EB-5 Event, New RCs (AL, CA, CT, FL, GA, IN, KY, MS, NC, NJ, NY, PA, PR, SC, TN, VA), New AAO Decisions, TO Training

EB-5 Event Reminder
If you are reading this blog as a way to investigate the EB-5 program, save yourself time by making sure that you have the CDFA Intro EB-5 Finance WebCourse on your calendar (Sept. 18-19). The Council of Development Finance Agencies has organized one of the very few EB-5 events whose number one purpose is to educate, not to sell products and services, and the line-up of topics and contributors looks great.  If you have something to learn in EB-5, I don’t think you can find a more solid, comprehensive, and time-efficient introduction than this course.

New Regional Centers
New entries to the USCIS list of Regional Centers from 8/16 to 9/6/2013:

168 America Regional Center, LLC (California)

FutureCare Regional Center of Southern California, Inc. (California)

HT Asset Holding Inc. (California)
http://www.htassetholding.com/

San Francisco EB-5 Regional Center, LLC (California)
http://www.sfeb5rc.com/
Designation Letter

South Florida EB-5 Regional Center, LLC (Florida)
www.southfloridaeb5rc.com/

Southern Film Regional Center, LLC (Georgia)

Civitas Indiana Regional Center (Indiana)
http://www.civitascapital.com/

CP Southern Regional Center (Alabama, Kentucky, Mississippi, Tennessee, Virginia)
www.cphomes.net
Designation Letter

Encore Mississippi Regional Center (Mississippi)
http://encore.bz/

New York Metropolitan Regional Center (New Jersey, New York, Pennsylvania)

US EB5 New York City Regional Center (Connecticut, New Jersey, New York, Pennsylvania)

U.S. Business Regional Center Inc. (New York)
http://www.usabrc.com/

Carolina Global Regional Corporation(North Carolina, South Carolina)
Designation Letter

North Carolina – East Coast RC (North Carolina, South Carolina)
www.progfs.com

Reside in America Puerto Rico, LLC (Puerto Rico)
c/o The LCP Group, White Plains NY. Ph: (212) 692-7228
USCIS Designation Letter

Dominion Mid-Atlantic Associates, Inc. (Virginia)
http://www.dmaarc.com/

(Note: See my Regional Center directory page for my most updated listings for all RCs. And please email me if you would like to provide additional information regarding your RC.)

2013 AAO EB-5 Decisions

I-924 Decisions (see Request for Participation as a Regional Center Decisions Decisions Issued in 2013)
Issues: geographic area, industry focus, “general proposals,” “hypothetical” projects and approvals

In 2011-2012, we saw a trend toward increasing granularity in Regional Center approvals, with USCIS insisting that RCs submit to the mandate to “focus on a limited geographic area,” and to strictly define their industry focus down to at least the 4-digit NAICS code level.  I had wondered whether the 5/30/2013 EB-5 policy memo would effectively blow the lid off such limitations, and it seems that it has. I definitely didn’t report new five-state Regional Centers last year, but recent new approvals include many with expansive geographic areas.  The AAO decisions published in 2013 on I-924 cases both cite the 5/30 policy memo to overturn USCIS’s decisions to deny cases for being too general.  JUN122013_01K1610 discusses a Regional Center amendment that sought to add the whole of five states plus four industry categories defined at the 2-digit NAICS level. USCIS predictably denied this request, but the AAO withdrew the USCIS’s denial.  The AAO determined that:  “The record contains a general proposal based on Census Bureau and other data and general predictions concerning the kinds of commercial enterprises that will receive capital, the direct and indirect jobs that will be created as a result of such capital investments based on RIMS II data and  multipliers, and other positive economic effects. Thus, the AAO withdraws the director’s concerns. While the amendment request is approved, it is based on hypothetical projects and, therefore, is not  due any deference in future filings.”  JUL192013_01K1610 likewise indicates considerable leeway for what can approved at the I-924 stage, provided that the approval has a “hypothetical” basis.  USCIS’s denied the I-924 initial application because “The director determined that the applicant had not provided a business plan with verifiable detail regarding how the proposal will create sufficient jobs.” The AAO disagreed, determining that “The record contains a general proposal based on general predictions concerning the kinds of commercial enterprises that will receive capital, the jobs that will be created as a result of such capital investments based on RIMS II data and multipliers, and other positive economic effects. As the record contains a general proposal, the applicant is not required to submit letters of intent or commitment from the prospective sources of matching funds for regional center designation.”

I welcome the openness to general industry categories and hypothetical projects, but would caution new applicants about wide-ranging geographic area. If a course doesn’t make sense, the powers that be will eventually realize that it doesn’t make sense and change course.  I see the concept of limited geographic focus at the very core of the Regional Center program — its impetus and defining feature. Congress instituted the Regional Center program based on the economic concept that the synergies that result from pooling investment in a region give more bang for the buck than the separate effects of  individual investments here and there, as occurs with the traditional/direct EB-5 program. When a “Regional Center” covers the whole of five states, I don’t even know what the title means anymore.  I don’t want to return to the granularity of 2012, when USCIS likewise departed from Congressional intent by defining Regional Center designation so restrictively that it essentially just meant approval to pursue one project. But neither extreme restriction nor extreme flexibility are good for the program, and I hope and believe that we’ll soon find ourselves back to a reasonable middle ground, especially with respect to the key question of target geographic area.

I-526 Decisions (see Form I-526 and Form I-829  Decisions Issued in 2013)
Issues: “at risk,” “meaningful concrete action,” “overcapitalized,” “inconsistencies”

The 2013 investor petition decisions all involve I-526 petitions, and all but APR172013_01B7203 are for direct EB-5 cases. I’m interested to note that whoever’s now writing AAO decisions is highly detail-oriented and influenced by the precedent decision Matter of Ho. (In contrast to last year’s writer, who was all about Matter of Izummi and who didn’t bother with microscopic rehearsals of detail from the record.) In re Ho is best known for its paragraph definition of the comprehensive business plan, but our AAO writer repeatedly returns to the decision’s treatment of the “at risk” requirement. According to Matter of Ho: “Simply formulating an idea for future business activity, without taking meaningful concrete action, is similarly insufficient for a petitioner to meet the at-risk requirement. Before it can be said that capital made available to a commercial enterprise has been placed at risk, a petitioner must present some evidence of the actual undertaking of business activity; otherwise, no assurance exists that the funds will in fact be used to carry out the business of the commercial enterprise. This petitioner’s de minimis action of signing a lease agreement, without more, is not enough.” For the first time that I’ve noticed, the AAO repeatedly harps on the issue of “meaningful concrete action,” to the point of requiring the petitioner to provide evidence of funds already spent in the business, contracts already executed, and employees already hired prior to I-526 filing. I kept thinking I must be reading I-829 cases, but no. Take warning, direct EB-5 investors: if you have primary control over your business’s bank account, USCIS may require you to show evidence at I-526 that you not only invested $500K/$1 million but that your business has already spent or was irrevocably/contractually committed to spending that amount before you even filed the I-526 petition.
I wonder if the AAO is going overboard with its application of Matter of Ho, and will be interested to hear the lawyers’ take on this new batch of cases. Is it fair to deny a case because the petitioner provided, in RFE, a copy of a lease that post-dated I-526 filing? Because the petitioner, prior to I-526 approval, spent only a few hundred thousand of the one million invested in his business? It seems to me that the distinction between I-526 and I-829 is a key feature of the EB-5 program, and that we’re seeing a negative trend toward pushing I-829 requirements into the I-526 stage. I-526 is the plan review stage, and gives USCIS opportunity to shut down non-compliant proposals (and the investor the opportunity to change course, if EB-5 turns out not to be an option). I-829, then, is the stage where the petitioner demonstrates that he implemented his USCIS-approved business plan. I think it doesn’t make sense to require the I-526 petitioner to prove that he already did what he hasn’t yet been approved to do. 2013 AAO decisions that approach the at-risk requirement through Matter of Ho include APR012013_01B7203, APR032013_02B7203, APR152013_01B7203, APR152013_02B7203, APR162013_01B7203.
Besides the new focus on “meaningful concrete action,” our 2013 AAO writer is concerned that EB-5 enterprises may be “grossly overcapitalized” (not proving that their job-creating activities require the full amount of EB-5 investment). The decisions also devote pages to dissecting apparent inconsistencies in the record, and repeat the warning that “Any attempt to explain or reconcile such inconsistencies will not suffice unless the petitioner submits competent objective evidence pointing to where the truth lies.”

More on Tenant Occupancy
IIUSA has obtained and published a presentation used by USCIS to train adjudicators on “tenant occupancy” cases. I note that the disclosed material does not discuss the requirement to demonstrate whether tenant jobs would be new or relocated – the issue that emerged as the final deal-breaking issue in several recently-denied cases. But maybe this issue is just so juicy that it explains the many pages redacted from the presentation.