EB-5 Updates

EB-5 Legislation? (S.2778, S.2540)

Since 2015, when the last three-year regional center program authorization expired, there’s been much effort to get EB-5 legislation passed. At minimum, we need Congress to put the regional center program on a stable footing by giving it a long-term authorization. (Since 2015, the program has been extended 17 times, each time for just a few weeks or months.)  Other features that one faction or another hope to get into legislation: update the EB-5 minimum investment amounts, revise the Targeted Employment Area incentive, implement additional integrity measures, improve procedures, and provide visa relief.

However, the status quo has been profitable, and those who profited most have resisted change. Several times since 2015, negotiators were reportedly close to getting EB-5 legislation attached to a funding bill, but ultimately did not succeed. Reviewing the history gives perspective on where we are today.

• December 2015: Senators Grassley, Leahy, Goodlatte, Conyers, Issa, and Lofgren drafted legislation that would have given the RC program a 4-year authorization, changed the EB-5 investment amount to $1.2 million ($800,000 in a TEA), restricted TEA definitions, and added integrity measures. According to Senator Grassley, “On that first day of December negotiations, there was a lot of discussion about how New York wouldn’t be able to compete with rural America if our reforms were enacted.  They thought the bill was unfair to urban areas.” Grassley claimed that he tried to compromise, but could not go far enough. ABC News reported that “the legislation was defeated by a group of lawmakers led by New York Democrat Chuck Schumer, who argued that security improvements were a good idea, but the way the reform was written would unfairly hurt investments in his home state.” ABC quoted a Schumer spokesman: “Sen. Schumer supports reforms that will bring transparency and accountability to the EB-5 program, but strongly believes that the EB-5 program should continue to act as a catalyst for thousands upon thousands of jobs throughout New York.”
• December 2016: A version of the The American Job Creation and Investment Promotion Reform Act of 2016 originally introduced by Representatives Goodlatte and Conyers was seriously discussed for inclusion in the December 2016 funding bill. This legislation would have given the RC program a 6-year authorization, gradually increased the EB-5 investment amount to $1.0 million ($800,000 in a TEA), revised TEA definitions, and revised integrity measures. But this also proved unacceptable. Senator Grassley wrote a post listing the specific reasons for “why this package was not acceptable to some – notably the U.S. Chamber of Commerce that was the most rigid in not compromising” and complained again that “the industry love the status quo and the billions of dollars that pour in to affluent areas.” The Wall Street Journal reported that “Related Cos., a developer of massive mixed-use projects, has waged an aggressive campaign to head off proposed changes to the so-called EB-5 program in an apparent effort to keep low-cost money flowing to luxury urban projects such as its $20 billion Hudson Yards development in Manhattan.” A few million in lobbying dollars proved money well spent for Related, which eventually raised $1.2 billion in EB-5 investment for Hudson Yards. According to the WSJ article from January 2017, Related Companies “found support from a handful of key senators including Sen. John Cornyn (R., Texas) and Sen. Charles Schumer (D., N.Y.), who have been resistant to the changes opposed by the developers.” A spokesman told WSJ that Schumer believes good projects in EB-5 “should rise to the top based on how many jobs they’ll create,” and that the government shouldn’t be trying to direct development to specific parts of cities.
• March 2018: The EB-5 Immigrant Investor Visa and RC Program Comprehensive Reform Act negotiated by Grassley, Goodlatte, Cornyn, Flake reportedly came close to inclusion in the March 2018 funding bill. This bill would have given the RC program a 5-year authorization, increased the EB-5 investment amount to $1.025 million ($925,000 in a TEA), revised TEA definitions, and revised integrity measures. I saw this bill as a generous compromise to urban interests. But the bill also failed, and Senator Grassley had an opinion as usual about what happened. “For the last year, my staff, along with Chairman Goodlatte, Senator Cornyn, and Senator Flake’s teams, has worked around the clock to produce an EB-5 reform package. Everyone made numerous concessions in order to reach a deal, and after more than twenty meetings and countless hours of drafting, we produced a reform package that was fair. These reforms weren’t acceptable to the big moneyed New York industry stakeholders who currently dominate the program. And because big money interests aren’t happy with these reforms, we’ve been told they won’t become law.”

This story gets repetitive. But now, circumstances have changed, due to the EB-5 Modernization Regulation to take effect on November 21, 2019. The regulations will create a new status quo of exclusive TEA definitions and investment amount increases that would tend to reduce the flow of EB-5 investment overall, and channel EB-5 investment away from many urban areas. That’s not the status quo that EB-5 protectionists want to protect, and now legislation offers the only path to change.

That brings us to S.2778 – Immigrant Investor Program Reform Act, introduced by Senators Mike Rounds (R-SD), Lindsey Graham (R-SC) and John Cornyn (R-TX). Charles Schumer (D-NY) has already signed on as an additional co-sponsor, pivoting from his traditional role as quasher of EB-5 bills. Robert Maples of Greenberg Traurig, who previously expressed Related’s objections to the EB-5 regulations, praises S.2778 for “proposing long overdue improvements to modernize the EB-5 program in alignment with industry and market principles.” IIUSA lauds “the EB-5 industry’s ability to work together and come to an agreement on many issues that until now left industry stakeholders divided.” Perhaps we finally have an EB-5 bill that can avoid being blocked.

S.2778 proposes Targeted Employment Area reforms that would allow EB-5 capital to continue to flow to high-quality urban projects that naturally attract investment according to market principles. The bill would shift TEA definitions to privilege the areas that major regional centers already favor (Opportunity Zones, closed military bases), and – more to the point – would minimize the incentive to choose a TEA investment over a standard investment.  In the regulations comment linked above, Related Companies argued that a $100,000 differential would be fair and reasonable (avoiding the problem of “financial incentive for foreign investors to invest in TEAs, regardless of the project”), and that’s what S.2778 proposes.  While past statute and the new EB-5 regulations offer a 50% TEA discount, S.2778 would offer a 9% TEA discount, with $1,100,000 standard investment and $1,000,000 TEA investment. As a concession for essentially eliminating the monetary TEA incentive, S.2778 offers two additional TEA incentives related to timing: expedited I-526 processing, and set-aside visas. These are safe concessions, because expedited processing is limited by USCIS’s ability to deliver such a benefit, and the visa set-aside incentive is limited to the number of visas offered (must stay under 3,000, or the incentive disappears) and to the few countries that need a visa incentive (China, Vietnam, India).  Current law already sets aside 3,000 visas annually for TEA investments (INA Sec. 203(b)(5)(B)), but people forget that because the existing TEA set-side has had zero incentive effect in practice. Set-asides only have any incentive value if limited to a few. The industry consensus proposal offered to give some potency to the new TEA set-asides by restricting them to TEA investors filing after the date of enactment. S.2778 does not specifically state such a restriction, however. I hope the restriction is not still implied, because reserving up 3,000 visas annually for incoming investors and their families would be at the direct cost of reducing visas available to the tens of thousands of past EB-5 applicants (mostly TEA investors) who are currently waiting for visas. To the extent that visa set-asides and expedited processing can work at all as incentives, they work by offering queue-cutting. That would hardly be fair to 70,000+ people in the queue before the rule was made.

Visa-limiting TEA incentives aside, S.2778 offers some significant backlog relief. The bill would make no additional EB-5 visas available, but would soften the pain of waiting for visa availability. S.2778 offers the possibility of parole (entry to the United States) and work authorization for EB-5 applicants with I-526 approval who have been waiting over three years for a visa. This would extend to EB-5 investors abroad the benefit already available to applicants in the U.S. who file I-485 to adjust status. Otherwise, parole has been restricted to urgent humanitarian or significant public benefit reasons. (Links FYI that describe how parole currently works in the I-485 context and for applicants abroad.) I wonder about the politics of offering parole to EB-5 investors, since the administration cancelled parole for immigrant entrepreneurs and threatened to take it away from U.S. military families.  But if this benefit can be enacted (and DHS consents to implement it), parole could really help EB-5 investors stuck abroad waiting for visas – particularly direct EB-5 investors who struggle to manage their US businesses from afar. This is not a visa giveaway, does not change the EB-5 visa limit, and only offers the weak promise that DHS may “temporarily parole… on a case-by-case basis,” but at least it’s something. Besides parole, the bill offers to soften the pain of long wait times by permanently protecting children from age-out. I understand that IIUSA pushed very hard for the additional relief of applying the EB-5 visa limit to investors, as intended by EB-5 program architects, not investors plus family, but that provision did not make the final bill.

Other positive features of S.2778 include 6-year authorization for the regional center program and recourse for investors and projects following termination of a regional center.

If I could choose three modest improvements on S.2778, I would suggest:

• Authorize DHS to assess fees necessary to meet reasonable processing time goals for EB-5 investor petitions. This is one of the few good ideas in Grassley and Leahy’s S.2540 EB-5 Reform and Integrity Act, which defines targets (in days) for each form, and charges USCIS to set fees to allow meeting those targets. The latest proposed fee rule from DHS shows that DHS will not, on its own initiative, allocate resources to improve the current status quo of 2-4 year processing times for I-526 and I-829. Congress needs to step in to push DHS toward processing integrity, and to authorize the resources necessary. (S.2778 suggests premium processing with a fee, but only for regional center applications, amendments, and reports, not for investor petitions. S.2778 suggests collecting $51,000 in additional fees from investors, but specifies that these are to be used for enforcement activities, not processing improvements.)
• Delete the $10,000 annual fee for regional centers that are not-for-profit or have fewer than 20 investors. If Congress wants to see at least a few face-saving EB-5 projects in distressed areas, it should keep the regional center option affordable to small entities, and open to areas that won’t have high-volume deal flow. A $20,000 annual fee – or $50,000 annual fee for that matter — is nothing to a regional center handling hundreds of millions of EB-5 capital. But a minimum a $10,000 fee (especially on top of all the other cumbersome red tape suggested by the bill) could eliminate small regional centers with modest and occasional EB-5 capital raises. The $10,000 minimum regional center fee is a handy as an anti-competitive measure, benefiting large, high-volume and established regional centers by helping to clear the deck of small players, but such a winnowing would not benefit EB-5’s potential or reputation.
• Include at least one genuine integrity measure – i.e. at least one measure that involves something besides reporting to and making records available to DHS. At minimum, why not borrow another good idea in Grassley’s S.2540: require regional centers to make their annual statements available to their investors. Record-keeping, reporting, and certifications are fine activities in themselves, but not anti-fraud measures if just paper disappearing into the vaults at USCIS, along with all the other paper that doesn’t get read for years. But that’s as far as S.2778 goes. S.2778 excludes an integrity measure that’s been in other EB-5 reform bills, including S.2540: the requirement to have an independent fund administrator to monitor the deployment of funds into any affiliated job-creating entity, and keep alien investors informed about the deployment.  In the cover article to their 2018 database of SEC actions, Friedland & Calderon note that “virtually every SEC civil enforcement action involving EB-5 fraud the NCE did not have an independent fund administrator, escrow conditions were ignored, and periodic reports of the status of investor funds were not furnished to investors.” Effective integrity measures had better address such proven vulnerabilities. It’s hard to imagine that any of the specific SEC cases would’ve been forestalled just by enhanced reporting to and threat of sanctions from USCIS. If I were putting EB5 language into a funding bill, and serious about program integrity, I’d consider taking the fund administration language from S.2540.

I will not bother to say more about Grassley and Leahy’s S.2540 EB-5 Reform and Integrity Act — a bill that no one will support. S.2540 alienates prosperous urban interests by not replaceing the TEA rules in the EB-5 regulations, and excludes most everyone else with a blizzard of restrictions, requirements, and fees that would be too much for most stakeholders serving distressed urban and rural areas. S.2540 doesn’t propose to simply terminate the regional center program, but the effect would be pretty close. So S.2778 is what we have, a bill with enough benefits for enough people to win support. The industry is rallying round and making positive statements. There’s some hope that language from S.2778 will get included in a funding bill this year, trump unwanted regulations, and provide desperately needed long-term authorization for the regional center program. Perhaps I too should pretend that S.2778 is an excellent bill and represents fair compromise.

A few links to other perspectives on the legislation:

• New EB-5 Legislation Addresses Chronic Wait Lines: Relief for Chinese, Vietnamese, and Indian Applicants? (Wolsfdorf & Barnett)
• Rounds doubles down on EB-5: New bill would reform and prolong program (Rapid City Journal)
• Why the EB-5 Industry Seeks to Make the TEA Incentive Meaningless Again and Continues to Keep EB-5 Investors in the Dark (Friedland & Calderon)

11/6 USCIS Policy Manual Update

The USCIS Policy Manual has been updated as of today with some edits to the EB-5 section in Volume 6 Part G,  and Adjustment of Status section in Volume 7 Part A. As usual, I saved the revised EB-5 section as a Word document in my folder of PM editions, and made a comparison document that redlines changes since the previous version.  I approached the policy manual update with some excitement, wondering (1) whether the PM update would add guidance or detail on TEA designation or priority date retention, and (2) whether USCIS would try to slip in any other policy changes under the cover of a regulations update. The answer to both questions is: no.  The PM says even less about new TEA rules and priority date retention than the reg says. The 11/6 PM update does not reflect all changes in the reg (i.e. does not include the new provision regarding evidence of property transferred from abroad, and does not mention most I-829 changes.)

Update: Robert Divine has written an article for IIUSA that reviews the changes.

Here is the update notice email from USCIS.

From: U.S. Citizenship and Immigration Services <uscis@public.govdelivery.com>
Sent: November 6, 2019 9:41 AM
Subject: Policy Update Notice on EB-5 Modernization Final Rule

USCIS is revising its policy guidance in the USCIS Policy Manual to align with the EB-5 Immigrant Investor Program Modernization Final Rule, published on July 24, 2019, and effective Nov. 21, 2019. We are updating the USCIS Policy Manual to conform with the final rule’s provisions, which include: Priority date retention for certain EB-5 immigrants; An increase in minimum investment amounts; Reforms to targeted employment area designations; and Clarification of USCIS procedures for the removal of conditions on permanent residence. Please see the Policy Alert for more detailed information on this update.

Reauthorization, Country Caps, S.2540, Visa Bulletin

Since last writing, Congress gave the regional center program another short authorization, the Fairness for High-skilled Immigrants Act almost passed the Senate, Senators Grassley and Leahy introduced a new piece of EB-5 legislation, and the Visa Bulletin offered a surprise window for Indians and Vietnamese to file I-485 regardless of priority date. I’ve had to hop, trying to keep my Washington Updates page up-to-date.

On Friday President Trump signed H.R. 4378, a continuing resolution that keeps the government funded and the regional center program authorized through 11/21/2019 —  or until the next funding bill or (more likely) the next short-term continuing resolution. The history of regional center program authorization now looks like this.

The regional center program needs the stability of a long-term authorization — something it hasn’t gotten since 2012. So far as I know, IIUSA and EB5 Coalition are still marching in lockstep and arm-in-arm over a consensus wish list for legislation that combines long-term authorization with an investment threshold lower than what was set in 1990, a neutered TEA incentive, and a TEA set-aside provision to set aside visas for incoming investors at the inevitable cost of reducing visas available to past investors. Meanwhile, last week Senators Grassley and Leahy announced proposed EB-5 legislation that does not appear to have benefited from any EB-5 industry input. S.2540 – A bill to reauthorize the EB-5 Regional Center Program in order to prevent fraud and promote and reform foreign capital investment and job creation in American communities is an updated version of the EB-5 Reform Acts associated with Senator Grassley’s office since 2015. Unlike previous versions, the new bill does not treat investment amounts or TEA designations. It does attempt to define measures that would improve the integrity and security of the EB-5 program. I admire the intention, but wish that Senator Grassley’s office had consulted with anyone who knows EB-5 in practice. If S.2540 passed, it would sweep almost everyone out of EB-5 except a few big-city regional centers (the only ones who could afford the swathes of new red tape and fees proposed) and direct EB-5 (whose existence the bill apparently forgot). That’s not Senator Grassley’s objective. If I had more time, I would write an analysis for Grassley’s office to explain where and how the S.2540 proposals depart from their intent, and suggest fixes that would better support the laudable accountability and transparency goals. Even better if this task could be done cooperatively by the EB-5 industry. But it seems that industry has decided to put all its marbles in the hope of no-compromise backroom deals.

Speaking of a few billionaires trying to cut deals, the Fairness for High-skilled Immigrants Act keeps coming back in the Senate. As of today the bill is blocked by Senator Durban, Senators Grassley, Paul, and Purdue having been talked out of their opposition. The funding bill process offers another possible opportunity to get the legislation passed on the down-low, tucked into a thousand-page omnibus. Unfortunately I can’t find anyone but Breitbart to keep me informed about developments. (I record what I hear of the various versions and actions in this post.) If the Fairness for High-skilled Immigrants Act can pass the Senate and get signed by the President, then there would be no more country cap on EB visas. That means the people already in line for an EB-5 visa – somewhere around 70,000 – would simply receive visas in order by priority date, regardless of nationality. With 10,000 EB-5 visas available per year, that means about 7 years to issue visas to everyone already in line, and 7+ years for any new investors to get a visa. That would be more than fair to the Chinese in line, who invested under a country cap that promised 10+ year visa waits. It would be less than fair to people born elsewhere, who invested under a country cap that promised little to no visa wait.  The bill offers to protect people already in the visa queue by saying that no one with an approved immigrant petition shall receive a visa later than that person would otherwise have received a visa under previous rules. However, that doesn’t help EB-5 because most of the non-China backlog is still stuck in slow I-526 processing, and thus does not yet have petition approvals that would protect them. The EB-5 industry has been nearly silent on this legislation, thanks to interests divided between China and the rest of the world. The industry will collapse if the bill passes, with new EB-5 demand quelled by the threat of a worldwide 7+year wait to conditional permanent residence.

I made a couple charts to assist in visualizing the impact of the Fairness for High-skilled Immigrants Act. To estimate how many years a given priority date would need to wait for a visa under the act, just add up the number of applicants with earlier priority dates, and divide by 10,000. (The latest version of the legislation has no transition period for EB-5.) To estimate how many people would be retroactively affected if the Fairness for High-skilled Immigrants Act becomes law, look at the number of applicants represented on petitions still pending at USCIS. (These charts are rough estimates starting from data by country and priority date published by USCIS and DOS as of October 2018, and that I updated with estimates based on worldwide I-526 and visa data since then. I guess the charts may be undercounting by about 10,000. As a reminder, my EB-5 Timing Page collects all the data to which I have access.)

At least there’s one bit of happy news for past investors. USCIS announced that in October 2019, applicants from Vietnam and India who are living in the U.S. and have I-526 approval can file I-485, regardless of priority date. The Visa Bulletin has two charts for EB visas: Chart A Final Action Dates and Chart B Dates for Filing. USCIS has agreed to use the Dates for Filing cart in the October 2019 Visa Bulletin, and all countries except China are Current in that chart.  This doesn’t necessarily affect the total time to actually get a visa, but having the I-485 filed brings significant benefits.

The USCIS AOS page explains that it opens Chart B “If USCIS determines there are more immigrant visas available for a fiscal year than there are known applicants for such visas.” The fiscal year starts in October with 700 visas available each to Vietnam and India, and apparently there aren’t yet 700 people ready yet to take those visas. No wonder, when USCIS is only advancing about 200 worldwide I-526 petitions a month. As illustrated in the above chart, much of the effective line for EB-5 visas is still stuck in USCIS processing.

Reauthorization by CR

The Regional Center program is currently authorized through September 30, 2019 as part of 2019 appropriations. We depend on Congress to pass a 2020 appropriations bill that continues to carry regional center authorization. As usual, Congress has not yet figured out government funding for the new year, so there will be another one or more Continuing Resolutions to extended 2019 appropriations and defer the deadline. Today, the House passed H.R. 4378, which defers the expiration of government funding (and incidentally the regional center program sunset) to November 21, 2019 (or until there’s a new appropriations bill, whichever comes fist.) The measure now goes to the Senate, which will vote on it next week. Since the Senate has not come up with any alternative, I assume that the bill will pass, the government will not shut down, and the regional center program will remain authorized for now. When the reauthorization is passed, then final action dates for regional center EB-5 categories will no longer be “unavailable” in the October Visa Bulletin. (See Visa Bulletin Section D for an explanation.)

November 21, 2019 also happens to be the date for new EB-5 regulations to take effect, but I assume that Congressional appropriators were thinking about Thanksgiving vacation, not minor regulations, in choosing the date. And if history is any guide, there may be another CR with a new short-term deadline passed before November 21. And possibly a series of CRs.

Here, FYI, is the daisy chain of language related to regional center program authorization.

• H.R. 4378 (p. 3-4, 7) “The following sums are hereby appropriated… namely: Such amounts as may be necessary…for continuing projects or activities… that are not otherwise specifically provided for in this Act, that were conducted in fiscal year 2019, and for which appropriations, funds, or other authority were made available in the following appropriations Acts: … (6) … title I of division H of Public Law 116–6…Unless otherwise provided for…  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 2020 without any provision for such project or activity. (3) November 21, 2019“
• This language refers back to Public Law 116-6 Division H, Title 1 (PDF page 463) which has current regional center program authorization in this sentence: “Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note) shall be applied by substituting ‘September 30, 2019’ for ‘September 30, 2015.’”
• This language refers back to Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (Public Law 102-395) Section 610(b) (PDF page 47), which originally established the regional center program.

Priority date retention and redeployment, with flow chart

Among other changes, the new final rule for EB-5 Immigrant Investor Program Modernization “provides priority date retention to certain EB-5 investors.” This post (1) discusses context for this change, (2) summarizes the content of the change, and (3) provides a flow chart to illustrate the various options for changing course with an EB-5 investment.

Context Summary

Priority date retention is one small fix toward a major problem in EB-5: the mismatch between policy and reality when it comes to EB-5 timing.

The EB-5 at-risk policy and material change policy depend on a relatively short EB-5 process.  An enterprise can be expected to sustain itself and keep EB-5 capital deployed for five years or so, and to closely mirror the original business plan predictions for a year or two.

But reality, for many investors, is a protracted EB-5 process with years upon years in which changes will inevitably occur. Projects will finish, loans will get repaid, plans may evolve, and problems may occur. The at-risk and material change policies are not flexible to accommodate such business developments over time. The longer the immigration process, the more vulnerable investors become to prohibited project-level changes or to difficulty in sustaining the investment at risk – and that despite having created jobs as required. A decade-long wait for a visa becomes particularly problematic when the visa depends on no material changes occurring with the investment over that period.  Thus the need for options for good-faith investors who may find themselves, at some point over the years, needing their funds to be moved from one project to another.

The “redeployment” policies are one attempt to accommodate change over time. The first redeployment policy, now described in Chapter 2(A) and Chapter 4(C) of the EB-5 section in the USCIS Policy Manual, creates some flexibility within the at-risk and material change requirements that apply to investors prior to conditional permanent residence. Moving EB-5 investment from one project to another would often be considered a fatal change at this stage, but Type 1 Redeployment defines a limited option for acceptable redeployment in a new project/use following completed job creation, within the scope of the enterprise’s business.  The second redeployment policy, described in Chapter 5(C), recognizes even more flexibility in the at-risk and change policies that apply to investors once they have received conditional permanent residence. Type 2 Redeployment recognizes options for acceptable redeployment even before completed job creation, and even outside the scope of the enterprise’s ongoing business. While succeeding and getting repaid too early could be a fatal failure to sustain investment, Type 2 Redeployment policy offers a path to keep investment sustained.

The redeployment policies have not been well-loved (1) because everyone is confused by them (with many people not even noticing that there exist two distinct redeployment policies, and with not even USCIS able to explain the parameters), and (2) because the policies are a limited work-around, not a solution to the fundamental problems: excessively long wait times, and flawed underlying material change and at-risk requirements. “Redeployment” was at least intended to help by creating paths to accommodate some change. The flow chart at the base of this post illustrates the project change options introduced by redeployment policies, and the conditions under which they apply as described in the policy manual. Without redeployment policy, more arrows in the flow chart would lead to the “you lose” result box.

Priority date retention now introduces another limited work-around for investors who face losing the chance for a visa due to changes over the course of long waits. It’s especially helpful for one category of people excluded from the redeployment recourse: those whose regional center sponsor is terminated or changed while they are still waiting for a visa.  These people still face I-526 revocation thanks to DHS’s faulty interpretation/application of material change policy. But at least, the new final rule provides them opportunity to salvage the priority date, saving the place in the visa queue in case they’d like to try again with a new I-526.

Content Summary: Priority Date Retention in the Final Rule

(All the answers in this section, except for my aside on data, come from the text of the Final Rule for EB-5 Immigrant Investor Program Modernization.)

What is priority date retention?

This provision of the Final Rule allows a petitioner to retain the priority date of an approved I-526 petition to use in connection with any subsequent I-526 petition filed by that petitioner.

Who are the “certain EB-5 investors” eligible to take advantage of priority date retention?

Eligibility for priority date retention applies to the population of people at any given time who meet all these conditions:

• The person is the petitioner on an I-526 petition that USCIS approved
• The person has not yet received an EB-5 green card (conditional permanent residence)
• If USCIS subsequently revoked the I-526 approval, it was for reasons other than (1) fraud or a willful misrepresentation of a material fact by the petitioner; or (2) a determination by USCIS that the petition approval was based on a material error

[Aside: DOS and USCIS statistics do not directly count this population. But to give a ballpark, I estimate that at least over 24,000 investors are currently in this window between I-526 approval and visa, and eligible to take advantage of the provision. Consider that no Chinese who filed I-526 after FY2014 has a visa yet per the visa bulletin, that there were about 35,500 China I-526 filed from FY2015-FY2018, that about 8,000 of those China I-526 were still pending at USCIS as of the end of FY2018, and that the approval rate for China I-526 has been about 90%. (Stats from my collection.) That’s already almost 24,000, and not counting the number of Vietnamese and Indian investors who are or will soon be stuck in that window thanks to retrogression. It’s another question what percent of this eligible population may be incentivized to take advantage of priority date retention. The most likely user: someone whose I-526 approval with an old priority date has been or is likely to be revoked, who comes from an oversubscribed country, and who has sufficient funds and immigrant intent to invest again in a new project at the new investment level.]

Clarifications in the final rule:

• The final rule becomes effective on November 21, 2019. Beginning on that date, eligible people may file a new I-526 while retaining the priority date from a previously-approved I-526. The rule specifies no restriction on when the previously-approved I-526 need have been filed. [9/30 UPDATE: Robert Divine said at the IIUSA conference that he also interprets no restriction on when the new I-526 can be filed — could be before 11/21.] “The changes in this rule will apply to any Form I-526 filed on or after the effective date of the rule, including any Form I-526 filed on or after the effective date where the petitioner is seeking to retain the priority date from a Form I-526 petition filed and approved prior to the effective date of this rule.”
• A priority date can only be transferred between one approved EB-5 petition and a subsequent EB-5 petition filed by that same petitioner. The priority date cannot be transferred between people (including, not to the investor’s spouse/dependents), and cannot be transferred to petitions for other visa categories.
• Priority date retention does not provide grandfathering under old rules. If someone chooses to file a new I-526 petition after November 21, 2019, he or she may keep the priority date of a previous I-526, but not the rules that applied that that previous I-526. The new I-526 filing will be subject to the increased investment amount and revised TEA provisions. “The regulatory requirements, including the minimum investment amounts and TEA designation process, in place at the time of filing the petition will govern the eligibility requirements for that petition, regardless of the priority date.”
• The priority date retention option depends on having an I-526 approval, and on not having an EB-5 visa. The commentary on the final rule explains why DHS thinks that filing I-526 is insufficient in itself to establish a priority date, and that people with an EB-5 visa do not need the priority date protection.
• The priority date retention option is available to victims of fraud by projects or regional centers. In fact, it was designed to help them. A petitioner is only excluded if an I-526 was revoked due to fraud by the petitioner.
• The final rule does not require NCEs to facilitate investors who wish to make a change. Nor does it change the EB-5 “at risk” requirement. That is to say, the rule does not change the difficulty of salvaging capital from one investment and moving it to another. The rule simply reduces the pain of starting over by allowing petitioners to at least salvage the old priority date if they choose to make a new investment and new I-526 filing
• DHS does not care how many I-526 you file. No matter how many priority dates you have for EB-5 petitions, you can use the oldest one associated with an approved petition when claiming a visa.
• The final rule specifies that it does not make any change to application of the Child Status Protection Act. The rule does not explain, if a petitioner had multiple I-526 petitions, which petition’s pendency gets subtracted from the child’s age at the time of visa availability.
• The final rule does not consider the question of how USCIS would treat a situation where the investor files a new I-526 after 11/21 in the same NCE/same project for which he had an approved I-526 from before 11/21. This situation could arise for someone whose I-526 approval was revoked only for loss of regional center sponsor, though the project was/is viable. So long as the original $500,000 was sustained in the NCE, presumably it would counted toward the investment amount required for the new I-526. But what if some of the initial capital had been lost/misappropriated — does it all still count in the new I-526 filing? Or what if the project had no particular use for the additional investment the investor would be required to make under the new minimum investment amounts — at least no use related to job creation? Maybe people drafting the rule just assumed that new I-526 would be based on fresh investments in new projects. At any rate there’s no guidance for situations in which the investor may be trying to salvage his or her original investment, original project, and original job creation as well as the original priority date.

Flow Chart

Considering that redeployment  (as described in the USCIS Policy Manual) and priority date retention (as described in the final rule) are a maze of if-then statements, I’ve attempted a picture worth a thousand words. The flow chart image highlights several points that are often forgotten in discussions about redeployment: the existence of different redeployment options/requirements at different stages, and the pivotal questions of material change and whether or not the initial deployment already met the job creation requirement. (This chart matches my careful reading of the Policy Manual. But lawyers please email me with references if you see anything that does not match your reading, and I may update the image.)

References:
USCIS Policy Manual https://www.uscis.gov/policy-manual/volume-6-part-g
New Regulation: https://www.govinfo.gov/content/pkg/FR-2019-07-24/pdf/2019-15000.pdf
Material change references and examples: https://blog.lucidtext.com/2015/11/05/what-is-material-change/

Country cap discussion (H.R.1044, S.386, S.2091, S.Amdt.939. D/26-3)

— UPDATES —

10/16: Senator Durban, the senator most recently responsible for holding up Mike Lee’s S.386 proposal to eliminate the country cap on EB visas, has now introduced alternative backlog relief legislation: Resolving Extended Limbo for Immigrant Employees and Families (RELIEF) Act. The bill text for S.2603 has not been published yet, but I’ll report further when I’ve read it. Cato Institute has a nice analysis of the bill’s content, implications, and (extremely slim) prospects.
9/30: Cato Institute has published a quantitative analysis of the Fairness for Highskilled Immigrants Act. An excellent article by Ira Kurzban has also been brought to my attention.
9/26: Now Senator Durban has stepped up to block unanimous consent to the Fairness for Highskilled Immigrants Act
9/25: Senator Purdue has agreed to drop his opposition to the Fairness for Highskilled Immigrants Act. I wait with bated breath to see what happens next.
9/19: There has been another attempt to get Fairness for Highskilled Immigrants Act through the Senate by unanimous consent, temporarily blocked by Senator David Perdue. Apparently the country cap proposal still has life after all, with the enormous power of Silicon Valley campaign donations possibly even competitive with the enormous power of Congressional inertia. Here is my summary of the most recent language: S.Amdt.939 to H.R.1044. Like S.386, this most recent version removes all EB visas (including EB-5) from the per-country cap, but omits EB-5 from the transition period, and limits the no-harm provision to people who have approved I-526 petitions on the date of enactment.
7/22: Nothing seems to be happening with the country caps proposals anymore. There’s been no reported action in the Senate on S.386, and Rand Paul has not bothered to announce S.2091 or collect any cosponsors.
7/11: Rand Paul, one of the Senators responsible for blocking S.386 in the Senate, will reportedly introduce a country caps proposal of his own in S.2091 Backlog Elimination, Legal Immigration, and Employment Visa Enhancement Act (BELIEVE Act). As time permits I’ll make a spreadsheet for S.2091, which would be much better for EB-5 since it proposes to significantly increase visa availability in addition to changing the per-country limitation. Probably it is too good to be popular, however. (Update: I made this document to highlight/interpret EB-5-relevant language in S.2091.)
7/10: H.R. 1044 passed the House today. S.386 has also made progress thanks to the addition on 7/10 of an amendment with H-1B provisions designed to broaden its appeal. The Senate’s version of the The Fairness for High-Skilled Immigrants Act differs from the House version in omitting EB-5 from the transition period. I added a tab for S.386 to my Backlog Calc Excel file to attempt to model this effect. The calculations suggest that H.R. 1044 and S.386 would have about the same effect on people with 2018 and 2019 priority dates (in either bill, it looks as if 2018 priority dates would start receiving EB-5 visas around 2025, and 2019 priority dates around 2027). S. 386 would be 2-3 years better than HR 1044 for China-born applicants with priority dates up to 2017, and 2-3 years worse than H.R. 1044 for applicants from other countries. In both the House and Senate versions, The Fairness for High-Skilled Immigrants Act is good for everyone in EB-5 with an old priority date (China) and bad for everyone who doesn’t want to move back in line behind the China backlog. I regret to say that the most informative article I’ve read so far on the politics around The Fairness for High-Skilled Immigrants Act is Brietbart’s Kevin McCarthy, 140 GOP Reps Vote for Democrat Plan to Outsource Jobs (July 10, 2019). The article includes this interesting quote:

The Department of Homeland Security finally announced its opposition to the Senate’s version — S.386 — of the legislation…:

The Department of Homeland Security does not support S. 386. The bill would do nothing to move the current employer-sponsored system toward a more merit-based system. The adverse effect on immigrant visa wait times for nationals of countries currently with lesser demand would be an obstacle to any potential plan to promote or increase immigration from countries who immigrants present reduced risk, such as Visa Waiver Program countries, or any other class of countries which the Administration may desire to provide preferential treatment (e.g., countries with which the U.S. has negotiated favorable trade deals).

The statement was signed by Joseph Joh, Assistant Director and Senior Adviser for the Office of Legislative Affairs at DHS.

And additional analysis from the same source: Jeff Bezos, Mark Zuckerberg Try to Sneak ‘Country Cap’ Prize from President Donald Trump (July 18, 2019)

— Original Post from 7/3–

How many EB-5 visas are available today to offer prospective investors?

If visas were simply allocated in order by priority date, then the answer would be 0, until about the year 2027. That’s assuming 74,000+ EB-5 investors plus family already in line divided by 10,000 EB-5 visas available annually equals 7.4 years to clear the backlog and have visas available for new investors. If visas were simply allocated in FIFO order, then all past investors in the queue would be looking at a wait of less than 8 years, with timing graded by priority dates.

As it is, visas are allocated in order by priority date subject to per-country limits. Under current rules, 3,000 to 6,000 visas are practically available to new investors annually in the coming years. (=10,000 annual quota – 1,400 annually promised to past investors from India and Vietnam under the per-country limits – 3,000 to 5,000 to be claimed annually by past investors from miscellaneous countries that are under the limit and gradually emerging from the I-526 process.) Thanks to the Chinese Student Protection Act, past Chinese investors get no by-right allocation, but priority dates give Chinese first priority for whatever is leftover. The current rules of FIFO plus per-country caps mean that visa waits for past investors vary widely from no time at all to over 16 years.

The Fairness for High-Skilled Immigrants Act proposes to change the rules, and do away with country limits for employment-based visas and the China visa reduction. Normally I just disregard rumblings from Congress, assuming they’ll come to nothing, but there’s been significant movement on H.R.1044 – Fairness for High-Skilled Immigrants Act of 2019. This bill now has 311 co-sponsors — 75% of the House. Zoe Lofgren moved on June 18 to have HR 1044 placed on the Consensus Calendar, which means it could be brought to a vote (Update: now scheduled for consideration the week of July 8) although it hasn’t been reported out of committee. It’s likely that momentum will die in the Senate, whose a mirror bill S.386 has less traction so far. (Update: The Senate bill now has action as well, with an amendment to address H-1B concerns.) Since the proposal seems so popular, I discuss the EB-5 implications.

I suspect that the bill is mainly popular for its nice title – fairness for high-skilled immigrants – and that few people have undertaken the extraordinarily difficult task of reading it and thinking through the practical effects.

Here’s my attempt to interpret the H.R. 1044 text (which differs from the Yoder Amendment text we discussed last year, mainly by adding a three-year transition period). The new HR1044 tab in my Backlog Calc Excel shows my best attempt at a quantitative analysis of the EB-5 implications. Based on this work, I draw these conclusions about what H.R. 1044 would mean to a variety of EB-5 stakeholders:

• Past EB-5 investors from China: Under HR 1044, would receive visas at least 3-5 years earlier than under current rules
• Past EB-5 investors from India: Under HR 1044, priority dates in 2017 and earlier would not be much affected, but investors with 2018/2019 priority dates would receive visas 3-4 years later than under current rules.
• Past EB-5 investors from Vietnam: Under HR 1044, priority dates in 2016 would not be much affected, but investors with 2018/2019 priority dates would receive visas 2-3 years later than under current rules.
• Past EB-5 investors other countries: Under HR 1044, priority dates after 2017 would receive visas 3-5 years later than under current rules.
• Future EB-5 investors from any country: Under HR 1044, EB-5 investors from any country who file shortly after the date of enactment would wait 7-8 years for visa.
• EB-5 industry: Would likely go into hibernation, except for services to past investors, for 7-8 years (or not, if prospective investors are willing to face the wait times)

The bill attempts a “no harm” provision, providing that those with a petition approved before the new rules take effect would be given a visa no later than they would’ve received it under the old rules. That’s cold comfort for EB-5, however, because about half of the backlog of past investors is still stuck at USCIS, waiting for petitions to be adjudicated. (Also, I don’t know how Department of State would implement the provision – “would have beens” being impossible to calculate with precision in the EB-5 visa context.) As a reminder, here’s the last EB-5 visa backlog snapshot provided by Department of State, estimating where people were in line as of April 1, 2019. At least the 73,157 people represented on this chart would be affected one way or other by HR 1044, if it became law.

Here are EB-5 groups attempting to influence Congress one way or another on The Fairness for High-Skilled Immigrants Act:

• An EB-5 investor group in favor of the proposal: https://www.aa-ed.org/
• An EB-5 investor group urging modifications to the proposal to protect people with pending I-526: http://bit.ly/2FtZshz
• IIUSA’s cautious public position: https://iiusa.org/blog/iiusa-statement-hr-1044-per-country-caps/

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EB-5 reg nears publication

7/23 Update: The final rule is available at https://www.federalregister.gov/documents/2019/07/24/2019-15000/eb-5-immigrant-investor-program-modernization.

— Original Post —

On June 27, 2019, the regulation for EB-5 Immigrant Investor Program Modernization (RIN: 1615-AC07) completed OMB review (Step 8 in the rulemaking process). This advances the rule toward the final rule-making step: publication in the Federal Register.

USCIS will make an announcement when the Final Rule is published in the Federal Register. You can sign up on the USCIS Federal Register Announcements page to get notified by email. The announcement could come any time now. The announcement will link to final rule text in the Federal Register. (Filter for “Final” rules on the Announcements page to see examples of past rules.) Until publication, the content of the final rule is unknown. The provisions will bear on EB-5 investment amounts and targeted employment area matters, but we do not know the specifics. (We know the content of the proposed rule from January 2017, but not what changes USCIS and OMB have made to the rule since then.)

The final rule will stipulate an effective date. The effective date will likely be 30 days after publication, since the rule has not been classed as “major” or “significant.” It might be later. (According to “When do final rules go into effect?” on page 8 in The Rulemaking Process.)

Rules created by administrative agencies should only possess a prospective effect, according to the Federal Administrative Procedure Act. (See Prospective and Retroactive Effect of Rules.) The Proposed Rule version of the EB-5 regulation explicitly applied investment amount changes to future I-526 filings only: “Unless otherwise specified, for EB-5 immigrant petitions filed on or after [INSERT EFFECTIVE DATE OF FINAL RULE], the amount of capital necessary to make a qualifying investment in the United States is….”

During the period between Federal Register publication and effective date, the rule is sent to Congress and the Government Accountability Office for review. Congress has almost never disapproved a rule at this point, however. (See “How is the Congress in involved in reviewing final rules?” on p. 10 in The Rulemaking Process). The regulation can also be subject to court review, if someone sues in federal court to block the regulations, based on a claim of adverse effects from the regs. (See “When do the courts get involved in rulemaking?” in The Rulemaking Process and an example of this happening.)

For now, I am not placing bets on the content or timing of the EB-5 regulation. I will wait and see, and update my Washington Updates page with any news.

In the meantime, issuers will want to hustle to complete raises under the existing rules. Prospective investors will want to balance their interests, weighing the advantage of current investment opportunities and the risks in being part of a filing surge. ILW foresees a potential 2,000 EB-5 investments from Indians in the next month or so. If realized, that surge would add about six years to an India backlog already well over eight years long. Some investors have high tolerance for long waits, but must be informed about timing issues and the associated immigration risks and investment risks.  The future direction of the EB-5 program will depend on the changes included in the final rule – but we’ll have to wait and see what those may be.