Updates (reauthorization or shutdown, indebtedness, visa numbers, litigation)

–12/22 UPDATE–

The page for the Immigrant Investor Regional Center Program at USCIS.gov has been updated with the following information.

The EB-5 Immigrant Investor Regional Center Program expired at the end of the day on Dec. 21, 2018, due to a lapse in congressional authorization to continue the program. All regional center applications and individual petitions are affected. USCIS will not accept new Forms I-924, Application for Regional Center Designation Under the Immigrant Investor Program, as of Dec. 21, 2018. Any pending Forms I-924 as of Dec. 21, 2018, will be put on hold until further notice.

Regional centers should continue to submit Form I-924A, Annual Certification of Regional Center, for fiscal year 2018.

We will continue to receive regional center-affiliated Forms I-526, Immigrant Petition by Alien Entrepreneur, and Forms I-485, Application to Register Permanent Residence or Adjust Status, after the close of business on Dec. 22, 2018. As of Dec. 22, 2018, we will put unadjudicated regional center-affiliated Forms I-526 and I-485 (whether filed before or after the expiration date) on hold for an undetermined length of time.

All Forms I-829, Petition by Entrepreneur to Remove Conditions on Permanent Resident Status, filed before or after the expiration date, will not be affected by the expiration of the program.

USCIS will provide further guidance to the public if legislation is enacted to reauthorize, extend, or amend the regional center program.

The Department of State website has this notice:

Operations During a Lapse in Appropriations

At this time, scheduled passport and visa services in the United States and at our U.S. Embassies and Consulates overseas will continue during the lapse in appropriations as the situation permits.  We will not update this website until full operations resume, with the exception of urgent safety and security information.  The National Visa Center, National Passport Information Center, and Kentucky Consular Center will still accept telephone calls and inquiries from the public.  Please note we will be closed for scheduled federal holidays on December 24 and 25 and will reopen on December 26.

–ORIGINAL POST–

Reauthorization or Shutdown

It remains to be seen whether our elected representatives decide they gain more from running the government past December 21, or from grandstanding over a shutdown. (I add any news as I hear it to the Washington Updates page.)

Just in case there’s no DHS funding bill or continuing resolution by December 21, here are the probable EB-5-related consequences of a shutdown:

  • The regional center program would lapse for the duration of the partial government shutdown, until a bill reauthorizes the RC program. During this lapse period, it’s likely that (1) any incoming regional center-associated I-526 and I-924 will be rejected, (2) no action will be taken on regional-center associated I-526 and I-924 already pending at USCIS, (3) adjudication will probably continue as usual for all I-829 petitions, (4) no regional-center based visas will be issued overseas, and no final action taken on adjustment of status cases involving regional center investment. Action can begin again as usual for all these petitions and visas as soon as a bill passes that renews regional center program authorization.
  • The EB-5 program itself is permanent program with no sunset date — only the regional center portion of EB-5 is subject to reauthorization. Petitions for investors without regional center sponsors (“direct EB-5”) are not affected by a lapse in RC program authorization.
  • USCIS is a fee-for-service agency not dependent on DHS funding, so IPO could remain open for business as usual and keep working on direct EB-5 and I-829 even during a shutdown.  But the Administration could choose to shut down USCIS operations to make a point. So far, there’s just a White House Executive Order that all federal departments and agencies will be closed Monday December 24. This may be an innocent Christmas Eve gift.
  • US Customs and Border Protection is deemed essential to national security and so will probably also keep operating during a shutdown. But travelers with any visa type should note that consular operations may be affected, and interviews may be may not be available.

I get my information from Government Shutdown (January 22, 2018) by Carolyn Lee, and Effects of a Potential Government Shutdown on Immigration Processing and Programs (December 12, 2018) by William Stock

Meanwhile, no evidence yet of action on the EB-5 Modernization regulation.

Source of Funds Victory

A US District Court has ruled in favor of EB-5 investors on a source of funds question.  The specific issue in Zhang et al. v. USCIS et al. was whether loan proceeds invested as cash constituted “cash,” as the plaintiffs claimed, or “indebtedness,” as USCIS claimed. The court ruled in favor of the two EB-5 investor plaintiffs, and also agreed to certify a class that comprises all I-526 petitioners who received or will receive I-526 denial solely on the ground that a loan used to obtain invested cash fails the collateralization test created by IPO in a 2015 IPO Remarks announcement. The court vacates USCIS denial of class members’ petitions, and remands the denials to USCIS for reconsideration. For more analysis, see 5 Things to Know About Ira Kurzban’s New “Use of Loan Proceeds for EB-5” Decision by the D.C. District Court (Wolfsdorf, Barnett)

Visa Numbers Case Setback

In less good news, State Dept. Can Still Count Relatives Toward EB-5 Visa Cap. The following excerpts from the Law360 article tell the story.

A D.C. federal judge refused to forestall the U.S. Department of State’s policy of counting foreign investors’ family members toward the EB-5 visa cap, dealing an early blow to a lawsuit levied by a group of Chinese investors who claim that the policy creates a lengthy visa backlog and conflicts with Congress’ intent.
U.S. District Judge Tanya S. Chutkan on Thursday denied the provisional class’ motion for a preliminary injunction against the government’s counting policy for the EB-5 visa program, which provides a path to permanent residency for foreign citizens who invest in U.S. enterprises, reasoning that language in the Immigration and Nationality Act does in fact support that policy.
…Ira J. Kurzban of Kurzban Kurzban Weinger Tetzeli & Pratt PA, who is representing the Chinese investors and the regional center, told Law360 that the plaintiffs will continue to pursue their claims in the district court, and “if necessary,” in the appeals courts.
“We recognize the issues in this case are difficult and the judge resolved them against our clients on a preliminary basis. We know that the court will take a fresh look at the matter when we seek summary judgment,” Kurzban told Law360 in an email. “We believe, that despite the longevity of the current method in counting visas, the process is simply wrong. [State’s] current counting policy is contrary to the law and the legislative history of the EB-5 program.”

Litigation

The busiest people in EB-5 now may be ambulance chasers looking to exploit the disappointment of backlogged EB-5 investors from China. Chinese investors – don’t get burned twice! If you wish now that you’d known more before putting money in a project, take the lesson to know more before putting money into litigation. Examine (1) does my counsel know EB-5 well enough to make accurate claims that could possibly win my case, and (2) what’s the best I could get out of the case, if I win?  The hot button retrogression/redeployment issue has a particularly complex history and factors, so be smart. Otherwise money gets spent on claims like this “Defendants were fully aware when they solicited investments from plaintiffs in 2014 and 2015 that plaintiffs’ capital would need to be reinvested into a different project beyond the term of the partnership’s initial investment.” In fact, a project redeployment requirement was not suggested until August 10, 2015 (in a draft memo never finalized), was not instituted as policy until July 14, 2017, and has not been clarified to this day. Homework needs to be done. This blog, which has a record of EB-5 updates from 2010 to the present, provides one textbook.

SEC Action

The SEC announces Three Developers Settle Charges of Fraudulent EB-5 Offering (December 12, 2018). In this tidy case, the developers allegedly told investors that funds would be used exclusively for one real estate project, and then in fact used some funds for purchases at two other unrelated real estate projects. No personal yachts or condos involved here, but transferring funds from one valid project to another valid project is still wrong if not properly disclosed to investors. The developers agreed to settle the case by paying back all the investors’ money, with a penalty.

Regional Center Compliance

My post from September Preparing to file I-924A Annual Certification has resources for the I-924A, which is due from all regional centers by December 29.

A helpful RCBJ article: Regional Center Compliance Reviews, by Lincoln Stone, Susan Pilcher, Elsie Hui Arias (October 2018)

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.

34 Responses to Updates (reauthorization or shutdown, indebtedness, visa numbers, litigation)

  1. MS says:

    Hello Suzanne, thanks for the post, very helpful as always. Could you explain, the worst case scenarios if Regional center program is not re-authorized what will happen to the pending and approved but not yet visa issued I526 petitions? would they all be shutdown?

    • If the regional center program is loses authorization temprarily, then pending I-526 and pending visa applications for regional center investors will be put on hold temporarily. If (worst case) the regional center program were permanently terminated, then those regional center investors who don’t yet have conditional permanent residence would lose the chance for a visa. Direct EB-5 investors would not be affected in any of these scenarios.

  2. Kishore says:

    Can users file adjustment of status during the shutdown or are they rejecting due to closure ?

    Washington soap opera every year

    • I’m not sure on this one — my sources didn’t mention I-485 filings. For sure, regional center-associated I-485 couldn’t have action on them during a lapse in regional center program authorization. But petitions generally can be filed during a DHS shutdown assuming USCIS stays open as usual.

    • Alex says:

      Yes, adjustment of status filings are fee-supported so they’re fine.

  3. connor says:

    Litigation case:

    ~~~ claims like this “Defendants were fully aware when they solicited investments from plaintiffs in 2014 and 2015 that plaintiffs’ capital would need to be reinvested into a different project beyond the term of the partnership’s initial investment.” In fact, a project redeployment requirement was not suggested until August 10, 2015 (in a draft memo never finalized), was not instituted as policy until July 14, 2017, and has not been clarified to this day. ~~~

    Hi Suzanne,

    Sorry, I don’t agree with you in this case.

    Once you look at the background of developer/GP, you may find they have long project cooperation history with one of the oldest RC. I think they should already had redeployment project with the said RC before the visa backlog happens. They already knew it was possible to do redeployment.

    USCIS policy guide is new, but the theory is not. You need to keep the money in project instead of returning to investors. That’s always the safest way as far as EB5 adjudication concern.

    That makes me wondering why they have GP with full power to do redeployment and investors without any voting rights in the offering documents .

    In addition, is it not a serious issue for a security offering, the issuer says I will put your money into project A, then move your money to project B with no need of your approval. They say YES, since the offering documents authorize them to do that.

    So in the very beginning,
    how GP know they should keep this right to do redeployment?
    how GP know they should waive their fiduciary Duty?
    how GP did not disclose the risk of visa backlog?
    It is hard to convince me that they are fully innocent.

    Yes, I agree with you that may not be a good argument in the complaint, but the investors may have no other choice to fight for their rights. GP did everything to protect themselves in the offering documents, what else the investor can argue? Just wait and enjoy being f***ed?

    The current situation make me believe that RCs are taking advantage of current situation to max their own interests. They don’t care how long investors have to wait and how painful to see their children aged out.

    That’s always harder to find new clients than keeping old ones, right? Be shamed of that.

    I hope I’m wrong.

    • Sounds like you know more about this case than I do. I was reacting to the detail in the article. As for USCIS policy, the long-standing theory is that funds cannot be returned from the NCE to investors until I-829. The idea that the “at risk” requirement further requires repeated redeployment in projects is new, and I agree that it’s very unfair to investors besides being troublesome for many issuers.

      • connorcn says:

        Thanks for you understanding, Suzanne. I talked to both sides and other guys related so knew a bit more. The law firm representing plaintiffs did have EB5 filling experience, I supposed they knew what’s the theory of redeloyment. I’d like to call for a common ground: Once the loan matures or redeployment takes place, RC should let the investors go and refunded, if they decide to quit EB5, instead of taking advantage of the current terrible situation and keeping using the free money to the end. If it goes on without any limitation on the power of RC, I’ll be shamed to be part of EB5.

  4. Corrine says:

    Hi Suzanne, I’d like to ask some questions regarding NCE Organization structure. During redeployment, according to PPM if investors recall NCE’s GP by a majority vote, will it result in NCE being dissolved? Before entering US with conditional green card, whether changing GP will be regarded as material change?  After entering US with conditional green card, can investors change GP? Thanks

  5. eric yao says:

    For the Downey case, I am wondering how the sponsor is able to defend themselves if they truly didn’t disclose in the PPM (which I haven’t reviewed) of the reinvestment risk. How could an investor appreciate the fact that a 6-8 year loan is suddenly turning into a 4 year loan A + a N year loan B? Especially to an investor who no longer wants a greencard. Perhaps, this is something they need to work on to convince the jurors in CA.

  6. Kelly says:

    Currently, it is difficult to withdraw and get refund. IIUSA wrote email to USCIS to ask whether refunding investors who want to give up immigration will infuence others’ green card in the same project. When the 1st project end, how does refunding influence other’s green card? Why binding up interests when redeployment?

    I don’t think USCIS will answer this question since they have not answered many questions before. USCIS don’t say yes or no. Thus it give opportunities for RC refuse to refund when redeployment is coming in the name of USCIS’s vague policy.

    Meanwhile, I don’t think IIUSA don’t know USCIS won’t answer questions.

    • The unclear policy makes both investors and issuers vulnerable. Some issuers take advantage of the lack of clarity, while others who really want to do the best for their investors are put in a very difficult position, with no clear “right thing” to do. And I think USCIS isn’t answering questions because it doesn’t know where to go from here. Sigh….

      • eric yao says:

        One of the IIUSA’s question is, if one investor decides to withdraw I-526 and does not do redeploy capital (allowed by NCE), would such an action affect the immigration petition of the remaining investors? The answer is so obvious. The withdrawing investor doesn’t affect the “at-risk” status of the remaining investors who have filed or will be filing I-829. Therefore, it won’t impact the remaining investors. This is a similar situation as the withdrawing investors whose I-526 was denied. It won’t affect the remaining investors and USCIS doesn’t care.

        I don’t understand why such a question would even be brought up at all. This does look like that the manager is trying to diverting the tough questions from the investors to the government. So each time the investor wants something which is reasonable by common sense, the manager would say: I am really sorry and I feel sympathetic about your situation. Unfortunately the policy is vague and we are as anxious as you are, expecting an answer from the government, which is not really functioning well as you are aware!

      • connorcn says:

        No matter what USCIS’s reply is, the investors can still drop off EB5 application and get paid. Since it is the buy option of NCE, to let the LP paid and go. That’s not redemption language at all. But some RCs are using redemption as excuse to refuse EB5 investors withdrawing application. Well done, USCIS!

  7. Nicholas says:

    Suzanne, thanks for all the great articles and analysis. I am EB-5 investor and waiting in the line for visa. I am also Canadian PR. I am considering to apply for Canadian citizenship. I wonder if nationality change will impact my EB-5 application? Many thanks!

    • The nationality change would not change your position with regard to the EB-5 waiting line, since that position depends on country of birth, not country of nationality. But I don’t know the possible affect on the EB-5 application generally — better ask the lawyer about that.

  8. Szk says:

    HI Suzanne,

    I wanted to know if you have any information on the increase in minimum amount from $500,000 to close to $1 million. Will the deadline be extended or is the change imminent with the signing of the CR

  9. John says:

    I have a visa appointment scheduled at a consulate in late January. If the shutdown persists, do you know if my appointment would be canceled and rescheduled? Haven’t been getting consistent answers, and maybe the answer is that nobody knows for certain

  10. jogi says:

    Hi Suzanne, My I-526 petition was approved last week and my file is moved to NVC for visa process, My question is do you think this USCIS shutdown will delay/affect my visa process?

  11. Bowen Zhao says:

    Hi Suzanne,

    I’m an investor from China. Your blog has been one of the most reliable and updated sources of information. Really appreciate the work you’ve been doing.

    Sincerely wish you Merry Christmas and Happy New Year!

  12. Sameer Deshpande says:

    This whole political fiasco is making the regional centre program seem like a very risky proposition, when politicians disrupt regional centre program so frequently.

  13. Swati says:

    Suzanne – Excellent findings and very helpful website. I have a question on the RC program. If there is no reauthorization or continuing resolution on the regional center, What happens to investors I-526 Regional Center petitions that were already filed before this shutdown? My case was filed in October 2017 and couple of investors started receiving I-526 approvals in December for the project I invested. Worst case scenario – what happens to pending I526 (RC petition)

    • So long as RC program authorization stays attached to government funding, we’ll get reauthorization eventually. The government can’t stay unfunded forever. I think the worst case for you is that adjudication will be delayed. If Congress actively moved to terminate the regional center program, worst case scenario is that you’d lose the opportunity for an immigration benefit. But I haven’t heard talk of termination. The RC program is currently temporarily unauthorized as collateral damage of the funding fight, not on purpose. (And even termination could have a better case scenario if Congress or USCIS did, as one would hope, offer some relief to past investors.)

  14. Pingback: Will the EB-5 Visa program get an extension from Congress before December 21, 2018? | Home

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