Sizing the reauthorization hurdle

I’ve been overwhelmed with everything that could be written, in this period of unparalleled transition, opportunity, and existential crisis for the EB-5 industry and investors. I’ll start by getting out a few words on the elephant of regional center program reauthorization, so that I can move on to many updates about USCIS processing, policy revisions, visa numbers and timing, and direct EB-5. And my business plan writing day job, also.

Before I begin my editorial about reauthorization, note that I’m summarizing and commenting from a distance on what I’ve read and heard. You can get more information and direct involvement by joining an advocacy group. Regional Centers and service providers can join IIUSA and/or EB5IC to get educated and influence legislative efforts. For EB-5 investors, I recommend joining AIIA. This organization is off to an impressive start in getting meetings with Congressional staff and industry decision-makers, and holds regular video call updates to involve and inform even small donors. For Chinese investors specifically, I see that AAED has recently been the largest spender on EB-5 lobbying.

And now, my perspective on the outlook for regional center program authorization.

Question: When will the regional center program be reauthorized? Answer: after Congress agrees to the industry’s reauthorization wish list, or the industry backs down and accepts sub-optimal reauthorization legislation. Practically, September 2021 now appears to be about the earliest that reauthorization could happen, and the latest it should happen.

Everyone seems to agree that regional center program authorization can’t get passed as a stand-alone bill, but must get loaded onto one of the big legislative trains going through Congress. That could mean the infrastructure bill being finalized right now, or the budget reconciliation and appropriations bills that will come up in September. The disagreement comes with the question: how big a reauthorization bundle can and should we try to load onto a legislative train?  How small a bundle can the industry agree to present, and how large a bundle will Congress be willing to take onboard?

With S.831/ H.R.2901, Senator Grassley made a relatively small bundle: just reauthorization with integrity measures. Integrity measures are not fun for the industry, but they are politically uncontroversial. No Congressperson is going to get slammed in the media or face an election challenge for having voted for integrity measures. EB-5 industry groups dislike some details, but they unite in saying that they support integrity measures. The industry association IIUSA supports S.831 because it’s a small bundle, and thus relatively easy to fit on a legislative train. The industry association EB5IC opposes S.831 because it’s a small bundle, and thus leaves some important industry priorities behind on the platform. EB5IC accepts reauthorization and integrity measures, but wants that to be bundled together with programmatic changes to reopen new investment: TEA/investment amount changes and visa set-asides. AAED, the group lobbying particularly for Chinese investors stuck in a terrible backlog, wants reauthorization to be bundled with visa relief.

Both EB5IC and AAED see reauthorization as the prime and only near-term chance to get what they need on a legislative train, and thus they balk at allowing a smaller reauthorization bundle to proceed instead. But the things that EB5IC and AAED want to add to reauthorization are politically controversial, thus increasing the risk that legislative trains will pass by without accepting such large bundles.  A Congressman can get slammed in the media and his next primary for having been seen to support TEA changes that obviously benefit prosperous urban developers. If he supports additional visas or new admissions for EB-5, he’ll incite everyone who’s against immigration, and also spark opposition from everyone who’s in favor of immigration but wants the same benefits for different categories. The politically-costly legislative bundles contemplated by EB5IC and AAED would have some great benefits for the EB-5 industry, if only they could be passed, but they create a high political hurdle for reauthorization. The industry has previously agreed that that TEA and visa relief asks are desirable, but now disagrees as to whether they’re at all achievable.  

And thus the reauthorization fight so far has happened on the loading dock, with disagreements about what to try to get on a train together with reauthorization. When Senator Grassley, with IIUSA’s support, brought S.831 up for Unanimous Consent on June 24, Senator Graham, pushed by competing industry factions, blocked S.831 from passing the Senate. In their webinar on June 24 prior to the Unanimous Consent effort, EB5IC explained the reasoning behind this block: they said that they do support integrity measures, but do not want a long-term reauthorization that omits and thus defers their other priorities of TEA/investment amount changes and visa set-asides.  (Senator Grassley attempted to compromise by offering the industry a shorter-term reauthorization – 2.5 years instead of 5 years – but this was not accepted.)  EB5IC went on to reference their negotiations behind the scenes for alternative legislation, and foresaw the infrastructure bill as a possible vehicle, with Senator Schumer as a possible champion willing and able to heft a larger and more valuable reauthorization bundle onto that vehicle.

We spent the month of July waiting, wondering if the industry factions with the will and power to temporarily block the advance of the low-risk low-reward Grassley reauthorization bill would also have the will and the power to advance a more ambitious alternative path to reauthorization. Senator Schumer and his group finalized the text of the infrastructure bill yesterday. The text as of August 1 spans over 2,000 pages and covers a number of economic development programs. It does not include the regional center program. I’m sad but not surprised. With all the effort to rid the infrastructure bill of controversial elements, could Senator Schumer possibly have agreed to pick up a heavy reauthorization bundle weighted with controversial elements, as had been hoped? And yet would industry groups have allowed him to pick up less, considering their objectives for reauthorization?

If the infrastructure bill proves to be a missed opportunity, then industry groups should re-assess how much they can expect and afford to demand in the next reauthorization attempt.  If Congressional negotiators wouldn’t touch TEA changes and EB-5 visa relief in the infrastructure bill, would these asks have a chance to board the next legislative train? Senator Grassley’s S.831/H.R.2901 remains an option, if the industry can accept a medium-term reauthorization with integrity measures, and without other programmatic changes in the medium term. The option of a “clean” no-change short-term reauthorization with the September funding bill is impossible, if Senator Grassley has power to make good on his strongly-worded promise to block such a move. A clean long-term reauthorization is even less an option, since no one but IIUSA would support it. Senator Grassley would oppose it as long-term deferral of his priority integrity measures, while industry groups would oppose it as long-term deferral of their priority programmatic changes. So long as we get long-term reauthorization at all, it’s going to be a bundle of some kind – a bundle that’s a compromise between what the interested parties want and what the interested parties are willing to give. (I don’t bother to account for the majority of Congress and the public who hardly realize or care that EB-5 even exists, and who lack the interest or the power to affect RC program authorization.)

We cannot afford to miss the next opportunity for legislative vehicle. Senator Grassley has little reason to shed tears if the regional center program stays expired due to dissatisfaction with his bill, which he is supporting for his own reasons and not on behalf of constituents. Industry groups do have reason to seriously consider compromise on their priorities, if necessary to get authorization, and the Senators only involved as a favor to constituents have reason to listen to them. AAED’s investor constituents have already suffered greatly from RC program expiration, with long-awaited consular interviews in Guangzhou scheduled and then abruptly cancelled, U.S. jobs lost, and thousands of visas going to waste. Chinese investors have much to lose if reauthorization happens without visa relief, but likely even more to lose from forcing reauthorization to wait for the blue moon of achievable visa relief. Some regional centers are hardened by belief that the EB-5 program is dead with or without reauthorization, unless Congress adds programmatic fixes. But regional center constituents will suffer too if the program stays expired long enough to result in mass I-526 denials, investors fighting for exits for their capital, and wide reputational damage. Regional center EB-5 petitions and applications are being held in abeyance for now, not denied, but USCIS and Department of State may reassess that policy if the fiscal year ends on September 30 with no progress yet toward RC program authorization. That’s a lot of pressure on industry to get reauthorization legislation attached to one of the legislative vehicles available by September 2021, one way or another. Let’s be serious about making reauthorization as probable as possible within that informal deadline. Reauthorization runs genuine risk of continuing to miss the train indefinitely, unless we are realistic.

This is my understanding, based on what I’ve read and heard. You’re welcome to post dissenting views in the comments. But even better, take action that makes a difference. Get involved in advocacy, get the interested factions to hear your voice, and let good results prove you right.

And finally, because I’m a business plan writer and prefer tables to paragraphs, here’s an attempt to summarize the various interests and priorities in table form.

USCIS Policy Manual EB-5 Updates (regulations, reauthorization, indebtedness, CSPA)

The USCIS Policy Manual is a fluid online document that gets edited periodically, with and without notice, which is exciting and disconcerting. Being someone who likes to know the rules, I save copies of the PM at different dates, and redline changes. In July 2021, USCIS made several PM updates that affect EB-5. However, redline shows that the updates are minor, and reflect policy that’s been in place for awhile already. Here’s my document highlighting specific EB-5 content added to the PM in July 2021.

1. Regulations update. I’d wondered when USCIS would acknowledge the Behring lawsuit win by revising policy language about EB-5 investment amounts and TEAs. On July 15, 2021, USCIS made a minimal Policy Manual revision: simply copying and pasting the same “Alert” about the Behring lawsuit that’s on the USCIS website EB-5 homepage into the beginning of Policy Manual Volume 6 Part G, Chapters 1, 2, 3, 4, and 5. USCIS did not revise the body of the PM.  So if you go to Chapter 2 today, the body of the chapter still says that the EB-5 investment amount since November 21, 2019 is $1.8 million, or $900,000 in a USCIS-designated TEA, but the header alert clarifies that the required EB-5 investment amount is $1.0 million, or $500,00 in a state-designated TEA and “In other words, we are applying the regulations in effect before Nov. 21, 2019 in this chapter.”  With this update, USCIS takes another important step to officially acknowledge the Behring lawsuit outcome. At the same time, the minimal note implies that someone does not expect the outcome to last long enough to justify actually revising rather than merely footnoting the old policy language.
2. Regional Center lapse update. Also on July 15, USCIS acknowledged the regional center program expiration by adding an “Alert” to the beginning of Policy Manual Volume 6 Part G, Chapters 1, 2, 3, and 4 (but not Chapter 5 on removal of conditions). Again, the body of the PM was not revised, presumably reflecting hope that the RC program expiration also will not last long. The “Alert” added to the PM is identical to the first half of the “Alert” put on the USCIS website regional center page. The PM alert does not include the language about RFE response, I-829, or I-485.
3. CSPA: On July 26, USCIS announced a Technical Update – Adding References to the EB-5 Visa Program in Child Status Protection Act Guidance. It appears that the single change was to add the words “Immigrant Petition by Alien Investor (Form I-526)” to the list of applicable underlying forms for status adjustment.
4. Indebtedness: On July 22, USCIS announced a POLICY ALERT – Immigrant Investors and Investment of Loan Proceeds. Redline shows that this update did no more than to replace a couple words in the Policy Manual with the word “indebtedness,” and to add a footnote that “USCIS no longer follows its interpretation of indebtedness as including the investment of loan proceeds as of November 30, 2018, the date of the district court decision Zhang v. USCIS, 978 F.3d 1314 (D.C. Cir. 2020).” Since USCIS lost the Zhang court case in November 2018 and lost its final appeal of that decision back in January 2019, USCIS should have been “no longer following its interpretation” for over two years now already. The new Policy Manual footnote is merely a belated acknowledgement of that fact. See also the “Class Action Member Identification Notice” that’s been on the USCIS website EB-5 homepage for a couple years now. And more to the point, see Administrative Appeals Office decisions that sustain appeals of I-526 denials over loan proceeds. For example: JUN162021_01B7203 and MAR242021_01B7203. If you are a member of the class whose I-526 was “denied on the sole basis of investing loan proceeds that were not secured by their own assets,” you have had and still have the right to get that denial vacated and reconsidered.