization is in Public Law 115-31 Division F Section 542 (PDF page 298), so it’s one of the continuing activities that’s extended by H.R. 601 Division D Section 101. (And to go back another step, the language in PL 115-31(F)542 refers back to Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (Public Law 102-395) page 47, which established the regional center program.) H.R. 601 Division D Section 106 (PDF page 13) further specifies that:

Unless otherwise provided for in this Act or in the applicable appropriations Act for fiscal year 2018, appropriations and funds made available and authority granted pursuant to this Act shall be available until whichever of the following first occurs:
(1) the enactment into law of an appropriation for any project or activity provided for in this Act;
(2) the enactment into law of the applicable appropriations Act for fiscal year 2018 without any provision for such project or activity; or
(3) December 8, 2017.

The language in Section 106 is a good reminder that “extended to December 8” doesn’t mean “guaranteed to remain unchanged until December 8.” Congress will reportedly turn its attention to immigration issues in the next couple months, and they could come up with legislation before December that affects multiple visa categories including EB-5.

I-924A Filing Tips
I’m not sure what changed, since I don’t work directly with I-924A, but yesterday USCIS published a new version of the Form I-924A Filing Tips page.

SEC Request Denied (Kameli)
When the SEC files a complaint, it’s easy for the public to just assume that the defendant is guilty as charged and there won’t be any more to the story but determining punishment. Even worse, USCIS tends to assume this and has been known to deny and revoke investor petitions and terminate regional centers before the SEC cases are concluded. We all need to remember that sometimes the defendant might have a compelling other side of the story, and might not be found guilty. The district court judge overseeing a recent EB-5 case filed by the SEC just found that the SEC “in numerous instances has not presented fully developed arguments to show why defendants’ actions violated securities laws.” The judge’s memorandum opinion, which considers the defendants’ side of the story, is linked at the end of the article Senior living developer avoids EB-5 ban, receivership (September 7, 2017). For the SEC’s version of events see SEC v. Seyed Taher Kameli, et al., Civil Action No. 17-cv-04686 (June 22, 2017). The article SEC Suffers One of its First Major Losses in EB-5 Realm (September 12, 2017) summarizes the issues.

Redeployment, Reauthorization, I-485, AAO Decisions, RC List Changes

Redeployment
Julia Harrison’s published statement for the July 19 engagement in San Jose has been updated with cautious answers to two important questions about how redeployment policy applies to pending I-526 petitions. Specifically, whether adding redeployment language to filed documents would constitute material change, and what process and documents are required if redeployment occurs while I-526 is pending. The answers aren’t direct and substantial enough to provide comforting guidance, but on the other hand they’re so open-ended as to potentially offer a lot of flexibility for compliance. I’ll let you consult the link to read for yourself. You needn’t return to my recording to check whether these topics were discussed in more detail in person on July 19, because they were not. Maybe these redeployment questions came up in follow-up emails to the Public Engagement mailbox, and now kindly being shared with everyone. Though it’s lucky I’m so vigilant, or we might never have noticed that the USCIS website replaced one version of the July 19 talking points with another.

Speaking of redeployment, here’s another helpful article. Fiduciary Duties of General Partners and Managers in Connection with Redeployment of EB-5 Capital (August 28, 2017) By Catherine DeBono Holmes

EB-5 Engagements
USCIS posted an official recording of the 8/24 I-924A webinar very promptly, and also sent a “Save the Date” announcement. “U.S. Citizenship and Immigration Services (USCIS) will hold the next EB-5 Immigrant Investor Program national stakeholder engagement on Tuesday, November 7, from 1 to 2:30 p.m. Eastern. This event will take place at the USCIS New York City Field Office with in-person and telephone participation and the option to submit questions in advance. We will send an invitation with more details in the coming weeks.”

Reauthorization
The next sunset date for the Regional Center Program comes in just a few days, on September 30. Since dropping or substantially extending the RC program would require attention and discussion, and no one seems to have time or interest for that, I’m guessing we’re in for another series of uncomfortable and inconclusive short extensions with spending bills, as in 2015 and 2016. (9/8 update: the Regional Center Program is now extended as part of a Continuing Resolution to December 8, 2017.)

EB-5 has an awkward position, politically. When the right likes investment but is queasy about immigrants, and the left is just the opposite, what’s the future of immigrant investment? EB-5 is a visa category that demonstrably creates rather than takes U.S. jobs, supports U.S. business development and American products, and brings in a small number of legal immigrants likely to generate a lot of tax dollars and not strain the welfare system. That should make it a favorite visa category, especially for economic nationalists. But a Congressman who’s actively working against the immigration prospects of US-raised kids and overseas grandmas is already getting some flack, and may hear criticism from all sides if he’s seen to simultaneously support wealth-related immigration. On the other hand, people concerned to protect visa opportunities get more political credit for focusing on kids and grandmothers and tech talent than on a small category of legal immigrants associated in the press with luxury real estate. So far as I know, no one in Congress has been interested enough in EB-5 recently to even criticize it, must less speak in support of it. The Senate Judiciary Committee is reportedly about to hold a hearing on immigrant visas, but EB-5 probably won’t be on the agenda. The hearing is designed to scrutinize visas that conflict with the administration’s “Buy American Hire American” policy, and EB-5 doesn’t conflict with that policy. Since EB-5 isn’t in the cross hairs, it may not even be on the radar. But I’ll keep looking for news, and please tell me if you have insights into what’s likely to happen between now and December. Maybe USCIS’s threat to possibly finalize EB-5 regulations by 4/00/2018 will incentivize lobbyists to push for substantial EB-5 legislation sooner rather than later, but we’ll see. A lot of good EB-5 projects and good faith investors depend on smooth seas ahead.

I-485 Interviews
Immigrants who apply for an EB-5 visa through the adjustment of status (I-485) rather than consular process should note the announcement that USCIS to Expand In-Person Interview Requirements for Certain Permanent Residency Applicants (August 28, 2017). These interviews are designed to provide USCIS officers with the opportunity to verify the information provided in an individual’s application, to discover new information that may be relevant to the adjudication process, and to determine the credibility of the individual seeking permanent residence in the United States. Miller Mayer comments on practical implications.

AAO Decisions (geography, material change, RC termination)
The 2017 folder of AAO decisions on I-526 appeals has already posted 177 decisions – or 26 decisions, if we exclude near duplicates (different petitioners, same decision). I read all the decisions and keep a log of points that are significant to my work with EB-5 business plans. A few comments on decisions that interested me.

  • JAN132017_03B7203 (Matter of WX) and AUG152017_01B7203 (Matter of SL) deal with the same business model: a proposal to open and operate three franchise hair salons, of which the first two have identified TEA locations and the third is a plan for the future, with location to be determined. The AAO decisions confirm what I’ve always said: that only the identified locations can be considered for the total EB-5 investment and employment eligibility requirements. A petition can’t depend on applying TEA investment to a prospective location, since the TEA status of that unidentified location can’t be determined at the time of investment or filing.
  • AUG152017_01B7203 (Matter of SL) has the additional wrinkle that the salons funded by qualifying investment had already gone out of business (after having operated 1.5 years) by the time USCIS got around to adjudicating SL’s I-526 petition. SL expressed her intention to make additional investment and resume operations in the same locations. Interestingly, AAO did not say that such a situation would automatically lead to denial or the need to file a new I-526 petition. AAO challenged the practical feasibility of restarting the business (based on minute analysis of the business plan), but does not challenge the very idea of funding a new business after the previously-funded business failed. The decision implies that business failure and need for new investment would not be, in themselves, a material change. The decision specifically states that opening new salons in the same TEA with different management and different staffing plan is not a material change.
  • JUN302017_01B7203 (Matter of WL) gives another rare example of a change NOT found to be material. WL filed Form I-526 with a business plan that anticipated that the NCE would provide shuttle and tour services, with auto accessories sale as a sideline (about 10% of business). A site visit subsequently found little evidence of shuttle/tour service, and auto accessories sale accounting for far more than 10% of the business. But AAO judged that “Merely shifting the percentages of the types of services the Petitioner said the NCE would offer is not, by itself, a sufficient basis to deny the petition.”
  • APR262017_02B7203 (Matter of YL) and JUL062017_01B7203 (Matter of YY) identify material changes and explain what makes the changes material. In Matter of YL, a change in business focus and location are judged to be “predictably capable of affecting” and “have a tendency to influence” determinations of whether the Petitioner invested at the required capital investment threshold and will prospectively create the requisite qualifying jobs. In Matter of YL, the petitioner filed a series of plans for different types of food service business. AAO judged that in this case “The NCE’s business plans two and three constitute a material change to the original one because they represent far more than a change in food styles. …In addition to the type of food, business plans two and three include changes to the NCE’s nature of business, services offered, location, start-up costs, and staffing needs. These changes are material and are made to correct a deficiency in the original submission.”  (By the way I add these examples as they come to my master post on material change.)
  • JUN222017_01B7203 (Matter of LPT) shows how real-life business development after I-526 can help the petitioner, so long as it’s successful. USCIS questioned the reasonableness and credibility of LPT’s business plan, and LPT responded not by revisiting the projections but by documenting actual successful business performance since I-526 filing. On the other hand, JUN132017_01B7203 (Matter of MYA) explains why disastrous developments after I-526 filing (in this case, the Palm House Hotel woes) justify judging the original business plan not credible in hindsight.
  • APR182017_01B7203 is good reading for anyone intending to set up a direct EB-5 investment with elements of a debt model, such as preferred return.
  • The cases from JUL192017_01B7203 to JUL282017_11B7203 are denials of appeals or motions to reopen/reconsider filed by Path America investors whose petitions were denied or revoked following the termination of Path America Regional Center. All are nearly identical to one or the other of the linked decisions, and dismiss the petitioners’ attempts to claim some due process protection.

Regional Center List Changes

Additions to the USCIS Regional Center List, 8/23/2017 to 8/28/2017

  • Guardian Regional Center, LLC (Texas)
  • NationSure, LLC (New York)
  • State of Maine EB-5 Regional Center, LLC (Maine)

New Terminations

  • Live in America – Georgia Regional Center LLC (Georgia) Terminated 8/18/2017
  • Live in America – Boston Regional Center LLC (Massachusetts, New Hampshire, Rhode Island) Terminated 8/18/2017
  • Live in America – Florida, LLC (Florida) Terminated 8/18/2017
  • Live in America – Nevada Regional Center, LLC (Nevada) Terminated 8/18/2017
  • Live in America – Louisiana Regional Center, LLC (Louisiana) Terminated 8/18/2017
  • Live in America – U.S. Virgin Islands Regional Center LLC (U.S. Virgin Islands (USVI)) Terminated 8/18/2017
  • Live in America – Arizona Regional Center, LLC (Arizona) Terminated 8/18/2017
  • Live in America – Indiana, Michigan, Ohio Regional Center (Indiana, Michigan, Ohio) Terminated 8/18/2017
  • Live in America Chicago Regional Center, LLC (Illinois, Indiana, Wisconsin) Terminated 8/18/2017
  • Live in America – Midwest Regional Center, LLC (Minnesota, Wisconsin) Terminated 8/18/2017
  • SoCal Regional Center, LLC (California) Terminated 8/18/2017

I-924A webinar, EB-5 regs, Articles, RC list changes

I-924A Webinar

Today USCIS held a webinar to discuss the latest version of Form I-924A, Annual Certification of Regional Center. USCIS has linked an official recording to the webinar page. (I previously posted a folder with my recording.)

The webinar was technical and specifically focused on Form I-924A — what’s new in the December 23, 2016 version of the form, and how to complete it. A couple points of general interest came out in the presentation.

  • The presenter highlighted the expanded definition of regional center “principal” in the new I-924A and additional information requested about principals. The presenter confirmed that the IPO Compliance Division plans to use this information to conduct background checks of everyone in a position to control, influence, or direct the management or policies of the regional center, and that the results of such background checks are material to the regional center’s ongoing designation.
  • USCIS instructed that petitions that were withdrawn should be reported as “denied” on I-924A. This categorization could explain the petition approval and denial statistics published last month by USCIS, which reported a surprisingly high number of denied petitions. A caller encouraged USCIS to consider recording withdrawn and denied petitions as separate categories, and the call presenters said they’d consider the suggestion. The presenters also indicated that regional centers can add a note to I-924A explaining how many of the “denied” petitions were in fact denied, and how many withdrawn.

EB-5 Regulations

The Semiannual Regulatory Agenda published today by DHS lists regulation 1615-AC07 (the EB-5 regulation concerning TEAs and investment amount increases) as being in the “Final Rule” stage. The timetable on the rule’s summary page gives an estimated date of 04/00/2018 for Final Action. I’m not sure how seriously to take the agenda or the date estimate.

Articles

Developer FAQ: Jim Butler of JMBM Global Hospitality Group has put together a booklet titled The Developer’s EB-5 Handbook for EB-5 Construction Financing. Although targeted to hotel developers, this free booklet provides experienced answers to a range of practical questions common to businesses as they first consider EB-5 financing.

Large-Scale EB-5 Real Etate Projects: Gary Friedland and Jeanne Calderon of the NYU Stern Center for Real Estate Finance Research have released a new paper featuring a database of large-scale real estate projects that incorporate EB-5 into the capital stack. See EB-5 Projects Database: 2017 Supplement with Trends and Observations (August 16, 2017 Draft).  This 2017 database collects publicly-available information on 26 projects in major metro areas with current/recent EB-5 raises. The authors previously published a 2016 database with 27 projects and a 2015 database with 25 projects.  These large-scale projects are significant for the industry because they target such a large number of investors. The 26 projects in Friedland & Calderon’s 2017 database aim to attract 6,736 EB-5 investors, which means that they alone could use up over two years of available EB-5 visas. Megaprojects take a large piece of a small pie, are too big to fail, can offer attractive and well-managed investment opportunities, and present a public relations challenge. A high-profile luxury development in a Tier 1 city is not typical of the EB-5 program overall, but it is typical of the few projects that seek and find hundreds of EB-5 investors.

Vermont: Speaking of too-big-to-fail, I continue to follow the efforts of Vermont Regional Center to clean up from fraud charges against a couple of its project managers. The regional center has worked hard to recover from the disaster and (at least recently) to protect and compensate investors, but now faces having to respond to a NOIT from USCIS. A Notice of Intent to Terminate is not the same as a termination notice (the RC has a chance to respond to a NOIT, and not all NOITs are followed by termination), but it is a significant development. This news story discusses the whole situation, and this story gives detail of NOIT content. “What level of oversight are regional centers responsible to provide?” is a grey area question in EB-5, and a question that USCIS addresses in its assessment of Vermont Regional Center.

Regional Center List Updates

Additions to the USCIS Regional Center List, 08/01/2017 to 8/23/2017

  • Liberty Regional Investment Center (Georgia)
  • Nevada First National Regional Center, LLC (Arizona, Nevada)
  • Pass2NY Regional Center, LLC (New York)
  • USA New York Liberty EB-5 Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)

New Terminations

  • IZON, LLC (South Carolina) Terminated 8/17/2017
  • America’s Regional Center, LLC (Florida) Terminated 8/15/2017
  • First American Regional Center, LLC (California) Terminated 8/14/2017
  • Civitas Rio Grande Regional Center (Texas) Terminated 8/10/2017
  • Illinois Valley Regional Center (Illinois) Terminated 8/10/2017
  • Southern California Investment Center, LLC (California) Terminated 8/10/2017
  • Powerdyne Regional Center, LLC (California) Terminated 8/2/2017

I-924A webinar, Processing Times, I-526 by country, visa numbers, EB-5 legislation (HR 3471)

I-924A Webinar
U.S. Citizenship and Immigration Services (USCIS) invites you to participate in a webinar on Thursday, August 24, from 1 to 2 p.m. Eastern to discuss Form I-924A, Annual Certification of Regional Center. This webinar will discuss certain changes to the Dec. 23, 2016 edition of Form I-924A and the accompanying instructions. Here is the invitation with instructions for registration. This webinar is also mentioned in Julia Harrison’s Talking Points (July 2017), a new document on the USCIS website that covers a bit of content from the EB-5 engagement in San Jose.

EB-5 Processing Times
Good news! The latest IPO Processing Times report indicates that IPO had a productive June and possibly made a dent in processing times. Most reports since 2014 have shown IPO processing less than a month’s worth of filings each month, which meant it got further and further behind. But in June 2017, the “processing petitions as of” date advanced 1.1 months for I-526, 1.4 months for I-829, and 2.1 months for I-924. If IPO can keep working through more than 30 days of filings every month, we’ll see processing times come down. I understand that periodic filing surges make this difficult, however.

EB-5 Investors by Country: 2016
The latest Regional Center Business Journal has an article with interesting data on I-526 petition filings by country of investor origin, obtained via FOIA request from USCIS. See A New Lens: What the Latest Data Tells Us about Raising EB-5 Capital in an Increasingly Challenging Marketplace (June 2017) by Lee Li.  The State Department publishes figures for visa issuance by country, but they aren’t a good indicator for current demand since most investors receive a visa years after investing. The figures on I-526 filings in 2016, however, likely reflect investment decisions in 2016.

A few takeaways from the 2016 data on I-526 petitions:

  • Vietnam and India register the largest demand spike, with 40+% increase in I-526 petition filings between 2015 and 2016
  • Iran, Venezuela, and Mexico are three countries that made the top 10 countries by number of petition filings in 2016, though they weren’t in the top 10 for visas issued in 2016.
  • Average I-526 approval rates vary by country. The lowest average approval rate in 2016 was for Iranian investors, at only 37%, while 96% of petitions from Hong Kong investors were approved. I will guess that approval rates correlate to the relative difficulty of verifying source of funds for specific countries, and on the relative experience/inexperience of people preparing petition paperwork for investors in each country. Other countries with low I-526 approval rates in 2016 were Mexico (57% approval rate), India (66%), and Russia (67%).
  • China-born investors filed more or less 10,948 I-526 petitions in 2016, while the rest of the world filed about 2,325. China-born investors should pay attention to that “rest of the world” number, since those petitioners and their family get to go ahead of China-born investors in the visa queue.

Visa Numbers

Speaking of the visa backlog, here’s another good article addressing the situation and possible solutions: It’s All About the Numbers (August 8, 2017) by H. Ronald Klasko.

The status quo is unsustainable and requires serious response. So long as we have a few mega-projects flooding the program and the backlog with investors, we must unite in support of visa number solutions or EB-5 will become unusable for everyone. And the U.S. would benefit from providing visas to accommodate the volume of people willing to make major investments in our economy.

New Legislation
Representatives Brian Fitzpatrick (R-PA) and Dwight Evans (D-PA) have introduced an EB-5 bill: H.R.3471 – American Job Creation and Investment Into Public Works Reform Act of 2017. The bill is nearly identical to H.R. 5992 introduced last year by Goodlatte and Conyers, with the most significant difference being the suggestion that infrastructure projects administered by a governmental entity should get a visa set-aside. This bill is significant because it’s one of only two EB-5 bills officially on the table this Congress, but I don’t hear anyone talking about it. The sponsor and co-sponsor haven’t announced it on their websites. Industry as a whole will not like the fact that it doesn’t offer a solution to the visa backlog. The big-league lobbyists won’t like it because it retains the features of H.R. 5992 that they worked so hard to negotiate out of subsequent discussion drafts: retroactive application to petitions filed since June 1, 2015, hefty and clunky account transparency requirement, gift and loan restrictions, significant incentive to invest in a distressed TEA, and significant spread in the annual fee applied to large versus small regional centers. The additional visa set-aside proposed by H.R. 3471 is sweetened by the fact that the bill eliminates the H.R. 5992 suggestion to make the set-asides permanent. I’ve added the bill to my comparison chart, and will keep watching for discussion. The Hill has another article on controversial immigration issues linked to the upcoming September spending fight, but EB-5 doesn’t get a mention. Perhaps H.R.3471 is a subtle solution to the border-wall funding argument that dominates current immigration debate?

 

RAISE Act

And now, Washington is talking about immigration after all. Today the White House announced that President Donald J. Trump Backs RAISE Act. Senator Tom Cotton introduced this bill back in February, but today released a significantly revised and expanded version of Reforming American Immigration for a Strong Economy Act (now with the number S.1720). The bill promises to “spur economic growth and raise working Americans’ wages by giving priority to the best-skilled immigrants from around the world and reducing overall immigration by half.” Most of the reduction would come at the expense of family-based visas, which would be cut dramatically. The proposal would keep the current 140,000 allocation for employment-based visas, but would do away with all current EB categories (including EB-5) and replace them with a “merit-based” or “skills-based” points system. A prospective EB immigrant would accumulate points to gain the right to enter an applicant pool, and then every year USCIS would invite the 140,000 applicants in the pool with the most points to file a visa petition. Points could be accrued based on age (the nearer to age 25 the better), English language test scores (the higher the better), educational credential (most points for US doctorate in STEM), extraordinary achievement (more points for Nobel laureate than Olympic medalist), job offer (more points for higher salary), spouse (negative points for low-point spouse), and investment in an enterprise that the immigrant will manage as a primary occupation (more points for bigger investment).

The bill seems unlikely to go far, considering that it proposes to change the current immigration system so radically and would hurt so many interests. In my capacity as a citizen, however, I’m very interested in this bill and the conversation around it. When we talk about immigration policy, we go straight to core questions of national identity – who we are, what we value, what borders define us, and where we want to go as a country. I’m fascinated by the history of U.S. immigration law, and how the laws reflect and shaped our socioeconomic history and values. I’m also fascinated by data on U.S. immigration, and how dramatically the data picture differs from the Emma-Lazarus-colored impression that both advocates and critics seem to have of US immigration. It’s helpful to consider the history and the data when assessing this new immigration vision as proposed by Senator Cotton and endorsed by President Trump.

Articles & Resources (Ombudsman, Visa Numbers, Investor Protection, Redeployment, RC Audits), Washington Updates, RC List Changes

Helpful Articles and Resources

Washington Updates
What is happening with EB-5 in Washington? I wish I knew. Immigration policy generally looks like an orphan child.  The top three leadership posts at USCIS are all still filled by “acting” people (Lee Cissna was nominated but still not confirmed as Director), and now we’re missing a DHS Secretary as well, until Congress can find time to confirm a replacement for John Kelly. That can’t facilitate significant USCIS action like finalizing regulations or hiring. The White House website listed immigration as a top issue a few months ago, and gave an immigration policy statement, but not anymore. (8/2 Update: The White House is now talking about immigration with the RAISE Act.) I hear rumors that lobbyists are still actively talking to Congressional staffers about EB-5 legislation and regional center program reauthorization, but don’t know where that will lead. Congress has so many fish to fry. We wonder whether Congress can even figure out funding the government past September 30, and there’s talk of another short-term Continuing Resolution, which could mean another series of hop-and-skip extensions of the RC program, whose current authorization is tied to the 2017 funding bill. But it’s hard to predict. Insights or insider information, anyone? (8/3 Updates: Senator Cornyn, author of the draft EB-5 legislation released most recently, has announced Building America’s Trust Act, a new immigration bill that doesn’t appear to address EB-5. Representative Brian Fitzpatrick has introduced H.R.3471 with the promising title “To amend section 203(b)(5) of the Immigration and Nationality Act to implement new reforms, and to reauthorize the EB-5 Regional Center Program, in order to promote and reform foreign capital investment and job creation in communities in the United States, and for other purposes.” I’ll report more fully when the bill text becomes available.)

Regional Center List Changes

Additions to the USCIS Regional Center List, 07/17/2017 to 8/1/2017

New Terminations:

  • Anacostia Regional Center (District of Columbia) Terminated 7/18/2017
  • AAA Florida Senior Living Regional Center, LLC (Florida) Terminated 7/12/2017
  • Allied Artist High Desert EB5 Regional Center (New Mexico) Terminated 7/12/2017
  • Rosti Capital Regional Center (California) Terminated 7/17/2017

IPO Report from San Jose (processing times, business plan advice, site visits, visa wait)

A small Employment Visa Engagement hosted at the US Patent and Trademark Office in San Jose on July 19 scored an impressive delegation from the Investor Program Office. I had a chance to meet and hear from IPO Deputy Chief Julia Harrison, IPO Senior Advisor for Economics Jan Lyons, and IPO’s FDNS Division Chief Kurt Vicha. They seemed more relaxed than usual at stakeholder meetings, and shared a lot of useful information. I haven’t seen USCIS post any notes yet (UPDATE: the USCIS website now provides Julia Harrison’s talking points from the engagement). I have summarized major points in this post.  (And FYI here is my folder with a rough unauthorized recording and snapshots of slides.)

Processing Times

Julia Harrison noted that program integrity was a focus for FY2017, with the launch of the site visit and audit and I-829 interview programs, and she made the welcome announcement that FY2018 will specially focus on reducing processing times.

A few initiatives that IPO hopes will improve processing times:

  1. Improve the Quality of Submissions: Mr. Lyons made the point that your processing time depends not only on your place in the queue, but also the quality of submissions before you in that queue. IPO has been hampered by quality problems, particularly in petitions filed in sunset date-surges. For example, in September and October 2015, IPO received 2.5 years-worth of I-924 filings, many of them apparently filed in haste and tough to review. No wonder processing times reports show IPO taking forever to work through I-924 filed in those months, not to mention I-526. Ms. Harrison noted two new resources designed to help make future filings easier to review.
    • In the March 2017 stakeholder meeting, IPO provided “Top 10 Tips for Submitting EB-5 Related Forms” – advice that should improve submissions and eventually reduce processing times, if followed (Also keep in mind the Form Filing Tips and EB-5 Filing Tips on the USCIS website.)
    • Ms. Harrison announced the new “Suggested Order of Documentation” pages linked to the EB-5 Resources page. This standardized order of exhibits is not required, but is designed make EB-5 forms easier and faster for IPO to review.
  2. Increase Capacity: IPO hopes to increase capacity by cross-training its economists and adjudicators so that a single staff person can handle a petition from start to finish. Previously, economists and adjudicators have each handled a distinct part of each petition.
  3. Other: The site inspection program that kicked off this year should facilitate I-829 processing by pre-emptively answering questions that might arise about actual use of investment and job creation.

I appreciated hearing Ms. Harrison say that IPO is “absolutely committed” to reducing processing times, but wish that she had mentioned some drastic measures. Education and operational efficiencies are welcome, but more will be needed to significantly improve processing times in view of a backlog that’s about 30,000 petitions long. Ms. Harrison did not mention new hiring, but I sincerely hope that’s also part of the plan.

Ms. Harrison pointed out that IPO does not have authority to offer premium processing (this would need to come from Congress), and also repeated, as has been said before, that IPO does not favor premium processing, anticipating that it would be unworkable because fees would probably not limit demand in the EB-5 context.

Advice for EB-5 Submissions and Business Plans

Jan Lyons spoke at length, introducing the EB-5 program from a business perspective and discussing adjudication issues. We forget the implications of having a veteran of investment banking and municipal finance at the helm at IPO, directing the team that reviews business plans and economic studies. When I started with EB-5 in 2009, one immigration attorney asked me to remove the financial projections from a business plan because “they’d just confuse the adjudicator.” Now we have an audience at IPO that knows how to read numbers, and struggles with the un-businesslike character of many EB-5 submissions. A cash flow statement is worth a thousand words to a finance person. Mr. Lyons shocked us with an estimate that only about 35% of business plans submitted to his office even contain a pro forma.  If you’re an attorney who reviews petitions, help change this!  Different types of financial information are appropriate to different types of projects, and in EB-5 the appropriate level of financial detail can vary depending on implications for the economic impact report, but a business plan without numbers cannot be called a business plan. Creating profit is the core rationale for any commercial enterprise (not to mention an EB-5 requirement per regulations and Matter of Izummi), and a plan without financials literally has no bottom line. A plan that’s only qualitative, not quantitative, gives a picture of the business that is incomplete, difficult to assess, and not credible. A business plan should have financials, and the financials should match and help explain the story that’s told in words. A pro forma doesn’t help if it lists revenue sources that the project description never mentioned, shows payroll expense insufficient to cover employees promised in the staffing section, indicates growth on a schedule different from what was anticipated in the schedule section, and assumes prices inconsistent with the market analysis.  That will certainly confuse adjudicators, even and especially ones with 20+ years in investment banking.  The industry needs to step up its game. (My service website describes the standards I use when writing and reviewing EB-5 plans.)

Key takeaways from the presentation by Mr. Lyons:

  • Invest in the business plan. Mr. Lyons noted that a majority of problems he sees in EB-5 submissions are not in the economic impact analysis (where simple ability to multiply is a major KSA) but in the business plans, which are often disorganized, incomplete, and full of conjectural information without backup. “We adjudicate on a preponderance of the evidence, not a preponderance of wishful thinking.”
  • A business plan should include financial information. Mr. Lyons made the point that forward-looking financial statements (pro formas) are significant evidence in a business plan, and also facilitate efficient review of the plan.  Pro formas have an expositive value that complements the written narrative of a project.  IPO economists can plod through the hundreds of pages submitted with business plans and reach a conclusion without pro formas, most of the time. But those cases could be analyzed much faster with the inclusion of three simple financial tables: a sources and uses of funds; a cash flow statement; and an income statement.  There are no specific requirements that the financial information be presented as pro forma statements, but pro formas are the most common type of financial information and are generally the most complete and the least expensive method of conveying a complete financial picture. While lack of such statements does not automatically result in an RFE or denial, it does make the plan relatively difficult to understand and assess. In reviewing pro proforms, IPO economists are not judging the quality of the investment. IPO economists are instructed that IPO is not a rating agency nor is it within its purview to make judgements relating to the suitability of investments for individual investors. However, financial information is relevant to EB-5 requirements that IPO must consider, including business plan credibility and the requirement that EB-5 investment be placed at risk with the chance of gain.
  • Do not interpret a Request for Evidence as an assault. Mr. Lyons emphasized that an RFE is not an attack on your intelligence or integrity, and not an indication that the requester is stupid. The requester simply does not have as much information about or familiarity with the petition as you do, and is asking for information.
  • When preparing I-924, keep in mind that “In an initial application, what we’re really looking for in a regional center is evidence that they know what they’re doing.” Demonstrate grasp of EB-5 requirements and show the credible experience of the applicants.
  • Limited geographic area is a legal rather than an economic requirement. In assessing geography requests, IPO is guided by Congressional intent that regional centers are literally “regional centers,” designed to create concentrated pools of investment to stimulate employment growth and economic activity within a defined and limited geographic area.

Site Visits and Audits:

Julia Harrison once again reviewed the difference between site visits and regional center audits, and added commentary on the purpose of each. Site visits are unannounced inspections of job-creating enterprises that look at the JCE site and assess the progress of development and job creation. Audits examine regional centers to see where money is going and whether the regional center has proper oversight and controls in place.

Kurt Vicha explained how the EB-5 site visit process has worked so far, and how sites are selected. In 2016, FDNS selected the one state with the most projects in each of four regions, and conducted site visits to job-creating enterprises (JCEs) in those states (for a total of 50 site visits). In 2017, FDNS selected JCEs for site visits based on a “window of opportunity” defined as about one year after I-526 approvals for that JCE, but before I-829 adjudication. Interestingly, there are about 225 JCEs within that window in 2017, and FDNS is on track to complete site visits at all of them. Inspectors are charged to observe and talk to people on-site about what’s happening at the JCE address, and then write an informational report. This report is then assessed in DC in context of petition filings, with opportunity for regional centers/project companies to respond to any questions. Mr. Vicha noted a common complaint that some questions specific to stand-alone filings have been asked at regional center JCEs (such as about the role of EB-5 investors in the business), and he promises that training will address this issue for next year. FDNS inspectors were hired at a high grade and receive extensive training.

Harrison and Vicha both suggested that site visits particularly emphasize schedule, and assessing whether the business or project has accomplished the activities anticipated in the schedule originally submitted to USCIS. Note to self: remind my clients to be extra conservative in estimating development schedule and hiring schedule dates! Better to estimate late in the business plan and give inspectors a happy surprise than to estimate on the early side and be accused of fraud if subsequent inspection shows unreached milestones.

As for audits, only one has been completed so far.

Visa Numbers and Wait Time

Charlie Oppenheim from Department of State was present, as genial and oracular as ever, and attempted once again to explain the allocation of visa numbers and the many contingencies and moving parts. He didn’t give any new figures related to the EB-5 visa queue, but mentioned that he estimated the wait time to conditional residence for a China-born investor filing now at about 9.9 years (my attempt to calculate had come up with 9.3 years). Those estimates don’t account for future demand, people dropping out, or action from Congress.  Mr. Oppenheim said that Congress has not yet asked for his assessment of the proposal to only count investors toward the EB-5 visa quota (rather than investors plus family members as is the current practice), and opined that such a change would indeed require legislative action.

IPO Suggested Order of Documentation

IPO has added a very valuable resource to the EB-5 Resources page on the USCIS website:

Suggested Order of Documentation

Form I-526

Form I-829

Form I-924

The links direct to pages that provide a suggested list and order of contents for each EB-5 form. The regulations and Form Instructions already describe the evidentiary requirements for EB-5 petitions and applications, and these new pages don’t add new requirements. Rather, they provide the content in handy checklist form and suggest a way to standardize submissions by arranging required documents in a predictable order. We keep asking IPO what we can do to help improve the adjudication process and processing times, and this is a very helpful response. Immigration lawyers take note! If we can widely adopt the suggested order of documentation for each form, and most petitions take on a standard shape, with the same tabs in the same order, this will certainly support operational efficiencies at IPO and should help reduce processing times. Julia Harrison flagged this resource at today’s Employment Visa engagement in San Jose. I’ll write another post with more complete report of helpful input from the IPO representatives Julia Harrison and Jan Lyons, Kurt Vicha of FDNS, and Charlie Oppenheim from Department of State.

Listening Session (EB-5 regs), EB-5 as securities (Hui Feng), RC Audits, RC List Changes

EB-5 Immigrant Investor Program Engagement July 13

At the EB-5 listening session on July 13, the USCIS participants stuck to their resolve to listen only, and did not provide input or feedback. The call solicited stakeholder comments on the questions raised by the Advance Notice of Proposed Rule-Making, which addressed regional center designation and participation and exemplar project approval. The ANPRM inspired few written comments to its preliminary questions, and this call also got tepid response. What did USCIS want to know from us, beyond what those of us who care said already in our written comments? USCIS would not specify, and we weren’t sure what to say. The Wolfsdorf Rosenthal blog has diligently summarized stakeholder comments, and my recording is available for anyone who’s really interested. I hope USCIS learned something from the call, but I did not. People with more to say on the designated topics of RC life-cycle (designation, participation, termination), RC exemplar process, RC compliance audits, or indirect job creation methodologies may email ipostakaeholderengagement@uscis.dhs.gov.

USCIS let slip one bit of info. Lori MacKenzie said that “the agency is working to finalize that rule” — referring to the regulation that people care about, the NPRM dealing with investment amounts and TEAs. No indication of timeline, however, or whether the listening session call reflects intention to combine NPRM and ANPRM topics in one new rule. (On July 3, Senators Dean Heller, John Cornyn, Rand Paul, and Thom Tillis had sent DHS a letter asking that the agency not move forward with the proposed EB-5 regulations. The listening session indicates that DHS is indeed moving forward, however slowly.)

Here is my favorite listening session caller comment, from a Mr. Fuentes in minute 45: “We have a bottleneck of processing in an environment where resources are not the limit.” Yes – that’s exactly what’s wrong and fixable in EB-5. So many problems for EB-5 projects and investors result from the fact of long processing times, and long processing times are traceable to constraints that need not exist in a program of multi-million-dollar projects and high-net-worth immigrants. I’ll write more on this soon.

The call also reminded me that we need to talk more about direct EB-5, and the kinds of business and investment that are and are not workable in that environment. Purchasing an operational existing business rarely works for direct EB-5. The history of AAO denial decisions is thick with business acquisition cases that foundered on the “new commercial enterprise” requirement and/or the requirement to create new jobs. EB-5 rules specify that mere ownership change does not make an enterprise or jobs in that enterprise new. I have a couple related posts (one on the difference between direct and regional center EB-5, and one on options for investing in an existing business), but see the need for a simpler article addressed to entrepreneurs contemplating direct EB-5.

EB-5 and Securities Law

Immigration lawyers happen to be well-placed to match EB-5 investors to EB-5 projects, and are pressured by the market and tempted with commissions to play a match-making role. This role is perilous, however, considering securities laws. In 2015 and 2016, the SEC made examples of several immigration lawyers who had received transaction-based compensation for facilitating investments, and of one of the regional centers that paid such compensation. The message: it’s illegal to be on the giving or receiving end of payments to someone acting as a broker without appropriate license.

One of the law firms targeted by the SEC fought back. Hui Feng (subject of a complaint published in December 2015 by the SEC against himself and his firm Law Offices of Feng & Associates, P.C.) argued that the SEC’s claims fail because EB-5 investments are not securities and the immigration lawyer does not act as a “broker” when receiving finder fees. He pointed out that EB-5 investments are primarily motivated by the visa, without expectation of profit, that his commissions were contingent on visa approval rather than in connection with securities sale, and that the attorney role has its own fiduciary duties and that broker requirements are inapplicable – i.e. the EB-5 process and investment and lawyer’s role are fundamentally immigration matters, not securities matters and not the SEC’s business. (My layman’s paraphrase; see the court filings for the actual legal arguments.) The US District Court, Central District of California, however, has come down on the SEC’s side in its Motions for Summary Judgment (June 29, 2017). The decision has the longest discussion I’ve seen yet in support of the point that yes, EB-5 investments are securities. It also enumerates the activities supporting the conclusion that yes, this immigration lawyer acted as a broker, and explains why the fee arrangement details were material and should have been disclosed to investors and regional centers. If you pay or receive EB-5 finders fees, pay attention to this decision. You may also want to review IIUSA’s Best Practices for Engaging with Sales Intermediaries.

Regional Center Compliance Audits
The Regional Center Business Journal has a helpful article by Mariza McKee, Kimberly Hare, and Clete Samson “USCIS Compliance Audits – Preparing Regional Centers for the First Wave”

RC List Changes
USCIS continues to cull the list of approved regional centers, with 50 terminations so far this year. 2017 termination letters haven’t been published yet, but I’ll guess that most of these terminations are for lack of recent activity.

Additions to the USCIS Regional Center List, 6/26/2017 to 7/17/2017:

  • No new regional centers.

New Terminations:

  • North Country EB-5 Regional Center, LLC (New York) Terminated 7/7/2017
  • Guam Strategic Development LLC RC (Guam) Terminated 7/7/2017
  • Good Life EB5 Georgia Regional Center, LLC (Georgia) Terminated 6/30/2017
  • Tri-Cities Investment District, LLC (California) Terminated 6/30/2017
  • Prosperity Regional Center (former name U.S. Prosperity Regional Center) (Florida) Terminated 6/23/2017

Draft legislation, NYC lawsuit, SEC action, RC decision (Path America), RC list changes

New Policy (comments due)

Recall that Wednesday June 28 is the last day to submit comments responding to USCIS’s new policy language on redeployment I appreciate the AILA Comments on the Policy Manual, which explain where the policy goes wrong in imposing an “at risk” requirement after jobs have been created.

Analysis of Draft Legislation (IIUSA, NYU)

IIUSA issued a legislative update on June 22 that comments on draft bills from Senator Grassley/Leahy and Senator Cornyn. I appreciate IIUSA’s thoughtful analysis, and its difficult position when it comes to commenting on contentious issues. The Cornyn bill would make everyone in EB-5 happy by clarifying that investors only (not investors plus family members) should be counted toward the annual EB-5 visa quota. Its TEA proposals would create winners and confirm losers – the winners being projects in rural areas and on closed military bases (which would be incentivized with new visa set-asides) and the losers being projects in distressed high-unemployment urban areas (which would only get 13.5% discount from the standard investment amount). To be fair, the Cornyn proposal would make projects in distressed high-unemployment TEAs slightly more viable than they are currently, since 13.5% is better than 0% — the effective investment threshold differential if projects not in distressed areas can also get TEA designation. But overall the TEA proposal looks designed to support the status quo, with a large percentage of EB-5 investors going to projects in prosperous urban areas and closed military bases.

NYU Scholar-in-Residence Gary Friedland, Esq. and Professor Jeanne Calderon, Esq. have expanded their analysis of paths to TEA reform and other questions in the paper EB-5 Prescription for Reform: Legislation or Regulation? (Draft 6/19/17). The authors review perceived problems in the structure of TEA incentives, summarize proposed changes, and suggest that USCIS expedite reform by finalizing regulations, which could prompt the industry to unite in supporting comparatively moderate EB-5 legislation. The authors throw down a gauntlet by arguing that allocating 100% of job creation by an EB-5-funded project to EB-5 investors overstates the economic impact of EB-5 capital.  They clarify that they do not challenge USCIS’s job credit methodology, but only question citing USCIS job credit methodology as evidence of EB-5’s economic impact. This is a helpful distinction, but I don’t see reformers in Congress accepting it, or liking the idea that EB-5 investors might get credit in practice for job impacts not supported in theory. The industry needs to take up the gauntlet, and explain (preferably with reference to economic theory, practicality, and other programs that require job creation) why and how EB-5 job counts and allocations make sense.

NYC RC Investor Lawsuit

After receiving many error reports, USCIS pulled down their logs of EB-5 petition approvals and denials by regional center. I hope that the logs will be reposted soon with corrections, and in the meantime we can prepare to interpret the data. A natural conclusion could be: if X Regional Center has had many investor petitions approved, then it must be a reliable regional center with happy investors. Coincidentally, I heard in the same week that New York City Regional Center ranks #1 among regional centers for number of I-829 approvals and #5 for volume of I-526 approvals, and also that it is facing a lawsuit by over a hundred unhappy investors in the Battery Maritime Building project. Chen Dongwu et al. v. New York City Regional Center et al. claims that the investors’ “dream turned into a financial nightmare,” with fraudulent misrepresentations and subsequent coverups and fiduciary failures leading up to investors facing the loss of their entire investment.  Presumably the investors in this suit received I-526 approval, but USCIS adjudication is only part of EB-5 investment success.  I’ll look forward to seeing how New York City Regional Center responds to the allegations, which are a big story since this RC is such a big player in EB-5. At-risk investments inherently risk loss, and some will lose, and loss does not equal fraud. Risk does not equal license to shirk responsibility or deceive investors, however, and the defendants need to explain their side of the story. Future filings for the case can be accessed at the New York State Unified Court System website with Index Number 6520242017.

RC Termination Decision

The AAO decision Matter of P-A-K, LLC JUN092017_01K2610 denies motions to reconsider and reopen filed by Path America KingCo regional center.  This decision reiterates that termination decisions “take into account a variety of factors, both positive and negative, that encompass past, present, and likely future actions.” But having reviewed new evidence of the RC’s on-going projects, AAO apparently concludes — almost in so many words — that SEC action against a former principal for fraud and mismanagement is the kind of negative that cannot be outweighed by any number of positives in terms of current management and project progress and prospects. I trust that USCIS/AAO thinking will be challenged and will develop more nuance over time.

New SEC Action

Securities and Exchange Commission v. Seyed Taher Kameli, et al. is a new civil action involving a regional center. The Complaint filed June 22, 2017 alleges that Seyed Taher Kameli and his companies, Chicagoland Foreign Investment Group, LLC and American Enterprise Pioneers, Inc., falsely claimed to foreign investors that their investments would be used to fund an EB-5 qualifying project, but instead diverted millions of dollars to fund other projects, make unrelated payments, and for personal enrichment. As with other SEC actions on EB-5, conflicts of interest are the dominant red flag. The defendant Mr. Kameli controlled the regional center, investment funds, and job-creating enterprises, and also represented many investors as their immigration attorney. This kind of scenario should not be hard for future investors (or even legislators) to avoid.

RC List Changes

Additions to the USCIS Regional Center List, 6/6/2017 to 6/26/2017

  • Art District Los Angeles Regional Center, LLC (California) Note: This is not a new RC, but recently added back to the approved list after having been briefly listed as a termination

New Terminations

  • JI Northern Nevada Regional Center, LLC (Idaho, Nevada, Utah) Terminated 6/5/2017
  • Dream Harbor Regional Center (Washington) Terminated 6/1/2017
  • ON Regional Center, LLC (California) Terminated 6/16/2017
  • Northeast Monument Regional Center LLC (Massachusetts, New Hampshire, Rhode Island) Terminated 6/20/2017
  • Rock Hill Regional Center LLC (New York) Terminated 6/1/2017
  • Texas Mining & Resource Center, LLC (Texas) Terminated 6/20/2017
  • Adirondack Regional Center of New York, LLC (New York) Terminated 5/24/2017
  • Las Vegas EB-5 Inmigration, LLC (Nevada) Terminated 6/14/2017
  • CIG Regional Center, LLC (California) Terminated 6/5/2017

I continue to update my Terminations Log, though USCIS has not yet posted any new letters for terminations since 2016.

Tally of I-526 and I-829 approvals and denials by regional center (updated)

The USCIS Immigrant Investor Regional Centers page at www.uscis.gov/eb-5centers has been updated with links to documents that list regional center names and tally the  I-526 and I-829 approvals for each RC from January 1, 2014 to May 31, 2017.

UPDATE: The logs formerly posted by USCIS have been replaced by a brief message that “USCIS is reviewing inquiries regarding the previously posted Form I-526 and Form I-829 approval and denial statistics by regional center. To provide feedback on that data, please e-mail USCIS.ImmigrantInvestorProgram@uscis.dhs.gov.” Apparently, a lot of regional centers contacted them to complain of errors. IIUSA wrote a formal letter to IPO reporting discrepancies noted by many members.

[ORIGINAL POST]

These documents — if accurate — can be very valuable for potential investors, and for program integrity. Track record of approvals is a material factor in decision-making that, until now, has been unverifiable. Records can offer investors a way to double-check claims about past approvals for a regional center.

Potential investors should interpret the numbers judiciously. As USCIS notes in the documents: “petitions may be denied for various reasons, some of which may be based on investor specific issues and not related to any project issues.” A large number of denials may be related to investor problems or to sudden USCIS policy changes (or to document errors in these posted reports), not to any problems with the regional center. A large number of approvals says something about the size, aggressiveness, and age of a regional center, but does not necessarily promise quality or reliability or anything about the character of future projects or success of future petitions. Also, keep in mind that the numbers are only for petitions adjudicated, not petitions filed. Considering processing times, I-526 adjudications in 2014 to 2017 (the time period reported) largely reflect investments made in 2013 to 2015. Most investments made and petitions filed through RCs since late 2015 would not show up on this log of approvals and denials. And the log does not show any of the EB-5 petition approvals or denials prior to January 1, 2014.

Regional centers should double-check their records in these newly published logs, and follow the instructions in the docs to alert USCIS of errors. Whoever created this database of approvals and denials made a number of entry errors on RC names (resulting in some double or even triple listings from name variants), so the probability of numerical errors is also high. Especially if the published list shows denials that your RC doesn’t in fact have, hasten to report that and request correction!

The petition tally by regional center provides interesting data on regional center activity. We’ve known that a handful of regional centers have dominated the EB-5 field, and now that phenomenon can be quantified. Assuming that the numbers reported by USCIS are reliable, we can draw conclusions about the distribution of investors by regional center.

No wonder the interests of one metro area and a handful of regional center operators dominate EB-5 politics, when those interests claim such a large piece of the EB-5 pie. The USCIS database indicates that three regional center operators (US Immigration Fund, CMB, and Related) account for nearly a quarter of all I-526 petitions approved since 2014. New York City RC alone accounts for a fifth of all I-829 approvals during that time.  Over half of the approved I-526s petitions since 2014 went through just 21 regional centers, while nearly half of investors with I-829 approvals in that time went through just four regional centers. Meanwhile, over half the regional centers currently on the USCIS list of approved RCs did not have any approved investor petitions from 2014 to the present. (Though these RCs haven’t necessarily been inactive. Long processing times mean that approvals and denials through 2017 only reflect petitions filed/investments made through 2014/2015 — or earlier for I-829. An RC that doesn’t appear with many approvals or denials yet may have many petitions currently pending.)

New EB-5 Policy (Sustaining Investment, Redeployment, and Investors in a Terminated RC)–Updated

We’ve been waiting for years for USCIS to clarify its policy on sustaining investment, and when and how EB-5 capital may need to be redeployed if a project winds up before the investor reaches the I-829 stage. Today, we have this notification:

The USCIS Policy Manual has been updated to provide further guidance regarding the job creation and capital at risk requirements for Form I-526, Immigrant Petition by Alien Entrepreneur, and Form I-829, Petition by Entrepreneur to Remove Conditions on Permanent Resident Status. Volume 6 (Immigrants), Part G: Investors is effective on June 14, 2017. The Policy Alert is available here: Volume 6 (Immigrants), Part G: Investors (Final date for comments: June 28, 2017)

The Policy Alert from USCIS does not actually say what changed. I compared the the June 14, 2017 version of the Policy Manual with my hard copy of the previous November 2016 version, and highlighted the changes to the new file in red font. (Here is my folder with dated versions of 6 USCIS-PM G). The June 2017 changes — which are significant and touch on material change and termination issues as well as redeployment — are in Chapter 2(A)2, Chapter 4(C), Chapter 5(A)2, and Chapter 5(C).

UPDATES: I’ve copied the new Policy Manual language on redeployment into a separate document and added my attempt to analyze the language and understand the terms. Here is my work so far.

Here are reactions from others to the new policy:

The new policy is effective as of today, before anyone has had a chance to review or comment on it. Indeed, the policy is essentially retroactive since it defines new requirements for investment agreements that current investors may have signed years ago. But USCIS is offering an opportunity to comment, for what it’s worth at this point.

Please send all comments to publicengagementfeedback@uscis.dhs.gov and be sure to include the following to make your comments clear:

    • State the title of the relevant volume and section in the subject line of your message;
    • Refer to a specific portion of the document;
    • Explain the reason for any recommended change; and
    • Include data, information, or authority that supports the recommendation.

Opening & Closing Dates for Comments: June 14, 2017 – June 28, 2017

As background, here are some reactions to the draft policy memo from August 2015 on sustaining investment, and wish lists of features we wish had been included in the new policy.

Q2 2017 EB-5 Petition Processing Data, Audits, Leahy letter

Q2 2017 EB-5 Petition Processing Data

The USCIS Immigration and Citizenship Data page has been updated with data from FY2017 Q2 (January to March) for petitions including I-526 and I-829.


A few points to note:

  • The fall in I-526 receipts was to be expected, since the previous quarters represented unnatural filing surges around sunset dates. Even 1,731 receipts in one quarter is not sustainable, however. So long as annual EB-5 visas are limited to about 10,000 for investors plus family members, only about 3,330 investors per year can get visas. The US actually benefited from 13,148 EB-5 investments over the past four quarters – but that’s almost four years of visa numbers for investors plus family.  Such a situation is not sustainable. If Congress wants to welcome more than 3,330 investments per year in the future, it needs to address visa availability.
  • USCIS processed 567 fewer I-526s this quarter than last quarter – not good news.
  • USCIS processed about 200 more I-829 petitions this quarter than last quarter – improvement, but not enough. If IPO continues processing about 300 I-829s per quarter, it will take over six years just to work through the existing backlog of I-829s. The California Service Center managed to process over 800 petitions in the final quarter that it handled I-829, and even IPO did better in early 2016 than it’s doing now. IPO announced their new I-829 adjudications unit in early March, so we may have to wait for Q3 stats to see real improvement.
  • The number of I-829 receipts has dropped the last two quarters. I wonder if this reflects petitioners giving up before reaching I-829, or being held up in the waiting line for conditional permanent residence.
  • The backlog of pending petitions is a tiny bit less dire than last quarter.

While inputting receipt numbers from this processing data report, I thought to try linking them with the dates in the IPO processing time reports. For example, IPO seems to have been working forever on I-526 cases filed in September 2015, and we might explain this this by looking at the surge in I-526 receipts around September 2015. So I added a tab to my processing times log that tries to make the link. My calculations don’t look right, which may be additional evidence that IPO processing time reports do not simply reflect FIFO case processing.

Regional Center Audits

Notes from a May 12, 2017 meeting between AILA and the USCIS Field Operations Directorate has some Q&A on EB-5 questions (page 10-15), including:

  • EB-5 Regional Center Compliance Audit Program: USCIS answered practical questions about the process and content of an audit.
  • Investors in terminated RCs: USCIS said that “Until a regional center that has been issued a Notice of Termination exhausts its administrative remedies before USCIS, the agency will generally delay final adjudication  or revocation of I-526 petitions associated with that regional center if the sole factor determining petitioner eligibility is the termination of the regional center’s designation.” (This is a welcome statement considering past evidence to the contrary.)
  • Regional Center amendments: In another installment of confusing guidance, USCIS indicated that amendments are required for both geographic area expansion and changes to ownership/org structure/administration, but not “required” in the same sense. The geographic area amendment must be “filed and approved” before I-526s are filed, while “Regional center projects are not on hold while the amendment is pending” in the case of an ownership change amendment

Washington Developments

The Kushner Companies EB-5 roadshow in China continues to reverberate, this time in a letter from Senator Leahy, Representative Conyers, and Representative Lofgren on behalf of the Senate and House Judiciary Committees to the Kushner Companies. The letter focuses on potential conflict-of-interest issues, and airs concerns about EB-5 generally. I’m most interested in this letter for the footnotes, and disturbed by the picture it paints of one-sided and minority-focused EB-5 lobbying. This meeting, for example, gives an unfortunate impression.

RC Terminations, investor litigation victory, China trends, agent ethics, RC list changes

Regional Center Termination Reasons

USCIS has terminated 109 regional centers over the past decade, and 23 regional centers in May 2017 alone. This month USCIS also initiated a page for Regional Center Termination Notices, with most notices up to November 2016 posted so far. The page explains that “USCIS will remain consistent and committed to transparency in the EB-5 program by proactively publishing Regional Center termination notices as they become available. This is an important step in assisting investors, the EB-5 industry, and the public to understand the reasons why a regional center has been terminated and what types of regional center activities may trigger the end of a regional center’s designation.”

I’ve started a Termination Log spreadsheet (also linked to my RC List page for ongoing reference) to correlate USCIS’s terminations list with its notices list, and facilitate analysis. Pivot table analysis of this log provides a quick overview of termination reasons (from the 69 termination notices posted so far) and timing.

In fact the termination notices are not very informative (most reference Notices of Intent to Terminate, which are not attached, for specific reasons), but we can generally learn that about 77% of RC terminations from 2008 through November 2016 occurred for one of two reasons: failure to file an I-924A annual report, or the fact that the I-924A report reflected inactivity (i.e. no investor petitions in three or more years). Just 12% (notices for eight regional centers) referenced problematic behavior by the regional center as a basis for termination. Other reasons include the regional center’s voluntary request to withdraw from the program. One letter dated July 13, 2016 explains “USCIS notes counsel’s request to withdraw from the program. The mechanism to end a regional center’s designation, whether initiated by the regional center or USCIS, is termination of the designation.” (This particular letter could’ve raised on-going FBI investigation as a termination issue, but that’s another story.) The Final Fee Rule published 10/24/2016 confirms that a regional center may elect to withdraw from the program, but does not offer an exit more dignified than termination. “A regional center may elect to withdraw from the program and request a termination of the regional center designation. The regional center must notify USCIS of such election in the form of a letter or as otherwise requested by USCIS. USCIS will notify the regional center of its decision regarding the withdrawal request in writing.This is a pity, as the terminated regional center list looks like a walk of shame, and I think voluntarily withdrawal should be treated differently from termination initiated by USCIS.

Legal Win for EB-5 Investors

Investors who think they’ve fallen victim to errors by USCIS will be interested in this long but ultimately successful battle by a group of EB-5 investors.

  • 2013: Twelve EB-5 investors file I-526 petitions based on investment in a regional center hospital project that sought to qualify as a troubled business
  • 2013-2015: USCIS denies the I-526 petitions, and then denies Motions to Reopen filed by the petitioners. The petitioners appeal the denials to the Administrative Appeals Office.
  • March to May 2016: AAO posts decisions dismissing appeal of I-526 denials (for example, MAR252016_02B7203)
  • April 2016: Four petitioners file civil action against USCIS in district court: Wei Gan v. USCIS
  • May 2017: USCIS and the plaintiffs resolve the case
  • May 2017: AAO posts decisions sustaining appeal of the previously-denied I-526s (For example, MAY182017_01B7203. Other May 18 2017 decisions sustain appeals for other investors in the same project)

Trends, Pitfalls, and Ethics in Working with Overseas Agents

China Market Demand Trends
Ronald Fieldstone reflects on a recent China trip in his post EB-5 Marketplace Measurement – China and Beyond (May 25, 2017). We’re reminded of the extent to which demand shapes supply in EB-5 investment.

Agent Marketing Claims
The Kushner Companies EB-5 roadshow in China continues to reverberate, with Senator Grassley mining it for yet another press release, this one calling for investigation of the Chinese agent involved, and its sales claims. (Grassley Seeks Investigation of Companies’ Promises of Green Cards 5/25/2017.) The regional center has protested to journalists that the senator’s allegations are baseless in this case, but all regional centers can take the reminder to double-check what their agents overseas are saying and posting online. Also keep in mind IIUSA’s best practices for engaging with sales intermediaries.

Ethics for US Lawyers Retained by Migration Agents
Lawyers who deal with overseas agents in EB-5 may be interested in a March 2017 Ethics Opinion by the New York State Bar Association. The opinion discusses conditions under which a lawyer may enter into an arrangement whereby a nonlawyer “foreign migration agent” hires the lawyer on behalf of the client and assists the lawyer in communicating with the client. Cyrus Mehta explores the matter further in his post EB-5 Green Card, Ethics and Trump (May 22, 2017).

DHS Director and EB-5

Lee Francis Cissna, President Trump’s nominee for Director of USCIS, committed to finalizing EB-5 reforms in his Senate Judiciary Committee hearing last week. In other words, new EB-5 regulations are still on the table. Mr. Cissna spent much of the past two years working for Senator Grassley on immigration issues, and reportedly wrote dozens of the letters sent under the senator’s name to Homeland Security officials. This does not bode well for his attitude to immigration generally or EB-5, though he made a nice statement at the hearing.

Regional Center List Changes

Additions to the USCIS Regional Center List, 05/08/2017 to 05/30/2017

  • Atlantic Casino & Entertainment Group Regional Center (Delaware, Maryland, New Jersey, Pennsylvania)
  • New York Immigration Regional Center (Connecticut, New Jersey, New York, Pennsylvania): www.goeb5nyc.com/
  • American Family Regional Center (Washington)

New Terminations

  • Dallas Regional Center (Texas) Terminated 5/22/2017
  • East Plumas County Regional Center, LLC (California) Terminated 5/22/2017
  • Immigration Funds LLC (former name United States Investors Regional Center) (Maine, Massachusetts, New Hampshire) Terminated 5/22/2017
  • Ohio Regional Center, LLC (Ohio) Terminated 5/21/2017
  • EB5 Express Regional Center (California) Terminated 5/18/2017
  • Arkansas Regional Economic Development Center, LLC (Arkansas, Oklahoma) Terminated 5/16/2017
  • Art District Los Angeles Regional Center, LLC (California) Terminated 5/16/2017 (this RC was removed from the terminated list and added back to the approved list on 6/19/2017)
  • The Z Global Corporation Regional Center (California) Terminated 5/16/2017
  • Mariana Stones Corporation Ltd. (Guam) Terminated 5/15/2017
  • NatureAll Co., Inc. EB-5 Regional Center Terminated 5/15/2017 (New Jersey)
  • USA Regional Center, LLC (California) Terminated 5/15/2017
  • Eight Islands Regional Center, LLC (Hawaii) Terminated 5/3/2017
  • Diamond City Montana EB-5 Regional Center, LLC (Montana) Terminated 5/10/2017
  • New York Pioneer Regional Center (New York) Terminated 5/3/2017
  • Optima Arizona Regional Center, LLC (Arizona) Terminated 5/3/2017
  • Puget Sound RC, LLC (Washington) Terminated 5/3/2017

New EB-5 Regulations: Comments Discussion

We’re waiting on the fate of draft EB-5 regulations published in the Federal Register in January 2017, with a public comment period that ended in April 2017. This post briefly reviews the proposed rules, considers the probability that they will be finalized any time soon, and distills insights from the 323 public comments that I’ve now read. The post is long because the topic is important. I expect EB-5 regulations to be finalized — in my lifetime, even — and the regulation comments include valuable contributions to the debate around EB5 program changes.

Content of Proposed Regulations

Future of Proposed Regulations

Final EB-5 regulations could take effect anywhere from 30 days from now (if a final rule were published today in the Federal Register) to never. (If you’re interested in how the process works, see A Guide to the Rulemaking Process prepared by the Office of the Federal Register.) Here are factors that I know of that could affect timing in this case.

  • DHS can be very slow. For example, the regulation dealing with EB-5 petitions approved 1995-1998 (RIN 1615-AA90) first appeared as a proposed rule in 2003, the Notice of Proposed Rulemaking was published in the October 2011 Federal Register, the public comment period closed in November 2011, and as of May 2017 the rule has not yet been finalized.
  • Most commenters on the NPRM reminded DHS that Congress has been working to deal with the very same issues through legislation, and that legislation should proceed regulations. Therefore regulations should be withdrawn or put on hold to allow Congress to act. Several speakers at the House Judiciary Committee Hearing on the NPRM supported the point that policy-making belongs to Congress, and it should act first.
  • On the other hand, no one at the House Hearing spoke in favor of cancelling the EB-5 regulations, even if they did come out under Obama, and four influential Congressmen behind EB-5 reform legislation (Goodlatte, Grassley, Conyers, and Leahy) collaborated to submit a comment on the NPRM strongly urging DHS to finalize it, at least with respect to minimum investment amounts. Senator Grassley personally encouraged DHS Secretary John Kelly in January to finalize the EB-5 regulations, and called on him again on May 11 to expedite the regulations. UPDATE: DHS Director nominee Lee Cissna committed on May 24 in his confirmation hearing to finalize EB-5 reform.
  • On May 8, the New York Times quoted a White House statement that the administration “is evaluating wholesale reform of the EB-5 program to ensure that the program is used as intended and that investment is being spread to all areas of the country.” Supporting drastic reform regulations could be a strategic move for President Trump: bombing the EB-5 program would conveniently show that he’s truly not in the pocket of any tangentially-related EB-5 promoters. On the other hand, the proposed regulations would inhibit job creation and impose excessive costs on business – points Trump has committed to avoid in regulations.
  • This Congress has so far officially introduced only one EB-5 bill, but we’ve seen a couple discussion drafts that might emerge as live legislative options.
  • The rule-making process requires DHS to review and respond to public comments. I took a long time just to read all the comments and write this post, and foresee that the final rule will be tough and time-consuming for DHS to write. If DHS takes the good feedback seriously, it will likely come up with another version that’s sufficiently different to justify a second posting and comment period.

Review of Public Comments

The 290 public comments on NPRM #0006 can be roughly divided as follows: brief personal pleas from EB-5 investors (61%), analysis and experience from EB-5 project people operating outside Tier I cities (14%), lengthy and sophisticated comments from the top few big-city regional centers and their surrogates (6%), brief comments on behalf of direct EB-5 projects (6%), feedback from immigration lawyers and other service providers (10%), rants about damn furriners (3%), and comments from Congress (0.3%). I summarize common themes in these groups, and then link to specific comments of interest.

Feedback from Congress

There is only one comment from Congress – a letter signed by Bob Goodlatte and John Conyers from the House and Charles Grassley and Patrick Leahy from the Senate – but I lead with this because it’s so significant and seems to have passed unremarked.  These Congressmen have spearheaded EB-5 reform legislation, and their comment reveals their good intentions and dangerous misunderstanding of how EB-5 works. They identify real problems but go very wrong in suggesting solutions.  We particularly need to respond to their counterproductive ideas about job creation and retroactivity. Clearly they haven’t realized that their suggestions would have the practical effect of gutting small, rural, and direct EB-5 projects while lining the pockets of mega-project developers with superfluous cash. (A post with more on this soon – and staffers if you’re reading this, please call me and I will explain.)  While most other public comments ask DHS to wait for Congress to act, these influential Congressmen “strongly urge” DHS to finalize EB-5 regulations, particularly with respect to minimum investment amounts, and also propose additional items that they’d like to see DHS address via regulation (visa set-asides for TEAS, limits on job creation, mandatory I-829 interviews, limits on regional center rental and sale, and limits on job counts).

Feedback from EB-5 Investors

The many comments from investors are generally short and sweet, bringing little data and evidence but a fair amount of appealing personal experience. The dominant message – repeated across most investor comments – is that EB-5 visa backlog problems need to be addressed before any other reforms can be meaningful. Investors from China express distress at finding themselves in a three-to-ten-year waiting line just to get conditional residence, depending on when they invested, and the many problems that flow from that – children aging out and separating families, the high risk of material change, the problem of asynchronous exit strategies, the difficulty of managing enterprises and overseeing investments from overseas, and so on.  Current investors don’t see the program remaining viable for new investment if the required minimum investment more than triples plus the backlog problems aren’t solved. Investors were also united in supporting (and suggesting ways to expand and strengthen) priority date protection, and opposing any retroactive application of new rules. Many proposed granting parole after I-526 filing, and allowing EB-5 investors who have waited more than two years since I-526 approval to file I-829 once a visa becomes available. The comments impressed me with the thought that EB-5 investors need an association that allows them to organize, collaborate, and advocate for their own interests. Past investors are important stakeholders, with distinct concerns and a strong interest in influencing debates around the future of the EB-5 program. But here they are represented by scattered 100-word comments with doubtful punctuation while regional center representatives present sharp 10,000-word essays bristling with footnotes. I see evidence of group coordination in some investor comments, and encourage people to contact me if they have any groups that they’d like publicized.

Feedback from Regional Centers and Project Developers

On the project side, nearly everyone opposes the DHS proposals regarding investment amount (a one-stage 180% increase to the standard investment amount and 270% increase to the TEA investment amount). Commenters argue that this abrupt and dramatic increase would quell demand, make the US investor visa program uncompetitive, reduce the total job creation and investment impact of the EB-5 program, be tough on small projects, and dampen the incentive to invest in a TEA. They make supply-demand arguments (suggesting that any inflation-based increase should be dated from 2008 or so when demand for the program took off, not from the 1990s when it was barely used), propose linking investment amount calculation to factors such as exchange value of the dollar and household income rather than merely considering the Consumer Price Index, encourage DHS to consider Congressional intent as expressed in recent proposed legislation, not just as expressed in 1992, point out the high risks that distinguish the US program from others, and advocate for a phased-in approach and protection for past investors and midstream offerings.

When it comes to Targeted Employment Areas definitions, and the incentive to invest in a TEA, big-city and small-city/rural regional centers part ways. Comments filed on behalf of the big urban regional centers advocate for large TEA areas based on commuting patterns (allowing for TEA projects located at a distance from where unemployed people live) and for a narrow differential between the TEA and non-TEA investment threshold (minimizing the TEA incentive). Comments filed on behalf of regional centers active outside of major cities were generally supportive of TEA changes proposed by the regulations (which would require TEA projects to locate in/very near high-employment areas) and advocate for a meaningful TEA incentive/investment differential. For example Related New York City Metro Regional Center suggests that TEAs should allow for unlimited combinations of areas within an MSA (and with no requirement that the constituent areas be contiguous), and that TEA investment should be only $50,000 cheaper than non-TEA investment. By contrast, Pine State Regional Center (Arkansas, Missouri, Tennessee) supports restricting TEA definitions and significantly incentivizing TEA investment (for example taking the $800,000/$1.2M investment levels proposed last year in legislation, which would be a $400,000 differential).  The two points of view were approximately balanced in comments on the regulations (with more voices on the small/rural side and stronger voices on the large urban side), though I note that the big players are winning lobbying (each successive draft of proposed legislation has progressively bargained down the investment differential/incentive to invest in a TEA).

Nearly every commenter (except for a couple thinkers who have never experienced USCIS processing) agrees that DHS absolutely must not enter the business of issuing case-by-case TEA determinations. USCIS designations would be needless assuming that TEA requirements are clarified and codified, senseless considering USCIS’s (lack of) expertise, and disastrous considering USCIS’s existing workload and processing times. These arguments were made very strongly, many times. If the final rule persists in assigning TEA designation to USCIS rather than creating an automated process or giving unambiguous guidelines to state agencies, then we’ll know that DHS just didn’t read the comments. I hope that Congressional staffers working on EB-5 would read these comments as well, for the case against individualized TEA designation by USCIS is extremely clear and compelling.

Many of the EB-5 industry commenters joined investors in arguing for I-526 priority date protection, for measures that would ease the visa backlog by not counting derivatives or recapturing unused visas, for protecting investors who already filed under old rules, and for palliative measures in light of the backlog such as parole after I-526 approval and age-out protection and priority date protection.

The ANPRM #0008, being a just preliminary notice, got little attention and feedback – sadly, because it did ask important questions. Comments that were submitted particularly focused on the proposal to require exemplar approval prior to I-526 filing (granting that this is a good idea only if the processing time can be short, and unworkable otherwise).

A sampling of noteworthy comments

The public comments are useful to help understand what DHS sees as it prepares a final rule, and also as a source for ideas worth discussing and support for arguments that you may want to make yourself. I’ve assembled a short list of comments that make particularly interesting or characteristic points, or that make points in a particularly effective way, with compelling language and evidence.

  • The case for TEA rules that don’t disadvantage urban projects: Jeffrey Carr (gives rationale for TEAs based on commuting patterns, unlimited areas within MSAs, census block groups, and NMTC criteria), EB-5 Investment Coalition (proposes a “9-Step Process” to designate areas that include “Residence Tracts” linked to “Workplace Tracts”), Angelique Brunner and David Morris (propose expanding provision to encompass existing government-designated economic development zones).
  • The case for TEA rules that significantly incentivize projects outside prosperous urban areas: Urban Manufacturing Alliance and  Mount Snow (for distressed urban and rural areas), Invest Atlanta (economic development agency perspective), Gary Friedland (considering the purpose to stimulate investment in undercapitalized areas), IIUSA (for fairness to a broad base of EB-5 users)
  • The case for a different approach to calculating EB-5 investment amount increases: Auray Capital (considers data on currency exchange rates, competitor programs, market threats, and the population of potential investors), Jim Nail, AISA (points out why an inflation-correction approach, if used, should calculate from the TEA investment amount), Centurion American Development (consider investment risk and return, and costs to the regional center), Suman Guduru (too high would discourage startups and entrepreneurs), Deputy Mayor of Columbus, Indiana (too high would discourage investment in small cities),  Alexandre Carvalho (too high would discourage investors).
  • The case against delegating TEA designation to USCIS: Nearly every comment, but for example Elliot Winer and Kimberly Atteberry (technical reasons); Stetson Law and Chanticleer Holdings (positive benefits of state involvement)
  • The case for broadening I-526 priority date protections: Green and Spiegel and AILA and Penny Zhang (for priority date protection not only contingent on I-526 approval),  Meisheng King (for the option of assigning priority date to children), Golden Southern Chicken (priority date protection would allow for better business decisions), Fei Zhiqiang (priority date protection would free investors to act on suspicions of malfeasance)
  • The case against priority date protections: US Chamber of Commerce (could encourage investors to abandon projects that no longer qualify as TEAs), Pacific ProPartners (would further swell the visa waiting line and undermine forecasts)
  • The case for taking EB-5 visa backlog problems seriously: ZeMing Gao and Shiting Yi  (and for those unfamiliar with the backlog problems, here’s my blog post with as much as I know)
  • The case that DHS has and should use the power to modify EB-5 visa availability: EB-5 Investment Coalition (the arguments for eliminating derivatives from the visa count and recapturing unused visas)
  • The case for and against making EB-5 program changes retroactive: Goodlatte/Grassley/Conyers/Leahy (for retroactive application), Fragomen (against). Industry response would have been stronger had we realized retroactivity could even be on the table for regulations. I will write more in response to the comment from Congress, and hope others will as well. Many investor comments speak against retroactivity, but without marshaling sources and evidence.
  • The case for a revised material change policy: American Immigration Lawyers Association (EB-5 material change policy as currently stated can make an EB-5 petition un-approvable even though it was eligible at the time of filing and remains eligible after an interim material change. AILA digs into the law and proposes a more appropriate material change rule that would only focus on changes that involve EB-5 credibility requirements, and only on changes that make a petition ineligible. The argument seems sensible and could solve severe current problems in EB-5 adjudication. I hope more people read, discuss, and promote it.)
  • The case against requiring exemplar approval without a strictly-controlled processing time: Suzanne Lazicki (explaining the process and timing issues), Jillian O-Brien (providing examples). It’s so important for USCIS to understand the practical difference between a requirement to file and a requirement to file plus wait for approval.
  • Thoughts on designation, monitoring, and oversight requirements for regional centers: EB5 Securities Roundtable and Citizen for Responsible Regulation