Q&A from USCIS on Economic Methodologies

Well, well. We ask and USCIS answers! I regret not emailing my questions to the USCIS public engagement mailbox, as it appears that public.engagement@uscis.gov is not a black hole after all. USCIS has already responded to two stakeholder questions arising from the conversation with USCIS Economist John Rodgers on June 22. Thank you to Stephen Yale-Loehr for pointing this out to me.

From the USCIS website:
Questions and Answers: EB-5 Economic Methodologies
On June 22, 2012, USCIS hosted a public engagement featuring two economists who work on the EB-5 Immigrant Investor program.  Following that engagement, some stakeholders sought clarification as to certain points raised by the economists.  USCIS is now pleased to provide clarification as to two of the primary questions raised.

EB-5 Projects Involving Hotel or Resort Development

Q:  When an EB-5 project involves the development of a hotel or resort, when is it economically reasonable to input projected funds spent by visitors into economic models to project indirect and induced job creation resulting from the spending of these potential hotel occupants (e.g. on rental cars, dining, etc.)?

A:  In general, job credit based on “visitor spending” is appropriate only where the applicant or petitioner can show by a preponderance of the evidence that the development of the EB-5 project or resort will result in an increase in visitor arrivals or spending in the area.  Applicants or petitioners should provide reasonable estimates of how new visitor spending and tourism demand is driven by the specific project that is the subject of the application or petition.  If the applicant or petitioner presents a reasonable case that the visitor spending and demand for tourism generated by a project is new then it may be reasonable to conclude that the specific project has generated an increase in demand, and thus, has generated increased employment in the region resulting from the projected increase in visitor spending.  If the applicant or petitioner meets this burden and the application or petition can otherwise be considered reasonable, new visitor spending revenue can be considered an eligible input to an appropriate regional input-output model.

Regardless of whether visitor spending is shown to be attributable to a particular project, jobs created from construction (lasting over two years), management, and operation of the hotel or resort, including hotel revenues, can be considered eligible inputs to an appropriate regional input-output model assuming that the application or petition can otherwise be considered reasonable.

Acquiring Real Estate

Q:  May a regional center use funds from EB-5 investors to acquire real estate?

A:  In general, yes, subject to the requirement of Matter of Izummi, 22 I & N Dec. 169 (Comm’r 1998), that the “full amount of money must be made available to the business(es) most closely responsible for creating the employment upon which the petition is based.”  For example, a job-creating enterprise may propose to allocate some EB-5 funds to purchasing land and allocate other EB-5 funds to developing and operating a business on the purchased land, and the jobs created by the enterprise can be apportioned among all the EB-5 investors.  It is important to note, however, that real estate acquisition is not generally recognized as a job-creating activity in and of itself.  Thus, it is not generally reasonable to treat funds spent on real estate acquisition as inputs to an employment impact model.  Where some EB-5 funds will be used for real estate acquisition, such apportionment should be detailed in the business plan.

USCIS does recognize that certain soft costs directly related to real estate transactions may reasonably be counted as valid job-creating expenditures and inputs to regional input-output models.  In addition, soft costs related to the development and construction of EB-5-supported projects on designated land parcels may be considered on a case-by-case basis.  If the input-output model utilized in the economic impact analysis provides specific categories for the soft costs, the multiplier categories specific to these costs should be used instead of bundling such costs under general construction expenditures.

About Suzanne (www.lucidtext.com)
Suzanne Lazicki is a business plan writer, EB-5 expert, and founder of Lucid Professional Writing. Contact me at suzanne@lucidtext.com (626) 660-4030.

2 Responses to Q&A from USCIS on Economic Methodologies

  1. Joe Whalen says:

    You didn’t think I could refrain from saying something, did you? Well, I have comments posted at:

  2. Fred Hooker says:

    I’m not sure if I understand Joe Whalen in his article. Is he saying that property acquisitions and building construction should not be included as factors in the indirect job count, input/output analysis? He seems to suggest as much when he implies that some RCs have been doing their own implicitly half-ass input/output analysis and business plans, or pressuring private economists to produce questionable economic analyses and business plans? Thanks.

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