AAO Decisions (termination, exemplar approval, bridge financing), Other Updates, RC List Changes

AAO Decisions

The Administrative Appeals Office continues to issue non-precedent decisions on appeals of denied EB-5 petitions and applications. The cases give insight into recent USCIS thinking on sensitive topics: material change, deference to prior approvals, regional center oversight responsibilities, regional center activity requirements, bridge financing, and evidentiary requirements.

• MAY032018_01K1610 (Matter of L-V-E-I, LLC) dismisses the appeal of a regional center that USCIS terminated for inactivity. The applicant successfully demonstrated that its principals have remained actively engaged in seeking EB-5 projects, have been carefully reviewing potential proposals, and have participated in EB-5 conferences and networking. However, the applicant has not received any capital from EB-5 investors since its designation in 2011, and has not offered documentation confirming any currently-active EB-5 projects. AAO concluded that “in light of the above positive and negative indicators, the Applicant has not established that, on balance, it is continuing to promote economic growth.”
• APR032018_01K1610 (Matter of A-G-R-C, LLC) and APR022018_01K1610 (Matter of W-F-R-C, LLC) sustain the appeals of two regional centers seeking exemplar approval for a project. USCIS cited multiple reasons for denying the exemplar requests, but the core concern seems to have been discomfort with the involvement of two regional centers in the same project (with a portion of EB-5 investors in the project sponsored by one regional center, and remaining investors by the other regional center). However, AAO countered that “The record included a sponsorship agreement that contained sufficient detail to explain how responsibilities and investors would be allocated amongst the two RCs.” AAO went on to determine that USCIS made several mistakes in its denial:
  • USCIS cited Form I-924A information in the denial, but “neither the regulations nor the form instructions predicate the adjudication of an amendment to a regional center’s designation upon a demonstration of consistency or accuracy in its own Form I-924A filings or in relation to those of another regional center.”
  • When USCIS determined that funds were not at risk in the JCE, it erroneously identified the JCE as the project DBA, which is just a name, not an entity.
  • USCIS concluded that EB-5 funds were not spent to develop the project because its site visit inspectors did not see construction underway, but AAO accepted that “applicant has provided permits and records indicating that the project has undertaken meaningful business activity.”
  • USCIS questioned the terms of non-EB-5 capital commitment, but AAO found that “Funds provided from sources other than EB-5 investors are not subject to the at-risk requirements in the regs.”
  • USCIS “opined that it was unlikely that NCE would raise the total amount of required foreign investor capital. He does not cite any evidence in the record to support this contention, nor do the regulations require the Applicant to demonstrate this ability.”
  • AAO agreed that the applicant overcame USCIS concerns about working capital as an input to the economic model, and inflation affecting the revenue estimate.

These cases reflect inconsistencies in EB-5 adjudications. USCIS denied exemplar I-526 amendment requests after having already approved eight investor I-526 petitions with the same project and documents (not to mention having reviewed the project in context of an initial regional center approval). Apparently, deference in EB-5 only goes one way: from exemplar to I-526, not the reverse. We wish that an approved actual I-526 petition could serve as de facto exemplar for future petitions involving the same project, but apparently it does not.

• APR252018_01K1610 Matter of E-B-F-N-Y concerns a regional center whose amendment request for exemplar project approval was denied, based in part on a bridge financing arrangement. AAO agreed with USCIS and dismissed the appeal. The bridge financing arrangement was found to be unacceptable because the funds were made available to an entity other than the JCE entity, and therefore “The record does not show that the EB-5 capital would go towards the construction that the Applicant claims would provide the job creation required for foreign investors, violating the holding of Mauer of lzummi and the USCIS policy on bridge financing.” Moreover the arrangement did not qualify because it was not sufficiently “temporary,” since the loan in which the investors participate is a construction-to-perm loan that will eventually be considered permanent financing. The applicant attempted to clarify matters by providing new loan agreements, but AAO countered that “the Applicant’s introduction on appeal of new loan documents between the NCE and the JCE may constitute an impermissible material change.” USCIS’s emerging and as yet undeclared new policy on bridge financing has major implications for many EB-5 offerings. For additional discussion, see: A tide change in EB-5 bridge financing policy (April 23, 2018) by Kristal Ozmun and Adam Schaye and EB-5 Bridge Financing: A Study of Market-Driven Applications & Definitions (April 2018) by David Hirson, Nima Korpivaara, Phuong Le
• APR242018_01B7203 (Matter of H-T-B-) concerns a regional center investor petition that was denied based on problems with the business plan: specifically, failure to link the plan to reality. USCIS doubted the project’s job creation potential because the plan was not grounded in evidence such as supply contracts, lease agreements, construction bids, permits, loan agreements, or analysis of competitors. Lacking such evidence, the plan was not considered comprehensive, credible, or  “any more reliable than hopeful speculation.” This is why the business plans I write bristle with footnotes citing verifiable sources.
• MAY032018_01B7203 (Matter of Z-Y-) and MAY032018_02B7203 (Matter of W-W-) deny direct EB-5 petitioners who apparently had not read EB-5 policy.  USCIS/AAO remind them of longstanding rules: direct EB-5 investment and job creation must be in a single enterprise (the JCE must be the same entity as the NCE, or its wholly-owned subsidiary), part-time positions cannot be combined to create full-time positions, qualifying investment must be a contribution of capital directly from the investor personally, and job preservation claims require documenting the pre-investment financial condition and employment records of a business that meets the policy definition of “troubled.”  (FYI my Direct EB-5 FAQ page summarizes policy specific to direct EB-5.)

Other Updates

• With midterm elections approaching, some of our Congressional representatives find it expedient to talk about immigration. The discussion still centers on border security and undocumented children, while wealthy job-creating immigrants don’t fit either party’s talking points. Even if Congress manages some immigration legislation this summer, I’ll be astonished if it includes or affects EB-5. But I keep reading the news, just in case. I’ve moved my Washington Updates page to a main page (new link), and continue to update it as I hear or read things related to potential EB-5 program changes through legislation or regulations. Most recently, I linked to a Bloomberg NA article “Immigrant Investor Program in Limbo as Regulations Stall,” a podcast with EB-5 lobbyists discussing prospects for EB-5 legislation, and notes from Kathy Nuebel Kovarik (USCIS Office of Policy and Strategy) explaining what she thinks needs to be changed in EB-5.
• The USCIS Policy Manual has a new section: Volume 7: Adjustment of Status, Part A, Adjustment of Status Policies and Procedures, Chapter 7, Child Status Protection Act (Final date for comments: June 6, 2018). My expertise doesn’t extend to CSPA or status adjustment, but I hear that this doesn’t introduce changes, just moving existing policy into the Policy Manual.
• The USCIS FOIA reading room posted USCIS’s response to the 2017 Ombudsman Report to Congress. I don’t really recommend that you read it: the response mentions EB-5, but says nothing new or substantial. I did add the processing times excuses from this report to my on-going log of USCIS communications on processing times.
• The SEC continues to crack down on unregistered brokers (ahem, immigration attorneys) who accept commissions for facilitating EB-5 investments. See Matter of Jason J. Lee (May 10, 2018) and Matter of Edwin Shaw LLC (March 5, 2018).

Regional Center List Changes
Meanwhile, I have hard work to update my regional center list as USCIS continues to designate and (mostly) terminate regional centers. 76 regional centers have been terminated so far in 2018, presumably mostly for inactivity. (But we don’t know for sure, since USCIS hasn’t updated the Termination Notices page since 2016.)

Additions to the USCIS Regional Center List, 04/10/2018 to 05/25/2018

• Auric Ventures International Regional Center (Connecticut, New Jersey, New York, Pennsylvania): www.eb5rc.org
• Formosa Gardens Regional Center, LLC (Florida)
• Greystone EB5 Northwest RC (Oregon, Washington): www.greystoneeb5.com
• Greystone EB5 West RC LLC (California, Nevada): www.greystoneeb5.com
• K-Stone LLC (Connecticut, New Jersey, New York, Pennsylvania)
• LD Capital SE Regional Center, LLC (Alabama, Georgia, Tennessee): ldcbtusa.com/regional-centers/
• Midwest Investment Fund, LLC (Indiana, Kentucky, Ohio)
• My Life California and Nevada, LLC (California, Nevada)
• Pan Enterprises Regional Center (California)
• Seattle Tacoma Area Regional Center, LLC (Washington)
• Strategic Capital Regional Center, LLC (Connecticut, New Jersey, New York)
• Te-Enterprise LLC (Texas)
• Texas Expanse, LLC (Texas)
• Utah Global Investments, LLC (Utah): utahglobalinvestments.com

Regional Center Terminations, 04/10/2018 to 05/25/2018

• Silver State Regional Center LLC (Nevada) Terminated 4/11/2018
• LIGTT Regional Center (Louisiana, Mississippi) 4/18/2018 Terminated
• Commonweaith of Puerto Rico Regional Center Corporation (Puerto Rico) Terminated 4/25/2018
• SAA Cedisus EB-5 Projects – SW Indiana Regional Center, LLC (Indiana) Terminated 4/18/2018
• Art District Los Angeles Regional Center Terminated, LLC Terminated 4/16/2018(California) Terminated
• SPG Regional Center, LLC (California) Terminated 4/26/2018
• Global America Regional Center (California) Terminated 4/27/2018
• California Bond Finance Regional Center, LLC (California) Terminated 4/12/2018
• Colorado Growth Fund, LLC (Colorado) Terminated 5/15/2018
• Home Paradise Texas Regional Center, LLC (Oklahoma, Texas) Terminated 4/17/2018
• Global Century (Houston) (Texas) Terminated 4/12/2018
• American International Venture Fund – Oregon, LLC (Oregon) Terminated 4/19/2018
• Central California Regional Center, LLC (California) Terminated 4/13/2018
• ADC Colorado Regional Center, LLC (Colorado) Terminated 5/1/2018
• East Coast Renewable Regional Center, LLC (New Jersey) Terminated 4/9/2018
• Midwest Regional Center, Inc. (Kentucky) Terminated 4/5/2018
• Ohio Lakeside Regional Investment Center (Ohio) Terminated 5/1/2018
• TBC Washington DC Area Regional Center, LLC (District of Columbia, Maryland, Virginia, West Virginia) Terminated
• American General Realty Advisors Regional Center (California) Terminated 4/20/2018
• Liongate Regional Center, LLC (Washington) Terminated 4/27/2018
• Altura Regional Center, LLC (California) Terminated 4/9/2018
• Florida East Coast EB5 Regional Center LLC (former name United States Growth Fund, LLC) (Florida) Terminated 4/10/2018
• Cornerstone Regional Center, Inc. (Alabama, Florida) Terminated 4/6/2018
• New England Center for Business Development, LLC (Maine) Terminated 5/9/2018
• Reside in America Puerto Rico, LLC (Puerto Rico) Terminated 5/1/2018
• Greystone EB5 Southeast Regional Center LLC (former name Greystone Florida Regional Center LLC) (Florida) Terminated 4/13/2018
• Washington Foreign Investment Management Group, LLC (Washington) Terminated 4/26/2018
• QueensFort Capital Texas Regional Center, LLC (Texas) Terminated 4/27/2018
• Landy Resources Management, LLC (North Dakota) Terminated 5/1/2018
• Encore S. CA RC, LLC (California) Terminated 4/18/2018
• One World Development Fund, Inc. (Texas) Terminated 4/12/2018
• Encore Boston RC, LLC (Massachusetts) Terminated 4/18/2018
• Pacific Northwest Regional Center (Washington) Terminated 4/5/2018
• North Atlantic Regional Center, LLC (New Jersey, New York, Pennsylvania) Terminated 5/1/2018
• Tacoma EB 5 Regional Center (Washington) Terminated 5/2/2018
• Collegiate Regional Center LLC d/b/a Texas Collegiate Regional Center (Texas) Terminated 5/15/2018
• QueensFort Capital California Regional Center, LLC (California) Terminated 4/12/2018
• Ark of the Ozarks LLC (Arkansas) Terminated 4/5/2018
• Energize-ECI EB-5 Visa Regional Center (Indiana) Terminated 5/9/2018
• Iowa Department of Economic Development (IDED) (Iowa) Terminated 4/19/2018
• 5 Starr Regional Center LLC (Oklahoma) Terminated 4/5/2018
• South Dakota International Business Institute (SDIBI) (South Dakota) Terminated 5/11/2018
• Regional Economic Development & Investment Group (California) Terminated 4/5/2018
• New Energy Horizons Regional Center (California) Terminated 4/12/2018
• Liberty EB5 Regional Center (Pennsylvania) Terminated 5/1/2018
• American YiYo Regional Center (Georgia) Terminated 4/12/2018
• Encore Washington/Oregon Regional Center, LLC (Oregon, Washington) Terminated 4/18/2018
• Amaxi Regional Center, LLC (California) Terminated 5/1/2018