Integrity Fees and I-956G Annual Report in 2023 (Who really has to file, and why)

10/11/2023 UPDATE: USCIS has now published a Q&A that discusses the impact on investors of regional center termination, beginning with the statement that “Given the large volume of investors that could be affected by terminations of previously designated regional centers based solely on noncompliance with certain new administrative requirements added by the RIA, such as paying the annual Integrity Fund fee, we interpret the RIA in a manner we hope permits good faith investors of terminated regional centers to retain their eligibility.” Please refer to the USCIS Q&A before reading my post, which I will need to revise as time permits.

[ORIGINAL POST]

Since the EB-5 Reform and Integrity Act (RIA) passed in March 2022, there’s been some confusion and dispute about how RIA applies to regional centers and EB-5 investments that pre-date RIA. After all, RIA creates new rules and procedures primarily for capital raising activities. How do these reasonably apply to regional centers with no post-RIA capital raising activities? Do regional centers that were designated and investments made pre-RIA get any different treatment post-RIA?

After a year and half of conflicting notices on the USCIS website, industry comments, litigation, and other bits and pieces of guidance (more on that below), one point has become clear: USCIS expects every regional center without distinction to pay the annual Integrity Fee of $10,000 or $20,000 and to file the I-956G Annual Report. In 2023, every regional center must pay two years of Integrity Fees (for both FY2023 and FY2024) and also file I-956G, or else be terminated in 2024.

If a regional center has no post-RIA project plans anyway, why jump these expensive hoops and why care about termination? But the regional center’s past investors must care. An EB-5 investor’s continued eligibility depends on having a regional center sponsor in good standing throughout the investor’s EB-5 process, however long that process may take. According to INA 203(b)(5)(M), a regional center termination will be followed by denials, revocations, and conditional permanent residence status terminations for all of the regional center’s past investors, unless the investors can manage to affiliate with another regional center. (Separate article coming shortly on this topic.) [UPDATE: the 10/11 USCIS Q&A contradicts this point.]

Here are the instructions, followed by the background of ambiguities and arguments around these requirements.

• Regional Center Integrity Fee: The latest USCIS “Alert” on Integrity Fee payments, published on September 29, 2023, can be found here: https://www.uscis.gov/IntegrityFund. The Alert acknowledges that “information about the due dates and penalties might not have been clear” but gives another chance for payment with the bold-face warning that “we will take steps to terminate any regional center that, on or before Dec. 30, 2023, has not paid the required EB-5 Integrity Fund fees for FY 2023 and FY 2024. NOTE: We will reject Integrity Fund fee payments for FY 2023 and FY 2024 we receive after Dec. 30, 2023, including those made in response to a Notice of Intent to Terminate.” (To avoid the FY2024 late fee, pay before October 31, 2023.) 
• Regional Center Annual Report: The latest I-956G annual report form, dated as of July 2023, can be found here https://www.uscis.gov/i-956g. Unlike the initial I-956G edition of July 2022, which asked for reporting specific to post-RIA NCEs (I-956F), the current form explicitly covers pre-RIA activity and NCEs. It asks the regional center to report on “each capital investment project undertaken by such NCE with active EB-5 investors (i.e. those who are seeking classification under INA 203(b)(5) or who have obtained conditional permanent resident status and not yet filed for removal of conditions),” and to provide data not only for recent activity but “over the lifespan of the project.”

In theory, RIA’s new rules should apply prospectively, not retroactively, but it’s complicated. Regional centers with only pre-RIA capital raises are still asked to grapple with Form I-956G and its questions about compliance with new rules for post-RIA capital raises. Regional centers with no new capital raises are still asked to pay $10,000 or $20,000 every year to fund oversight for new capital raises. EB-5 investors who started the process pre-RIA are still dependent on their sponsor’s ongoing eligibility post-RIA.

How did we get here, and what arguments have been made along the way?

Initially, USCIS interpreted RIA as creating a new regional center program and terminating the previous program — meaning a clear break between past and future. Under that interpretation, pre-RIA regional centers were no longer designated and had no grounds to file annual certifications or amendments (according to the April 2022 Q&A on the USCIS website), while pre-RIA investors were protected as a function of the protections around expiring legislation. But Behring Regional Center filed suit to challenge that interpretation, instead fighting for continuity between pre-RIA and post-RIA regional center designation. The litigation ended in August 2022 with a Settlement Agreement in Behring’s favor. The Settlement specified that “previously approved regional centers sponsoring new projects or new investors under the Integrity Act will comply with all the requirements of the Integrity Act” and “if a previously approved regional center fails to file a Form I-956 application or amendment by December 29, 2022, it may no longer engage in any activities under the Integrity Act, including sponsoring I-526E visa petitions or the development of new projects.” Sadly, the Settlement Agreement was silent on the question of what happened to previously approved regional centers NOT sponsoring new projects or new investors under the Integrity Act, but merely needing to stay designated for the sake of past investor eligibility.

USCIS told Behring plaintiffs on October 14, 2022 that “USCIS has not determined what will happen to regional centers that choose not to file Form I-956. Specifically, it has not decided whether such regional centers will be terminated, whether they will have to file I-956H, whether they will have to file annual statements, or whether any of the RIA requirements apply to them.”

On December 23, 2022, USCIS published an “Alert” on the website (which remains on the site to this day), that “Dec. 29, 2022, is no longer the deadline to file Form I-956, Application for Regional Center Designation, amendments, as required by the Behring Settlement, and Form I-956G, Regional Center Annual Statement. USCIS is extending this deadline until we publish guidance that clarifies the requirements of these forms.”

Also in December 2022, USCIS slipped a file called I-956-001 NEW 60-Day Public Comment Response Matrix 20221207 among the Federal Register supplementary documents for Form I-956. This deeply buried file is the most extensive available Q&A on the various I-956 forms, with 126 responses by USCIS to public comments. For example, Q&A #90 addresses a comment by Ron Klasko who suggested “that a regional center that wishes to continue to exist solely to meet its contractual and fiduciary obligations relating to pre-RIA projects, but does not intend to file form I-956 to sponsor new post-RIA projects, should not be required to file Form I-956G, which requests information and references forms that do not apply to these regional centers.” USCIS did not take this fine point, but simply responded to Klasko that “Each approved regional center must file Form I-526G.” Q&A #51 addresses a I-956G comment from AILA arguing that “regional centers designated prior to the RIA that still choose to operate under the RIA are not required to provide data for fiscal years prior to the RIA passage.” USCIS disagreed in its response: “The statute does not distinguish between capital invested before or enactment of the RIA (EB-5 Reform and Integrity Act of 2022) for purposes of reporting under INA 203(b)(5)(G).” (AILA then shot back with a follow-up letter arguing in detail that some I-956G questions retroactively apply RIA requirements, and why that’s wrong, but AILA’s suggested changes to I-956G still did not make it into the revised form.)

In January 2023, USCIS announced a stakeholder meeting where “We will discuss issues related to regional center operations,” including “those who do not wish to solicit investments for new projects under the RIA.” USCIS received so much written feedback that they first delayed the meeting, to give more time to review all the feedback, and then cut the meeting agenda.  As IPO Chief Alyssa Emmel said in the April 25^th meeting: “While we’re unable to discuss the regional center operations and investment period topics today, please rest assured that USCIS is engaged in ongoing efforts at the immigrant investor program office and across the agency to ensure that when we do have updates, we’re equipped to provide the EB-5 stakeholder community with clear guidance.”

In meeting with the Behring plaintiffs on May 1, 2023, USCIS reiterated that “Form I-956 and I-956G filing date deadlines still not set. These deadlines continue to be pushed back until the agency publishes guidance clarifying the requirements of these forms.”

The promised “guidance that clarifies the requirements of these forms” has not yet been published, so far as I know.  But I believe that I-956G, at least, nevertheless has a real deadline for all regional centers in December 2023, and that the Integrity Fee requirement is being applied to all regional centers this year without exception. I believe this from the latest fee and form instructions, and because USCIS has yet to grant the rationales for making any exceptions. [10/11 UPDATE: the new USCIS Q&A is part of the promised guidance.]

Everyone agrees that regional centers designated and active under the new law must tick all the compliance boxes under the new law, including filing I-956G annual reports and paying the Integrity Fee. The open question has been over which compliance boxes reasonably apply to regional centers that were designated under the old law and not taking any more investors under the new law. But so far, USCIS has not entertained that question because it has not granted any distinction between types of regional centers. This comes out in USCIS response to litigation. In Sunshine State Reg’l Ctr., Inc. v. Jaddou (23-cv-60795), “Plaintiff alleges that the Act distinguished between those Regional Centers created before the Act was passed, ‘Legacy-Regional Centers,’ and those after the Act was passed, ‘RIA-Regional Centers.’” But both USCIS and ultimately the judge disagreed. To quote the Opinion of May 30, 2023, “Plaintiff has not shown that it is likely to succeed on the argument that the statute unambiguously distinguishes between Regional Centers created before and after the Act for purposes of the Integrity Fund Fee.” In Gulf States Regional Center, LLC v. USCIS (2:2023cv01354), “Gulf States attempts to distinguish between the phrases ‘each regional center designated under subparagraph (E)’ and ‘any regional center’ used throughout the RIA,” (the logic that I also used in my February 2023 suggestion to USCIS about fairly applying RIA requirements).  But USCIS disagreed (as of Doc 49-1 filed 9/13/2023) that “subparagraph (E) is not limited to regional centers approved after the RIA’s enactment, but governs all regional centers in existence, regardless of their time of designation.” At least in litigation, USCIS has not entertained any ground of distinction that would allow treating regional centers differently depending on the time of designation and whether or not they choose to raise new EB-5 investment under RIA. Did the Behring Settlement force this position? Anyway, it seems to be the reality.

Back in October 2022, USCIS said it had then “not determined what will happen to regional centers that choose not to file Form I-956” to sponsor new projects and investors under RIA, including “whether such regional centers will be terminated, whether they will have to file I-956H, whether they will have to file annual statements, or whether any of the RIA requirements apply to them.” USCIS has not yet published a revision to this statement as of October 6, 2023. But based on the above sources, I gather that USCIS has, at least, firmly decided that the requirement to file I-956G and pay the Integrity Fee apply universally this year — and prepared to terminate regional centers that do not comply. Regional centers should prepare accordingly for Integrity Fee(s) due by the end of this month and annual reports due by the end of December. (And let me know if there are other court cases or buried sources of USCIS guidance that I should cite in this post.) [UPDATE: See EB-5 Questions and Answers as of October 11, 2023.]