RC Designation and Terminations, SEC (Palm House), RC List Updates

Regional Center Terminations

USCIS has now posted notices for regional centers terminated through March 2018, and I’ve added them to my termination log. Now we know the reasons behind about two thirds of the 250 regional center terminations to date.

USCIS has framed its activity in terminating regional centers as an integrity measure, but in fact only 11% of terminations so far have been due to integrity problems. The majority of terminations have been because (1) the regional center has not secured EB-5 investment in the past three or more years, and/or (2) USCIS did not receive the regional center’s Form I-924A annual report and fee on time for the most recent year.

The letters themselves are interesting for discussion of a topic not fully explained by the regulations or policy: what does it mean to promote economic growth? What must a regional center do, exactly, to justify its continued existence? How can the definition of “failure to promote economic growth” be stretched to cover the various reasons USCIS might want to terminate a regional center in practice?

A few noteworthy letters from the most recent batch posted on the USCIS website:

  • Some might see Lansing Economic Development Corporation Regional Center as a model of regional center worth: the economic development agency of a distressed city using EB-5 as a tool in its economic development toolkit. This development agency reported that it promoted the EB-5 option in multiple trips to India, China, Italy, and throughout Europe, and offered EB-5 as an option to all development projects in Lansing. However, USCIS found that “While these activities are necessary for the continued operation of any regional center in the EB-5 Program, it does not show that the Regional Center has engaged in activities that promote economic growth as understood under the EB-5 Program. Specifically, these actions have not resulted in increased export sales, improved regional productivity, job creation, or increased domestic capital investment in the Regional Center’s designated geographic area.” Whatever its promotional activities, the regional center had not yet secured any EB-5 investment, and its potential projects did not include a shovel-ready project certain to use EB-5 investment. Therefore “USClS concludes that the Regional Center no longer serves the purpose of promoting economic growth.”
  • Live in America-Midwest Regional Center is an example of an as-yet inactive regional center that’s part of an active network. USCIS issued the RC a Notice of Intent to Terminate for three years of I-924A that did not report any EB-5 investment. The Regional Center countered by pointing to successful projects sponsored by other regional centers in the Live in America network, arguing that this demonstrates LIA’s proven ability to get projects done, and potential to promote economic growth in the regional center geography. The RC indicated that is exploring and actively seeking investment opportunities,  has met with EB-5 project candidates, and has entered into strategic partnerships. USCIS responded that the RC cannot rely on evidence of projects outside its approved geographic area, and that the future plans described are merely “future aspirational goals,” and do not count as “actually engaged in the promotion of economic growth.”  Having an operator that’s been demonstrably successful in promoting economic growth did not save Live in America-Midwest Regional Center from termination. Sorry, Minnesota! The Midwest has had any regional centers at all thanks in part to serial regional center operators who can afford to give low-profile geographies a chance because they also have feet in New York and California. But USCIS appears less willing to give the Midwest a chance. Attract EB-5 investors within three years (or at least, get term sheets and file an I-924 amendment) or thy regional center designation shall be terminated.
  • Charlotte Harbor Regional Center is a cautionary tale of what can happen when a regional center does not have copies of documents submitted by its investors to USCIS in I-526 petitions.
  • USCIS terminated Greater Houston Investment Center, LLC for inactivity, and declined what seems to me a sensible request: the option to reactivate designation if a project opportunity presents itself in the future.
  • America’s Regional Center was terminated in 2017 for lack of activity (no investors in 3 years), but was restored on July 5, 2018 to the list of approved regional centers. No appeal has been published, so I don’t know how the RC overcame the termination decision.
  • Powerdyne Regional Center‘s mistake was to hire a President who turned out to be a wanted man in China.
  • These regional centers presented USCIS with evidence of EB-5 projects in the pipeline, but USCIS argued that the projects were insufficiently advanced or showed insufficient commitment to EB-5 financing. Liberty South Regional Center, EB5 Memphis Regional Center, LLC, North Country EB-5 Regional Center, LLC, Guam Strategic Development Regional Center, Immigration Funds, LLC
  • New Orleans Mayors Office of Economic Development got a 36-page termination notice that fits six termination reasons under the general umbrella of failure to serve the purpose of promoting economic growth. These are: lack of activity (only one project since 2008, and no new job creation/investment since 2013), lack of progress in the construction of the regional center’s one project, doubt about the legitimacy and viability of the portfolio business model used, material misrepresentations that cast doubt on the regional center’s legitimacy (Form I-924A reports that were inconsistent with each other and evidence that USCIS determined independently), improper use of EB-5 capital that casts doubt in investor’s ability with EB-5 requirements, and diversion of EB-5 funds (outside of the regional center geography, and inconsistent with the job creation purpose).  Generally the termination comes as no surprise, since the New Orleans Mayor’s Office made the mistake of hiring operators for their regional center who proceeded to loot investor funds (or so alleged investors as early as 2012 and the Department of Justice in 2018). USCIS did not consider the Mayor’s suggestion that her office might continue to use EB-5 as a tool for job creation and growth in New Orleans under a different operator. The decision includes this paragraph that reads like policy, though it’s not written elsewhere,
    • The reasons why a regional center may no longer serve the purpose of promoting economic growth are varied and “extend beyond inactivity on the part of a regional center.” 75 FR 58962. For example, depending on the facts, a regional center that takes actions that undermine investors’ ability to comply with EB-5 statutory and regulatory requirements such that investors cannot obtain EB-5 classification through investment in the regional center may no longer serve the purpose of promoting economic growth and may subvert a purpose of Section 610(a)-(b) of the Appropriations Act, which provides for regional centers as a vehicle to concentrate pooled investment in defined economic zones by setting aside visas for aliens classified under INA 203(b)(5). Likewise, a regional center that fails to engage in proper monitoring and oversight of the capital investment activities and jobs created or maintained under the sponsorship of the regional center may no longer serve the purpose of promoting economic growth in compliance with the Program and its authorities.

Most of the termination letters have little discussion, but appear to reflect a simple bright line: you didn’t attract an EB-5 investor in three years and thus are not promoting economic growth and lose your designation. This line can look reasonable, but I also see it threatening the regional center program’s basic potential as an economic tool. Consider that according to a list of investor petition approvals by regional center (briefly published by USCIS in June 2017), only 328 out of around a thousand regional centers had had one or more I-526 adjudicated from 2014 to 2017. Of those 328 regional centers, the majority were located in New York, California, Florida, Washington D.C., Atlanta, Chicago, Seattle, or Texas. If USCIS keeps terminating every regional center that’s not immediately popular with investors and active projects, the program will soon be left with few regional centers (and thus little opportunity to use the program) outside New York, California, Florida, Washington D.C., Atlanta, Chicago, Seattle, and Texas. That certainly wouldn’t match Congressional intent for economic impact. And how does it even benefit USCIS? How much would it cost USCIS to keep the generally blameless Economic Development Corporation of Lansing, Michigan on the list of regional centers, even if that RC doesn’t have EB-5 investors yet? (On the other hand, this position paper on regional center terminations makes the case that inactive RCs burden the system and are incompatible with the RC program as defined.)

SEC Action

The SEC has announced its first EB-5 fraud action this year: Securities and Exchange Commission v. Palm House Hotel LLLP, et al., No. 9:18-civ-81038 (S.D. Fla. filed August 3, 2018).  The SEC is rather late to the party, following United States of America v. Robert V. Matthews and Leslie R. Evans (3/14/2018) and a civil suit filed by EB-5 investors in 2016. (Though not as late as USCIS, which has not terminated the regional center involved even as it hustled to terminate Lansing EDC.) The allegations are familiar: misappropriation of investor funds by people who arranged to have unfettered access to those funds. I note that the SEC’s list of defendants is much shorter than the list of defendants in the complaint by investors. The SEC identifies the regional center principals as responsible for misrepresentations, while investors also felt misled by the consultants and service providers involved.

Processing Times

USCIS updated the Processing Times page on August 1, with improvements for all EB-5 forms (-23 days for I-526, -5 days for I-829, and -63 days for I-924).

Washington Updates

As I hear anything new on the Yoder amendment with potential to remove per-country limits for EB-5, I add it to my previous post. Not that I have heard much. Since the explosion of conflicting comment on my post, perhaps others in EB-5 have learned better than to make statements on this topic. (Update: IIUSA has finally made a comment.) I guess that response has also been complicated by the difficulty of reading the amendment text; it appears that even Yoder and the House appropriations committee may not have initially understood what was actually in it. I hear that my reader comments are being noticed and appreciated, and I hope that those comments help inform discussions among the powers that be.

I keep an eye on www.reginfo.gov just in case EB-5 regulations should proceed after all to the review stage in time to be finalized in August 2018. But nothing there yet.

Regional Center List Changes

Additions to the USCIS Regional Center List, 7/16/2018 to 08/02/2018

  • Cypress Regional Center LLC (California)
  • Liberty Harbor Regional Center LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • Lighthouse Regional Center, LLC (Texas)
  • My Life Atlanta Regional Center, LLC (Georgia)
  • Rise Investment Management, LLC (Connecticut, New Jersey, New York)
  • Tinian EB-5 Regional Center, LLC (Commonwealth of Northern Marianas Islands)

New Terminations

  • Northeast Ohio Regional Center (Ohio) Terminated 7/18/2018
  • Nevada Development Fund LLC (Nevada) Terminated 7/12/2018
  • Americas Green Card Regional Center (Maine, Massachusetts, New Hampshire) Terminated 7/12/2018
  • Chicagoland Foreign Investment Group (CFIG) Regional Center (Illinois, Indiana, Michigan, Minnesota, Wisconsin) Terminated 7/16/2018
  • EB5 United West Regional Center, LLC (California) Terminated 7/27/2018
  • Fairhaven Capital Advisors American Samoa Regional Center Corp. (American Samoa)
  • Cal Pacific RC LLC (California) Terminated 7/16/2018

Per-country limits in question?

I do not normally quote the Center for Immigration Studies, but for once I agree with David North. This is a concerning development:

An alarming bit of news – generally ignored by the press – is that the country of origin ceilings that try to diversify our immigration streams may be scrapped by congressional action.

The House Appropriations Committee, while marking up the Department of Homeland Security spending bill this week, inserted language that would eliminate the long-standing requirement that no more than 7 percent of any group of employment-based immigrants could come from a single nation. The same provision would ease the 7 percent rule on family migration as well, but not eliminate it. (See the amendment here, on pp. 23-28; it was introduced last year as a stand-alone bill, H.R. 392.)

This came about because the chair of the DHS Appropriations Subcommittee, Rep. Kevin Yoder, R-Kan.), managed to persuade his colleagues on the full committee that the current system is unfair to the Indian nationals whose visa applications, notably in the EB-2 category, are backlogged for several years. The provision would also speed up the delivery of EB-5 (immigrant investors) to Chinese applicants, while slowing down their arrival for people elsewhere in the world.

This amendment language may not get into a final bill, but it’s still important for the community to be educated about what the per-country limit means for EB-5. Based on data for EB-5 usage to date, here is what I calculate would happen to EB-5 visa availability if the per-country cap were removed as part of the FY2019 funding bill in September:

  • The October 2018 Visa Bulletin would have a 2014 cut-off date for the EB-5 category for all countries.
  • From 2019 to 2027, Department of State would be issuing EB-5 visas to people already in the backlog as of 2018, with no visas left for contemporary demand. Here are my estimates for when visas would be available to investors from various dates, based on data about I-526 filings from 2014 to 2018 and assumptions about denials/dropouts, family size, and visas already issued. Investors from all countries would be in the same line in order by priority date, without regard to nationality.
    • 2014 priority date: visa issued in 2019 (5-year wait)
    • 2015 priority date: visa issued in 2020/2021 (6-year wait)
    • 2016 priority date: visa issued in 2022/2023 (7-year wait)
    • 2017 priority date: visa issued in 2024/2025 (8-year wait)
    • 2018 priority date: visa issued in 2026/2027  (9-year wait)
    • 2019 priority date: visa issued in 2027/2028
  • China-born applicants would dominate the front of the line for EB-5 visas, having the oldest priority dates. They would get 99% of EB-5 visas in 2019, and gradually reduce to about 80% of visas by 2027.

Pros and Cons

  • Removing the per-country limit for EB-5 would give past China-born investors a predictable visa wait of 5 to 10 years, mostly just competing with each other for visas. That would be better than the current hard-to-predict wait of 5 years to life that depends on the wild card of future incoming non-China demand. Removing the per-country limit would give the China-born investor filing today an estimated 9+ year wait rather than the currently-estimated 15+ year wait. This is a benefit for China, but not a solution even for China. 9 years is preferable to 15 years, but this difference becomes irrelevant if both times are unacceptably long.
  • Removing the per-country limit for EB-5 would be a pure disaster for non-China investors. All non-Chinese with pending I-526 or pending visa applications would find themselves in line behind the tens of thousands of Chinese with older priority dates, with many-year visa waits for everyone. Today’s China-born investor suffers, but at least it’s from policy that was in place when he invested, and an excess China demand situation knowable at that time. The non-China investor already in the system would suffer retroactively from new policy that didn’t exist when he invested.
  • Lacking the per-country limit to protect new investment from a variety of countries, the EB-5 program would be essentially dead as regards new investment for the next ten years. Interest might revive by 2030, when the backlog that piled up in 2011-2018 is out of the system, leaving visas available for new applicants. (Or earlier, if many people in the system are shocked at finding their visa timeline unexpectedly expanded by 5-10 years, and try to exit.)

There’s still room for lobbying on this issue, so judge where your interest lies and speak with your contacts.

Additional Reading:

Visa Numbers (FY2018 Q3 and conference update)

The 2018 eb5 investors Magazine EB-5 Convention in Los Angeles provided a platform to discuss a challenged industry. The dominant theme was EB-5 visa numbers, and the consequences of excess demand for a limited quota.  Panels and conversations discussed alternatives to China in view of untenable visa wait times, alternatives to EB-5 for investors and project companies and service providers, alternatives to the visa quota as currently interpreted, and options for deploying past investor funds during the visa wait. I learned that everyone is confused about redeployment and material change, with smart lawyers giving conflicting advice, and that many people are confused about visa availability.   I copy below the most important piece of solid information I learned at the conference – the latest DOS statistics on EB-5 visas issued – followed by my comments and predictions.

Information reported by Bernard Wolfsdorf at the EB-5 Waiting Line panel at the eb5 investors Magazine EB-5 Convention on July 24, 2018, based on information provided by Charlie Oppenheim at the Department of State Visa Controls Office [recording here]

As of the third quarter of FY2018 (June 2018), Department of State had issued the following number of visas:

  • Worldwide: 7,900
  • China: 4,049
  • Vietnam: 692
  • South Korea: 423
  • India: 375
  • Taiwan: 337

DOS China Predictions:

  • On October 2018, the cut-off date for China will move to August 8, 2014 (or maybe August 15).
  • China has received a large number of visas annually because it has been able to take visas unused by other countries. Increased marketing in the rest of the world means that the number of visas available for China is dropping. Charlie will allocate 4,675 visas to China in FY2018—much fewer than in previous years. (China received 7,567 visas in FY2017.) Charlie predicts that China will have 3,500 visas available in FY2019, and 3,000 in FY2020.

DOS Vietnam Predictions:

  • On October 1, 2018, the Vietnam cut-off date will move up to January 2016.
  • In March 2019, the Vietnam cut-off date is expected to retrogress.
  • [Suzanne’s note: In other words, the October Visa Bulletin date moves up so that Vietnamese can get the about 700 new visas available to them in the new fiscal year. These having been issued, the March Visa Bulletin will put Vietnam back to the same cut-off date as China — i.e. in the same line as China for any leftover visas.]

Notes on visa availability:

The China backlog has the oldest priority dates in the system and thus first claim on all visas left over after the up-to-700 per country allocation. The total allocation to China depends on number of leftover visas. Countries behind China are effectively limited to about 700 visas annually. Data on visas issued for FY2018 to date indicate that Vietnam has already reached its limit for the year, while South Korea, India, and Taiwan are closer than ever before to the 700 limit. (As a reminder, total visas issued to these countries in FY2017: Vietnam 471; South Korea 195; India 174; Taiwan 188.)  DOS predicts future visa wait times for investors from these countries. (No FY2018 Q3 numbers were provided for Brazil — don’t know if that means fewer FY2018 visa applications than expected from Brazil.)

Remember that investors from one country don’t all have the same wait time.  Individual wait times vary by priority date (date of I-526 receipt). Vietnamese investors who filed I-526 in January 2016 will likely have an almost 3-year wait for a conditional green card (per Charlie’s Visa Bulletin cut-off date prediction above), while Vietnamese who filed I-526 in April 2018 will likely have a 6-year wait (per Charlie’s prediction at the IIUSA conference in April). Each of those estimates is specific to a point in time – that is, to Vietnamese investors who filed on a certain date — not for all Vietnamese.  If the number of I-526 filings from Vietnam increased in a linear manner from 2015 to the present, then the visa wait time for Vietnamese investors over that time period is also linear. As a Vietnamese investor, I’d estimate my visa wait by plotting a line through the two wait-time estimates provided by Charlie, and see where my priority date would fall on that line. (i.e. I’d estimate about a 2-year wait if I filed in 2015 and a 4-5 year wait if I filed in 2017, since he estimated 3 years for early 2016 filers and 6 years for early 2018 filers.) The demand line often isn’t linear (e.g. I expect Vietnam I-526 filings to drop in 2019, thus changing the calculation for 2019 Vietnamese investors), but still plot-able given data.

In EB-5 some people have a false sense of panic (i.e. past Chinese investors thinking Charlie estimated a 15-year visa wait for all Chinese as of April 2018, when he just estimated a 15-year wait for new Chinese investors filing I-526 in April 2018), while others have a false sense of security (i.e. current Vietnamese investors thinking an October 2018 Visa Bulletin indicating 3-year wait applies to today’s new investors, when in fact it’s just specific to people who filed by January 2016 and at the visa application stage in October 2018.) The misunderstandings both result from forgetting to think of the visa wait as a waiting line problem, with the wait for any one investor as a function of that investor’s place in a priority-date-ordered queue (subject to country limits, but not in undifferentiated pools by country). Generally, the longer ago you filed I-526, the shorter your total wait for an EB-5 visa. Chinese investors who filed I-525 four years ago are receiving visas today (four year wait), while Chinese investors filing I-526 today will have longer to wait.  The EB-5 waiting line problem extremely complex but not impossible, considering the process we know and the fact that we have at least some data. (FYI my spreadsheet of backlog-related data is currently under revision as I try to think out a simpler presentation with clearer country-specific analysis. And I really wish we could get updated per-country I-526 data!)

Misconceptions about visa availability were evident in several promoters who spoke at the conference about demand  potential. The EB-5 quota and per-country limit mean that each non-China country can get only about 700 visas i.e. accommodate only about 230 investors annually.   (10,000 visa quota * 7% per country + 0 visas leftover after the China backlog) * 1 investor/3 visas = about 230 investors per country, sustainably. Meanwhile, thousands of investor I-526 * 3 visas/1 investor * 1 year/700 visas = many years visa wait for any country that falls for the siren song of big projects. India especially, take note.  CanAm alone boasts of securing 200 Indian investors this year – almost a year’s worth of visas to one regional center operator – and I hear about multiple other projects each seeking hundreds of Indians. Investors should be vigilant, and EB-5 promoters consider their long-term interests and watch the activity of other promoters.  No market can replace China; raising too much in any one market will simply spoil it. That is, unless the EB-5 visa quota changes.

Will the EB-5 visa quota change, and who will advocate for change? I was reminded at the conference that the industry has conflicting interests. On the one hand, we cannot keep raising money or creating jobs at historical levels without visa relief. Long wait times would ruin the market going forward. Either EB-5 visa numbers increase or EB-5 economic contributions fall.  On the other hand, long visa waits result in the golden gift of billions of dollars in past investment free to be redeployed for 10+ years longer than expected with little investor input and no new job creation requirement. Some companies with large amounts of EB-5 money already in pocket may not be motivated to press for change. But a majority of industry players do want change, as do investors of course.  A new lawsuit pressing the 10,000 EB-5 visas-for-investors argument has maximized its slim chance of success by being entrusted to rockstar Ira Kurzban. (The 10,000 EB-5 quota has been historically interpreted to include family members, thus making it effectively a 3,300-investor quota.) If Kurzban can’t argue this, no one can. People at the conference seemed to think the lawsuit is, at least, a significant and productive gesture. (Update: here is the complaint.) A new organization has been formed just to advocate for backlog problems: EB-5 Visa Relief Group. We shall see where all this leads. This year the draft EB-5 reform legislation did not touch EB-5 backlog problems, while larger immigration bills offered to increase visa numbers for every EB category except EB-5. I welcome more pressure and lobbying on behalf of EB-5 visa relief.

Based what I heard from panels and in conversation at the conference, I would be willing to bet money on the following predictions:

  • The regional center program will get another short-term reauthorization with no changes by the next sunset date of September 30, 2018, as part of the funding bill for FY2019.
  • Another EB-5 bill with longer-term regional center authorization and some EB-5 reforms will be introduced following the midterm elections. The bill will not go anywhere, unless finalized regulations motivate the EB-5 factions to consult with each other, accept painful compromises, and figure out a minimum broadly-beneficial platform that Washington can count on being thanked for enacting. In other words, the bill will not go anywhere.
  • The EB-5 modernization regulations will be finalized in 2018, probably right when I wanted to focus on pumpkin pie and Christmas shopping. The investment amount increases and priority date protections may be modified from the original draft regulations. Litigation around the rollout may come out of New York City.
  • The total number of I-526 filings will fall gradually through 2018, and drop significantly in 2019 as a result in of the regulations and new Visa Bulletin cut-off dates. Because I predict a fall in demand overall, my projections for China visa numbers are more optimistic than Charlie’s. I think that rest-of-the-world demand will fall after 2019, leaving more visas left for China.
  • When new Visa Bulletin cut-off dates are imposed in 2019, many people will express surprise that the cut-off dates and associated visa wait effect people who invested back in 2017 and 2018. If the visa cut-off dates come earlier than expected as a result of more/faster-than-expected I-526 approvals, people will be surprised by that too.
  • With increasing pressures and alternatives, many regional centers, real estate companies, and service providers (and some past investors) will look to exit EB-5 in 2019.
  • Litigators will keep busy, cashing in on questionable interpretations by USCIS and investor frustration with wait times, issuer redeployment decisions, and project progress.
  • I-526 processing times will improve significantly with the fall in I-526 receipts. EB-5 will become a fast track again for investors from low demand countries, escrows contingent on I-526 approval will become feasible again, and new types of projects will find opportunity in EB-5.

Senate Judiciary Committee hearing on EB-5

The Senate website now has video of of today’s Judiciary Committee hearing on EB-5, as well as a statement from Senator Grassley and written testimony from USCIS Director L. Francis Cissna. I’ve uploaded my recording, and transcribed below the major news from the hearing: that EB-5 regulations are not actually close to being finalized, and the reason is not conspiracy but honest ineptitude. Hanlon’s Razor proves right again. I should’ve known better than to repeat rumors attributing delays to interference. It’s so plausible that, as Cissna says, CIS would be still reviewing public comments, slowed by a complex process and competing demands.

I listened to the hearing for hints that anyone plans to do anything about EB-5, and noted few such hints. The Democrats on the committee sent the message that they care about immigration law/policy that hurts children, and can’t be bothered about immigrant investment right now. Most did not even mention EB-5 in their statements or questions, instead changing the subject to undocumented migrants, and the administration’s zero tolerance policy and resulting family separations. Two senators (Feinstein and Durban) called for a kind of action — termination — but didn’t actually talk about EB-5. They discussed a mythical program that allows people to “buy their way to the front of the line” and purchase legal status as a commodity, apparently simply ignorant of basic facts: that EB-5 investors enter the back of a long waiting line with no premium processing option and must put capital at risk but can only acquire status based on job creation, not money. Senator Cornyn was the one person who spoke as if he might still have EB-5 legislation in mind. Senator Grassley granted the necessity of legislation, but complained about how he’d been stymied in the past and focused on calling for regulations (which “can probably do better than legislation”), attacking Director Cissna for not having finalized regs yet. Grassley definitely seemed to be trying to pass the buck on EB-5 program changes from Congress to USCIS. Cissna, meanwhile, tried to pass the buck back, telling the committee that he doubted his department could finalize regs before September 30, and urging Congress to either manage legislative reforms or let the program expire. Meanwhile, it wasn’t clear that anyone present really grasped what’s in the EB-5 modernization regulations, or how the regulations or the last legislative proposal would affect the real world of EB-5. I appreciate that at least Grassley and Cissna tried to do their homework, but clearly still operating with some basic misconceptions that won’t help yield good law or policy. Sigh. So much education remains to be done in EB-5. If our lawmakers and regulators do not know what’s mostly right or what’s actually wrong with EB-5, how can they direct it effectively?

On the positive side, Director Cissna’s testimony clarifies that EB-5 does not operate the way it did 25 years ago. The department has made major strides in its efforts to administer the program, particularly in the past couple years. Mr. Cissna reviews operational enhancements that have been implemented, even without reform legislation or regulations.

Transcript of a Q&A between Chairman Grassley and Director Cissna (starting at minute 47:30 of the Judiciary Committee hearing)

Grassley: In your written testimony, you say that the department is still, still, reviewing comments, but you plan to move forward as expeditiously as possible. Those last four words are yours. Do you have a sense of when the EB-5 Modernization regulations will be finalized, and how quick is “as expeditiously as possible.”

Cissna: It’s not soon enough. I want those regs out as quick as humanly possible. And from the moment I got sworn in back in October, I have been pushing and pushing and pushing for those regs to be completed. There is a process that all regs have to go through, often very lengthy, and I’ve been doing everything I can, from where I sit, since October to ensure those regs get out very fast.

Grassley: Are you getting the help of the Secretary?

Cissna: Yes. The Secretary is aware of the urgency of this and she is committed to getting the regs–       ….

Grassley: Do you anticipate the Modernization regulations being finalized before the expiration of the Regional Center program September 30?

Cissna: I don’t know. That would be hard to pull off. I think it might be tight.

Grassley: More time, hmm?

Cissna: I think so.

Grassley: Have you or Secretary Nielsen received political pressure from anyone to delay or halt the Modernization regulations?

Cissna: No. That I can say with certainty. No one’s been pushing us or telling us to drag our feet or delay this reg in any way.

Grassley: If anyone ever does that, will you tell this Committee?

Cissna: Oh yeah.

Grassley: If the Modernization regulation is not finalized before the expiration of the Regional Center program, do you support letting the program expire?

Cissna: I believe that if the program is not fixed in a way that addresses all these problems that we’re going to talk about today then yes, I think that it should expire.

Senate hearing, legislation, I-829 receipt notices (updated)

Senate Hearing

Mark your calendars for 10 am EST Tuesday, June 19, when Chairman Grassley will host a Senate Judiciary Committee hearing with the provocative title Citizenship for Sale: Oversight of the EB-5 Investor Visa Program. So far the only announced witness is USCIS Director L. Francis Cissna. As background for the hearing, I recommend my 2015 post Immigrant investor program comparison, which explains how EB-5 fits in the continua of investor visa programs around the world, and the risks and challenges for government oversight inherent in the fact that it’s specifically not a “citizenship for sale” program.

Legislation

The House will reportedly vote next week on immigration legislation: Bob Goodlatte’s H.R. 4760 Securing America’s Future Act, and another to-be-announced bill dealing at minimum with DACA and border security. H.R. 4760 as written would not affect EB-5. (It covers DACA, border security, family reunification, and diversity visas, and proposes reallocating diversity visas to reduce backlogs in EB-1, EB-2, and EB-3 only.) The second bill (available in discussion draft) would affect EB-5 by removing the per-country limit on visa numbers for the EB-5 category. (This would be good news for backlogged China and bad news for all other countries, which would then share the burden of oversubscription equally with China.) In an apparent slight to EB-5, the discussion draft bill would increase total visa numbers for every EB category except EB-5.

I-829 Notices

And a nice email (followed up by another email with qualifications) for people facing long I-829 waits.

From: U.S. Citizenship and Immigration Services <uscis@public.govdelivery.com>
Sent: Tuesday, June 12, 2018 9:02 AM
Subject: Update to Form I-797 Receipt Notices for Form I-751 and Form I-829

As of June 11, 2018, petitioners who file Form I-751, Petition to Remove Conditions on Residence, or Form I-829, Petition by Entrepreneur to Remove Conditions on Permanent Resident Status, will receive a Form I-797 receipt notice that can be presented with their Form I-551, Permanent Resident Card, as evidence of continued status for 18 months past the expiration date on their Permanent Resident Card.

We are making the change from 12 to 18 months because current processing times for Form I-751 and Form I-829 have increased over the past year.

Additionally, we will issue new Form I-797 receipt notices to eligible conditional permanent residents whose Form I-751 or I-829 was still pending as of June 11, 2018. Those Form I-797 receipt notices will also serve as evidence of continued status for 18 months past the expiration date on petitioner’s Permanent Resident Card.

As a reminder, conditional permanent residents who plan to be outside of the United States for a year or more should apply for a reentry permit by filing Form I-131, Application for Travel Document, before leaving the country. Read more information on our Green Card webpage.

To learn more, visit our website.

From: U.S. Citizenship and Immigration Services <uscis@public.govdelivery.com>
Sent: Wednesday, June 13, 2018 10:21 AM
Subject: Form I-751 Data Entry Delay at California Service Center

USCIS’ California Service Center (CSC) is experiencing a delay in initial data entry for Form I-751, Petition to Remove Conditions on Residence. Since initial data entry has to be completed before a receipt notice can be issued, some petitioners and their dependents may experience a delay in receiving a receipt notice for a Form I-751 submitted to the CSC.

If you submitted a Form I-751 to the CSC in May 2018 and you have not received a receipt notice, do not file a duplicate Form I-751 unless you have received a rejection notice or have been instructed to do so by the CSC.

The CSC is working to complete data entry of these petitions by the end of June 2018, and will issue another web alert once initial data entry has returned to normal. Petitioners will receive a receipt notice once their data is entered into USCIS systems.

If your 2-year green card has expired, you should call the USCIS Contact Center at 1-800-375-5283 (TTY for people with hearing or speech disabilities: 1-800-767-1833). The USCIS Contact Center will setup an appointment for you and any eligible dependents at your local field office. If possible, bring evidence that you sent your Form I-751 via USPS or courier service, such as FedEx.

For more information, visit our website.

Processing Report, Terminations, Regulations, RC List Changes

Processing Time Report Update

The processing times reports for EB-5 forms were updated on May 31, 2018 with new Estimated Time Ranges and new variables for calculating the Case Inquiry Date. Until this update, the reports had been constant since March 23, 2018.

Form I-526 Processing Time:
* Estimated Time Range changed to 20-25.5 months (previous report: 25-32.5 months)
* Case Inquiry Date changed to today’s date minus 761 days (previous report used -971 days)

Form I-829 Processing Time:
* Estimated Time Range changed to 29-37.5 months (previous report: 23-30 months)
* Case Inquiry Date changed to today’s date minus 1,121 days (previous report used -893 days)

Form I-924 Processing Time:
* Estimated Time Range changed to 19.5-25 months (previous report: 17-22.5 months)
* Case Inquiry Date changed to today’s date minus 746 days (previous report used -663 days)

My theory, supported by an informed-sounding blog commenter, is that USCIS recalculated the time ranges based on a dramatic drop in I-526 receipts and dramatic rise in I-829 receipts over the past few months. (The Immigration Data page has not yet been updated with FY2018 Q2 or Q3 data, so I’m not sure.) Alternatively, IPO might have decided to reallocate resources away from I-829 to I-526 adjudication, or the I-526 team might be on fire while the I-829 team struggles with something.

But it’s tough to interpret these reports. A processing time estimate could be either (1) forward-looking, “the average time it will take a petition filed today to get adjudicated” or (2) backward-looking, “the average time that petitions being processed today have been waiting.” It can’t be both because 1 and 2 are very different numbers, thanks to dramatic fluctuations in receipt numbers and changing processing capacity over time. But we don’t know which we’re getting with the USCIS processing time report. The “Case Inquiry Date” would logically be backward-looking, while the “Estimated Time Range” is forward-looking if, as I suspect, it’s calculated by dividing currently-pending petitions by current average rate of adjudication. But the report says that the Case Inquiry Date is based on the Estimated Time Range. But calculating a backward-looking estimate from a forward-looking estimate would be nonsense. So I don’t know what to think. (For everything else I know/don’t know about processing times, refer back to the post How Long Does I-526 Take? (III))

Considering the ambiguity (and the fact that the report, however it’s calculated, can evidently suddenly change by six months or more), better not rely on USCIS processing time information for major decision-making. Just one thing is clear: EB-5 petition processing times are too long, and fuel a number of the political and integrity threats that face EB-5 today.

Regional Center Terminations

The USCIS website has been updated with some additional termination notices for regional centers terminated through May 2017. I added the letters to my Termination Log, summarized in the following table.

The recent termination letters mainly cite failure to file a Form I-924A annual report and/or inactivity (i.e. no EB-5 investors in the last 3-5 years) as reasons for termination. They rarely mention derogatory evidence as a reason.

Examples:

Regulations

The indefatigable Senator Grassley continues to nip at the heels of the EB-5 regulations. Today he sent a letter to President Trump with this complaint: “As I mentioned to you yesterday afternoon, certain EB-5 interest groups are telling investors they have ‘bought off the White House’ and that your Administration will never allow the EB-5 regulations to take effect. These comments are very disturbing, and undermine the American people’s faith in your ability to restore integrity to our immigration system.” Earlier this week he sent a letter to DHS urging “It is past time for your Department to publish the modernization rules. I have received reports that certain industry groups believe the White House will never allow the regulations to go into effect. Please confirm or deny this allegation, provide my office with an update on the status of these rules, and any impediments to their finalization.” (FYI I don’t know to which”certain industry group” Senator Grassley refers. To the extent that I’ve observed questionable marketing around the regulations, it’s people trying to hustle prospects into investing now by claiming that the possible August 2018 date for final action on regulations is actually a hard and firm August 2018 deadline to invest under current rules — while omitting to mention that final action date doesn’t mean effective date, and the OMB Unified Agenda dates are not guaranteed.)

I used to read between the lines of Senator Grassley’s legislative proposals that he wished to make EB-5 safe, legal, and rare, but now he seems ready to settle for just making it rare. Because the proposed EB-5 regulations (at least, the RIN: 1615-AC07 possibly on schedule to be finalized in August) do not in fact address the integrity or security concerns that the Senator raises in his letters; their major impact would be to dampen demand by increasing investment amounts.

I keep watching the OMB website to see when/whether the EB-5 regulations progress to the OMB review stage, but that hasn’t happened yet. Any status changes will be recorded on my Washington Updates page.

Regional Center List Changes

Additions to the USCIS Regional Center List, 05/25/2018 to 06/05/2018

  • 900 Regional Center LLC (Hawaii)
  • American Lending Center Arizona, LLC (Arizona): usa-rc.com
  • Birmingham Alabama Regional Center, LLC (Alabama)
  • Discovery California, LLC (California)
  • Gladstone Regional Center, LLC (California)
  • Golden Gateway Regional Center LLC (California)
  • Napa Valley Regional Center (California)
  • Northeast EB5 Regional Center, LLC (District of Columbia, Maryland, New Jersey, New York, Pennsylvania)
  • Principal Regional Center, LLC (Washington)
  • Southeast EB5 Regional Center, LLC (Alabama, Florida, Georgia, Louisiana, Mississippi)
  • West Coast EB5 Regional Center, LLC (California, Oregon, Washington)

New Terminations:

  • Encore Wash D.C. RC, LLC (District of Columbia, Maryland, Virginia) Terminated 5/25/2018
  • Colorado Headwaters RC, LLC (Colorado) Terminated 5/24/2018
  • Faustus Capital LLC (California) Terminated 5/24/2018
  • Marianas EB5 Regional Center (Commonwealth of Northern Marianas Islands) Terminated 5/29/2018

5/15 Policy Manual Update (tenant occupancy)

Update: for more in-depth analysis, see USCIS Evicts Tenant Occupancy Job Counting from EB-5 by Robert C. Divine, Baker Donelson Bearman, Caldwell & Berkowitz, PC and R.I.P. Tenant Occupancy Jobs? An Economist’s Perspective By Jeffrey B. Carr, Economic & Policy Resources, Inc.

–ORIGINAL POST–

USCIS has made another revision to the EB-5 section of the USCIS Policy Manual, this time to rescind its former guidance on counting jobs associated with tenants in a new building funded by EB-5 investment. Now, the tenant occupancy policy formerly in 6 USCIS-PM G Chapter 2 (D) Section 6 has been deleted and replaced with a section in which USCIS explains why the previous policy was wrong. Old policy in a nutshell: We concede the possibility of demonstrating acceptable nexus between investment and tenant job creation, under certain very restricted conditions. New policy in a nutshell: there is no acceptable nexus between investment and tenant job creation. In other words, what was previously only effectively nearly impossible is now definitively impossible, officially.

FYI this document compares the deleted section with the new section. Once again, I copied the 5/15/2018 PM in its entirety into a new document, and used Word’s Compare function to confirm that nothing else changed between the 5/15 and 5/2 versions of Volume 6 Part G. And indeed, no other significant changes. FYI, here’s my folder with all distinct versions of 6 USCIS-PM G.

I don’t know whether to laugh or cry about this change. We’ve been desperately, urgently waiting and begging for clear policy on redeployment, among other issues, and they spend time fiddling with tenant occupancy? How many people have even tried counting tenant jobs since 2013? How is this an issue now? Last year I deleted a bunch of old tenant occupancy-related posts and most of my informational page on the TO question because I thought it had become irrelevant. If indeed TO is not involved in any recent or current offerings, then USCIS is guilty of shameful waste of time. Or if by chance any recent/current offerings do involve TO, relying on guidance that’s been consistent since 2012, then shame on USCIS for sending out a Policy Alert today literally saying that the policy is rescinded as of yesterday.

The new PM language on tenant occupancy states that “a direct financial connection between the EB-5 capital investment and the job creation is necessary to determine a sufficient nexus between the two.” I wonder what USCIS thinks “direct financial connection” means exactly, and the implications beyond tenant occupancy.

Apparently we get until May 29 to comment on the policy change, though it’s effective as of May 15.

On the bright side, two EB-5 policy updates in a month! It’s nice to see the policy process moving. I could just wish for better updates.

Also, FYI there is a change to Volume 7 on adjustment of status that can affect EB-5 among other visa categories.

 

Regulations Update (8/2018?)

The OMB Spring 2018 Unified Agenda has been published, with new estimated dates on action for EB-5 regulations.

  • Estimated Final Action in August 2018 for RIN 1615-AC07 (EB-5 Immigrant Investor Program Modernization), which proposed investment amount and TEA changes. (The Fall 2017 Agenda had previously anticipated Final Action in February 2018.)
  • Estimated Notice of Proposed Rule-making in March 2019 for RIN 1615-AC11 (EB-5 Immigrant Investor Regional Center Program), which dealt with regional center designation and the exemplar approval process. (The Fall 2017 Agenda had previously anticipated NPRM in October 2018.)

It remains to be seen whether these new estimated action dates will be more reliable than previous deadlines. RIN 1615-AC07 is currently a Proposed Rule at Step 7 in the Rulemaking Process, and is not yet listed by the OMB as a Regulatory Action Currently Under Review for Department of Homeland Security.

[6/19 UPDATE: USCIS Director L. Francis Cissna testified at a Senate Judiciary Committee hearing on EB-5 regarding the regulations that “USCIS is currently reviewing the comments and moving forward in the regulatory process with both of these items as expeditiously as possible.” This means that the regs have not in fact advanced as far as we’d thought. When asked whether he thought the regs could be finalized before the 9/30/2018 regional center program sunset date, Mr. Cissna said he didn’t know but that would be “hard to pull off.”]

Speaking at the IIUSA conference on April 27, Kathy Nuebel Kovarik of the USCIS Office of Policy and Strategy “reinforced her department’s position that they will try to get EB-5 regulatory reform done this year, as indicated on the Unified Regulatory Agenda.” This came on the heels of a letter sent by Senators Grassley, Goodlatte, and Leahy to DHS urging the administration to finalize regulations (repeating calls previously made in 2015 and again in 2016 and again in 2017). This week, IIUSA sent an open letter to USCIS encouraging the agency to finalize the proposed EB-5 regulation, but with lower investment amounts ($1 million, or $800,000 in a TEA) than previously suggested. However, the forces against finalizing the regulations remain strong (administrative inertia, and the many stakeholders opposed to the proposed changes). We shall see what happens.

The OMB notices indicate that IPO has hired a new Chief of Policy (Edie Pearson), which is good to know.

FYI, my May 2017 post New EB-5 Regulations: Comments Discussion reviews the proposed regulations and industry response.

5/2 Policy Manual Update (CPR while I-829 pending)

The following new section has been added to the USCIS Policy Manual Vol. 6 Part G, Chapter 5:

D. Extension of Conditional Permanent Residence While Form I-829 is Pending
USCIS automatically extends the conditional permanent resident status of an immigrant investor and certain dependents for 1 year upon receipt of a properly filed Form I-829. [13] The receipt notice along with the immigrant’s permanent resident card provides documentation for travel, employment, or other situations in which evidence of conditional permanent resident status is required.

Within 30 days of the expiration of the automatic 1-year extension, or after expiration, a conditional permanent resident with a pending Form I-829 may take his or her receipt notice to the nearest USCIS field office and receive documentation showing his or her status for travel, employment, or other purposes.

In such a case, an officer confirms the immigrant’s status and provides the relevant documentation. USCIS continues to extend the conditional permanent resident status until the Form I-829 is adjudicated.

An immigrant investor whose Form I-829 has been denied may seek review of the denial in removal proceedings. [14] USCIS issues the immigrant a temporary Form I-551 until an order of removal becomes administratively final. An order of removal is administratively final if the decision is not appealed or, if appealed, when the appeal is dismissed by the Board of Immigration Appeals.

USCIS announced the addition this morning with a Policy Alert on Documentation of Conditional Permanent Resident Status for Immigrant Investors with a Pending Form I-829. The agency solicits stakeholder comments through May 15, 2018 using the procedure described on the Policy Comment page. (Scroll past the tables for instructions.)

Because I love my readers and don’t like relying on online documents, I painstakingly copied all of today’s version of the EB-5 Policy Manual chapter into a Word document, now added to my folder of Policy Manual versions. Word’s document comparison function indicates that Chapter 5 Part D is indeed the only significant change from previous versions, although there are minor unflagged tweaks in other sections (e.g. changing “See Form I-829, Petition by Entrepreneur to Remove Conditions on Permanent Resident Status” to “See Petition by Entrepreneur to Remove Conditions on Permanent Resident Status (Form I-829).”

Update: Robert Divine has published a helpful article explaining the context of this Policy Manual addition: May 2 Policy Manual Update: One Small Step for I-829 Filers; Some Giant Leaps Left for USCIS to Take

New Litigation and AAO Decisions (“invest” requirements)

Appeals and litigation give a rare public glimpse into how the Investor Program Office is adjudicating I-526 petitions. It appears that IPO may be in the midst of a campaign to re-interpret/enforce the EB-5 “invest” requirements as described in 6 USCIS Policy Manual G.2  There have been a spate of denials that turn on language in the securities and transaction documents. Recent examples:

  • Guaranteed returns and debt arrangements, call option issue: CHANG et al v. DEPARTMENT OF HOMELAND SECURITY et al (Case Number: 1:18-cv-00659) is a civil action filed on March 22, 2018 by ten investors who put money into senior living project in Florida. (Here’s a summary and the full complaint.) These investors filed I-526 in 2014 and 2015 and heard nothing back from USCIS, finally making a mandamus complaint in October 2017 to compel agency adjudication. USCIS responded in February 2018, denying all investor petitions based on finding that “a call option reflected in the Partnership Agreement and the offering documents demonstrated the existence of an impermissible debt arrangement.” The investors have responded with a complaint pointing out that this issue was previously addressed by federal judges who found that a call option does not of itself constitute a debt arrangement. In previous cases, the US District Court in DC ruled that the USCIS denials could not survive review because they conflict with the plain language of the regulations, are not compelled by statutory or regulatory purpose, unreasonably stretch the rationale of precedent decisions, and run counter to evidence. Call options (buyout options) have been quite common in EB-5, and I wonder if many I-526 are being held up now behind the scenes while USCIS figures out how to deal with them (balancing newfound intent to deny such cases with the fact that the court has shredded the reasoning behind several denials so far). I’ve seen recent NOIDs based on call options, so USCIS hasn’t given in yet. I can’t see what legs the court (not to mention policy and reality) have left to the case against call options per se, and I hope USCIS accepts that soon to avoid further needless delays, disruption, and lawsuits. (UPDATE: FYI here are my notes for an ILW call on 4/17 to discuss the “invest” requirement, and new USCIS challenges to equity with debt-like features. The notes link to the relevant AAO and district court decisions, and summarize the fact patterns and arguments for each case.)
  •  “Made available” and bridge financing issues: JAN262018_05B7203, JAN302018_01B7203, FEB072018_02B7203, and MAR152018_01B7203 are decisions on the same regional center offering to invest in construction of a distribution center in Washington. After having approved 10 investors in the project, USCIS denied petitions for the last 10 investors. USCIS’s main excuses for this treatment: (1) the project having completed construction constitutes a material change of fact that prevents the last investors from relying on favorable decisions for previous investors, (2) USCIS belatedly identified a legal deficiency: that the PPM and loan agreement language don’t unambiguously obligate the NCE to make the entire amount of the petitioners’ funds available to the JCE, and (3) the reality that the investors chose a project that successfully developed and created jobs does not overcome paperwork problems. The petitioners were judged ineligible not based on reality, necessarily, but based on wording: they submitted documents that had leaky language in the loan agreement, didn’t paper up a bridge financing arrangement the way it’s supposed to be papered, and left sloppy inconsistencies in the business plan and economic impact report. Several morals from this case: People who draft transaction documents need to be mindful of the “made available” and bridge financing features of the EB-5 “invest” requirement, and write that into documents — taking particular care when it’s likely that (as often happens now considering long processing times) the project will have been completed by the time USCIS finally gets around to adjudicating I-526 petitions for investors. Prepare for the fact that an adjudicator may ask two years later: “why the JCE would still need this capital and to what use it would be put by the JCE in light of the completion of the project.” Document preparers must be very attentive to detail and careful about language, because compliant documents are apparently more determinative than compliant reality in whether or not investor petitions get approved. I keep this burden in mind as I write EB-5 business plans.
  • “Chance for gain” issue: FEB282018_02B7203,  MAR092018_02B7203, MAR162018_01B7203 are decisions on the same offering to invest in a regional center NCE to make a loan to a JCE to construct, finance, and operate an hotel. The denials rest on a finding that the LP agreement and loan agreement “do not provide the Petitioner with any rights to the NCE’s profits, whether derived from the loan interest or otherwise, and the sole opportunity for the Petitioner to generate a return on the investment is if the general partner elects to pay a 0.05% interest payment upon the NCE’s loan repayment.” USCIS will deny cases that guarantee a return, but – as we see here – can also deny cases that appear to make a return too discretionary. USCIS found in these cases that “discretionary chance for return which is unrelated to the investment does not satisfy the regulatory requirement for capital at risk under 8 C.F.R. § 204.60)(2).” Again, people drafting documents must walk a very fine line. USCIS wants to see (1) that investors have a chance for gain, (2) that the income sources to pay a return are directly related to the purpose of the underlying investment, (3) that the return is not guaranteed, (4) that the NCE general partner does not have absolute discretion to make or withhold the return. And furthermore, the documents have to be right the first time, at I-526 filing. The petitioners in FEB282018_02B7203 and MAR092018_02B7203 provided amended documents in response to NOID, but USCIS judged this an impermissible material change and refused to consider such post-filing clarifications.
  • “Business activity” at-risk issue and identified location: To meet the at-risk requirement for EB-5 investment, a petitioner must present evidence of actual undertaking of business activity, not just an idea for future activity. The precedent decision Matter of Ho cited entering a lease as an example of de minimus activity that doesn’t  itself qualify as sufficient business activity to put funds at risk. So if a petitioner hasn’t even secured a business location before filing I-526, he can expect to be challenged as having even less than de minimus activity. That happened to the petitioner in MAR162018_02B7203, a regional center case. “The Chief concluded that without a specific property, the Petitioner could not demonstrate that his funds were at risk, that the business plan was comprehensive rather than hypothetical, or that certain inputs to the economic model were valid.” (This decision also shows the importance of a quality business plan with real market analysis and financials, as it rips apart the placeholder content in the petitioner’s plan. And it shows confusion about the job creation timing requirement in the USCIS Policy Manual Vol. 6 Chapter 2(D)5. The decision seems to assume that job creation must occur within two years of filing I-526, while the PM states that the two-year job creation window is deemed to begin 6 months after adjudication of Form I-526.)

Other recent AAO decisions of note:

  • FEB072018_01B7203 is one of the rare cases where AAO decides to withdraw USCIS’s decision – in this case involving source of funds derived from loan proceeds received as a gift from the petitioner’s husband.
  • FEB152018_01K1610 upholds USCIS’s decision to terminate a regional center for this fatal error: filing Form I-924A to the wrong address.
  • FEB282018_01B7203 is yet another reminder that the new owner of a pre-existing business cannot expect that the enterprise and its new employees automatically qualify as “new” for EB-5 purposes.

Minor Investors:

Long processing times and the visa backlog have motivated families to make a teenage child to be the principal EB-5 applicant. USCIS has questioned but started approving such petitions, as reported by Wolfsdorf Rosenthal in this post and Miller Mayer in this webinar (35 minutes into the recording).

Washington Updates:

I continue to update my Washington Updates page, most recently with post-March analysis and a link to a letter from several senators to USCIS urging that regulations be finalized. Senator Grassley has made this plea multiple times since 2016; we’ll see what happens now.

Personal Update:

As EB-5 reporting and analysis become increasingly time-consuming, and less linked to my selfish purpose of encouraging demand for my business plan-writing service, I’ve decided to put up a donate option. If you can support the effort behind the blog and help keep it in business, please visit my About page and scroll down to the Paypal button, which can facilitate making a contribution through Paypal. I want to avoid a subscription model because publicly-available EB-5 information is important to my clients and the health of the EB-5 program.

Regional Center List Changes:

Additions to the USCIS Regional Center List, 03/19/2018 to 04/10/2018

  • American Capital Regional Center, LLC (Texas)
  • Borrego Development, LLC (California, Nevada)
  • Colorado Rocky Mountain High Regional Center, LLC (Colorado): www.coloradorockymountainhighrc.com
  • M5 Venture Silicon Valley RC LLC (California): www.m5venture.com
  • Mile High Regional Center (Colorado)
  • National Regional Center, LLC (California)
  • Protogroup, Inc. (Florida)
  • Texas Tilegend Regional Center (Texas)
  • Y & L Enterprises LLC (Iowa, Nebraska)

New Terminations

  • Encore Raleigh/Durham Regional Center (North Carolina)
  • Encore Alabama/Florida Regional Center (Alabama, Florida)
  • G.R.E.E.N. Regional Center (New Jersey)
  • BLMP Florida Healthcare Regional Center, LLC (Florida)
  • Michigan-Indiana EB-5 Regional Center (Indiana, Michigan)
  • Queensfort Capital Massachusetts Regional Center, LLC (Massachusetts)
  • South Pacific Regional Center, LLC (Hawaii)
  • Queens Fort New York Regional Center, LLC (New Jersey, New York, Pennsylvania)
  • Central Texas Properties Regional Center (Texas)
  • South Texas EB-5 Regional Center, LLC (Texas)
  • Pacific Viniculture (Washington)
  • California Investment Immigration Fund, LLC (CIIF) (California)
  • USA ODI Regional Center, LLC (Maryland, Virginia, West Virginia)
  • Manchester Pacific Regional Center (California)
  • Regency Regional Center, LLC (California)

RC Authorization to 9/30/2018, Processing Times, New RCs

Regional Center Program Authorization

The last time Congress voted a significant regional center program extension was 2012. Since then, the program has been extended a few months at a time, in connection with government funding. This is now happening again with H.R.1625, the vehicle for the Consolidated Appropriations Act 2018, which was signed by the President today.  The text includes regional center program authorization to 9/30/2018 on PDF page 1759, as follows:

SEC. 204. Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note) shall be applied by substituting “September 30, 2018” for “September 30, 2015”

This language refers back to Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (Public Law 102-395) Section 610 (PDF page 47), which established the regional center program. The 2018 Appropriations Act does not include the EB-5 Reform Act, or other EB-5 changes. It just extends the borrowed time until we get a good piece of EB-5 legislation.

Processing Times

USCIS has attempted to clarify reporting for processing times, and succeeded in confusing me, at least, even more than before. Unfortunately I missed a webinar on this topic yesterday because even the emails were confusing, but here’s what I think I understand, having read the new pages at egov.uscis.gov/processing-times/ and egov.uscis.gov/processing-times/more-info, and used my spreadsheet to fiddle with the EB-5 form numbers in comparison with numbers in the old-style report.

USCIS has changed its method for calculating processing times for four forms: N-400, I-90, I-485, and I-751. The underlying method for calculating (and underlying reality behind) times for I-526, I-829, and I-924 has not changed. What’s different for the EB-5 forms is that USCIS now reports three pieces of information: a high and low month in an “estimated time range” and a “case inquiry date.” The low month in the time range corresponds to the date USCIS previously reported for “processing cases as of…” in the old-style report, while the high month multiplies that duration by 1.3, and the case inquiry date more-or-less corresponds to the high month. Apparently IPO doesn’t want people complaining that they’re outside of normal processing times until their cases are taking 130% longer than average. If you took part in the webinar and have additional insights or corrections, please share.

See also the OIG Report: USCIS Has Unclear Website Information and Unrealistic Time Goals for Adjudicating Green Card Applications

Visa Availability

The Visa Bulletin for April 2018 confirms that Vietnam is definitely up next month for a cut-off date based on oversubscription. With visa availability being the major political and practical factor for EB-5 today, I’ll be writing more about this soon.

Regional Center List Updates

Additions to the USCIS Regional Center List, 03/09/2018 to 03/19/2018:

  • 888 American Dream Projects Regional Center (California, Nevada)
  • American National Regional Center d.b.a. EB5 Financial Regional Center (California): www.anrcs.com
  • Dayton Regional Center, LLC (Ohio)
  • Delvelyn Regional Center, LLC (California)
  • Hudson Funds New York Regional Center, LLC (New Jersey, New York, Pennsylvania): hudson-funds.com
  • MGV NYC Regional Center LLC (New Jersey, New York, Pennsylvania)
  • Monterey Massachusetts Regional Center, LLC (Massachusetts)
  • Monterey Northern California Regional Center, LLC (California)
  • Monterey Southern California Regional Center, LLC (California)
  • New York/New Jersey Real Estate and Infrastructure Regional Center LLC (Connecticut, New Jersey, New York)
  • PacNW Regional Center, LLC (Oregon, Washington)
  • Propet American Dream, LLC (Washington): www.propetamericandream.com
  • RSR EB-5 Regional Center, LLC (North Carolina, South Carolina)
  • Smith Mountain Regional Center, LLC (Colorado, Oklahoma, Texas)
  • U.S. Green Capital Regional Center, LLC D/B/A Playa Vista Regional Center (California): pvcapitalmanagement.com
  • Washington American Investments, LLC (District of Columbia, Maryland, Pennsylvania, Virginia)

New Terminations:

  • Chen Roberts Regional Center (Oklahoma)
  • Regency Regional Center LLC (California)

EB-5 Reform: Missed Opportunity

It’s easy to blame big-moneyed New York City real estate interests, as Senator Grassley likes to call them. I had assumed their lobbying was to blame for the draft EB-5 Reform Act, which seemed designed to protect investment in prosperous areas and privilege well-heeled regional centers. But now Senator Grassley blames them for blocking the bill. He says “For the last year, my staff, along with Chairman Goodlatte, Senator Cornyn, and Senator Flake’s teams, has worked around the clock to produce an EB-5 reform package… But, these reforms weren’t acceptable to the big moneyed New York industry stakeholders who currently dominate the program. And because big money interests aren’t happy with these reforms, we’ve been told they won’t become law.” Could this really be what doomed the bill? The EB-5 Reform Act didn’t look like reform to many stakeholders, but apparently Senator Grassley and NYC both believed in its potency, enough to support it and block it respectively. I’ll respond more later to Senator Grassley’s speech, which shows his good faith and fundamental misunderstanding of several aspects of EB-5. Pro tip: don’t have your staffers work around the clock on legislation for a year before calling in organizations like IIUSA to give input and education to help keep the content on track with your laudable objectives. A broad base of people in EB-5 agree with you in wanting legislation that helps support the program’s good purpose with respect to investment in underserved areas and job creation. Include them in the process. (The benefits of such inclusion are already evident in the Revised EB-5 Reform Act of 2018 posted by IIUSA.) As Klasko Law puts it in their client alert: “The EB-5 industry was largely shut out of the process or brought in too late to be able to provide meaningful guidance and input. So it should come as no surprise that the proposed bill died the same way it began: in a secret, back-room agreement without the participation or input of the vast majority of the EB-5 industry.”

Excerpt from the IUSA Statement on Missed Opportunity for Long-Term EB-5 Authorization:

…In early March, IIUSA was pleased to join a group of industry organizations to review and discuss a bicameral compromise draft proposed by Senate and House Judiciary Committee Chairmen and key members of House and Senate leadership. After additional revisions were made to the compromise draft, IIUSA’s Board of Directors voted overwhelmingly to support the bicameral compromise that would have offered a six-year reauthorization and much-needed reforms.

Unfortunately, the compromise reform and reauthorization legislation failed to garner the support of all industry organizations and failed to be included in the omnibus appropriations legislation. We are extremely disappointed in this missed opportunity but are most appreciative of the House and Senate Judiciary Committee leaders and members of Leadership who worked tirelessly to delicately craft the compromise package. The omnibus legislation, however, does include an extension of the current EB5 Regional Center Program through September 30, 2018. We plan to continue to work diligently with Congress and our membership to build on the compromise draft legislation.

Other reactions:

EB-5 Reform Act: the Good

This post summarizes points in favor of the proposed EB-5 Reform Act. Its details and compromises won’t please everyone, as discussed in my previous post, but it is a piece of EB-5 legislation currently without a better alternative.  Here are some reasons for stakeholders be happy if it gets included in the spending bill due by March 23.

  • People who already invested and waiting for a green card: Although they would bear downside of this bill’s most painful compromise – visa set-asides – they will suffer more if the regional center program loses authorization. At least under current policy, the process will simply be over for RC investors awaiting conditional permanent residence if the RC program is deauthorized long-term. The RC program will sunset on March 23 unless something is done, and this EB-5 Reform Act appears to be the only thing that can be done. I’d love to see another short-term extension to give time for Congress to draft more fully-baked and inclusive legislation, but after three years of short-term extensions that’s a lot to hope for. (Update: another short-term extension has now emerged as a possibility.)
  • All EB-5 investors: The bill gives desperately-needed protections and options for investors in case of change with projects and regional centers, and improves and compresses the process for removing conditions.
  • Future investors: The new investment amounts are high, but much lower than they could’ve been, or will be if the regulations are finalized instead. Visa set-asides offer hope (if no more) to potential investors from backlogged countries. Future investors will benefit from new process improvements, investor protections, and integrity measures.
  • Regional Centers: A more difficult and expensive life under the EB-5 Reform Act is better than death from loss of RC program authorization. The five-year program extension will provide much-needed stability. The moratorium and transition period will be rocky at first, but should result in a more-clearly-defined program eventually. The visa set-asides will help with marketing, at least for awhile, and the new incentive categories broaden the kinds of projects that may be viable to market. The new investment amounts are not so high as to kill demand entirely, unlike in the regulations. And the bill opens up a new category of potential demand: investors who already filed with someone else but now want to switch projects and/or regional centers — something not previously allowed.
  • People who want program integrity: This bill proposes integrity measures that mostly appear possible to implement (unlike previous drafts that would have made good-faith compliance near-impossible in practice, and thus not been effective in weeding out bad players either). And it offers funding, personnel, and official authorization for effective compliance initiatives already started by USCIS.
  • People who want to tighten TEA incentives: This bill puts responsibility for incentive-area designation with USCIS, which will be more narrow, rigorous, and consistent than states. It’s naturally difficult to incentivize investment in significantly distressed and remote areas, and such areas would be at least as competitive under the EB-5 Reform Act as they are now.
  • Investor Program Office: Although this bill gives them more work, it also exempts most some of their decisions from judicial review. (I oversimplified — see MF’s comment.)

It’s too late for major changes and amendments if the EB-5 Reform Act is to get into the omnibus at all, but if I could propose one amendment it would be this: a period of at least weeks before the provisions take effect and the filing moratorium begins. Most stakeholders haven’t even seen the bill text yet, and it will be very hard to comply instantly if it goes into effect instantly.

Other commentary on this bill:

EB-5 No-Reform Act, RC List Changes

On Friday, IIUSA reported that “Yesterday IIUSA met with Republican negotiators and received draft legislative text that is being proposed for inclusion on the March 23rd Congressional omnibus package… We expect the House to vote the omnibus out of the chamber as early as March 16, allowing the Senate the entire week of March 19 to pass the measure before government funding expires on Friday, March 23…. the current debate over what policy provisions to include in the FY18 omnibus spending package provides one of the few, if not the only, opportunity to secure a long-term EB-5 reauthorization.”

With three years to work on drafting EB-5 legislation, why did Congressional negotiators keep this most recent EB-5 bill hidden until the very last minute, and provide even IIUSA only a few hours to read it and respond? Possibly because this “Immigrant Investor Visa and Regional Center Program Comprehensive Reform Act” is a tissue of minority hand-outs, declawed reforms, poison pills, and half-baked good ideas. We’re to conclude “This is our last chance to get significant regional center program authorization, and it’s too late to make changes now, so we have to support this, no matter the details.”  I understand, but oh those details. I am ashamed of this bill, and on behalf of the people behind it. How did years of negotiation produce this document? The media, pro-reform lawmakers, and the good proportion of EB-5 stakeholders left out of compromises will not be kind to those who drafted this bill, if it passes as-is.

The EB-5 Reform Act has a few generally-favorable provisions:

  • It would reauthorize the regional center program to 2023
  • It would add some flexibility for material change, and some protection for investors in projects that don’t work out
  • It would make some process improvements

The EB-5 Reform Act is lobbying money well-spent for a few:

    • The TEA reform in this bill is calculated to avoid unduly incentivizing investment in distressed areas. In three years of EB-5 legislative proposals, each version has had a softer TEA proposal than the last. This one reduces the monetary incentive to a hair, compensates with incentives that will either be impotent/unrealizable in practice (visa set-asides, premium processing) or positively counterproductive (lower jobs requirement for needy areas?), broadens the definitions of what qualifies as an urban distressed or rural area (e.g. switching from the NMTC “severe distress” criteria in previous proposals to just the NMTC low-income criteria, and no specified limit on gerrymandering), and adds new incentivized areas for a special few (closed military bases, U.S. territories, infrastructure, franchise investment funds). Congress was originally energized for EB-5 reform because they didn’t like seeing most EB-5 dollars flowing to already well-capitalized projects in already well-capitalized areas. That status quo has little to fear from this legislation. Luxury real estate will keep its top spot if this passes, and we’ll still have Chuck Grassley and the media shaking their fists.
    • The bill offers real estate projects an extra gift for good measure: construction jobs can be aggregated and counted as qualifying direct permanent jobs regardless of duration.
    • The integrity provisions in this bill are calculated to avoid making life difficult. Gone are the suggestions in past bills about involving third parties in oversight or reporting or requiring account transparency or fund administration. Here, integrity measures focus on internal certifications of compliance to the best of the certifier’s knowledge. That’s good for honest players who can do without burdensome and intrusive regulation, but also little limit on bad players happy to self-report compliance. Such teeth as the bill has — site visits, audits, background checks, termination threat — are largely things IPO is doing already, though I’m sure they’d appreciate the official authorization and extra funding. But generally, I’m not sure this bill will satisfy lawmakers who wanted EB-5 reform to combat fraud.
    • The bill retains integrity measures that conveniently double as anti-competitive measures. The bill keeps a previously proposed annual regional center fee – lowering the amount for the largest regional centers and keeping it high for the smallest. It is more severe than previous proposals on involvement by anyone with foreign government connection at any level, even in providing non-EB-5 capital to a job-creating entity.
    • UPDATE: Re-reading more carefully, I see that I’m wrong about this one. The bill says that for four months after enactment, no one can file I-526 except for new investors in in-progress raises with an approved examplar. The bill even attempts to set aside 7,000 visas for these privileged investors, forgetting that the numerical limit for 2018 visas was already exceeded back in 2014.

Here’s who will be most upset, if the EB-5 Reform Act passes:

  • The approximately 92,000 people in line for an EB-5 visa. These people are already in for a long wait with an annual quota of about 10,000 visas, and the EB-5 reform act has set-asides that would reduce generally-available visa numbers to about 6,900 per year. The situation will be especially bad for people from China, Vietnam, and possibly India. Those people already in line didn’t plan to wait 17 years or so for conditional green cards — and neither did the projects accepting their investment. The bill does not include on-purpose retroactivity (it doesn’t make TEA, investment amount, or job creation changes apply to people who already filed I-526), but past investors will be severely affected by the visa set-asides, and potentially by new restrictions that affect regional centers and investment projects.
  • Those hoping to raise EB-5 funds to benefit projects in rural or distressed urban areas. The new incentives are not better designed to benefit them than the current incentive structure. The new regional center fees and requirements are well-designed to put anyone out of business who isn’t raising funds from hundreds of investors for prosperous urban projects.
  • Entrepreneurs planning to file EB-5 petitions in the near future for their own enterprises, and any regional centers planning to raise funds for a project without a pre-approved exemplar. The bill has a 120-day moratorium on filing new I-526 and I-924, followed by a transition period from day 121 to day 365 that limits the petitions that can be processed.
  • The Investor Program Office. This legislation will be tough to interpret and implement. USCIS will have to figure out provisions that the bill hardly explains: the franchise investment fund idea, the provision that I-829 petitions based on investment in unrealized/failed projects are to remain valid, the new amendment and re-petition processes, the provisions that imply retroactive new requirements for past projects, and the effects on direct EB-5. The bill stipulates a 120-day transition period, during which USCIS can come up with new regulations and policy, new forms and supporting processes, a new TEA designation process, and a new premium processing option. Hahahahaha. 120 months would be more plausible, considering past experience.
  • Regional centers with fewer than 20 investors annually. They’ll face a $10,000 annual fee and a list of new compliance certifications that will be hard work if taken seriously.
  • EB-5 projects with any foreign-government-entity-related funds in the capital stack, or personnel at any level.

End of rant. If I wake up tomorrow to find that this has been attached to the House version of the new omnibus spending bill, then I shall transition to learning to live with it. And polish my resume, perhaps.

In the meantime, USCIS approved a bunch of new regional centers. Probably most of these applicants filed I-924 back in 2015, little thinking what they’d be up against today!

Additions to the USCIS Regional Center List, 02/02/2018 to 03/05/2018.

47 regional centers have been added.

  • AHRC GA, LLC (Georgia)
  • All American Investment Holdings, LLC (California)
  • Ameri-Link Northeast Regional Center, LLC (California, New Jersey, New York)
  • American Citizen Regional Center – Southern California LLC (California)
  • American Equity Fund California, LLC (California)
  • American Equity Fund, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • Avista Regional Center, LLC (Florida, Georgia)
  • BC Southeast Regional Center, LLC (Florida)
  • BC West Coast Regional Center, LLC (California)
  • Bay Area Community Regional Center, LLC (California)
  • CMB Hawaii Regional Center, LLC (Hawaii): www.cmbeb5visa.com
  • Carolina EB-5 Regional Center, LLC (North Carolina)
  • Chicago Golden Pacific, LLC (Illinois): www.usgoldenpacific.com
  • EB-5 Inc Regional Center, LLC (Florida)
  • EB5 Texas Investment Group LLC (Texas)
  • East Coast Prime Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • Education Fund SC Regional Center, LLC (Louisiana, New Mexico, Texas): edufundamerica.com
  • Gateway America Regional Center (New York, Ohio, Pennsylvania)
  • Green Mountains Regional Center, LLC (New Hampshire, Vermont)
  • Happy Family USA Regional Center (California, Nevada): www.hfeb5.net
  • Hawaii Investor Regional Center Corp. (Hawaii)
  • LJHB Perpetual, LLC (District of Columbia, Maryland, Virginia, West Virginia)
  • Landmark Regional Center, LLC (Connecticut, New Jersey, New York)
  • Manhattan CBD Development Regional Center, LLC (New York)
  • Mid-America Renaissance Regional Center, LLC (Kansas, Missouri)
  • NYC Liberty Green Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • New York City EB-5, LLC (New Jersey, New York, Pennsylvania): www.americaneconomicgrowthfund.com/nyceb5
  • New York City Transportation Regional Center LLC (Connecticut, New Jersey, New York)
  • OMS Group, LLC (North Carolina, South Carolina)
  • Omaha Old Market Regional Center LLC (Iowa, Nebraska)
  • Pacific West Economic and Development Center LLLP (California, Nevada)
  • Phoenix & Dragon LLC (Connecticut, Massachusetts, New Hampshire, Rhode Island)
  • Phoenix Pacific LLC (Washington)
  • Prime Capital, LLC (California)
  • RW EB-5 Regional Center, LLC (Nevada)
  • Real Estate Development Center of America LLC (Florida, Georgia, South Carolina, Tennessee): redcoaregionalcenter.com
  • Redwood Regional Center, LLC (Oregon, Washington)
  • Roundhay Partners Regional Center, LLC (California)
  • Serendipity Regional Center, LLC (California)
  • Smith Delta Regional Center, LLC (Alabama, Arkansas, Louisiana, Mississippi, Tennessee)
  • SoCal Global Regional Center, LLC (California)
  • South Florida Real Estate and Infrastructure Regional Center LLC (Florida)
  • SunCapital Texas Regional Center (Texas)
  • The Harbor Bank Community Development Capital RC (District of Columbia, Maryland, Pennsylvania, Virginia, West Virginia)
  • WRCI California Regional Center, Inc. (California, Nevada)
  • Zephyrus Regional Center LLC (Arizona, California, Nevada, Oregon, Washington)

Renamed:

  • EB5 Affiliate Network State of Texas Regional Center, LLC (Texas) into EB5 Affiliate Network States of Texas and Louisiana Regional Center, LLC (Louisiana, Texas

Finally restored to the approved list, after AAO sustained its termination appeal:

  • Path America Sonoco, LLC (Washington)

New Terminations:

  • Omega Puerto Rico Regional Center, LLC (Puerto Rico)
  • Southwest Kansas Regional Center (Kansas)
  • EB5 Memphis Regional Center, LLC (Tennessee)
  • New Orleans’ Mayor’s Office RC (Louisiana)
  • Diversified Global Investment, LLC (Georgia)

 

No-change February

My Washington Updates page started the month of February full of anticipation.

I thought we’d see final action for EB-5 regulations, because the Fall 2017 Unified Agenda said we would (having advanced the anticipated action date from April to February), Congressmen who might’ve been behind alternative legislative action (Grassley, Goodlatte) instead sent a letter in April 2017 urging DHS to finalize the regulations, USCIS Director Cissna committed in his confirmation hearings in May 2017 to finalize the regulations, and the few White House statements on EB-5 sounded warm to the proposed changes. So I was willing to bet that the February Final Action date would be met. But nothing happened in February, and now I wonder whether we’ll ever see action on these regulations. I’ll keep my eye out for an update in the Spring 2018 Unified Agenda just in case, but now that the initial impetus for action was quelled, I don’t know what’s left to counteract the overwhelming power of administrative inertia. The person responsible for drafting the regulations has left IPO (and Lori Mackenzie’s Policy Chief position was still vacant as of November 2017), the EB-5 industry has many problems with the regs as proposed, DHS would surely prefer to avoid policy-revising headaches associated implementing new regs, Chairmen Grassley and Goodlatte have bigger fish to fry, and who has incentive and energy left to push EB-5 program modernization? The proposed regulations could’ve had a devastating effect on my client base, particularly for direct EB-5, so I’m selfishly glad they weren’t finalized. But the process is still frustrating.

I also started February with hope that Congress might manage immigration legislation, and that EB-5 could benefit from the expressed intent to redistribute some visa numbers in a way that privileges immigration by economically-successful people. But now here we are in March with no immigration legislation and no indication that there will ever be any. The last word I heard is that Congress may handle DACA – the primary impetus for new legislation — with its favorite cop-out: a short term extension attached to the next omnibus funding bill. Negotiations over immigration legislation apparently failed because Democrats really wanted DACA while Republicans didn’t want a border wall or to redefine the nuclear family as much as they wanted Democrats to fail with DACA. Now I see no prospect on the horizon for the two things EB-5 needs from legislation: more visa numbers to relieve the backlog and keep up with on-going demand, and a long-term extension of the regional center program. Would public relations allow Congress to achieve a long-term extension to the little-considered EB-5 regional center program benefiting wealthy foreigners if they simultaneously manage only a short-term extension for the high-profile DACA program benefiting US-raised kids? With DACA and border security having failed to sustain bipartisan immigration negotiations, what remains to bring people back to the table for a successful negotiation involving visa numbers? How likely is it that Grassley & co. will stop demanding genuine TEA reform as a condition for stabilizing the RC program, or that industry lobbyists will suddenly agree to make painful-to-their-backers TEA concessions? Who is there even to seriously advocate for the overall health and long-term stability of the EB-5 program, when most major users just need it a few more months unchanged to finish their own capital raises?

I’m just sitting in my armchair in Utah reading the news, not on the ground in Washington D.C., but at any rate it’s tough to theorize change at this point. Here’s what I currently expect for 2018/2019: several more last-minute months-long content-free extensions to the regional center program, no visa backlog relief, and no change to the EB-5 investment amount or TEA definitions or other targets for EB-5 reform. But I’ll keep updating my Washington Updates page as I hear anything, and maybe I’ll be surprised by action.

Updates (CR to 3/23, AAO sustained appeals, RC List)

EB-5 Legislation and Regulations
I’ve started a Washington Updates page off the Resources tab to keep track of what’s going on with legislation and regulations, and will revise it regularly as I hear about changes, in lieu of endless update posts. The page has details of regional center authorization (currently extended through March 23, 2018) and the immigration debate and new bills as they relate (or mostly do not relate) to EB-5.

AAO decisions: troubled RCs/projects

Do investor petitions fail when the project and/or regional center runs into trouble? Not necessarily, according to recent AAO decisions on EB-5 appeals.

  • In August 2015, the SEC filed a complaint against Path America companies including Path America Kingco LLC and Path America Snoco LLC. The case was settled in August 2017, with the former Path America principal receiving four years in prison. In the meantime, USCIS terminated Path America Kingco in March 2016, denied and revoked a bunch of Path America Kingco I-526 petitions starting in April 2016, and terminated Path America Snoco LLC in November 2016. Path America Kingco appealed its termination and was dismissed (JUN092017_01K2610), the PAK investors appealed their denials and were dismissed (e.g. DEC052016_01B7203, MAY112017_01B7203, JUL192017_01B7203), but Path America Snoco appealed its termination and was sustained (DEC212017_01K1610). PAK and PAS were terminated for malfeasance by the same former principal, but in the PAK case “he diverted proportionally more of the investors’ funds and the comparatively new management has only recently begun the process of renewing the project after its time in receivership.” AAO decided that PAS deserved to keep its designation because “the near completion of the project as proposed and the existence of a new owner committed to promoting future economic growth in the aggregate warrant maintenance of the regional center.” PAK has the same new owner, and the PAK and PAS situations appear to differ in degree more than substance, but at least AAO shows that it can give positive factors some weight. The PAS decision states that “There may be cases where, to maintain program integrity, the nature or degree of bad acts cannot be ameliorated or counter-balanced by positive factors of job creation and economic growth. For the foregoing reasons, this is not such a case.” Path America Snoco has been restored to the USCIS list of approved regional centers.
  • The PhoenixMart project by Central Arizona Regional Center has seen considerable drama and lengthy project delays. In 2017, USCIS denied a bunch of I-526 in the project, finding that “the business plan was not credible because construction did not substantively commence until years after the initially-forecasted completion date.” However, AAO just posted several decisions in the 2018 folder (JAN172018_02B7203, JAN172018_05B7203, JAN172018_06B7203, JAN172018_07B7203) that withdraw those denials, remanding the matter for further proceedings. AAO was impressed by evidence that the project has recently made substantial progress, and “Therefore, we withdraw the Chiefs finding that the business plan was not credible with regard to the construction portion of the plan.” (Reflecting its new sensitivity to return provisions, however, AAO takes the opportunity to bring up an issue not included in the USCIS denial: “whether the granting of first right of refusal to EB-5 investors for the purchase of up to 1,500 shops in ___ constitutes an impermissible redemption agreement.”)
  • The Palm House Hotel project has been the subject of numerous lawsuits and went into receivership in 2015. In 2016, EB-5 investors sued sponsor South Atlantic Regional Center and associated entities, alleging that the project was, in reality, nothing more than a façade pursuant to which their funds were stolen and distributed among the conspirators. However, the project has made some progress under the receiver, and at least two investors appealed their I-526 denials to the AAO (JUN132017_01B7203, JAN172018_03B7203). AAO denied the motions, but in a way that leaves open the possibility that the outcome might have been different had the petitioners presented better documentation regarding availability of funds to complete the project.

LucidText in the news
Suzanne Lazicki is featured in the latest EB5 Investors Magazine as one of the Top 5 Business Plan Writers of 2017, and in a podcast with Mona Shah discussing business plans and the current EB-5 landscape.

Regional Center List Changes
Additions to the USCIS Regional Center List, 12/05/2017 to 02/02/2018

  • Awesome American Regional Center LLC (California, Nevada)
  • Commuter Center Regional Center, LLC (Washington)
  • Florida Capital Group Regional Center (Florida)
  • Grand Commonwealth Regional Center, LLC (California)
  • Hawaii Investment Funds, LLC (Hawaii): www.hawaiieb5.com
  • Live in America – Louisiana Regional Center, LLC (Louisiana): www.liveinamerica.us
  • Midtown NYC Regional Center, LLC (Connecticut, New Jersey, New York)
  • Mugo Regional Center LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • North American Asset Management Regional Center, LLC (Washington)
  • Polaris Regional Center (Guam)
  • Stonehenge Regional Center, LLC (Texas)
  • TS Pacific Regional Center (California)
  • Texo Capital, LLC (Ohio, Pennsylvania): www.texoeb5.com

Additions to the Regional Center Terminations page, 12/05/2017 to 02/02/2018

  • Greater Houston Investment Center, LLC (Texas)
  • Lansing Economic Development Corporation (LEDC) Regional Center (Michigan)
  • Maryland Area Regional Center, LLC (Maryland)
  • Liberty South Regional Center (Arkansas, Mississippi)
  • Southeastern Higher Education Regional Center (South Carolina)
  • EB-5 Fund CA, Inc. (California)
  • EB-5 Regional Center Florida, LLC (Florida)
  • America Development Investment Center Regional Center (Alabama, Georgia)
  • Florida East Coast Regional Center, LLC (Florida)
  • Lakewood Regional Center a/k/a American Life, Inc. – Lakewood Regional Center (Washington)
  • American Logistics [International] Regional Center (California)
  • South East Los Angeles RC (SELARC) California (California)
  • Southwest Florida Regional Center, LLC (Florida) (terminated 5/25/2017 but not listed until 1/30/2018)

Previously listed as terminated, but now restored to the list of approved regional centers:

  • ON Regional Center, LLC (California)

At-risk with call option and preferred return? — updated

—ADDITIONAL UPDATES—

IIUSA has included helpful analysis of challenges to investment structures and terms in its letter from IIUSA to USCIS regarding Major Issues Facing the EB-5 Industry.

Ron Klasko explains how his firm is litigating challenges to debt arrangements in the article At Risk, Debt Arrangement, Guaranteed Redemption: Important Distinctions

Ira Kurzban has published an article based on his success with Chiayu Chang, et. al., v USCIS  “Federal Litigation: The Knockout Punch to USCIS’s Overbroad Policy on Redemption Agreements and Call Options?”

FYI here are my notes for an ILW call on 4/17 to discuss the “invest” requirement, and new USCIS challenges to equity with debt-like features. The notes link to the relevant decisions and cases, and summarize the fact pattern and arguments for each case.

—UPDATE 4/6/2018—
Other petitioners continue to fight call option denials.

  • Another lawsuit: CHANG et al v. DEPARTMENT OF HOMELAND SECURITY et al (Case Number: 1:18-cv-00659). Here’s a summary and the full complaint.
    (Attorney representing the plaintiffs: Jason D. Wright, Wright Law Firm)

— UPDATE 2/9/2018 —
I’ve been alerted to a couple district court decisions that rule against USCIS in favor of EB-5 petitioners in cases involving call options.

Chiayu Chang, et. al., v USCIS 1:16-cv-01740 (Filed 02/07/2018)
…The question in this case is whether United States Citizenship and Immigration Services (USCIS) acted in an arbitrary and capricious manner when it declared plaintiffs ineligible for visas because their investments came with a “call option,” which gave the company in which they invested the choice to buy plaintiffs out. Because the call option at issue here does not provide the investors with any right to repayment, the Court answers this question in the affirmative and grants partial summary judgment to plaintiffs… Unlike a sell option—or a note, bond, or similar arrangement—a buy option provides the investor with no security that she will ever see her money again. …A call option alone does not a debt arrangement make….
(Attorney representing the plaintiffs: Ira J. Kurzban of Kurzban Kurzban Weinger Tatzeli & Pratt, PA)

DOES 1-72 v. UNITED STATES CITIZENSHIP & IMMIGRATION SERVICES et al 1:15-cv-00273 Filed 2/24/2015, decided 03/10/2017
…Importantly, the Call Option was a right exercisable by Quartzburg Gold or its general partner, not the Plaintiff-investors, and the Quartzburg Gold documents made clear that there was no guarantee that it would be exercised. Despite statements that the general partner would strive to be able to exercise this option and buy out the Plaintiff-investors, both the LPA and the Offering Memorandum made clear that “[t]here [was] no guarantee regarding when the Partnership shall exercise such call option, or if such call option shall ever be exercised at all.” …. The Call Option accordingly did not guarantee Plaintiff-investors anything, nor did it have any effect on the risk that the Plaintiff-investors faced that they might lose their capital contributions if the underlying mining projects were not successful…
(Attorneys representing the plaintiffs: Robert C. Divine & J. David Folds of Baker Donelson)

— ORIGINAL POST 1/26/2018 —
Every EB-5 offering is a balance between natural investor desire for a return and exit strategy, and EB-5 policy prohibiting debt arrangements between the immigrant investor and new commercial enterprise. (As a reminder, there’s no problem with debt between the NCE and job-creating entities in regional center offerings. The restriction is between the EB-5 investor and NCE.) People who prepare offering documents have to walk a fine line, and should note recent cases that help define where USCIS thinks that line lies.

A number of recently-posted cases in the 2017 and 2018 folders I-526 appeals deal with investors in a regional center project who were denied due to a provision in their Limited Partnership Agreement.  (See DEC222017_03B7203 as a representative example. Other decisions for the same offering: DEC192017_01B7203, DEC192017_02B7203, DEC222017_01B7203, DEC222017_02B7203, JAN172018_01B7203, JAN172018_04B7203, JAN172018_08B7203, JAN172018_09B7203, JAN172018_10B7203.) Here’s the targeted provision:

Article 9.1 of the partnership agreement provides that at any time on or after the date that a foreign investor’s Form I-829 has been adjudicated, the NCE’s general partner may, in its sole discretion, notify the investor of its desire to purchase (i.e. redeem) his or her interest. The purchase price will include 100 percent of his or her capital contribution ($500.000) plus all accrued and unpaid preferred returns. ….Preferred return is one half of one percent (0.5%) per annum on the total unreturned Capital Contributions [$500.000] of an investor.

Considering the USCIS Policy Manual policy on guaranteed returns and Matter of Izummi, one might think this provision would be acceptable because (1) this provision doesn’t give the investor a right to demand the return (since only the general partner can initiate the buyout), (2) the NCE general partner is not guaranteed to be a willing buyer (since the purchase “may” happen at its sole discretion), and (3) a certain price is not assured (since the purchase itself is not assured). But one would be wrong, according to the analysis by USCIS and the AAO.  They found that,

The fact that the general partner has the right to purchase or redeem, which the partnership agreement references as a “buyout right,” rather than the Petitioner having a right to sell his interest is not determinative. We previously found that a sell option was an impermissible debt arrangement regardless of whether it was enforceable.

AAO admits that Matter of Izummi treated a different kind of redemption agreement that gave the Petitioner a sell right, but “the language of the decision goes beyond those facts, explaining not only that the enforceability of the arrangement is immaterial but that an investor may not be assured of receiving a certain price.”

The “certain price” issue is the main leg to stand on for the December 2017 denials. (One wonders about the difference a profit-contingent preferred return would’ve made. Also, the leg still looks pretty weak, considering that the offering apparently lacks the defining feature of debt: fixed obligation to pay.)  But the AAO appears to question debt-like elements generally.

A review of the record as a whole reveals an arrangement where once the conditions on the Petitioner’s resident status have been removed, the NCE would likely redeem the Petitioner’s original capital contribution and pay him or her a modest “preferred return,” similar to an interest payment. Such an arrangement, though not characterized as a loan in the offering documents, contains the same elements (principal, interest, repayment period) that one would find in a debt agreement.

AAO concludes,

Considering the partnership agreement and offering memorandum together, we find that the Petitioner did enter into an impermissible debt arrangement with an understanding that the general partner intended to repay the full investment plus preferred returns. This arrangement is not permitted under the broad language at 8 C.F.R. § 204.6(e) (definition of “invest”).

As another example, consider APR182017_01B7203, a 2017 decision that challenges a “Priority Return” in a direct EB-5 offering.

Page 4 of the business plan states that “the NCE will pay the limited partners, if funds are available, a preferred return on their investment, beginning after the EB-5 funds are invested in the project.” As we discussed in our second NOID, Izummi, 22 I&N Dec. at 183-88, provides that if an investor is guaranteed a specific rate of return or the return of his or her investment, then the capital is not at risk, because in essence, the investor has loaned funds to, rather than invested in, the business. See 6 USCIS Policy Manual, supra, at G.2(A)(2).”

Preferred returns on equity investment and buyout provisions are common in EB-5 offerings, and have mostly passed without challenge. I’d be happy to hear analysis of the above non-precedent decisions by someone who can help define (or criticize) the line that USCIS and AAO took in these particular cases. (Thank you, commenters.)

Quotes for reference:

6 USCIS Policy Manual G.2(A)(2)

An arrangement under which funds have been contributed in exchange for an equity interest subject to a redemption agreement which provides that the investor may demand a return of some portion of his or her investment funds, including after obtaining conditional permanent resident status, is an impermissible debt arrangement, no different from the risk any business creditor incurs.

Matter of Izummi

For the alien’s money truly to be at risk, the alien cannot enter into a partnership knowing that he already has a willing buyer in a certain number of years, nor can he be assured that he will receive a certain price. Otherwise, the arrangement is nothing more than a loan, albeit an unsecured one.

RC Reauthorization to 2/8/2018

February 2
See my Washington Updates page for ongoing updates.

January 23
The President has signed H.R. 195: Extension of Continuing Appropriations Act, 2018, which puts the federal government generally, and the regional center program, back in business through February 8, 2018. The bill text was amended over the weekend, but no additions that would decouple RC program authorization from government funding. However, this extension just gives a couple weeks to breathe before the same issues need to be re-fought. Congressional leaders have vowed to use the time to come up with their long-promised immigration legislation. I hope that this will happen and include EB-5 (though EB-5 is still absent from all debate). Ideally legislation should precede and preempt the EB-5 regulations threatened in February.

IIUSA has posted a helpful EB-5 Advocacy Announcement that includes this information: “While Republican negotiators on EB-5 are closer than ever to finding agreement internally, there are still bipartisan negotiations that need to occur. With pending regulations that could raise investment levels by over 100% and a current potential posted final action date in February, Congressional leaders would likely be left with only 60 days after that final action date to produce a legislative solution in place of the regulations.”

January 22

Update: Congress has cleared legislation to extend government funding to February 8, 2018. The vehicle is “Senate amendment to the House amendment to the Senate amendment to H.R. 195,” and I’ll link the text here when available.

As we wait for Washington to reach an agreement that would fund the government and reauthorize programs including the regional center program, here’s a post from Carolyn Lee on what the shutdown does and does not mean for EB-5.

January 20
The USCIS website announces:

The current lapse in annual appropriated funding for the U.S. government does not affect USCIS’ fee-funded activities. Our offices will remain open, and all applicants should attend interviews and appointments as scheduled. However, several USCIS programs will either expire or suspend operations, or be otherwise affected, until they receive appropriated funds or are reauthorized by Congress.

The list of programs to be affected until reauthorized by Congress includes the regional center program.

January 19
Congress lost its bet and failed to pass a new funding bill by midnight. But “lawmakers are believed to be negotiating a days-long extension that could be approved quickly.” In the meantime, the regional center program is on hold, and regional center-associated petitions and applications won’t advance until Congress takes action.

January 18-19
The Hill has a new article every few minutes on the likelihood that Congress will or won’t agree on time to the CR extending current funding and associated authorities (including RC program authorization) into February. So much drama. I expect that the CR will pass by 11:59 pm on Friday, assuming that our lawmakers have much to gain from speaking out against the CR, and more lose from the shutdown that would result from not voting for it in the end. But we shall see. Just in case, Klasko Law comments on effects of a potential government shutdown on immigration processing and programs and IIUSA explains Possible Government Shutdown: What it Means for the EB-5 Regional Center Program.

January 16
House Appropriations Chairman Rodney Frelinghuysen today introduced legislation (H.J.Res 125) to maintain current funding for federal operations and prevent a government shutdown. The Continuing Resolution (CR) is a stop-gap measure that will extend government funding through February 16, 2018.
There’s nothing in the text of H.J.Res 125 to prevent regional center program authorization from being extended with other authorities tied to current funding. But we’ll see whether Congress can manage to agree long enough to pass the CR and avoid a shutdown. The White House supports the CR, at least.

January 15
No indication yet that Washington is near compromise on new immigration legislation. A Continuing Resolution of current funding and authorities to February 16 continues to look likely. In honor of Dr. Martin Luther King Jr. Day today, I quote President Trump making an important point:

Today, we celebrate Dr. King for standing up for the self-evident truth Americans hold so dear, that no matter what the color of our skin or the place of our birth, we are all created equal by God.

This is not the belief evident in the current immigration reform discussion, which looks more like this:

We hold these truths to be self-evident, that all men are not created equal, that they are endowed by their nationalities with certain inalienable characteristics, that among these are propensity to violence, noxious ideology, inability to assimilate, and failure in the pursuit of property. — That to secure against such characteristics inherent in certain nations and their nationals, immigration policy is instituted among Us, to effect Our Safety and Happiness by erecting barriers against threats embodied in Them, and screening Them by the color of their passports in lieu of the content of their character.

Dr. King’s genealogy of racial segregation from his How Long Not Long speech in 1965 could also be recast to explain how and why our current populist movement has been co-opted into an anti-immigrant movement with such violent sentiment against DACA. It may be said of the new economy that the donor class took the world and gave the poor white man legal status. And when his wrinkled stomach cried out for the food that his empty pockets could not provide, he ate legal status, a psychological bird that told him that no matter how bad off he was, at least he was a citizen, better than the Illegals.

We miss you, Dr. King!

January 11 post
Some dates to keep in mind as we wonder what will happen next with EB-5:

  • January 19, 2018: The next regional center program sunset date (and the deadline for a new funding bill that some hoped to make a vehicle for sweeping new immigration legislation). It’s looking likely that this deadline will be pushed back a few weeks, however, with another continuing resolution.
  • February 2018: The date indicated for final action on new EB-5 regulations (with provisions including drastic increase to the EB-5 investment amount)
  • February 16, 2018: Possible next regional center program sunset date, if Congress fails to pass a new funding bill in January, and instead defers the funding and immigration fight with a continuing resolution  (or some speculate the CR could go into March)
  • March 5, 2018: The date DACA protections are slated to end, and thus the date Congress is pushing to beat in passing a big immigration bill
  • April 2018: The possible effective date for new EB-5 regulations, assuming that the rule is finalized in February with an effective date after 60 days (as ILW rumors)

The race is on for EB-5 legislation, with pressure from sunset dates and the need to forestall unwelcome regulations. Washington is actually talking about comprehensive immigration reform, including reshuffling visa numbers. But I haven’t heard EB-5 mentioned once, for good or ill, anywhere, by anyone, in recent immigration discussion. The left is for DACA; the right is for border security and against diversity visas and chain migration. Immigrant investment doesn’t fit with any side’s talking points. I hope that Congress privately remembers EB-5, because we really need action from them: to give the regional center program a longer-term authorization, to enact program changes better than what would come with new regulations, and to realize program potential by freeing up more visas for EB-5.

If broad-based immigration legislation happens soon, what will it include and how will it affect EB-5? We have a few hints, but nothing definitive yet. This week President Trump hosted a bipartisan and bicameral meeting on immigration reform that concluded (reportedly) with “an agreement to negotiate legislation that accomplishes critically needed reforms in four high-priority areas: border security, chain migration, the visa lottery, and the Deferred Action for Childhood Arrivals policy.”  (As an aside, I recommend the White House transcript of the meeting. It’s not especially informative, but an amazing artifact. If Aristophanes or Alexievich set out to write Washington today, I doubt they could beat this straight record of the January 9 Cabinet Room scene.)  Yesterday House Judiciary Chairman Bob Goodlatte introduced H.R. 4760 Securing America’s Future Act, which proposes sweeping changes in line with President Trump’s immigration priorities. The bill includes nothing that would directly affect EB-5, so far as I can tell. (The Immigrant Investor Pilot Program gets a name check, but only in context of a technical amendment that renumbers a subsection. No mention of program authorization or any EB-5 changes. H.R. 4760 proposes to increase employment-based visa numbers, but EB-5 wouldn’t benefit because the bill would change its allocation from 7.1% of the total to a flat 9,940 visas annually, regardless of the worldwide level. The bill fiddles with per-country limits for family-based visas, but not for employment-based visas.)  Meanwhile, the Senate is still trying to come up with a competitive immigration deal that’s more passable by Congress while still signable by the President. I’ll report on details when available, and also hope that advocacy people will eventually share what’s happening with EB-5 on the ground. (Update: IIUSA has published an Industry Special Report, and Senator Graham has posted summary provisions of the Senate’s Immigration Reform Act of 2018. The summary mentions nothing that would affect EB-5.)

 

EB-5 Regulations (2/2018?)

Update: For current status, check the Regulations Detail section of my Washington Updates page.

— Original Post —

While we have our eye on the legislation ball, the Office of Management and Budget has given us a new EB-5 deadline to think about. The Spring 2017 Unified Agenda had mentioned April 00, 2018 as a “Final Action Date” for regulations dealing with EB-5 investment amounts and TEAs (RIN 1615-AC07), but now the Fall 2017 agenda has advanced that prediction to February 00, 2018. I’d doubted the April date because so many factors seemed likely to delay regulations (the prospect of legislation instead, the fact that Congressional intent as expressed in draft legislation looks so different from what DHS put in the proposed regulations, the administration’s coolness to regulation in general, government inertia in general), but advancing the date to February looks like positive intent to really get the EB-5 regulations done.

We don’t know yet what will be in the final Rule 1615-AC07, since it may have been revised significantly since the Notice of Proposed Rulemaking. But as a reminder, here’s what the NPRM proposed:

  • Increase the standard minimum EB-5 investment amount to $1,800,000, or $1,350,000 in a TEA.
  • A TEA is based on high unemployment and incentivized with 25% reduction to the investment amount (not other factors or incentives as proposed by Congress).
  • A TEA can only be designated for a high-unemployment MSA, county, city, single census tract, or limited group of census tracts. DHS, not the states, is responsible for TEA designation.
  • Give priority date protection (an investor with an approved I-526 could choose to file a new I-526 while keeping the original priority date, subject to certain restrictions)
  • Spouse and children may be able to file I-829 even if not included on the principal investor’s petition.
  • Other technical changes.

The federal rulemaking process requires that “At the end of the process, the agency must base its reasoning and conclusions on the rulemaking record, consisting of the comments, scientific data, expert opinions, and facts accumulated during the pre‐rule and proposed rule stages.” In April 2017, the public responded to the NPRM with challenging questions and criticism, and some persuasive data and policy arguments. The agency must take these into account. If USCIS revised the proposed rule in response to public comment, they might have modified the proposed investment amount increases (nearly all commenters argued strongly for this), either narrowed or expanded the gap between TEA and non-TEA investment (there were spirited arguments on both sides), modified the restrictions on census tract TEAs, or reconsidered giving DHS the burden of issuing TEA designations. On the other hand, USCIS is not well known for changing track in response to evidence and arguments presented by the public. The Fall 2017 OMB notice reiterates USCIS thinking about the potential costs and benefits of the proposed regulations:

The proposal to raise the investment amounts and reform the targeted employment area (TEA) geography could deter some investors from participating in the EB-5 program. The increase in investment could reduce the number of investors as they may be unable or unwilling to invest at the higher proposed levels of investment. On the other hand, raising the investment amounts increases the amount invested by each investor and thereby potentially increases the total economic benefits of U.S. investment under this program. The proposed TEA provision would rule out TEA configurations that rely on a large number of census tracts indirectly linked to the actual project tract by numerous degrees of separation, and may better target investment capital to areas where unemployment rates are the highest.

If a final rule were published in the Federal Register in February 2018, it could go into effect as early as March 2018, and apply to petitions filed on or after the effective date. (See A Guide to the Rulemaking Process for an explanation of the typical process.)

On the other hand, the threat of immanent regulations may inspire Congress/industry to finalize EB-5 legislation ASAP instead.

Meanwhile, the OMB Unified Agenda has pushed back the estimated date for a Notice of Proposed Rulemaking for RIN: 1615-AC11, the EB-5 rule dealing with regional center designation, the exemplar filing process, continued regional center participation, and regional center termination. The Spring agenda had estimated April 2018; the Fall agenda has October 2018. We previously responded to this as a Advance Notice of Proposed Rulemaking. The agenda’s cost/benefit comment notes that:

DHS is still in the process of reviewing potential changes it would propose to the regional center process. DHS may propose to implement an exemplar filing requirement for all designated regional centers that would require regional centers to file exemplar project requests. An exemplar filing requirement could cause some projects to not go forward, but DHS is still in the process of assessing the impacts on the number of projects that may be affected. DHS anticipates that any proposed changes to the regional center program would increase overall program efficiency and predictability for both USCIS and EB-5 stakeholders.

RC Reauthorization to 1/19/2018, visa numbers, legal actions, RC list changes

Countdown to Regional Center Program Reauthorization

  • 12/22: President Trump has signed the continuing resolution H.R. 1370, which means that the regional center program is now extended together with other authorities to January 19, 2018. (See Congress.gov for the text of the enrolled bill H.R.1370, now Public Law No 115-96.) I also notice that the White House website has been reorganized to highlight immigration as a key issue. The new White House immigration page emphasizes these priorities for the administration: constructing a border wall, ensuring the swift removal of unlawful entrants, ending chain migration, eliminating the Visa Lottery, and moving the country to a merit-based entry system.
  • 12/21: The House and Senate have passed a Continuing Resolution that replaces the expiration date in previous legislation with “January 19, 2018,” and doesn’t include any language that would exclude regional center program authorization. See the House Appropriations Committee news release for the text of House Amendment to the Senate Amendment to H.R. 1370.
  • 12/20: The content of a Continuing Resolution through 1/19 is still under negotiation.
  • 12/18: Nothing settled yet on the next stopgap funding measure, which will have to fight with tax reform for attention this week. The Senate Appropriations Committee may come up with its own proposal to compete with the House proposal. Senator Cornyn indicates that the Senate bill would also be through January 19, but may include some different provisions.
  • 12/13: Yesterday the House Appropriations Committee introduced H.J.Res 124 – a Continuing Resolution that would temporarily extend federal funding and maintain current federal operations (currently authorized to December 22) until January 19, 2018. Basically, it’s a clean extension that just switches out expiration dates: “SEC. 101. The Continuing Appropriations Act, 2018 6 (division D of Public Law 115–56) is further amended—7 (1) by striking the date specified in section 8 106(3) and inserting ‘‘January 19, 2018.’’ The 250 pages of miscellaneous additional provisions (defense appropriations, CHIP extension, etc.) do not mention EB-5 or move to separate RC program authorization from continued government funding. This bill is just barely out of committee, not enacted yet, but I’ll add updates as I hear news ahead of the 12/22 deadline.
  • 12/8: IIUSA members will be happy to note that the association has decided to tell us its 2017 Policy Platform and comments on the draft legislative framework. Now to see if we’ll be asked for our opinion on the policy positions someone has formulated. Probably not, since the hard-won industry unity depends on a narrow base. UPDATE: IIUSA has sent an email to members with the invitation “Please contact advocacy@iiusa.org with any comments or questions” on the IIUSA policy framework.
  • 12/8: IIUSA did the right thing with a stern statement on Marketing Hypothetical EB-5 Reform Outcomes as Certainties. Prospective investors take note: do not rest your current EB-5 decision on the possibility of visa set-asides in hypothetical future legislation. We have no assurance that a set-aside proposal will ever be enacted, or to whom/what a set-aside proposal would apply, if enacted. Even if set-asides became available, the size of the visa backlog and volume of I-526 filings mean that they may disappear too quickly to have an appreciable incentive effect. Their main function appears to be now, in hypothetical form, as a phantom concession to help get what industry negotiators really want (low investment difference between TEA and non-TEA areas) and a phantom carrot to encourage new investors.

Visa Backlog Update

The backlog of EB-5 visa applications at the National Visa Center continues to grow, as one would expect with I-526 filing surges reaching the visa application stage. The Annual Report of Immigrant Visa Applicants in the Family-sponsored and Employment-based preferences Registered at the National Visa Center as of November 1, 2017 reveals that the EB-5 visa application backlog is 23% longer this year than last year, with 17% increase in pending applications from mainland China and a 106% increase in pending applications from other countries. I’ve added these numbers to my master backlog calculation spreadsheet, which has a projection tab to estimate how statistics translate into wait times.

Legal Actions

Additional reading for those interested in following litigation in the EB-5 space, and learning from the actions and statements that got other people in trouble.

Other Helpful Articles

McKee, Curylo, Parrington: Considerations for Independent Third Parties to Assist With EB-5 Investments (December 12, 2017)

Regional Center List Changes

Additions to the USCIS Regional Center List, 11/08/2017 to 12/05/2017:

  • American Dream Fund Seattle Regional Center, LLC (Washington): www.adreamfund.com
  • American EB5 Regional Center (Florida)
  • Cactus21 LLC (California)
  • Chicago Real Estate Development Regional Center, LLC (Illinois, Indiana, Wisconsin)
  • Great North Regional Center, LLC (Massachusetts, New Hampshire, New York, Vermont): www.peakresorts.com
  • Hawaii Regional Fortune Center LLC (Hawaii)
  • M5 Venture Southern California RC, LLC (California): www.m5venture.com
  • Manhattan Empire State Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • NCP Regional Center (California)
  • North Carolina EB5 Regional Center, LLC (North Carolina, South Carolina): eb5affiliatenetwork.com/regional-centers-access/eb5-regional-center-north-carolina
  • SRC NY, LLC (Connecticut, New Jersey, New York, Pennsylvania)

One regional center was removed from the approved list, but not added to the terminated list:

  • Bart Investment Group, LLC (Florida)