How Long Does I-526 Take? (III)

This post combines, updates, and replaces my two previous posts on I-526 processing times. I’ve divided the post into five sections:

How much time does USCIS take to process an I-526 petition? The short answer: usually between 3 and 33 months. The rest of this post provides the long answer.

Interpreting Official USCIS Processing Time Information

USCIS addresses the processing time question on the EB-5 filing tips page:

How long does USCIS take to process a Form I-526 petition?
For current estimates, see USCIS Processing Time Information. However, processing times can vary depending on the circumstances of each case. These include factors such as the time it takes to complete a background check and whether we need to request additional evidence.

Since, March 23, 2018, the USCIS Processing Time Information page for I-526 has looked like this:

The report claims that “We generally process cases in the order we receive them,” and provides two pieces of information: an estimated time range, and a case inquiry date.

  • What “Estimated time range” means:  This month range gives a theoretical average processing time and an upper limit. The lower number (25 months) is an average that’s calculated by dividing the number of I-526 petitions pending at IPO by the average number of petitions that IPO has been processing in a month. The higher number (32.5 months) is the lower number multiplied by 1.3. Cases that take longer than 32.5 months to process have exceeded an arbitrary “upper limit” for “normal” processing times, and considered outliers. The month range provides a reasonable theoretical estimate for I-526 processing times. However, we have no evidence that the dates broadly reflect the actual ages of cases currently being adjudicated at IPO. Quite the contrary, in fact, as discussed below. (Source of my interpretation: USCIS’s More Info page, which says that we “continue to use our old method to calculate processing times” for non-pilot forms such as I-526, combined with an Office of Inspector General report exposing the “old method” for calculating processing times in the I-485 context, and corroborated by reproducing USCIS’s presumed time range calculation using public data on I-526 pending petitions and volume of adjudications.)

    From March 23, 2018 to May 18, 2018, the Processing Time Information Report Estimated Time Range for I-526 has remained unchanged: 25 to 32.5 months. Since the Estimated Time Range appears to be a broad theoretical calculation, not dependent on fluctuating reality, I expect it to remain unchanged in the report indefinitely, regardless of what’s happening on the ground at IPO.

  • What “Case inquiry date” means: As the Processing Time Information page explains,

    We have posted a Case Inquiry Date … to show when you can inquire about your case. If your receipt date is before the Case Inquiry Date, you can submit an “outside normal processing time” service request online.

    From March 23, 2018 to May 18, 2018, the Case Inquiry Date for I-526 has remained constant: today’s date minus 971 days. (I spot check the webpage periodically, and log the reports in my IPO Times file.) The webpage claims that the report gets updated “around the 15th of each month,” but that has not been true yet.

    Like the Estimated Time Range, the Case Inquiry Date appears to be merely theoretical and functional. It’s more-or-less simply the upper end of the Estimated Time Range, converted from a month into a calendar date. It does not claim to be the date of cases that IPO is processing now. It’s just the cut-off date that IPO has set for complaints – and naturally IPO would choose to put that date back as far as possible. If you want to estimate when you may start to complain, add 971 days to your priority date. But your I-526 will get a decision before that date, unless it’s an outlier. And I predict that variable currently set at 971 will be adjusted downward eventually, assuming that IPO continues to improve processing speed.

Predicting Average Processing Times

Average processing time is theoretically a function of inventory (number of pending petitions) and flow rate (rate at which IPO approves and denies petitions). You can get the input data for this equation from the USCIS Immigration and Citizenship Data page, which posts quarterly reports for I-526 and other forms. My I-526 Time spreadsheet turns the quarterly data into a prediction model that estimates average processing times as a function of petition volume at different points in time (with some assumptions about future trends). The last quarterly report indicated 24,627 I-526 pending at IPO in December 2017 and an average of 2,954 petitions processed per quarter over the last four quarters. 24,627/2,954 = 8.3 quarters to process the pending petitions (estimated average). So an I-526 petition filed in January 2018 would be theoretically likely to wait 8.3 quarters (25 months) for processing, other factors being equal. That’s consistent with the Processing Times Information page, which starts the Estimated Time Range at 25 months. But unequal reality leads to some petitions being processed more quickly.

Understanding Variation in Processing Times

Here’s what IPO has said about I-526 time variation (summarized from communications copied in my log of IPO communications on processing times).

  • DHS estimates that the average Form I-526 gets 6.5 hours of touch time.  That means an adjudicator spends less than a day handling the case —  the remaining (and most variable) processing time is queue time and time spent waiting for additional evidence or supervisory approval.
  • IPO has at least three queues going for I-526 petitions: (1) a queue for direct EB-5 petitions; (2) a queue for regional center petitions based on investment in projects that haven’t yet been reviewed; (3) a queue for regional center petitions based on investment in projects that have Exemplar I-526 approval or previous I-526 approvals.  The following chart illustrates my understanding of IPO Deputy Chief Julia Harrison’s description of the process.  

    IPO indicates that each queue has dedicated staff working on it. Petitions within each queue are ordered by earliest filing date. A regional center petition for a project not previously reviewed must wait in Queue 2 (for project-specific adjudication) and then again in Queue 3 (for investor-specific adjudication). RC petitions for previously-approved projects advance straight to Queue 3. IPO encourages communication between team leaders on the Queue 1 and Queue 2/3 side to ensure that direct and RC petitions filed at the same time move forward concurrently. With this complex process, it’s unsurprising that IPO appears far from its intention to process cases more-or-less in the order in which they are received.
  • Factors that can speed I-526 processing per IPO:
    • Investing in a project with an approved Exemplar and/or previously-approved I-526
    • Having a clear, high-quality petition (this is important when evidence requests and supervisory approval are the major variables — besides queue time — in overall processing time)
    • Having an approved expedite request (this shortens the queue time, not the adjudicator touch time)
  • Factors that can slow I-526 processing per IPO:
    • Having a petition that’s poor-quality, unclear, problematic, or otherwise inspires IPO to request additional evidence
    • Filing with/after a surge of other people who filed poor-quality petitions
  • Factors that don’t affect I-526 processing time per IPO:
    • The investor’s nationality. (IPO does not currently sort petitions by nationality. There is no hold-up for China-born petitioners at the I-526 stage, as there is at the visa stage. However, IPO asks whether they should change that — considering that fast I-526 approval doesn’t help China-born investors facing a long visa wait regardless. Stats show that I-526 denial rates are much higher for some countries than others, which makes me suspect that IPO finds some countries’ source of funds and background checks more challenging than others – which could naturally be associated with longer processing times. So even if the process is FCFS for all nationalities, it’s probably not FIFO for all nationalities.)
    • Whether the petition is for a direct or regional center investment. (IPO claims that they try to move direct and RC petitions forward concurrently. However there may be some regional center advantage in practice since direct petitions are often the first in a project and cannot take advantage of Exemplar approval.)
    • Project size. (IPO reports that they do not privilege petitions for big projects with many investors. But some anecdotal evidence suggests otherwise.)
    • TEA status. (Some legislative reform proposals have suggested offering quicker processing to petitions based on investment in a Targeted Employment Area, but IPO does not report having any such policy now.)

Individual Processing Time Experience

Individual processing time variation means that some people wait longer than the theoretical average 25 months for I-526 approval, while others receive approval much more quickly.

My best evidence for faster-than-average approval is priority dates for pending visa applications. If all I-526 take 2 years to process, then Department of State should have been receiving applications in 2017 from people who filed I-526 in 2015. In fact, as of October 2017 Department of State reported having over 1,500 pending visa applications based on I-526 petitions filed in 2016 and 2017. Assuming an average 3 visa applications per approved petition, that reflects about 500 I-526 petitions approved and advanced to the next stage within a year of filing. And the DOS report only mentioned pending applications for five countries, not counting all applications for the year. I-485 inventory statistics likewise show many pending status adjustment applications with recent priority dates.

I set up a Google Form to collect reports of processing time experience from individual investors. (Entries still welcome!) In the very limited sample of entries so far (which appear in this Google Sheet), I-526 approvals in 2017/2018 that were reported to me had an average processing time of 19 months, with standard deviation of 7 months. The following tables summarize results reported in my Form so far.

Resources for Investors

5/15 Policy Manual Update (tenant occupancy)

Update: for more in-depth analysis, see USCIS Evicts Tenant Occupancy Job Counting from EB-5 by Robert C. Divine, Baker Donelson Bearman, Caldwell & Berkowitz, PC and R.I.P. Tenant Occupancy Jobs? An Economist’s Perspective By Jeffrey B. Carr, Economic & Policy Resources, Inc.

–ORIGINAL POST–

USCIS has made another revision to the EB-5 section of the USCIS Policy Manual, this time to rescind its former guidance on counting jobs associated with tenants in a new building funded by EB-5 investment. Now, the tenant occupancy policy formerly in 6 USCIS-PM G Chapter 2 (D) Section 6 has been deleted and replaced with a section in which USCIS explains why the previous policy was wrong. Old policy in a nutshell: We concede the possibility of demonstrating acceptable nexus between investment and tenant job creation, under certain very restricted conditions. New policy in a nutshell: there is no acceptable nexus between investment and tenant job creation. In other words, what was previously only effectively nearly impossible is now definitively impossible, officially.

FYI this document compares the deleted section with the new section. Once again, I copied the 5/15/2018 PM in its entirety into a new document, and used Word’s Compare function to confirm that nothing else changed between the 5/15 and 5/2 versions of Volume 6 Part G. And indeed, no other significant changes. FYI, here’s my folder with all distinct versions of 6 USCIS-PM G.

I don’t know whether to laugh or cry about this change. We’ve been desperately, urgently waiting and begging for clear policy on redeployment, among other issues, and they spend time fiddling with tenant occupancy? How many people have even tried counting tenant jobs since 2013? How is this an issue now? Last year I deleted a bunch of old tenant occupancy-related posts and most of my informational page on the TO question because I thought it had become irrelevant. If indeed TO is not involved in any recent or current offerings, then USCIS is guilty of shameful waste of time. Or if by chance any recent/current offerings do involve TO, relying on guidance that’s been consistent since 2012, then shame on USCIS for sending out a Policy Alert today literally saying that the policy is rescinded as of yesterday.

The new PM language on tenant occupancy states that “a direct financial connection between the EB-5 capital investment and the job creation is necessary to determine a sufficient nexus between the two.” I wonder what USCIS thinks “direct financial connection” means exactly, and the implications beyond tenant occupancy.

Apparently we get until May 29 to comment on the policy change, though it’s effective as of May 15.

On the bright side, two EB-5 policy updates in a month! It’s nice to see the policy process moving. I could just wish for better updates.

Also, FYI there is a change to Volume 7 on adjustment of status that can affect EB-5 among other visa categories.

 

Regulations Update (8/2018?)

The OMB Spring 2018 Unified Agenda has been published, with new estimated dates on action for EB-5 regulations.

  • Estimated Final Action in August 2018 for RIN 1615-AC07 (EB-5 Immigrant Investor Program Modernization), which proposed investment amount and TEA changes. (The Fall 2017 Agenda had previously anticipated Final Action in February 2018.)
  • Estimated Notice of Proposed Rule-making in March 2019 for RIN 1615-AC11 (EB-5 Immigrant Investor Regional Center Program), which dealt with regional center designation and the exemplar approval process. (The Fall 2017 Agenda had previously anticipated NPRM in October 2018.)

It remains to be seen whether these new estimated action dates will be more reliable than previous deadlines. RIN 1615-AC07 is currently a Proposed Rule at Step 7 in the Rulemaking Process, and is not yet listed by the OMB as a Regulatory Action Currently Under Review for Department of Homeland Security.

Speaking at the IIUSA conference on April 27, Kathy Nuebel Kovarik of the USCIS Office of Policy and Strategy “reinforced her department’s position that they will try to get EB-5 regulatory reform done this year, as indicated on the Unified Regulatory Agenda.” This came on the heels of a letter sent by Senators Grassley, Goodlatte, and Leahy to DHS urging the administration to finalize regulations (repeating calls previously made in 2015 and again in 2016 and again in 2017). This week, IIUSA sent an open letter to USCIS encouraging the agency to finalize the proposed EB-5 regulation, but with lower investment amounts ($1 million, or $800,000 in a TEA) than previously suggested. However, the forces against finalizing the regulations remain strong (administrative inertia, and the many stakeholders opposed to the proposed changes). We shall see what happens.

The OMB notices indicate that IPO has hired a new Chief of Policy (Edie Pearson), which is good to know.

FYI, my May 2017 post New EB-5 Regulations: Comments Discussion reviews the proposed regulations and industry response.

5/2 Policy Manual Update (CPR while I-829 pending)

The following new section has been added to the USCIS Policy Manual Vol. 6 Part G, Chapter 5:

D. Extension of Conditional Permanent Residence While Form I-829 is Pending
USCIS automatically extends the conditional permanent resident status of an immigrant investor and certain dependents for 1 year upon receipt of a properly filed Form I-829. [13] The receipt notice along with the immigrant’s permanent resident card provides documentation for travel, employment, or other situations in which evidence of conditional permanent resident status is required.

Within 30 days of the expiration of the automatic 1-year extension, or after expiration, a conditional permanent resident with a pending Form I-829 may take his or her receipt notice to the nearest USCIS field office and receive documentation showing his or her status for travel, employment, or other purposes.

In such a case, an officer confirms the immigrant’s status and provides the relevant documentation. USCIS continues to extend the conditional permanent resident status until the Form I-829 is adjudicated.

An immigrant investor whose Form I-829 has been denied may seek review of the denial in removal proceedings. [14] USCIS issues the immigrant a temporary Form I-551 until an order of removal becomes administratively final. An order of removal is administratively final if the decision is not appealed or, if appealed, when the appeal is dismissed by the Board of Immigration Appeals.

USCIS announced the addition this morning with a Policy Alert on Documentation of Conditional Permanent Resident Status for Immigrant Investors with a Pending Form I-829. The agency solicits stakeholder comments through May 15, 2018 using the procedure described on the Policy Comment page. (Scroll past the tables for instructions.)

Because I love my readers and don’t like relying on online documents, I painstakingly copied all of today’s version of the EB-5 Policy Manual chapter into a Word document, now added to my folder of Policy Manual versions. Word’s document comparison function indicates that Chapter 5 Part D is indeed the only significant change from previous versions, although there are minor unflagged tweaks in other sections (e.g. changing “See Form I-829, Petition by Entrepreneur to Remove Conditions on Permanent Resident Status” to “See Petition by Entrepreneur to Remove Conditions on Permanent Resident Status (Form I-829).”

Update: Robert Divine has published a helpful article explaining the context of this Policy Manual addition: May 2 Policy Manual Update: One Small Step for I-829 Filers; Some Giant Leaps Left for USCIS to Take

FY2018 Q1 EB-5 Form Processing Statistics

USCIS has updated its Immigration and Citizenship Data page with statistics on EB-5 forms received, processed and pending in the first quarter of FY2018 (October to December 2017). Form I-526 and I-829 are in the Employment Based subsection, and (I belatedly realize) Form I-924 is in the Forms subsection in the “All Forms Report.” (The row title is labeled “I-924/924A” for some quarters’ reports and just “I-924” in others, but it’s evident from the numbers that the data is for I-924 only, not including I-924A. I assume the row comprises initial applications and amendments.) This processing volume information provides the best picture we have of the progress and prospects for IPO processing.

My charts below summarize FY2018 Q1 data compared with previous quarters, and highlight trends. A few notes:

  • IPO processed fewer forms overall in FY2018 Q1 than in the previous quarter. The volume of I-526 and I-924 processed stayed about the same on average over the past few quarters, while I-829 volume leapt and then tumbled. I had hoped for a more positive growth trend, and was disappointed.
  • However, annual numbers trend in a positive direction, with IPO improving processing volume every year, and annual adjudications growing at a slightly faster rate than annual receipts.
  • I-526 and I-924 receipt numbers continue to correlate with regional center program sunset dates, but with smaller and smaller surges.
  • I-829 receipts increased last quarter as expected following the mysterious dips in previous quarters.
  • I-924 adjudication has been remarkable for number of denials.
  • IPO ended December 2017 with about twice as many pending I-526 and I-829 as it’s proven able to process in a year, and nearly three times as many I-924. So if we estimate processing times by dividing inventory by flow rate, that yields a 2-year processing time estimate for I-526 and I-829, and three-year estimate for I-924. That volume-based estimate matches exactly with the base month that USCIS posts on its new Processing Time Information page for I-526 and I-829, which makes me think they’re using the same equation. USCIS’s processing time estimate for I-924 is much lower, however. Maybe they plan to dramatically increase volume of I-924 adjudication, or disappear some of the pending backlog?
  • FY2018 Q1 showed fewer I-526 adjudications and more I-526 receipts than I’d expected, so I recalculated my I-526 time prediction model accordingly.

Now that I’ve chosen to spend so much time sweating over Excel and Photoshop and injuring my eyes to make this post better than it needs to be, and as helpful as possible to you, I shall recopy my Paypal plug below. (Thank you to the 26 readers who contributed to the blog since I opened the option last month.)

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4/23 Visa Numbers (China, Vietnam, India, Brazil, S. Korea, Taiwan)

Visa Numbers Update

Charlie Oppenheim, Chief of the Visa Controls Office at the U.S. Department of State, spoke about EB-5 visa numbers and allocation at the IIUSA conference on April 23. This post summarizes interesting data from his slides. (The tables pictured below are also in my increasingly untidy Backlog Calc Excel file. When I have time, I’ll reorganize the file and recalculate projections.) I’m relying on a partial video recording and reports from others for this post, not having heard Mr. Oppenheim’s talk in person. When someone at the conference posts a substantial report, I’ll link it here. As always, I welcome corrections.

Update: IIUSA posts: EB-5 Future Final Action Date Predictions – Special Insights from Department of State

Highlights from Mr. Oppenheim’s presentation [with my commentary in brackets, and images showing my summaries of data points from the presentation]:

  • USCIS has picked up the pace on I-526 adjudication. The National Visa Center received 25% more EB-5 applicant petitions in 2017/2018 than 2016/2017. That reflects I-526 processing improvement (good news), and results in more people ready to claim available visas (bad news for the visa backlog).
  • Visas can be issued by Department of State through consular processing (for applicants residing outside the US) or USCIS through I-485 status adjustment (for applicants in the US). Historically most EB-5 visas have come through DOS, but we’re seeing a steady increase in visas through status adjustment: 991 in FY2015, 1,442 in FY2016, 1,676 in FY2017, and 952 already in the first six months of FY2018. This reminds us to keep an eye on what’s happening at USCIS as well as DOS, when tracking visa number demand.
  • Department of State has seen a dramatic increase in visa applications from people outside China. In just the first six months of FY2018, DOS issued 2,735 EB-5 visas to applicants from outside China – more than in the whole of the previous year. That increase in “rest of the world” visas can be bad news for China, because annual visas available to China depend on leftovers from the rest of the world. [My model estimates that the China line is 10 years long assuming 80% of annual visas available to China, and 15 years long if 50% of annual visas are left to China. Also, I wonder if the “rest of the world” bump could reflect IPO taking initiative to prioritize moving non-China I-526 petitions – an idea they suggested in November 2017.]
  • Based on growing demand, Vietnam, India, Brazil, South Korea, and Taiwan are on Mr. Oppenheim’s radar for potential to trigger the per-country cap and thus get held back with cut-off dates. Vietnam already has a final action date that Mr. Oppenheim expects to advance by several months in 2019 (but not make it current). He expects to set a final action date for India by June 2019 at latest, and for Brazil, South Korea, and (maybe) Taiwan in Summer 2019. The projected final action date for September 2019 is October 1, 2014 (worst case) or October 15, 2014 (best case) for China and other oversubscribed countries. [Cut-off dates for other countries is good news for China, because those countries get temporarily removed from the queue-cutting “rest of the world” pool, and instead stuck in line behind older Chinese applications for leftover visas.]
  • In the Q&A period, Mr. Oppenheim reportedly projected these EB-5 visa wait times: China 15 years, Vietnam 6 years, India 5 years, Brazil and South Korea 2 years. [I guess that means “years from today to conditional permanent residence for people filing I-526 today,” but I’m not sure since I wasn’t present to hear the quote. Please clarify if you can! Also, note that future wait time predictions generally assume linear demand trends, but forthcoming demand seems likely to depart from the historical trend considering potential program changes and country shifts. If EB-5 demand falls, wait time estimates for current/future investors will decrease.]

Consider the lesson from China. EB-5 was still current for China throughout 2014; Chinese applicants didn’t start getting held back with a cut-off date until May 2015. But Chinese investors who filed I-526 back in FY2014 have been affected.  Applicants with 2014 priority dates started getting visas in September 2015 (per the Visa Bulletin) and will still be getting visas into 2019 (per Mr. Oppenheim’s predicted final action dates). That’s a lot of years just to issue conditional green cards to petitioners from one year.  Look at 2014, and then visualize how many years it will take to issue the visas to Chinese who filed I-526 in 2015, 2016, 2017, and 2018, unless something changes. (See my graphic for visual reference.) If Chinese with 2014 priority dates are still in line for visas into the end of 2019, how long will a Chinese with a priority date of today have to wait for a visa? That tower of past petitions is a sobering fact for China, and also any potentially high-volume countries that may end up in line behind China. The prospect of unacceptable wait times creates urgency to advocate for more EB-5 visa numbers. As things are, we can’t keep attracting every year three to four times the number of investors who could eventually get visas in a year, or depend heavily on any one country given the per-country limits.

EB-5 Processing Times

Since late March, I’ve been tracking EB-5 forms on the new USCIS Processing Times page. So far the month range has remained unchanged for each form, while the “Case Inquiry Date” has advanced one day per day for each form. No evidence yet of human intervention to update the information, and I rather doubt the link to reality. But for the record, here’s how the system is currently set to auto-advance the “Case Inquiry Date”:

  • I-526 case inquiry date: today’s date minus 971 days (i.e. priority date plus 971 days is the date when one can start to inquire about the petition as being outside normal processing times)
  • I-829 case inquiry date: today’s date minus 893 days
  • I-924 case inquiry date: today’s date minus 663 days

FYI, of people who’ve filled out my I-526 processing experience Google form so far, a majority of those with approvals  in 2018 had priority dates in 2016, and some even in 2017. (Form results here.)  Apparently IPO isn’t simply processing petitions from 2015, as the published Processing Time Information would suggest.

New TEA Data

The Bureau of Labor Statistics has made its annual Spring release of employment data for the previous year, which means a new data set for calculating Targeted Employment Area qualification.  Impact DataSource explains what changed. To learn more, consider signing up for a webinar.

Other Resources

Speaking of webinars, note that the Council of Development Finance Agencies is hosting a course  designed to provide a substantial practical introduction to EB-5.

New Litigation and AAO Decisions (“invest” requirements)

Appeals and litigation give a rare public glimpse into how the Investor Program Office is adjudicating I-526 petitions. It appears that IPO may be in the midst of a campaign to re-interpret/enforce the EB-5 “invest” requirements as described in 6 USCIS Policy Manual G.2  There have been a spate of denials that turn on language in the securities and transaction documents. Recent examples:

  • Guaranteed returns and debt arrangements, call option issue: CHANG et al v. DEPARTMENT OF HOMELAND SECURITY et al (Case Number: 1:18-cv-00659) is a civil action filed on March 22, 2018 by ten investors who put money into senior living project in Florida. (Here’s a summary and the full complaint.) These investors filed I-526 in 2014 and 2015 and heard nothing back from USCIS, finally making a mandamus complaint in October 2017 to compel agency adjudication. USCIS responded in February 2018, denying all investor petitions based on finding that “a call option reflected in the Partnership Agreement and the offering documents demonstrated the existence of an impermissible debt arrangement.” The investors have responded with a complaint pointing out that this issue was previously addressed by federal judges who found that a call option does not of itself constitute a debt arrangement. In previous cases, the US District Court in DC ruled that the USCIS denials could not survive review because they conflict with the plain language of the regulations, are not compelled by statutory or regulatory purpose, unreasonably stretch the rationale of precedent decisions, and run counter to evidence. Call options (buyout options) have been quite common in EB-5, and I wonder if many I-526 are being held up now behind the scenes while USCIS figures out how to deal with them (balancing newfound intent to deny such cases with the fact that the court has shredded the reasoning behind several denials so far). I’ve seen recent NOIDs based on call options, so USCIS hasn’t given in yet. I can’t see what legs the court (not to mention policy and reality) have left to the case against call options per se, and I hope USCIS accepts that soon to avoid further needless delays, disruption, and lawsuits. (UPDATE: FYI here are my notes for an ILW call on 4/17 to discuss the “invest” requirement, and new USCIS challenges to equity with debt-like features. The notes link to the relevant AAO and district court decisions, and summarize the fact patterns and arguments for each case.)
  •  “Made available” and bridge financing issues: JAN262018_05B7203, JAN302018_01B7203, FEB072018_02B7203, and MAR152018_01B7203 are decisions on the same regional center offering to invest in construction of a distribution center in Washington. After having approved 10 investors in the project, USCIS denied petitions for the last 10 investors. USCIS’s main excuses for this treatment: (1) the project having completed construction constitutes a material change of fact that prevents the last investors from relying on favorable decisions for previous investors, (2) USCIS belatedly identified a legal deficiency: that the PPM and loan agreement language don’t unambiguously obligate the NCE to make the entire amount of the petitioners’ funds available to the JCE, and (3) the reality that the investors chose a project that successfully developed and created jobs does not overcome paperwork problems. The petitioners were judged ineligible not based on reality, necessarily, but based on wording: they submitted documents that had leaky language in the loan agreement, didn’t paper up a bridge financing arrangement the way it’s supposed to be papered, and left sloppy inconsistencies in the business plan and economic impact report. Several morals from this case: People who draft transaction documents need to be mindful of the “made available” and bridge financing features of the EB-5 “invest” requirement, and write that into documents — taking particular care when it’s likely that (as often happens now considering long processing times) the project will have been completed by the time USCIS finally gets around to adjudicating I-526 petitions for investors. Prepare for the fact that an adjudicator may ask two years later: “why the JCE would still need this capital and to what use it would be put by the JCE in light of the completion of the project.” Document preparers must be very attentive to detail and careful about language, because compliant documents are apparently more determinative than compliant reality in whether or not investor petitions get approved. I keep this burden in mind as I write EB-5 business plans.
  • “Chance for gain” issue: FEB282018_02B7203,  MAR092018_02B7203, MAR162018_01B7203 are decisions on the same offering to invest in a regional center NCE to make a loan to a JCE to construct, finance, and operate an hotel. The denials rest on a finding that the LP agreement and loan agreement “do not provide the Petitioner with any rights to the NCE’s profits, whether derived from the loan interest or otherwise, and the sole opportunity for the Petitioner to generate a return on the investment is if the general partner elects to pay a 0.05% interest payment upon the NCE’s loan repayment.” USCIS will deny cases that guarantee a return, but – as we see here – can also deny cases that appear to make a return too discretionary. USCIS found in these cases that “discretionary chance for return which is unrelated to the investment does not satisfy the regulatory requirement for capital at risk under 8 C.F.R. § 204.60)(2).” Again, people drafting documents must walk a very fine line. USCIS wants to see (1) that investors have a chance for gain, (2) that the income sources to pay a return are directly related to the purpose of the underlying investment, (3) that the return is not guaranteed, (4) that the NCE general partner does not have absolute discretion to make or withhold the return. And furthermore, the documents have to be right the first time, at I-526 filing. The petitioners in FEB282018_02B7203 and MAR092018_02B7203 provided amended documents in response to NOID, but USCIS judged this an impermissible material change and refused to consider such post-filing clarifications.
  • “Business activity” at-risk issue and identified location: To meet the at-risk requirement for EB-5 investment, a petitioner must present evidence of actual undertaking of business activity, not just an idea for future activity. The precedent decision Matter of Ho cited entering a lease as an example of de minimus activity that doesn’t  itself qualify as sufficient business activity to put funds at risk. So if a petitioner hasn’t even secured a business location before filing I-526, he can expect to be challenged as having even less than de minimus activity. That happened to the petitioner in MAR162018_02B7203, a regional center case. “The Chief concluded that without a specific property, the Petitioner could not demonstrate that his funds were at risk, that the business plan was comprehensive rather than hypothetical, or that certain inputs to the economic model were valid.” (This decision also shows the importance of a quality business plan with real market analysis and financials, as it rips apart the placeholder content in the petitioner’s plan. And it shows confusion about the job creation timing requirement in the USCIS Policy Manual Vol. 6 Chapter 2(D)5. The decision seems to assume that job creation must occur within two years of filing I-526, while the PM states that the two-year job creation window is deemed to begin 6 months after adjudication of Form I-526.)

Other recent AAO decisions of note:

  • FEB072018_01B7203 is one of the rare cases where AAO decides to withdraw USCIS’s decision – in this case involving source of funds derived from loan proceeds received as a gift from the petitioner’s husband.
  • FEB152018_01K1610 upholds USCIS’s decision to terminate a regional center for this fatal error: filing Form I-924A to the wrong address.
  • FEB282018_01B7203 is yet another reminder that the new owner of a pre-existing business cannot expect that the enterprise and its new employees automatically qualify as “new” for EB-5 purposes.

Minor Investors:

Long processing times and the visa backlog have motivated families to make a teenage child to be the principal EB-5 applicant. USCIS has questioned but started approving such petitions, as reported by Wolfsdorf Rosenthal in this post and Miller Mayer in this webinar (35 minutes into the recording).

Washington Updates:

I continue to update my Washington Updates page, most recently with post-March analysis and a link to a letter from several senators to USCIS urging that regulations be finalized. Senator Grassley has made this plea multiple times since 2016; we’ll see what happens now.

Personal Update:

As EB-5 reporting and analysis become increasingly time-consuming, and less linked to my selfish purpose of encouraging demand for my business plan-writing service, I’ve decided to put up a donate option. If you can support the effort behind the blog and help keep it in business, please visit my About page and scroll down to the Paypal button, which can facilitate making a contribution through Paypal. I want to avoid a subscription model because publicly-available EB-5 information is important to my clients and the health of the EB-5 program.

Regional Center List Changes:

Additions to the USCIS Regional Center List, 03/19/2018 to 04/10/2018

  • American Capital Regional Center, LLC (Texas)
  • Borrego Development, LLC (California, Nevada)
  • Colorado Rocky Mountain High Regional Center, LLC (Colorado): www.coloradorockymountainhighrc.com
  • M5 Venture Silicon Valley RC LLC (California): www.m5venture.com
  • Mile High Regional Center (Colorado)
  • National Regional Center, LLC (California)
  • Protogroup, Inc. (Florida)
  • Texas Tilegend Regional Center (Texas)
  • Y & L Enterprises LLC (Iowa, Nebraska)

New Terminations

  • Encore Raleigh/Durham Regional Center (North Carolina)
  • Encore Alabama/Florida Regional Center (Alabama, Florida)
  • G.R.E.E.N. Regional Center (New Jersey)
  • BLMP Florida Healthcare Regional Center, LLC (Florida)
  • Michigan-Indiana EB-5 Regional Center (Indiana, Michigan)
  • Queensfort Capital Massachusetts Regional Center, LLC (Massachusetts)
  • South Pacific Regional Center, LLC (Hawaii)
  • Queens Fort New York Regional Center, LLC (New Jersey, New York, Pennsylvania)
  • Central Texas Properties Regional Center (Texas)
  • South Texas EB-5 Regional Center, LLC (Texas)
  • Pacific Viniculture (Washington)
  • California Investment Immigration Fund, LLC (CIIF) (California)
  • USA ODI Regional Center, LLC (Maryland, Virginia, West Virginia)
  • Manchester Pacific Regional Center (California)
  • Regency Regional Center, LLC (California)

EB-5 Visa Waiting Line and Visa Allocation

People who use EB-5 face some tough facts:

  • Demand for EB-5 visas (annual I-526 filings) has been three to four times higher than EB-5 visa availability since 2011, resulting in a backlog now about a decade long. (For those not already familiar with the situation, here’s a simplified explanation.)
  • New investors from most countries today can still expect to receive a conditional green card fairly promptly after I-526 approval, but only due to exceptions that will allow their applications to skip ahead of (push back) other people stuck in the backlog. (Or the overall wait could be shortened if the visa quota changes, or many people drop out of line.)

We respond to these facts by (1) advocating for backlog relief (AILA’s White Paper: Solutions to the EB-5 Visa Waiting Line gives suggestions), and (2) figuring out how the exceptions work, because investors and projects want to avoid a decade-long wait if possible.

The past few years offered a simple exception that allowed jumping much of the queue: be born outside China, since China accounts for most of the backlog and was the only oversubscribed country. Now, people from Vietnam face getting stuck in the visa wait line behind the Chinese (the May 2018 Visa Bulletin will have a Vietnam cut-off date), other countries wonder whether the same could happen to them one day, and Congress threatens set-asides and other changes to visa availability. And so we feel the urgency to understand just how visa allocation works, and relevant numbers.

First, here’s the law related to EB-5 visa allocation, with linked citations. (Or you can download my Word doc to get the text with headings to assist navigation.)

  1. The annual worldwide level for all employment-based (EB) immigrants is effectively 140,000. INA 201(d)(1)(A)
  2. At most 7.1 percent of the employment-based worldwide level is made available to immigrants in the EB-5 category. INA 203(b)(5)(A)
  3. Available EB-5 visas are issued to eligible immigrants in the order in which the immigrant petition was filed. INA 203(e)(1)
  4. At least 3,000 EB-5 visas are reserved annually for immigrants based on investment in a Targeted Employment Area. INA 203(b)(5)(B)
  5. 3,000 EB-5 visas are set aside annually for immigrants based on investment in a Regional Center. PL 102-395 Section 610(b) as amended by PL 105-119 Section 116(a)
  6. The EB-5 visas made available to natives of any one country may not exceed 7 percent of the available worldwide total. But if one or more countries gets held back by this rule, resulting in available visas with no one else to take them, then those remaining visas can be made available again without regard to per-country numerical limits for that year. INA 202(a)(2) and INA 202(a)(3) and INA 202(e) and PL 106-313 Section 104
  7. EB-5 visa numbers available to China annually under the per-country limit are reduced by 700 to compensate for cases processed under the Chinese Student Protection Act of 1992. PL 102-404 Section 2(d)(B) [Comment: It’s not obvious when this compensation is/was already complete; if the CSPA off-set does still remain in effect now, then Chinese start the year with (9,940*0.07) – 700 = -4 EB-5 visa numbers available to them.]

I imagine Charlie Oppenheim at the Department of State, sitting at his desk on October 1, 2017 with 30,000 EB-5 visa applications before him and tens of thousands more to come as USCIS approves pending I-526. How does he apply the above rules to decide who gets a visa in FY2018, and in what order? I hope he addresses this question during his keynote speech at the IIUSA EB-5 Advocacy Conference on April 23. (4/25 update: here are notes from Mr. Oppenheim’s presentation.) In the meantime, here’s my understanding of how the rules get applied in practice.

  • #1 and #2 above give the target quota for EB-5 visa numbers in one year: 140,000*0.071=9,940.
  • #3 specifies the basic rule of order: first-in-first-out by priority date (applicants with oldest I-526 priority dates are first in line for a visa)
  • #4 to #6 are factors that can override the basic FIFO order principle. The applicant with oldest priority date gets the first visa number unless she’s held back by:
    • #4) being the 6,941st+ applicant that year (9,940-3,000) who invested outside of a TEA, in which case she’s held back for any TEA-based applications to go ahead (thus far, non-TEA applications have been too few to trigger this set-aside)
    • #5) being the 6,941st + applicant that year who invested outside of a regional center, in which case she’s held back for any regional center-based applications to go ahead (thus far, direct EB-5 applications have been too few to trigger this set-aside)
    • #6) being the 696th+ applicant that year (9,940*0.07) from a single country, in which case she’s held back for any applicants from not-oversubscribed countries to go ahead (China has been oversubscribed and triggered the per-country cap since 2015, and Vietnam will as of May 2018)
  • #6 does not mean that 7% of visas get set aside annually for each country in the world. It does not mean that any one country gets only 7% of visas annually. #6 just means that any one country’s allocation gets capped at 7% so long as other countries are also competing to use up available visas. When other countries aren’t competing, then any visas still on the table get allocated to the waiting line in FIFO order without regard to per-country limits. So in 2017, China in fact got 75% of visas: 7% plus the 68% of visas that remained after numbers had been allocated to qualified applicants from other countries. (Or maybe only the remainders, if the Chinese Student Protection Act in fact took the first cut.)
  • When total demand promises to exceed total available visas for the year, then DOS looks at individual countries to see which look likely to exceed the 7% per-country cap, and sets a cut-off date or final action date for each of those countries. When a cut-off date is in place, only people from that country with priority dates earlier than the cut-off date can proceed with visa applications; others are held back. DOS gradually advances the cut-off date to release just enough people to apply for available visas.  At the beginning of the year, different oversubscribed countries can have different cut-off dates. When each country is getting its 7% of visas for the year, DOS looks at each country individually when setting the cut-off dates. When per-country caps have been met, then all oversubscribed countries are just competing together for remaining EB-5 visas left by not-oversubscribed countries. That means they are all in the same line again and will have the same cut-off date. (In practice that puts China at the head of the line for leftover EB-5 visas, since it’s been held back for years and thus its applicants have the oldest priority dates. Vietnam will start being held back in 2018, and its more recent held-back applicants will find themselves behind many longer-pending Chinese applicants. If India or Brazil get held back next, their still-more-recent applicants will find themselves behind both China and Vietnam in the competition for leftover visas. )
  • Exceeding the 7% cap is scary because it puts a country in the same line as China for leftover EB-5 visas, and near the back of that line based on priority dates and the FIFO process. The saving grace for small countries is that they can at least get 7% of EB-5 visas every year, and probably won’t exceed that cap by very much. If I’m a Vietnamese applicant held back this year, I’ll be one of the older Vietnamese applications next year and thus well-placed to get one of 700 new EB-5 visas available to Vietnam then. What I can’t expect is to get an EB-5 visa left over after not-oversubscribed-countries took what they want, since tens of thousands of Chinese have earlier claim on any leftover visas. But small excess = small backlog = small need to compete for leftover visas, thus relatively short wait time. As an Indian, I’d be a bit more concerned and vigilant. India hasn’t had high EB-5 numbers before, but the companies that helped create the China backlog with giant EB-5 raises have turned to India. If Indians flock to big raises seeking 100s of investors, then they will end up needing many more than 700 visas per year,  thus creating a significant India backlog that needs leftover visas but won’t get them for ages because behind the earlier China/Vietnam backlog plus squeezed by any new rest-of-the-world applications.
  • Visas can only be issued to people with complete visa applications ready, not to people with I-526 investor petitions still pending at USCIS. But it’s important to keep an eye on I-526 petitions – on number of receipts, petitioner origin, adjudication speed, approval rates – to estimate how many of those petitions will become visa applications, and when. New visa applications from not-oversubscribed countries immediately reduce the number of leftover visas available to pending applicants from oversubscribed countries. New applicants from a country near the 7% cap could tip the balance into cut-off dates and backlogs for fellow-countrymen already in line. A major decrease in I-526 filings or increase in denials or withdrawals would reduce incoming pressure on the visa backlog, and shorten wait time projections. Estimates are tough with all these moving parts and limited data, but we must try. The China backlog ballooned quickly and came to many investors (and their projects) as a nasty surprise. They didn’t realize how many other Chinese investors were already in the system or entering at the same time, and what that would imply for future visa wait times. A cautionary tale.

To facilitate analyzing numbers relevant to country-specific visa availability, I’ve added a tab titled “Country Focus” to my ongoing Backlog Calc Excel file. (The numbers aren’t new, but highlight significant previously-reported I-526 and pending visa data. I even made a cartoon to assist in visualizing the numbers. The thumbnail image here gives a teaser of the new Excel tab.) I don’t offer conclusions, but information to assist your conclusions.

Additional reading:

Benefit from this blog? Please consider supporting the effort behind it. As the EB-5 industry changes, your contribution can help preserve this space for conscientious and freely-available EB-5 reporting. Donations go to Lucid Professional Writing (a for-profit business) to fund work on this blog. Thank you!

RC Authorization to 9/30/2018, Processing Times, New RCs

Regional Center Program Authorization

The last time Congress voted a significant regional center program extension was 2012. Since then, the program has been extended a few months at a time, in connection with government funding. This is now happening again with H.R.1625, the vehicle for the Consolidated Appropriations Act 2018, which was signed by the President today.  The text includes regional center program authorization to 9/30/2018 on PDF page 1759, as follows:

SEC. 204. 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, 2018” 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 (PDF page 47), which established the regional center program. The 2018 Appropriations Act does not include the EB-5 Reform Act, or other EB-5 changes. It just extends the borrowed time until we get a good piece of EB-5 legislation.

Processing Times

USCIS has attempted to clarify reporting for processing times, and succeeded in confusing me, at least, even more than before. Unfortunately I missed a webinar on this topic yesterday because even the emails were confusing, but here’s what I think I understand, having read the new pages at egov.uscis.gov/processing-times/ and egov.uscis.gov/processing-times/more-info, and used my spreadsheet to fiddle with the EB-5 form numbers in comparison with numbers in the old-style report.

USCIS has changed its method for calculating processing times for four forms: N-400, I-90, I-485, and I-751. The underlying method for calculating (and underlying reality behind) times for I-526, I-829, and I-924 has not changed. What’s different for the EB-5 forms is that USCIS now reports three pieces of information: a high and low month in an “estimated time range” and a “case inquiry date.” The low month in the time range corresponds to the date USCIS previously reported for “processing cases as of…” in the old-style report, while the high month multiplies that duration by 1.3, and the case inquiry date more-or-less corresponds to the high month. Apparently IPO doesn’t want people complaining that they’re outside of normal processing times until their cases are taking 130% longer than average. If you took part in the webinar and have additional insights or corrections, please share.

See also the OIG Report: USCIS Has Unclear Website Information and Unrealistic Time Goals for Adjudicating Green Card Applications

Visa Availability

The Visa Bulletin for April 2018 confirms that Vietnam is definitely up next month for a cut-off date based on oversubscription. With visa availability being the major political and practical factor for EB-5 today, I’ll be writing more about this soon.

Regional Center List Updates

Additions to the USCIS Regional Center List, 03/09/2018 to 03/19/2018:

  • 888 American Dream Projects Regional Center (California, Nevada)
  • American National Regional Center d.b.a. EB5 Financial Regional Center (California): www.anrcs.com
  • Dayton Regional Center, LLC (Ohio)
  • Delvelyn Regional Center, LLC (California)
  • Hudson Funds New York Regional Center, LLC (New Jersey, New York, Pennsylvania): hudson-funds.com
  • MGV NYC Regional Center LLC (New Jersey, New York, Pennsylvania)
  • Monterey Massachusetts Regional Center, LLC (Massachusetts)
  • Monterey Northern California Regional Center, LLC (California)
  • Monterey Southern California Regional Center, LLC (California)
  • New York/New Jersey Real Estate and Infrastructure Regional Center LLC (Connecticut, New Jersey, New York)
  • PacNW Regional Center, LLC (Oregon, Washington)
  • Propet American Dream, LLC (Washington): www.propetamericandream.com
  • RSR EB-5 Regional Center, LLC (North Carolina, South Carolina)
  • Smith Mountain Regional Center, LLC (Colorado, Oklahoma, Texas)
  • U.S. Green Capital Regional Center, LLC D/B/A Playa Vista Regional Center (California): pvcapitalmanagement.com
  • Washington American Investments, LLC (District of Columbia, Maryland, Pennsylvania, Virginia)

New Terminations:

  • Chen Roberts Regional Center (Oklahoma)
  • Regency Regional Center LLC (California)

EB-5 Reform: Missed Opportunity

It’s easy to blame big-moneyed New York City real estate interests, as Senator Grassley likes to call them. I had assumed their lobbying was to blame for the draft EB-5 Reform Act, which seemed designed to protect investment in prosperous areas and privilege well-heeled regional centers. But now Senator Grassley blames them for blocking the bill. He says “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… But, 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.” Could this really be what doomed the bill? The EB-5 Reform Act didn’t look like reform to many stakeholders, but apparently Senator Grassley and NYC both believed in its potency, enough to support it and block it respectively. I’ll respond more later to Senator Grassley’s speech, which shows his good faith and fundamental misunderstanding of several aspects of EB-5. Pro tip: don’t have your staffers work around the clock on legislation for a year before calling in organizations like IIUSA to give input and education to help keep the content on track with your laudable objectives. A broad base of people in EB-5 agree with you in wanting legislation that helps support the program’s good purpose with respect to investment in underserved areas and job creation. Include them in the process. (The benefits of such inclusion are already evident in the Revised EB-5 Reform Act of 2018 posted by IIUSA.) As Klasko Law puts it in their client alert: “The EB-5 industry was largely shut out of the process or brought in too late to be able to provide meaningful guidance and input. So it should come as no surprise that the proposed bill died the same way it began: in a secret, back-room agreement without the participation or input of the vast majority of the EB-5 industry.”

Excerpt from the IUSA Statement on Missed Opportunity for Long-Term EB-5 Authorization:

…In early March, IIUSA was pleased to join a group of industry organizations to review and discuss a bicameral compromise draft proposed by Senate and House Judiciary Committee Chairmen and key members of House and Senate leadership. After additional revisions were made to the compromise draft, IIUSA’s Board of Directors voted overwhelmingly to support the bicameral compromise that would have offered a six-year reauthorization and much-needed reforms.

Unfortunately, the compromise reform and reauthorization legislation failed to garner the support of all industry organizations and failed to be included in the omnibus appropriations legislation. We are extremely disappointed in this missed opportunity but are most appreciative of the House and Senate Judiciary Committee leaders and members of Leadership who worked tirelessly to delicately craft the compromise package. The omnibus legislation, however, does include an extension of the current EB5 Regional Center Program through September 30, 2018. We plan to continue to work diligently with Congress and our membership to build on the compromise draft legislation.

Other reactions:

EB-5 Reform Act: the Good

This post summarizes points in favor of the proposed EB-5 Reform Act. Its details and compromises won’t please everyone, as discussed in my previous post, but it is a piece of EB-5 legislation currently without a better alternative.  Here are some reasons for stakeholders be happy if it gets included in the spending bill due by March 23.

  • People who already invested and waiting for a green card: Although they would bear downside of this bill’s most painful compromise – visa set-asides – they will suffer more if the regional center program loses authorization. At least under current policy, the process will simply be over for RC investors awaiting conditional permanent residence if the RC program is deauthorized long-term. The RC program will sunset on March 23 unless something is done, and this EB-5 Reform Act appears to be the only thing that can be done. I’d love to see another short-term extension to give time for Congress to draft more fully-baked and inclusive legislation, but after three years of short-term extensions that’s a lot to hope for. (Update: another short-term extension has now emerged as a possibility.)
  • All EB-5 investors: The bill gives desperately-needed protections and options for investors in case of change with projects and regional centers, and improves and compresses the process for removing conditions.
  • Future investors: The new investment amounts are high, but much lower than they could’ve been, or will be if the regulations are finalized instead. Visa set-asides offer hope (if no more) to potential investors from backlogged countries. Future investors will benefit from new process improvements, investor protections, and integrity measures.
  • Regional Centers: A more difficult and expensive life under the EB-5 Reform Act is better than death from loss of RC program authorization. The five-year program extension will provide much-needed stability. The moratorium and transition period will be rocky at first, but should result in a more-clearly-defined program eventually. The visa set-asides will help with marketing, at least for awhile, and the new incentive categories broaden the kinds of projects that may be viable to market. The new investment amounts are not so high as to kill demand entirely, unlike in the regulations. And the bill opens up a new category of potential demand: investors who already filed with someone else but now want to switch projects and/or regional centers — something not previously allowed.
  • People who want program integrity: This bill proposes integrity measures that mostly appear possible to implement (unlike previous drafts that would have made good-faith compliance near-impossible in practice, and thus not been effective in weeding out bad players either). And it offers funding, personnel, and official authorization for effective compliance initiatives already started by USCIS.
  • People who want to tighten TEA incentives: This bill puts responsibility for incentive-area designation with USCIS, which will be more narrow, rigorous, and consistent than states. It’s naturally difficult to incentivize investment in significantly distressed and remote areas, and such areas would be at least as competitive under the EB-5 Reform Act as they are now.
  • Investor Program Office: Although this bill gives them more work, it also exempts most some of their decisions from judicial review. (I oversimplified — see MF’s comment.)

It’s too late for major changes and amendments if the EB-5 Reform Act is to get into the omnibus at all, but if I could propose one amendment it would be this: a period of at least weeks before the provisions take effect and the filing moratorium begins. Most stakeholders haven’t even seen the bill text yet, and it will be very hard to comply instantly if it goes into effect instantly.

Other commentary on this bill:

EB-5 No-Reform Act, RC List Changes

On Friday, IIUSA reported that “Yesterday IIUSA met with Republican negotiators and received draft legislative text that is being proposed for inclusion on the March 23rd Congressional omnibus package… We expect the House to vote the omnibus out of the chamber as early as March 16, allowing the Senate the entire week of March 19 to pass the measure before government funding expires on Friday, March 23…. the current debate over what policy provisions to include in the FY18 omnibus spending package provides one of the few, if not the only, opportunity to secure a long-term EB-5 reauthorization.”

With three years to work on drafting EB-5 legislation, why did Congressional negotiators keep this most recent EB-5 bill hidden until the very last minute, and provide even IIUSA only a few hours to read it and respond? Possibly because this “Immigrant Investor Visa and Regional Center Program Comprehensive Reform Act” is a tissue of minority hand-outs, declawed reforms, poison pills, and half-baked good ideas. We’re to conclude “This is our last chance to get significant regional center program authorization, and it’s too late to make changes now, so we have to support this, no matter the details.”  I understand, but oh those details. I am ashamed of this bill, and on behalf of the people behind it. How did years of negotiation produce this document? The media, pro-reform lawmakers, and the good proportion of EB-5 stakeholders left out of compromises will not be kind to those who drafted this bill, if it passes as-is.

The EB-5 Reform Act has a few generally-favorable provisions:

  • It would reauthorize the regional center program to 2023
  • It would add some flexibility for material change, and some protection for investors in projects that don’t work out
  • It would make some process improvements

The EB-5 Reform Act is lobbying money well-spent for a few:

    • The TEA reform in this bill is calculated to avoid unduly incentivizing investment in distressed areas. In three years of EB-5 legislative proposals, each version has had a softer TEA proposal than the last. This one reduces the monetary incentive to a hair, compensates with incentives that will either be impotent/unrealizable in practice (visa set-asides, premium processing) or positively counterproductive (lower jobs requirement for needy areas?), broadens the definitions of what qualifies as an urban distressed or rural area (e.g. switching from the NMTC “severe distress” criteria in previous proposals to just the NMTC low-income criteria, and no specified limit on gerrymandering), and adds new incentivized areas for a special few (closed military bases, U.S. territories, infrastructure, franchise investment funds). Congress was originally energized for EB-5 reform because they didn’t like seeing most EB-5 dollars flowing to already well-capitalized projects in already well-capitalized areas. That status quo has little to fear from this legislation. Luxury real estate will keep its top spot if this passes, and we’ll still have Chuck Grassley and the media shaking their fists.
    • The bill offers real estate projects an extra gift for good measure: construction jobs can be aggregated and counted as qualifying direct permanent jobs regardless of duration.
    • The integrity provisions in this bill are calculated to avoid making life difficult. Gone are the suggestions in past bills about involving third parties in oversight or reporting or requiring account transparency or fund administration. Here, integrity measures focus on internal certifications of compliance to the best of the certifier’s knowledge. That’s good for honest players who can do without burdensome and intrusive regulation, but also little limit on bad players happy to self-report compliance. Such teeth as the bill has — site visits, audits, background checks, termination threat — are largely things IPO is doing already, though I’m sure they’d appreciate the official authorization and extra funding. But generally, I’m not sure this bill will satisfy lawmakers who wanted EB-5 reform to combat fraud.
    • The bill retains integrity measures that conveniently double as anti-competitive measures. The bill keeps a previously proposed annual regional center fee – lowering the amount for the largest regional centers and keeping it high for the smallest. It is more severe than previous proposals on involvement by anyone with foreign government connection at any level, even in providing non-EB-5 capital to a job-creating entity.
    • UPDATE: Re-reading more carefully, I see that I’m wrong about this one. The bill says that for four months after enactment, no one can file I-526 except for new investors in in-progress raises with an approved examplar. The bill even attempts to set aside 7,000 visas for these privileged investors, forgetting that the numerical limit for 2018 visas was already exceeded back in 2014.

Here’s who will be most upset, if the EB-5 Reform Act passes:

  • The approximately 92,000 people in line for an EB-5 visa. These people are already in for a long wait with an annual quota of about 10,000 visas, and the EB-5 reform act has set-asides that would reduce generally-available visa numbers to about 6,900 per year. The situation will be especially bad for people from China, Vietnam, and possibly India. Those people already in line didn’t plan to wait 17 years or so for conditional green cards — and neither did the projects accepting their investment. The bill does not include on-purpose retroactivity (it doesn’t make TEA, investment amount, or job creation changes apply to people who already filed I-526), but past investors will be severely affected by the visa set-asides, and potentially by new restrictions that affect regional centers and investment projects.
  • Those hoping to raise EB-5 funds to benefit projects in rural or distressed urban areas. The new incentives are not better designed to benefit them than the current incentive structure. The new regional center fees and requirements are well-designed to put anyone out of business who isn’t raising funds from hundreds of investors for prosperous urban projects.
  • Entrepreneurs planning to file EB-5 petitions in the near future for their own enterprises, and any regional centers planning to raise funds for a project without a pre-approved exemplar. The bill has a 120-day moratorium on filing new I-526 and I-924, followed by a transition period from day 121 to day 365 that limits the petitions that can be processed.
  • The Investor Program Office. This legislation will be tough to interpret and implement. USCIS will have to figure out provisions that the bill hardly explains: the franchise investment fund idea, the provision that I-829 petitions based on investment in unrealized/failed projects are to remain valid, the new amendment and re-petition processes, the provisions that imply retroactive new requirements for past projects, and the effects on direct EB-5. The bill stipulates a 120-day transition period, during which USCIS can come up with new regulations and policy, new forms and supporting processes, a new TEA designation process, and a new premium processing option. Hahahahaha. 120 months would be more plausible, considering past experience.
  • Regional centers with fewer than 20 investors annually. They’ll face a $10,000 annual fee and a list of new compliance certifications that will be hard work if taken seriously.
  • EB-5 projects with any foreign-government-entity-related funds in the capital stack, or personnel at any level.

End of rant. If I wake up tomorrow to find that this has been attached to the House version of the new omnibus spending bill, then I shall transition to learning to live with it. And polish my resume, perhaps.

In the meantime, USCIS approved a bunch of new regional centers. Probably most of these applicants filed I-924 back in 2015, little thinking what they’d be up against today!

Additions to the USCIS Regional Center List, 02/02/2018 to 03/05/2018.

47 regional centers have been added.

  • AHRC GA, LLC (Georgia)
  • All American Investment Holdings, LLC (California)
  • Ameri-Link Northeast Regional Center, LLC (California, New Jersey, New York)
  • American Citizen Regional Center – Southern California LLC (California)
  • American Equity Fund California, LLC (California)
  • American Equity Fund, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • Avista Regional Center, LLC (Florida, Georgia)
  • BC Southeast Regional Center, LLC (Florida)
  • BC West Coast Regional Center, LLC (California)
  • Bay Area Community Regional Center, LLC (California)
  • CMB Hawaii Regional Center, LLC (Hawaii): www.cmbeb5visa.com
  • Carolina EB-5 Regional Center, LLC (North Carolina)
  • Chicago Golden Pacific, LLC (Illinois): www.usgoldenpacific.com
  • EB-5 Inc Regional Center, LLC (Florida)
  • EB5 Texas Investment Group LLC (Texas)
  • East Coast Prime Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • Education Fund SC Regional Center, LLC (Louisiana, New Mexico, Texas): edufundamerica.com
  • Gateway America Regional Center (New York, Ohio, Pennsylvania)
  • Green Mountains Regional Center, LLC (New Hampshire, Vermont)
  • Happy Family USA Regional Center (California, Nevada): www.hfeb5.net
  • Hawaii Investor Regional Center Corp. (Hawaii)
  • LJHB Perpetual, LLC (District of Columbia, Maryland, Virginia, West Virginia)
  • Landmark Regional Center, LLC (Connecticut, New Jersey, New York)
  • Manhattan CBD Development Regional Center, LLC (New York)
  • Mid-America Renaissance Regional Center, LLC (Kansas, Missouri)
  • NYC Liberty Green Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • New York City EB-5, LLC (New Jersey, New York, Pennsylvania): www.americaneconomicgrowthfund.com/nyceb5
  • New York City Transportation Regional Center LLC (Connecticut, New Jersey, New York)
  • OMS Group, LLC (North Carolina, South Carolina)
  • Omaha Old Market Regional Center LLC (Iowa, Nebraska)
  • Pacific West Economic and Development Center LLLP (California, Nevada)
  • Phoenix & Dragon LLC (Connecticut, Massachusetts, New Hampshire, Rhode Island)
  • Phoenix Pacific LLC (Washington)
  • Prime Capital, LLC (California)
  • RW EB-5 Regional Center, LLC (Nevada)
  • Real Estate Development Center of America LLC (Florida, Georgia, South Carolina, Tennessee): redcoaregionalcenter.com
  • Redwood Regional Center, LLC (Oregon, Washington)
  • Roundhay Partners Regional Center, LLC (California)
  • Serendipity Regional Center, LLC (California)
  • Smith Delta Regional Center, LLC (Alabama, Arkansas, Louisiana, Mississippi, Tennessee)
  • SoCal Global Regional Center, LLC (California)
  • South Florida Real Estate and Infrastructure Regional Center LLC (Florida)
  • SunCapital Texas Regional Center (Texas)
  • The Harbor Bank Community Development Capital RC (District of Columbia, Maryland, Pennsylvania, Virginia, West Virginia)
  • WRCI California Regional Center, Inc. (California, Nevada)
  • Zephyrus Regional Center LLC (Arizona, California, Nevada, Oregon, Washington)

Renamed:

  • EB5 Affiliate Network State of Texas Regional Center, LLC (Texas) into EB5 Affiliate Network States of Texas and Louisiana Regional Center, LLC (Louisiana, Texas

Finally restored to the approved list, after AAO sustained its termination appeal:

  • Path America Sonoco, LLC (Washington)

New Terminations:

  • Omega Puerto Rico Regional Center, LLC (Puerto Rico)
  • Southwest Kansas Regional Center (Kansas)
  • EB5 Memphis Regional Center, LLC (Tennessee)
  • New Orleans’ Mayor’s Office RC (Louisiana)
  • Diversified Global Investment, LLC (Georgia)

 

No-change February

My Washington Updates page started the month of February full of anticipation.

I thought we’d see final action for EB-5 regulations, because the Fall 2017 Unified Agenda said we would (having advanced the anticipated action date from April to February), Congressmen who might’ve been behind alternative legislative action (Grassley, Goodlatte) instead sent a letter in April 2017 urging DHS to finalize the regulations, USCIS Director Cissna committed in his confirmation hearings in May 2017 to finalize the regulations, and the few White House statements on EB-5 sounded warm to the proposed changes. So I was willing to bet that the February Final Action date would be met. But nothing happened in February, and now I wonder whether we’ll ever see action on these regulations. I’ll keep my eye out for an update in the Spring 2018 Unified Agenda just in case, but now that the initial impetus for action was quelled, I don’t know what’s left to counteract the overwhelming power of administrative inertia. The person responsible for drafting the regulations has left IPO (and Lori Mackenzie’s Policy Chief position was still vacant as of November 2017), the EB-5 industry has many problems with the regs as proposed, DHS would surely prefer to avoid policy-revising headaches associated implementing new regs, Chairmen Grassley and Goodlatte have bigger fish to fry, and who has incentive and energy left to push EB-5 program modernization? The proposed regulations could’ve had a devastating effect on my client base, particularly for direct EB-5, so I’m selfishly glad they weren’t finalized. But the process is still frustrating. UPDATE: A contact suggests that the proposed regs may have been put on hold just to give Congress a chance to pass EB-5 legislation in connection with the funding bill due by March 23. In that case, the regs could return as a live possibility in April if Congress fails to do more than a clean RC program reauthorization at the end of March.

I also started February with hope that Congress might manage immigration legislation, and that EB-5 could benefit from the expressed intent to redistribute some visa numbers in a way that privileges immigration by economically-successful people. But now here we are in March with no immigration legislation and no indication that there will ever be any. The last word I heard is that Congress may handle DACA – the primary impetus for new legislation — with its favorite cop-out: a short term extension attached to the next omnibus funding bill. Negotiations over immigration legislation apparently failed because Democrats really wanted DACA while Republicans didn’t want a border wall or to redefine the nuclear family as much as they wanted Democrats to fail with DACA. Now I see no prospect on the horizon for the two things EB-5 needs from legislation: more visa numbers to relieve the backlog and keep up with on-going demand, and a long-term extension of the regional center program. Would public relations allow Congress to achieve a long-term extension to the little-considered EB-5 regional center program benefiting wealthy foreigners if they simultaneously manage only a short-term extension for the high-profile DACA program benefiting US-raised kids? With DACA and border security having failed to sustain bipartisan immigration negotiations, what remains to bring people back to the table for a successful negotiation involving visa numbers? How likely is it that Grassley & co. will stop demanding genuine TEA reform as a condition for stabilizing the RC program, or that industry lobbyists will suddenly agree to make painful-to-their-backers TEA concessions? Who is there even to seriously advocate for the overall health and long-term stability of the EB-5 program, when most major users just need it a few more months unchanged to finish their own capital raises?

I’m just sitting in my armchair in Utah reading the news, not on the ground in Washington D.C., but at any rate it’s tough to theorize change at this point. Here’s what I currently expect for 2018/2019: several more last-minute months-long content-free extensions to the regional center program, no visa backlog relief, and no change to the EB-5 investment amount or TEA definitions or other targets for EB-5 reform. But I’ll keep updating my Washington Updates page as I hear anything, and maybe I’ll be surprised by action. UPDATE 1: I might after all put some money on a Final Rule on EB-5 regulations in April, with an effective date to delay implementation past September. (This bets against Congress’ ability to do anything with EB-5 by March 23, and for the assumption that the administration might still want the regs but amenable to influence on timing.) UPDATE 2: I’ve just seen some draft EB-5 legislation that’s so shameless I believe it might get passed, if quietly tucked into the omnibus spending bill. The Washington Updates page continues to evolve.

How long does I-526 take? (Part II)

Update: I have deleted this now-outdated post and replaced it with How long does I-526 take? (Part III)

Updates (CR to 3/23, AAO sustained appeals, RC List)

EB-5 Legislation and Regulations
I’ve started a Washington Updates page off the Resources tab to keep track of what’s going on with legislation and regulations, and will revise it regularly as I hear about changes, in lieu of endless update posts. The page has details of regional center authorization (currently extended through March 23, 2018) and the immigration debate and new bills as they relate (or mostly do not relate) to EB-5.

AAO decisions: troubled RCs/projects

Do investor petitions fail when the project and/or regional center runs into trouble? Not necessarily, according to recent AAO decisions on EB-5 appeals.

  • In August 2015, the SEC filed a complaint against Path America companies including Path America Kingco LLC and Path America Snoco LLC. The case was settled in August 2017, with the former Path America principal receiving four years in prison. In the meantime, USCIS terminated Path America Kingco in March 2016, denied and revoked a bunch of Path America Kingco I-526 petitions starting in April 2016, and terminated Path America Snoco LLC in November 2016. Path America Kingco appealed its termination and was dismissed (JUN092017_01K2610), the PAK investors appealed their denials and were dismissed (e.g. DEC052016_01B7203, MAY112017_01B7203, JUL192017_01B7203), but Path America Snoco appealed its termination and was sustained (DEC212017_01K1610). PAK and PAS were terminated for malfeasance by the same former principal, but in the PAK case “he diverted proportionally more of the investors’ funds and the comparatively new management has only recently begun the process of renewing the project after its time in receivership.” AAO decided that PAS deserved to keep its designation because “the near completion of the project as proposed and the existence of a new owner committed to promoting future economic growth in the aggregate warrant maintenance of the regional center.” PAK has the same new owner, and the PAK and PAS situations appear to differ in degree more than substance, but at least AAO shows that it can give positive factors some weight. The PAS decision states that “There may be cases where, to maintain program integrity, the nature or degree of bad acts cannot be ameliorated or counter-balanced by positive factors of job creation and economic growth. For the foregoing reasons, this is not such a case.” Path America Snoco has been restored to the USCIS list of approved regional centers.
  • The PhoenixMart project by Central Arizona Regional Center has seen considerable drama and lengthy project delays. In 2017, USCIS denied a bunch of I-526 in the project, finding that “the business plan was not credible because construction did not substantively commence until years after the initially-forecasted completion date.” However, AAO just posted several decisions in the 2018 folder (JAN172018_02B7203, JAN172018_05B7203, JAN172018_06B7203, JAN172018_07B7203) that withdraw those denials, remanding the matter for further proceedings. AAO was impressed by evidence that the project has recently made substantial progress, and “Therefore, we withdraw the Chiefs finding that the business plan was not credible with regard to the construction portion of the plan.” (Reflecting its new sensitivity to return provisions, however, AAO takes the opportunity to bring up an issue not included in the USCIS denial: “whether the granting of first right of refusal to EB-5 investors for the purchase of up to 1,500 shops in ___ constitutes an impermissible redemption agreement.”)
  • The Palm House Hotel project has been the subject of numerous lawsuits and went into receivership in 2015. In 2016, EB-5 investors sued sponsor South Atlantic Regional Center and associated entities, alleging that the project was, in reality, nothing more than a façade pursuant to which their funds were stolen and distributed among the conspirators. However, the project has made some progress under the receiver, and at least two investors appealed their I-526 denials to the AAO (JUN132017_01B7203, JAN172018_03B7203). AAO denied the motions, but in a way that leaves open the possibility that the outcome might have been different had the petitioners presented better documentation regarding availability of funds to complete the project.

LucidText in the news
Suzanne Lazicki is featured in the latest EB5 Investors Magazine as one of the Top 5 Business Plan Writers of 2017, and in a podcast with Mona Shah discussing business plans and the current EB-5 landscape.

Regional Center List Changes
Additions to the USCIS Regional Center List, 12/05/2017 to 02/02/2018

  • Awesome American Regional Center LLC (California, Nevada)
  • Commuter Center Regional Center, LLC (Washington)
  • Florida Capital Group Regional Center (Florida)
  • Grand Commonwealth Regional Center, LLC (California)
  • Hawaii Investment Funds, LLC (Hawaii): www.hawaiieb5.com
  • Live in America – Louisiana Regional Center, LLC (Louisiana): www.liveinamerica.us
  • Midtown NYC Regional Center, LLC (Connecticut, New Jersey, New York)
  • Mugo Regional Center LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • North American Asset Management Regional Center, LLC (Washington)
  • Polaris Regional Center (Guam)
  • Stonehenge Regional Center, LLC (Texas)
  • TS Pacific Regional Center (California)
  • Texo Capital, LLC (Ohio, Pennsylvania): www.texoeb5.com

Additions to the Regional Center Terminations page, 12/05/2017 to 02/02/2018

  • Greater Houston Investment Center, LLC (Texas)
  • Lansing Economic Development Corporation (LEDC) Regional Center (Michigan)
  • Maryland Area Regional Center, LLC (Maryland)
  • Liberty South Regional Center (Arkansas, Mississippi)
  • Southeastern Higher Education Regional Center (South Carolina)
  • EB-5 Fund CA, Inc. (California)
  • EB-5 Regional Center Florida, LLC (Florida)
  • America Development Investment Center Regional Center (Alabama, Georgia)
  • Florida East Coast Regional Center, LLC (Florida)
  • Lakewood Regional Center a/k/a American Life, Inc. – Lakewood Regional Center (Washington)
  • American Logistics [International] Regional Center (California)
  • South East Los Angeles RC (SELARC) California (California)
  • Southwest Florida Regional Center, LLC (Florida) (terminated 5/25/2017 but not listed until 1/30/2018)

Previously listed as terminated, but now restored to the list of approved regional centers:

  • ON Regional Center, LLC (California)

At-risk with call option and preferred return? — updated

—UPDATE 4/17/2018—

Ira Kurzban has published an article based on his success with Chiayu Chang, et. al., v USCIS  “Federal Litigation: The Knockout Punch to USCIS’s Overbroad Policy on Redemption Agreements and Call Options?”

FYI here are my notes for an ILW call on 4/17 to discuss the “invest” requirement, and new USCIS challenges to equity with debt-like features. The notes link to the relevant decisions and cases, and summarize the fact pattern and arguments for each case.

—UPDATE 4/6/2018—
Other petitioners continue to fight call option denials.

  • Another lawsuit: CHANG et al v. DEPARTMENT OF HOMELAND SECURITY et al (Case Number: 1:18-cv-00659). Here’s a summary and the full complaint.
    (Attorney representing the plaintiffs: Jason D. Wright, Wright Law Firm)

— UPDATE 2/9/2018 —
I’ve been alerted to a couple district court decisions that rule against USCIS in favor of EB-5 petitioners in cases involving call options.

Chiayu Chang, et. al., v USCIS 1:16-cv-01740 (Filed 02/07/2018)
…The question in this case is whether United States Citizenship and Immigration Services (USCIS) acted in an arbitrary and capricious manner when it declared plaintiffs ineligible for visas because their investments came with a “call option,” which gave the company in which they invested the choice to buy plaintiffs out. Because the call option at issue here does not provide the investors with any right to repayment, the Court answers this question in the affirmative and grants partial summary judgment to plaintiffs… Unlike a sell option—or a note, bond, or similar arrangement—a buy option provides the investor with no security that she will ever see her money again. …A call option alone does not a debt arrangement make….
(Attorney representing the plaintiffs: Ira J. Kurzban of Kurzban Kurzban Weinger Tatzeli & Pratt, PA)

DOES 1-72 v. UNITED STATES CITIZENSHIP & IMMIGRATION SERVICES et al 1:15-cv-00273 Filed 2/24/2015, decided 03/10/2017
…Importantly, the Call Option was a right exercisable by Quartzburg Gold or its general partner, not the Plaintiff-investors, and the Quartzburg Gold documents made clear that there was no guarantee that it would be exercised. Despite statements that the general partner would strive to be able to exercise this option and buy out the Plaintiff-investors, both the LPA and the Offering Memorandum made clear that “[t]here [was] no guarantee regarding when the Partnership shall exercise such call option, or if such call option shall ever be exercised at all.” …. The Call Option accordingly did not guarantee Plaintiff-investors anything, nor did it have any effect on the risk that the Plaintiff-investors faced that they might lose their capital contributions if the underlying mining projects were not successful…
(Attorneys representing the plaintiffs: Robert C. Divine & J. David Folds of Baker Donelson)

— ORIGINAL POST 1/26/2018 —
Every EB-5 offering is a balance between natural investor desire for a return and exit strategy, and EB-5 policy prohibiting debt arrangements between the immigrant investor and new commercial enterprise. (As a reminder, there’s no problem with debt between the NCE and job-creating entities in regional center offerings. The restriction is between the EB-5 investor and NCE.) People who prepare offering documents have to walk a fine line, and should note recent cases that help define where USCIS thinks that line lies.

A number of recently-posted cases in the 2017 and 2018 folders I-526 appeals deal with investors in a regional center project who were denied due to a provision in their Limited Partnership Agreement.  (See DEC222017_03B7203 as a representative example. Other decisions for the same offering: DEC192017_01B7203, DEC192017_02B7203, DEC222017_01B7203, DEC222017_02B7203, JAN172018_01B7203, JAN172018_04B7203, JAN172018_08B7203, JAN172018_09B7203, JAN172018_10B7203.) Here’s the targeted provision:

Article 9.1 of the partnership agreement provides that at any time on or after the date that a foreign investor’s Form I-829 has been adjudicated, the NCE’s general partner may, in its sole discretion, notify the investor of its desire to purchase (i.e. redeem) his or her interest. The purchase price will include 100 percent of his or her capital contribution ($500.000) plus all accrued and unpaid preferred returns. ….Preferred return is one half of one percent (0.5%) per annum on the total unreturned Capital Contributions [$500.000] of an investor.

Considering the USCIS Policy Manual policy on guaranteed returns and Matter of Izummi, one might think this provision would be acceptable because (1) this provision doesn’t give the investor a right to demand the return (since only the general partner can initiate the buyout), (2) the NCE general partner is not guaranteed to be a willing buyer (since the purchase “may” happen at its sole discretion), and (3) a certain price is not assured (since the purchase itself is not assured). But one would be wrong, according to the analysis by USCIS and the AAO.  They found that,

The fact that the general partner has the right to purchase or redeem, which the partnership agreement references as a “buyout right,” rather than the Petitioner having a right to sell his interest is not determinative. We previously found that a sell option was an impermissible debt arrangement regardless of whether it was enforceable.

AAO admits that Matter of Izummi treated a different kind of redemption agreement that gave the Petitioner a sell right, but “the language of the decision goes beyond those facts, explaining not only that the enforceability of the arrangement is immaterial but that an investor may not be assured of receiving a certain price.”

The “certain price” issue is the main leg to stand on for the December 2017 denials. (One wonders about the difference a profit-contingent preferred return would’ve made. Also, the leg still looks pretty weak, considering that the offering apparently lacks the defining feature of debt: fixed obligation to pay.)  But the AAO appears to question debt-like elements generally.

A review of the record as a whole reveals an arrangement where once the conditions on the Petitioner’s resident status have been removed, the NCE would likely redeem the Petitioner’s original capital contribution and pay him or her a modest “preferred return,” similar to an interest payment. Such an arrangement, though not characterized as a loan in the offering documents, contains the same elements (principal, interest, repayment period) that one would find in a debt agreement.

AAO concludes,

Considering the partnership agreement and offering memorandum together, we find that the Petitioner did enter into an impermissible debt arrangement with an understanding that the general partner intended to repay the full investment plus preferred returns. This arrangement is not permitted under the broad language at 8 C.F.R. § 204.6(e) (definition of “invest”).

As another example, consider APR182017_01B7203, a 2017 decision that challenges a “Priority Return” in a direct EB-5 offering.

Page 4 of the business plan states that “the NCE will pay the limited partners, if funds are available, a preferred return on their investment, beginning after the EB-5 funds are invested in the project.” As we discussed in our second NOID, Izummi, 22 I&N Dec. at 183-88, provides that if an investor is guaranteed a specific rate of return or the return of his or her investment, then the capital is not at risk, because in essence, the investor has loaned funds to, rather than invested in, the business. See 6 USCIS Policy Manual, supra, at G.2(A)(2).”

Preferred returns on equity investment and buyout provisions are common in EB-5 offerings, and have mostly passed without challenge. I’d be happy to hear analysis of the above non-precedent decisions by someone who can help define (or criticize) the line that USCIS and AAO took in these particular cases. (Thank you, commenters.)

Quotes for reference:

6 USCIS Policy Manual G.2(A)(2)

An arrangement under which funds have been contributed in exchange for an equity interest subject to a redemption agreement which provides that the investor may demand a return of some portion of his or her investment funds, including after obtaining conditional permanent resident status, is an impermissible debt arrangement, no different from the risk any business creditor incurs.

Matter of Izummi

For the alien’s money truly to be at risk, the alien cannot enter into a partnership knowing that he already has a willing buyer in a certain number of years, nor can he be assured that he will receive a certain price. Otherwise, the arrangement is nothing more than a loan, albeit an unsecured one.

FY2017 EB-5 Visas by Country

The US Department of State has published Table V Part 3 of the Report of the Visa Office 2017, which gives a tally of visas issued by country for the Employment Fifth preference (EB-5) in FY2017. If we believe USCIS processing times reports, these should be visas based on investments/petitions from 2015 or earlier. A few points to note:

  • Having issued slightly fewer than the annual EB-5 visa quota last year, DOS compensated by going slightly over the quota this year.
  • Vietnam and Brazil are the countries with greatest increase in EB-5 visas issued between 2016 and 2017. South Korea showed the largest drop.
  • South America is the region with the greatest increase in number of EB-5 visas issued in 2017, and Europe the region with the greatest increase in number of nationalities receiving EB-5 visas.
  • Compared with 2016, the 2017 report has more countries taking at least one visa, but fewer countries taking over 20 visas. Kudos to the brave lone souls from Angola, Cameroon, Bolivia, Bulgaria, Tajikistan, and Suriname who immigrated last year though EB-5.
  • Countries besides China claimed 25% of the 2017 EB-5 visas (compared with 24% in 2016).
  • There were 160 fewer visas based on direct EB-5 investments in 2017 than 2016.
  • In addition to the Visa Office Report data on EB-5 visas issued during FY2017, we also have data on applications pending at the National Visa Center at the end of FY2017. (I’ve copied a couple charts below, and you can consult the Visas tab in my master visa/backlog spreadsheet for additional detail and source links.) It’s puzzling to look at the different reports together. For example, one wonders why the drop in visas issued to South Koreans in 2017, when there were 278 visa applications for South Koreans left pending at the end of the year. Or why people from Hong Kong got only 81 EB-5 visas in 2017, when there were 447 Hong Kong applications pending in November 2016 and 423 still pending in November 2017. Vietnamese received a hefty 335 EB-5 visas in 2017, just behind China, but 649 Vietnamese applications were still left pending. In total, DOS issued 2,523 visas in 2017 to applicants from countries other than China, but that still left 3,524 applications from countries other than China pending at NVC as of November 2017. Anyone know the story behind the non-China backlogs at NVC?

For reference, here are my posts on the Visa Office Reports from 2016, 2015, and 2014.

RC Reauthorization to 2/8/2018

February 2
See my Washington Updates page for ongoing updates.

January 23
The President has signed H.R. 195: Extension of Continuing Appropriations Act, 2018, which puts the federal government generally, and the regional center program, back in business through February 8, 2018. The bill text was amended over the weekend, but no additions that would decouple RC program authorization from government funding. However, this extension just gives a couple weeks to breathe before the same issues need to be re-fought. Congressional leaders have vowed to use the time to come up with their long-promised immigration legislation. I hope that this will happen and include EB-5 (though EB-5 is still absent from all debate). Ideally legislation should precede and preempt the EB-5 regulations threatened in February.

IIUSA has posted a helpful EB-5 Advocacy Announcement that includes this information: “While Republican negotiators on EB-5 are closer than ever to finding agreement internally, there are still bipartisan negotiations that need to occur. With pending regulations that could raise investment levels by over 100% and a current potential posted final action date in February, Congressional leaders would likely be left with only 60 days after that final action date to produce a legislative solution in place of the regulations.”

January 22

Update: Congress has cleared legislation to extend government funding to February 8, 2018. The vehicle is “Senate amendment to the House amendment to the Senate amendment to H.R. 195,” and I’ll link the text here when available.

As we wait for Washington to reach an agreement that would fund the government and reauthorize programs including the regional center program, here’s a post from Carolyn Lee on what the shutdown does and does not mean for EB-5.

January 20
The USCIS website announces:

The current lapse in annual appropriated funding for the U.S. government does not affect USCIS’ fee-funded activities. Our offices will remain open, and all applicants should attend interviews and appointments as scheduled. However, several USCIS programs will either expire or suspend operations, or be otherwise affected, until they receive appropriated funds or are reauthorized by Congress.

The list of programs to be affected until reauthorized by Congress includes the regional center program.

January 19
Congress lost its bet and failed to pass a new funding bill by midnight. But “lawmakers are believed to be negotiating a days-long extension that could be approved quickly.” In the meantime, the regional center program is on hold, and regional center-associated petitions and applications won’t advance until Congress takes action.

January 18-19
The Hill has a new article every few minutes on the likelihood that Congress will or won’t agree on time to the CR extending current funding and associated authorities (including RC program authorization) into February. So much drama. I expect that the CR will pass by 11:59 pm on Friday, assuming that our lawmakers have much to gain from speaking out against the CR, and more lose from the shutdown that would result from not voting for it in the end. But we shall see. Just in case, Klasko Law comments on effects of a potential government shutdown on immigration processing and programs and IIUSA explains Possible Government Shutdown: What it Means for the EB-5 Regional Center Program.

January 16
House Appropriations Chairman Rodney Frelinghuysen today introduced legislation (H.J.Res 125) to maintain current funding for federal operations and prevent a government shutdown. The Continuing Resolution (CR) is a stop-gap measure that will extend government funding through February 16, 2018.
There’s nothing in the text of H.J.Res 125 to prevent regional center program authorization from being extended with other authorities tied to current funding. But we’ll see whether Congress can manage to agree long enough to pass the CR and avoid a shutdown. The White House supports the CR, at least.

January 15
No indication yet that Washington is near compromise on new immigration legislation. A Continuing Resolution of current funding and authorities to February 16 continues to look likely. In honor of Dr. Martin Luther King Jr. Day today, I quote President Trump making an important point:

Today, we celebrate Dr. King for standing up for the self-evident truth Americans hold so dear, that no matter what the color of our skin or the place of our birth, we are all created equal by God.

This is not the belief evident in the current immigration reform discussion, which looks more like this:

We hold these truths to be self-evident, that all men are not created equal, that they are endowed by their nationalities with certain inalienable characteristics, that among these are propensity to violence, noxious ideology, inability to assimilate, and failure in the pursuit of property. — That to secure against such characteristics inherent in certain nations and their nationals, immigration policy is instituted among Us, to effect Our Safety and Happiness by erecting barriers against threats embodied in Them, and screening Them by the color of their passports in lieu of the content of their character.

Dr. King’s genealogy of racial segregation from his How Long Not Long speech in 1965 could also be recast to explain how and why our current populist movement has been co-opted into an anti-immigrant movement with such violent sentiment against DACA. It may be said of the new economy that the donor class took the world and gave the poor white man legal status. And when his wrinkled stomach cried out for the food that his empty pockets could not provide, he ate legal status, a psychological bird that told him that no matter how bad off he was, at least he was a citizen, better than the Illegals.

We miss you, Dr. King!

January 11 post
Some dates to keep in mind as we wonder what will happen next with EB-5:

  • January 19, 2018: The next regional center program sunset date (and the deadline for a new funding bill that some hoped to make a vehicle for sweeping new immigration legislation). It’s looking likely that this deadline will be pushed back a few weeks, however, with another continuing resolution.
  • February 2018: The date indicated for final action on new EB-5 regulations (with provisions including drastic increase to the EB-5 investment amount)
  • February 16, 2018: Possible next regional center program sunset date, if Congress fails to pass a new funding bill in January, and instead defers the funding and immigration fight with a continuing resolution  (or some speculate the CR could go into March)
  • March 5, 2018: The date DACA protections are slated to end, and thus the date Congress is pushing to beat in passing a big immigration bill
  • April 2018: The possible effective date for new EB-5 regulations, assuming that the rule is finalized in February with an effective date after 60 days (as ILW rumors)

The race is on for EB-5 legislation, with pressure from sunset dates and the need to forestall unwelcome regulations. Washington is actually talking about comprehensive immigration reform, including reshuffling visa numbers. But I haven’t heard EB-5 mentioned once, for good or ill, anywhere, by anyone, in recent immigration discussion. The left is for DACA; the right is for border security and against diversity visas and chain migration. Immigrant investment doesn’t fit with any side’s talking points. I hope that Congress privately remembers EB-5, because we really need action from them: to give the regional center program a longer-term authorization, to enact program changes better than what would come with new regulations, and to realize program potential by freeing up more visas for EB-5.

If broad-based immigration legislation happens soon, what will it include and how will it affect EB-5? We have a few hints, but nothing definitive yet. This week President Trump hosted a bipartisan and bicameral meeting on immigration reform that concluded (reportedly) with “an agreement to negotiate legislation that accomplishes critically needed reforms in four high-priority areas: border security, chain migration, the visa lottery, and the Deferred Action for Childhood Arrivals policy.”  (As an aside, I recommend the White House transcript of the meeting. It’s not especially informative, but an amazing artifact. If Aristophanes or Alexievich set out to write Washington today, I doubt they could beat this straight record of the January 9 Cabinet Room scene.)  Yesterday House Judiciary Chairman Bob Goodlatte introduced H.R. 4760 Securing America’s Future Act, which proposes sweeping changes in line with President Trump’s immigration priorities. The bill includes nothing that would directly affect EB-5, so far as I can tell. (The Immigrant Investor Pilot Program gets a name check, but only in context of a technical amendment that renumbers a subsection. No mention of program authorization or any EB-5 changes. H.R. 4760 proposes to increase employment-based visa numbers, but EB-5 wouldn’t benefit because the bill would change its allocation from 7.1% of the total to a flat 9,940 visas annually, regardless of the worldwide level. The bill fiddles with per-country limits for family-based visas, but not for employment-based visas.)  Meanwhile, the Senate is still trying to come up with a competitive immigration deal that’s more passable by Congress while still signable by the President. I’ll report on details when available, and also hope that advocacy people will eventually share what’s happening with EB-5 on the ground. (Update: IIUSA has published an Industry Special Report, and Senator Graham has posted summary provisions of the Senate’s Immigration Reform Act of 2018. The summary mentions nothing that would affect EB-5.)

 

I-526 processing time (Part I)

Update: I have deleted this now-outdated post and replaced it with How long does I-526 take? (Part III)

EB-5 Regulations (2/2018?)

3/1/2018 Update: See my No change, no stability? post
While we have our eye on the legislation ball, the Office of Management and Budget has given us a new EB-5 deadline to think about. The Spring 2017 Unified Agenda had mentioned April 00, 2018 as a “Final Action Date” for regulations dealing with EB-5 investment amounts and TEAs (RIN 1615-AC07), but now the Fall 2017 agenda has advanced that prediction to February 00, 2018. I’d doubted the April date because so many factors seemed likely to delay regulations (the prospect of legislation instead, the fact that Congressional intent as expressed in draft legislation looks so different from what DHS put in the proposed regulations, the administration’s coolness to regulation in general, government inertia in general), but advancing the date to February looks like positive intent to really get the EB-5 regulations done.

We don’t know yet what will be in the final Rule 1615-AC07, since it may have been revised significantly since the Notice of Proposed Rulemaking. But as a reminder, here’s what the NPRM proposed:

  • Increase the standard minimum EB-5 investment amount to $1,800,000, or $1,350,000 in a TEA.
  • A TEA is based on high unemployment and incentivized with 25% reduction to the investment amount (not other factors or incentives as proposed by Congress).
  • A TEA can only be designated for a high-unemployment MSA, county, city, single census tract, or limited group of census tracts. DHS, not the states, is responsible for TEA designation.
  • Give priority date protection (an investor with an approved I-526 could choose to file a new I-526 while keeping the original priority date, subject to certain restrictions)
  • Spouse and children may be able to file I-829 even if not included on the principal investor’s petition.
  • Other technical changes.

The federal rulemaking process requires that “At the end of the process, the agency must base its reasoning and conclusions on the rulemaking record, consisting of the comments, scientific data, expert opinions, and facts accumulated during the pre‐rule and proposed rule stages.” In April 2017, the public responded to the NPRM with challenging questions and criticism, and some persuasive data and policy arguments. The agency must take these into account. If USCIS revised the proposed rule in response to public comment, they might have modified the proposed investment amount increases (nearly all commenters argued strongly for this), either narrowed or expanded the gap between TEA and non-TEA investment (there were spirited arguments on both sides), modified the restrictions on census tract TEAs, or reconsidered giving DHS the burden of issuing TEA designations. On the other hand, USCIS is not well known for changing track in response to evidence and arguments presented by the public. The Fall 2017 OMB notice reiterates USCIS thinking about the potential costs and benefits of the proposed regulations:

The proposal to raise the investment amounts and reform the targeted employment area (TEA) geography could deter some investors from participating in the EB-5 program. The increase in investment could reduce the number of investors as they may be unable or unwilling to invest at the higher proposed levels of investment. On the other hand, raising the investment amounts increases the amount invested by each investor and thereby potentially increases the total economic benefits of U.S. investment under this program. The proposed TEA provision would rule out TEA configurations that rely on a large number of census tracts indirectly linked to the actual project tract by numerous degrees of separation, and may better target investment capital to areas where unemployment rates are the highest.

If a final rule were published in the Federal Register in February 2018, it could go into effect as early as March 2018, and apply to petitions filed on or after the effective date. (See A Guide to the Rulemaking Process for an explanation of the typical process.)

On the other hand, the threat of immanent regulations may inspire Congress/industry to finalize EB-5 legislation ASAP instead.

Meanwhile, the OMB Unified Agenda has pushed back the estimated date for a Notice of Proposed Rulemaking for RIN: 1615-AC11, the EB-5 rule dealing with regional center designation, the exemplar filing process, continued regional center participation, and regional center termination. The Spring agenda had estimated April 2018; the Fall agenda has October 2018. We previously responded to this as a Advance Notice of Proposed Rulemaking. The agenda’s cost/benefit comment notes that:

DHS is still in the process of reviewing potential changes it would propose to the regional center process. DHS may propose to implement an exemplar filing requirement for all designated regional centers that would require regional centers to file exemplar project requests. An exemplar filing requirement could cause some projects to not go forward, but DHS is still in the process of assessing the impacts on the number of projects that may be affected. DHS anticipates that any proposed changes to the regional center program would increase overall program efficiency and predictability for both USCIS and EB-5 stakeholders.