Regulations Update (Spring 2019)

The Spring 2019 OMB Unified Agenda has been published with updated timetables for three EB-5 regulations in progress.

  • RIN1615-AC07 EB-5 Immigrant Investor Program Modernization, with proposed changes to TEAs and the minimum investment amount:
    • Timetable for Final Rule is May 2019 (The Fall 2018 agenda had anticipated November 2018)
  • RIN 1615-AC11  Regional Center Program Regulation, with proposed changes to regional center designation requirements and process:
    • Timetable for Notice of Proposed Rulemaking is March 2020 (The Fall 2018 agenda had anticipated March 2019)
  • RIN 1615-AC26 EB-5 Immigrant Investor Program Realignment, which “will solicit public input on proposals that would increase monitoring and oversight, encourage investment in rural areas, redefine components of the job creation requirement, and define conditions for regional center designations and operations”
    • Timetable for Advance Notice of Proposed Rulemaking is March 2020. (The Fall 2018 agenda had anticipated September 2019)

RIN1615-AC07 is still listed as Pending Review by the OMB before it can become a final rule. Meanwhile, a number of parties have requested to meet with OMB regarding the regs (View EO 12866 Meetings).

  • 5/30/2019 meeting requested by Carmen Group Inc representing United States Immigration Fund LLC
  • 5/7/2019 meeting requested by EB-5 Investment Coalition representing Related Companies and other regional centers
  • 3/25/2019 meeting requested by Real Estate Roundtable; Commonwealth Strategic Partners representing IIUSA; HLP+R representing EB5 Capital; US Chamber of Commerce; Klein/Johnson Group representing Civitas Capital Group
  • 3/20/2019 meeting requested by Navigators Global representing Related Companies
  • 3/6/2019 meeting requested by American Life

The regional centers named have historically undertaken large EB-5 raises for projects in major cities, most remarkably Related with $1.2 billion in EB-5 raised for the Manhattan Hudson Yards project. They naturally oppose a regulation that would dramatically cut EB-5 demand with higher investment amounts and that would make urban TEAs more scarce. (To know the messages likely conveyed at the OMB meetings, see comments on the regulations submitted by Related, EB-5 Investment Coalition, U.S. Chamber of Commerce, Civitas, EB5 Capital, American Life, and IIUSA).  Apparently anyone can request a EO 12866 meeting, so any interests that have another perspective can take the chance to provide additional input. But the EB-5 Modernization Regulation, at least as written in 2017, managed to threaten such a variety of interests that I’m not sure anyone exists to advocate for it to be finalized. Except people like Senator Grassley who want reform but apparently unclear about what’s actually in the regulation.

 

TEA set-aside proposal

This post examines the visa set-aside proposal in the industry’s most recent Letter to Judiciary Committees in Joint Support of Reform and Reauthorization of EB-5 Program.

Here’s the recommendation in the letter:

Notably, we recommend a 30% set aside of the annual visa allotment each year for investors in TEA projects, which would be split equally between Rural and Urban Distressed communities.

TEA Set-Asides

  • 15% of visas for Rural
  • 15% of visas for Urban Distressed
  • Unused visas roll-over annually at the end of each year to general visa pool for access by all projects in the immediately following year
  • The set asides apply immediately to new I-526 petitions filed after enactment, but they cannot be applied retroactively towards petitions that were pending as of the date of enactment.

Possible arguments in favor of the recommendation:

  • A visa set-aside could be a genuine incentive for TEA investment because it offers something that’s of value to investors (visa fast track) and that doesn’t have the economically counter-productive effect of reducing capital available to the TEA project (as does the current monetary-discount TEA incentive)
  • A visa set-aside can only be a potent incentive if new investors have a chance to benefit from it. Therefore, such set-asides must be limited to new petitioners, not available to the tens of thousands of past investors. Consider that current law (INA 203(b)(5)) has already set aside a minimum of 3,000 visas annually for TEA investment. We forget that this set-aside even exists, because it means nothing when TEA investments far exceed 3,000 annually in any case. The new TEA set-aside proposal will be no more effective than the existing one unless demand for it is limited.
  • Limiting the visa set-aside to new investors would help, at least short-term, to address a major industry problem identified in the letter. “In the current marketplace, protracted EB-5 wait times have slowed inbound foreign capital to a trickle.” People who want to raise more EB-5 capital from China, Vietnam, and India need to be able to offer shorter wait times. Future prospective investors from those countries want shorter wait times too. So long as we can’t get more visas for those countries, the only option is to create a shortcut around people already waiting in line from those countries.
  • The industry must appease reformers who want to incentivize investment in distressed and rural areas, but industry (as represented in this letter) does not wish to upset the status quo or disadvantage prosperous urban areas. Set-asides can be presented as a TEA incentive to help bargain down the monetary TEA incentive, while likely to have limited effect in practice.

Possible arguments against the recommendation:

  • Considering the backlogs, EB-5 visa availability is a zero-sum game. Restricting 30% of visas to future investors means removing 30% from past investors still waiting on a future visa. Getting in front of the line means pushing someone else back in line. Improving visa wait times for some means worsening them for others. Supporting the set-aside recommendation for the sake of future capital raises requires betraying investors in past capital raises. This is a serious problem for regional centers and project companies. The zero-sum issue is a painful fact unless Congress/the White House agree to offer additional visa numbers to EB-5, which no one says is likely to occur. The only question is how many past investors would be harmed by set-asides, and how badly. The following is my attempt so far to reason out the impact, and I welcome thoughts from others.
    • Damage from the set-aside would vary by country.
      • The worst impact of set-asides would likely be for past investors from Vietnam and India (and South Korea, Taiwan, and Brazil if they also exceed the per-country cap). These countries can each access only 7% of total EB-5 visas annually until the China backlog dissipates – i.e. for the foreseeable future.  That means about 700 visas each. If, for example, 350 new investors from India are recruited in a year under the new set-aside categories, that could be sufficient to claim the total visas available to India. 700 available visas minus 700 visas allocated to new investors gaining priority under reserved set-asides would equal 0 visas left for past investors. 0 visas available year by year would stretch visa waits for past investors to infinity. The disaster for past investors would be less if (1) the new TEA categories are not popular and fail to attract many new investors from India or Vietnam, or (2) the new categories are so popular that excess demand creates backlogs even for new investors that would eventually depress new demand, or (3) the statute is interpreted such that past investors at least get 7% of the 7,000 generally-available visas, or such that set-aside status would only trump priority-date status after the 7,000 non-TEA limit is reached. In other words, the set-asides would not be disastrous for these past investors provided that they are ineffective for new investors.
      • Past investors from China calculate their wait times based on 10,000 total available visas minus visas claimed by the rest of the world. Their current wait time calculations already assume over 3,000 new investors a year getting priority due to nationality. If those same investors get the additional priority of TEA set-aside status, that would not change the China calculation very much. The set-aside proposal would harm past China investors if the set-asides are not popular, and new investors from other countries instead compete with China for the reduced pool of generally-available visas.
      • The visas set-aside provision would likely be neutral for investors from relatively low-volume countries (i.e. countries other than China, Vietnam, India, Brazil, and South Korea). New investors from these countries would not receive special benefit, since they already don’t face a visa wait by virtue of nationality, and past investors from these countries would not be specially harmed, since they already demand far fewer than 7,000 visas annually.
    • How many past investors would be affected? All those who are still waiting for a future visa when the set-aside proposal is passed. The industry’s letter to Congress numbers “all pending applicants in the queue” at “approximately 30,000.” This is phrased to imply that there are 30,000 total people waiting in line, though in context “all pending applicants” appears to refer specifically investors, not counting family also in line. Charles Oppenheim of Department of State estimates EB-5 applicants with petitions on file at NVC and Estimated USCIS Applicant Data (as of April 1, 2019) at 73,157 people. Looking at data from USCIS on I-526 filings by country, we can count over 40,000 people who filed I-526 but couldn’t possibly have visas yet, either due to cut-off dates or because the I-526 is still pending. That would translate into a queue with 70,000 to over 100,000 people in it depending on one’s assumptions about denials, withdrawals, and family size. The queue is 68% to 85% Chinese, by various estimates. (Here’s Oppenheim’s estimate — see especially slide 10 — and my analysis.)
  • Set-asides would not even be an effective TEA incentive
    • Set-asides offer a time incentive.  They incentivize TEA investment from new investors by offering a visa wait significantly shorter than the norm. Such incentive depends on a norm of long visa waits. Therefore:
      • If the industry’s recommendations for visa backlog relief/increased visa numbers were accepted and visa waits were reduced, the potency of the set-aside incentive would be diminished accordingly.
      • If there’s no visa relief, set-asides would still only incentivize new investment from China, Vietnam, and India. Other countries that already do not expect a visa wait would not value a ticket to avoid the wait.
    • Set-asides would only incentivize new investment so long as demand for the set-asides is low. If they’re popular and attract over 1,000 investors annually, their 3,000 visas will quickly be claimed, backlogs will form, and the time advantage on which the incentive depends will disappear.

Please send me links to alternative analysis and I will post them, or add your comments. The TEA set-aside proposal has been brought forward regularly since 2016, but I still haven’t quite grasped why, in light of the above issues. EB-5 Investment Coalition and U.S. Chamber of Commerce, how about publishing justification for the TEA proposal? Current IIUSA members, did you hear about this letter before it was released to the public last week? Did you take part in crafting it or have opportunity to vote on it? I’d love to hear your perspective.

EB-5 Reform, Immigration Reform

Today, IIUSA and others published a letter to the Senate and House Judiciary Committees laying out “consensus reform concepts” recommended for new EB-5 legislation. I’m heartened to see effort toward reform and reauthorization, and saddened by the letter’s content. Ideally, a consensus will appear to balance the interests of a variety of groups. I don’t see that here. Two recommendations particularly deserve input from a broader base of stakeholders:

  • Recommended investment amounts. The letter proposes $800,000 minimum for investment in a TEA, and $900,000 for investment outside a TEA – replacing the current 50% discount with a 12% discount. Competitive advantage requires that a feature be both rare and valuable. The letter offers a concession that TEAs can be more strictly defined so as to make them more rare than now, but then redefines the incentive to make TEA designation less valuable. The net result is clear for projects located in genuinely distressed areas that struggle to complete against prosperous urban areas. (I don’t see expedited processing being an effective additional incentive, considering USCIS’s likely inability to deliver such benefit, or visa set asides for reasons discussed below.) The recommended investment amounts don’t look like an attempt to compromise with interests outside big cities, and also don’t look like a compromise with reform advocates. How likely is Congress to accept a proposal that not only hardly increases but would actually lower the standard EB-5 investment amount set back in 1990? The recommended investment amounts have the advantage that they’re feasible and wouldn’t destroy the market, but are too-obviously the status quo.  Where’s the attempt to sell the recommendations to people who want to be seen voting for modernization and reform?
  • Recommended visa set-asides. This is framed as an additional TEA incentive, but I am doubtful. The letter recommends setting aside 30% of visas annually for TEA investments, with the set-asides applying immediately to new I-526 filed after enactment, and not allowed to apply to petitions pending on the date of enactment. I foresee that this will act as a TEA incentive only for a short time, until the set-aside categories build up backlogs of their own. However, set-asides would allow raising new capital by taking visas from backlogged investors and offering them to new investors. The tens of thousands of people already in line for a visa would see the pool of visas available to them reduced by 30%, for the sake of having 30% of visas set aside in a special category only open to future investors. Thanks to the additional action of per-country caps, the set-asides could theoretically reduce visas available to past investors from India and Vietnam to zero (if promoters exploit the opportunity to offer all 700 annual visas available to India/Vietnam to new investors under the set-asides).  I want the EB-5 program to remain viable as much as anyone, but I don’t see how this visa set-aside proposal can possibly be an honorable option, considering the size and nature of the EB-5 backlog. To be fair, the letter also recommends visa relief. It suggests eliminating derivatives from the visa allocation, and suggests giving pending applicants the opportunity to pay $50,000 each to “re-set the program,” whatever that may mean. But since Congress has entertained the visa set-aside idea in recent years, and hasn’t expressed remote willingness to increase visa numbers in any way, one struggles to see good faith to past investors in the recommendations. Impossible benefits do little to counterbalance possible harm. And there ought to be obvious good faith to past investors, considering that the associations signing the letter represent members that benefited from over $10 billion in past EB-5 investment. (My post TEA set-aside proposal gives additional analysis.)

It may be pointless to get upset, considering the low likelihood that Congress will heed these recommendations or act on EB-5 any time soon. But why can’t we, as an industry, do better than this letter? If you’re represented by an organization that signed this letter, and you do not agree with the so-called consensus, make your voice heard in the on-going discussion.

Speaking of immigration proposals likely to be ignored, President Trump gave a speech yesterday to outline an immigration plan. In 2016, I wrote about candidate Trump’s vision “to choose immigrants based on merit, skill and proficiency,” and cribbed a chart from the New York Times that pictures visa allocation under our current system.

Yesterday’s speech enlarged on a “big, bold, beautiful” plan to reorient our immigration system so that it issues fewer visas based on “random” characteristics such as family relationship and humanitarian concerns, and more based on personal qualities, particularly economic position and potential. The plan sounds similar to the points-based system promoted by Senator Tom Cotton in the RAISE Act, though details have yet to be released.

One sentence from the President’s speech struck me particularly: “America’s immigration system should bring in people who will expand opportunity for striving, low-income Americans, not to compete with those low-income Americans.”

This sentiment could get some bi-partisan support, if anything received bi-partisan support anymore. And certainly, the EB-5 program deserves credit for already realizing this value. EB-5 can use the immigration incentive to expand opportunity in two ways: by creating jobs that are within reach of striving low-income Americans, and by providing capital for striving Americans who might otherwise not have been able to implement their business ideas.  How many small towns across the US now have their first flagged hotels thanks to local entrepreneurs matching with EB-5 investors to make the dream happen? How many local restaurant chains were able to expand their portfolios thanks to partnership with EB-5 investors? Such ventures don’t make the news, but I see them as a business plan writer working with small EB-5 projects.  They highlight an important feature of the EB-5 program: that it doesn’t only reward immigrants establishing their own businesses, but immigrants who support US citizen-owned businesses. I hope that any immigration reform debate will keep that EB-5 value in mind. Tom Cotton’s proposal, for example, though intending to reward economic contribution, would only have granted points for an immigrant’s investment in his or her own business.

Apparently the the administration’s plan has few friends and unlikely to go anywhere. But I’m interested as a citizen. What kind of immigration system would really accomplish a “Build America” goal? Here in Ogden Utah we just celebrated the sesquicentennial of a major nation-building milestone: the completion of the first transcontinental railroad. In his speech at the centennial celebration, then-transportation secretary John Volpe proudly asked “Who else but Americans could drill 10 tunnels in mountains 30 feet deep in snow? Who else but Americans could drill through miles of solid granite? Who else but Americans could have laid 10 miles of track in 12 hours?” As it happens, Americans did none of those things. There’s a railroad through the Sierra Nevadas thanks to Chinese workers.  What would have happened to America’s economic development without the incredible stamina and skill of those migrants from China, few of whom would’ve scored points in Tom Cotton’s system? Would Leland Stanford just have become less rich, having had to pay a naturalized workforce at least 30% more? Or is there a broader lesson about what builds America?

 

 

 

Updates (Redeployment, Material Change, India Retrogression, I-526 processing and RFEs)

Redeployment

Last year IPO asked industry stakeholders to offer suggestions regarding redeployment. IIUSA has now followed up with a Memo to USCIS on Redeployment Policy. The memo points out again why the redeployment policy should not even exist, since neither statute nor regulation nor precedent supports a requirement to redeploy EB-5 investment into additional business activity after the job creation requirement has already been met and funds have been returned to the NCE.  The memo goes on to make the case that if USCIS still persists in requiring redeployment, the options for redeployment investment should not be arbitrarily limited. I hope that IPO will, as promised, give serious consideration to this reasonable feedback.

Material Change

The redeployment problem is bound up with the material change problem, which is why I’m looking forward to a free Material Change Seminar to be hosted by Carolyn Lee on April 17th, 2019 at 2:00 – 3:00PM Eastern. E-mail to reserve a spot and send advance questions.

India Retrogression

Based on a prediction by Charles Oppenheim in October 2018, we’ve been expecting India to reach its annual limit of available EB-5 visas this fiscal year, and get a cut-off date in the Visa Bulletin by July 2019 at latest. However, in a post on 4/2/2019, Matthew Galati shares quotes from AILA’s March 2019 “Check-in with DOS’s Charlie Oppenheim”: “Charlie previously expected EB-5 India to reach its per country limit by July 2019. However, he is no longer certain that will happen. He is watching the demand data and should have a better sense of the number usage within a few weeks. The decline in demand mentioned above, possibly resulting from reauthorization concerns, makes it difficult for Charlie to estimate how many additional numbers may be used by ‘high demand’ EB-5 countries.”

That “decline in demand” refers to “fewer applicants proceeding to final action on their cases at consular posts abroad and USCIS Offices.” The queue of applicants has not reduced in length (probably), but it has advanced to final action more slowly than expected – delayed by the government shutdown and lapse in regional center program authorization.  So what does this mean? For most Indians awaiting a visa number, possibly not much. The key question is not “in which month will retrogression occur” so much as “can I get my visa number before retrogression occurs?” That second question depends on the length of the queue in front of the petitioner (which probably hasn’t changed) more than the specific date for running out of visas (which may be later than expected due to slower-than-expected processing).  For Indians who will adjust status, a later Visa Bulletin could at least have the benefit of maximizing the window to at least file I-485 (thus opening the combo card option in advance of visa availability).

I-526 processing and RFEs

I created a model that divides inventory of pending I-526 petitions by completion rates, and concludes that processing times should be falling as inventory falls. However, the USCIS processing times report indicates that I-526 times are getting longer, even as IPO has fewer and fewer petitions to process. Why is this so? IPO’s secret, I gather, is to introduce an unofficial new step to the EB-5 process: the comprehensive I-526 RFE. Officially, Form I-526 foresees how funds will be spent and how jobs will be created, while Form I-829 demonstrates how funds were spent and how jobs were created. Officially, a Request for Evidence on the Form I-526 asks questions about the original submission and clarifies eligibility at the time of filing. In practice, IPO has been issuing I-526 RFEs that do not only or primarily question the original submission, but basically ask the petitioner to submit an updated collection of I-526 evidence plus prematurely provide I-829-stage evidence for actual past expenditures and job creation. IPO is adjudicating the I-526 one to two years after it was filed, and the adjudicator is naturally curious about the current status and progress of the project. I-526 business plans are dusty by the time adjudicators finally review them, while payroll records may be available by that time. But the adjudication delay is not the petitioner’s fault, and does not change I-526 eligibility or evidentiary requirements. It’s not right to make a habit of using RFEs as a surreptitious new “Form I-526-B” that calls on petitioners to redo and resubmit original I-526 documents with no fault but age, and prematurely satisfy I-829 requirements at the I-526 stage.

Washington Updates

Apparently there’s some discussion in Washington about visa numbers, and leadership upsets throughout DHS. We shall see what changes actually occur, and whether they affect EB-5.

FAQ for potential regulatory changes and visa bulletin updates

Nothing is changing at the moment. The EB-5 modernization regulation is still pending review at OMB, the Visa Bulletin is still current for India and moving forward for China and India, IPO remains silent, and there are no hints of EB-5 legislation.

But for the sake of being prepared, this post considers “what if” questions related to possible forthcoming changes.

To start with the Visa Bulletin, here are the most recent predictions I’ve heard (from the February 2019 Visa Bulletin and Charles Oppenheim’s presentation at IIUSA in October 2018):

  • China: Final action date was expected to move about one week per month between January and May 2019. When the new fiscal year starts in October 2019, the final action date is expected to be October 22, 2014 (best case) or October 8, 2014 (worst case)
  • Vietnam: Final action date was expected to move about three weeks per month between January and May 2019, and progress at least to September 2016 this fiscal year.
  • India: Will get a final action date when visas available to India for the year have been used up, likely “no later than July 2019.” The final action date will initially be the same as for China, to effectively stop visa issuance to India-born for the fiscal year. When FY2020 starts in October 2019, the final action date for India will move forward enough to release enough Indian applicants to claim the new year’s visas. The final action date will likely be in 2017 at that time.

IIUSA recently announced that Charles Oppenheim of Department of State will speak at the Advocacy Conference on May 6. We look forward to hearing his updated projections.

Regarding regulations, the final rule for the EB-5 Modernization Regulation RIN: 1615-AC07 could be published as early as tomorrow or as late as never, and take effect 30 or so days after publication. We don’t yet know the content of the final rule, but there’s a fair chance that it will be similar to the proposed rule (NPRM) from January 2017 (full text here). If the regulation gets finalized with content that mirrors the NPRM, then here are some issues and considerations to keep in mind.

Investment Amount and TEA Changes:

  • Proposed change: The minimum EB-5 investment will increase significantly for TEA and non-TEA investments (the NPRM proposed $1.8M and $1.35M). The incentive to invest in a TEA will likely be reduced (the NPRM proposed 25% discount instead of 50% discount from the standard investment amount). Many fewer urban areas will qualify as TEAs, due to limits on TEAs that combine census tracts. USCIS, rather than states, will become responsible for TEA designation.
  • Effect: The NPRM says that “unless otherwise specified,” the investment amount and TEA changes will apply to “EB-5 immigrant petitions filed on or after [INSERT EFFECTIVE DATE OF FINAL RULE.]” i.e. changes will apply to all I-526 filed after the rule becomes effective. The NPRM mentions no exceptions, not even for capital raises in progress, or for projects that have filed or approved I-924 exemplars or other approved I-526. On the other hand, the NPRM specifically applies the investment amount and TEA changes to new I-526 filings – i.e., not to people at other stages in the process (not to I-526 pending, I-526 approved and waiting for a visa, conditional permanent residence, or I-829)
  • Practical consequences: Considering the chance that we might need to deal soon with a Final Rule that looks like the NPRM,
    • Prospective investors: If I were planning an EB-5 investment, I’d make every effort to get I-526 filed soon under the current lower investment threshold. In vetting potential projects, I’d consider how much EB-5 money the project still needs to raise (the larger the EB-5 raise, the more exposure to risk from rules changing for future investors).
    • People past I-526 filing: I’d congratulate myself on being already in the system, so the investment amount and TEA changes do not affect my eligibility. If my project still hasn’t completed its EB-5 raise, I’d consider its ability to adapt to the changes for incoming investors. (If the project can still attract the investment, past investors will benefit from changes that mean fewer investors to claim the available job creation.)
    • Project companies and regional centers: If I were promoting an EB-5 investment, I’d try to complete the raise asap, before new rules constrict the market. Meanwhile, I’d strategize about what can work under the new rules. It seems likely that a dramatic investment amount increase, combined with reduced and restricted TEA incentive, will create an environment that privileges high-end projects with attractive ROI.  Some people can afford to write off $500,000, but an investor committing $1-$2 million of equity will likely care about it as an investment, not just an immigration opportunity.  The ideal project will offer security, a solid return, and be located in a distressed or rural area. Since economic reality makes such opportunities very rare, security and profitability will probably carry the day. Sadly, the NPRM proposed to make TEA status both more difficult to obtain and less valuable – not a recipe for competitive advantage for distressed and rural areas. But for what the revised TEA incentive is worth, it’s possible check whether a given project would qualify. The revised TEA designation rules in the NPRM are basically the same as the current rules, except when it comes to making a TEA from census tracts. Look at a mapping tool that shows unemployment rates by census tract (this one for example). A project can qualify under new rules if the census tract where it’s located (combined, if needed, in a weighted average with one or more of the immediately contiguous census tracts) has high unemployment. The difference from current practice is that a special TEA as defined in the NPRM can only include census tracts that touch the tract where the project is located, not larger and more extended groupings.

Priority Date Retention Change:

  • Proposed change: An EB–5 immigrant petitioner may to use the priority date of an approved EB–5 immigrant petition for any subsequently filed EB–5 immigrant petition. This provision would provide some protection from material change, allowing the investor to keep her priority date even if changed circumstances require filing a new I-526 petition.
  • Effect: The NPRM proposed that priority date retention would specifically apply to anyone in the stage between I-526 approval and conditional green card. The NPRM does not offer the protection to people with pending I-526, people whose I-526 was denied or revoked, or people who already have conditional permanent residence.
  • Practical consequences:
    • Prospective investors: This change is promising – an additional future protection that’s particularly important to anyone from oversubscribed countries (China, Vietnam, India) who faces a long wait between I-526 approval and green card.
    • People with pending I-526: The change is no help yet, but a nice promise for the future
    • People with approved I-526 and still waiting for a green card: The priority date retention could be a game-changer. It means that so far as USCIS is concerned, you’re free and welcome to withdraw from one project and invest or reinvest in another. At this stage you’d still have to file a new I-526 for changed circumstances (and deal with the rules that apply to new I-526 filings), but could keep the original I-526 priority date, and original place in the visa wait line. Priority date retention removes some of the sting from material change, and opens the door for investor-lead redeployment.  USCIS can’t force terminated regional centers or under-performing projects give investor money back. But at least the regulation removes barriers on the immigration side to change and voluntary reinvestment.
    • People with conditional permanent residence: The priority date retention does not apply to them, in the NPRM. However, note that EB-5 policy already allows significant leeway for change during the CPR period without need to refile I-526.
    • Project companies and regional centers: For underperforming projects, priority date retention could lead to a rush of investors pushing to withdraw so that they can reinvest somewhere else. For attractive projects, priority date retention could open a new market: people with approved I-526 who need a new investment after the original one didn’t satisfy. Priority date protection could effectively create a secondary market in EB-5 investment, and entirely change the redeployment issue by giving investors power to reinvest their own funds. But there’s an important limiting factor: priority date is all that investors could retain from the original I-526 filing. The NPRM does not offer to let people reinvest under the same rules for minimum investment and TEAs that applied to the original I-526 filing. People who could invest $500,000 in Project A last year may be practically unable to invest $1.35 million in Project B this year, even if USCIS allows and facilitates withdrawing from Project A and reinvesting in Project B. But still, priority date protection could have significant implications for the EB-5 landscape.

I-829 Changes:

  • So far as I can tell, the proposed I-829 changes are an unmixed good. The NPRM would make people more free to grow up, marry, divorce, and die, knowing that family members will still be able to file I-829 to remove conditions. CPR status would be automatically extended between I-829 receipt and adjudication, blunting the pain of long processing times. Interviews would be conducted within reason as to time, place, and content.

And now the waiting game, to see whether EB-5 regulations ever get finalized, and if so which provisions get included in the final rule. Congress, if only you would act instead, and provide the modernization that EB-5 really needs to protect integrity and incentivize economic development!

UPDATE: Frieldland & Calderon have published an article that explains the process behind the regulations and why they don’t believe that the EB-5 regs will ever be finalized. They also reiterate why EB-5 needs Congress to act, though Congressional action is also unlikely.  “EB-5 Reform on the Horizon – If the Palm House Hotel Debacle Does Not Precipitate Congressional Action, What Will?” (March 22, 2019)

EB-5 Modernization Regulation Advances

The Office of Management and Budget List of Regulatory Actions Currently Under Review shows that the EB-5 Modernization Regulation advanced on Friday to the OMB Review stage.

OMB Review is the last step in the rulemaking process before publication of a final rule.

How long does OMB review take? It usually takes many months, as evidenced by other DHS regulations currently listed on the OMB site with receipt dates as early as June 2018, and still with “Pending Review status.” Or it occasionally happens in as little as a month, I’ve noted in my time tracking the OMB site.

After OMB review, the Final Rule will be published in the Federal Register. How long after publication will the final rule become effective? Here’s the answer according to The Federal Register’s Guide to the Rulemaking Process: “When an agency publishes a final rule, generally the rule is effective no less than thirty days after the date of publication in the Federal Register. If the agency wants to make the rule effective sooner, it must cite “good cause” (persuasive reasons) as to why this is in the public interest. Significant rules (defined by Executive Order 12866) and major rules (defined by the Small Business Regulatory Enforcement Fairness Act) are required to have a 60 day delayed effective date.”

And the most burning question of all — what will be in the Final Rule? We know what was in the Notice of Proposed Rulemaking for RIN: 1615-AC07, but that was published in January 2017, and DHS has spent almost two years since making some kind of changes.  It’s unfortunately plausible that DHS just spent two years writing out why they’re not accepting any suggestions in public comments, but I’d like to think that they made some significant adjustments in response to public concerns and insights. I hope to see a different minimum investment amount in the final rule, considering that nearly every single commenter informed DHS that the NPRM proposal would be fatal.  But for what it’s worth, here’s a summary of provisions in the NPRM from 2017:

  • 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.

 

Updates (reauthorization, visa cap, redeployment, AAO decisions)

Reauthorization

There seems to be optimism that Congress and President Trump will agree before February 15 on a deal to fund the government for 2019. I assume and trust that the deal, when unveiled, will include extension of regional center program authorization at least to September 30, 2019. [Update: H.J.Res 31, which became law on 2/15, has regional center program authorization to 9/30/2019 in Division H, Title 1, Sec. 104 (PDF page 463), and no other changes that affect EB-5.]

Luckily for EB-5, the case against it has been taken up by the pariah Rep. Steve King. Last month he introduced H.R.773 – To terminate the EB-5 program, proposing that EB-5 be erased from the INA, and that DHS cease to accept new petitions and dismiss all pending petitions and applications. The bill has gained 0 cosponsors, reflecting what other lawmakers think of this proposal and/or of supporting anything associated with Steve King.

Visa Availability

The per-country cap for EB visas continues to be an issue in the new Congress, with at least two new bills proposing to eliminate it: H.R. 1044 ‘Fairness for High-Skilled Immigrants Act of 2019 and S.386 – A bill to amend the Immigration and Nationality Act. These bills have quite a few cosponsors. This time around, IIUSA has taken a stand on the issue. “While the elimination of per-country caps may make sense for some categories, the elimination of the per-country caps for EB-5 will be to the detriment of the program,” stated IIUSA Executive Director Aaron Grau. [2/18 Update: IIUSA has expanded on its statement.]

IIUSA members, note the in-depth data report linked to the IIUSA post. Or for a briefer and publicly available discussion of implications, see my post from last year. (My analysis from last year did not account for the transition period and protections for past applicants included in H.R.1044.)

EB-5 Activity at USCIS

Here’s what USCIS has done publicly so far for EB-5 in 2019:

  • Not finalized EB-5 regulations (or at least, not yet advanced them to OMB for review)
  • Not approved or terminated any regional centers
  • Not published petition processing data for July-Sept 2018 (I expected this to happen by December 2018)
  • Not held or announced any stakeholder engagements
  • Made a couple tweaks to petition processing time reports, each time adding or subtracting a few days. Currently, petitioners can be considered “outside normal” processing times if they are 796 days from I-526 filing, 1,077 days from I-829 filing, or 715 days from I-924 filing.  Dear me. However, I’m hearing anecdotally of I-526 adjudicated within a year.
  • Published a number of AAO decisions on EB-5 appeals (a few of which I discuss below)

Material Change and Redeployment

I have something to add to the redeployment discussion, as a business plan writer who has spent years grappling with the intersection of EB-5 theory and business practice. But until I have time to actually write the post I have in mind, here FYI are two planks to my thinking on the redeployment issue:

  • Carolyn Lee’s analysis of the EB-5 at-risk requirement and its misapplication in redeployment policy. USCIS, be sure to read this article, which helps explain why applying redeployment policy is so hard for us. When a policy makes sense theoretically, then we don’t have to badger you with questions about how to apply it. Then we can figure it out ourselves with reference to the statue/regs/precedents etc., with the help of our smart lawyers. As it is, we do hassle you with questions because there’s a broken link to the established rules, giving us and you no firm foundation to stand on in applying the policy, and leaving us all vulnerable to capricious case-by-case determinations.
  • A number of redeployment complications and constraints arise from the fact that redeployment policy is a subset of the material change policy. In preparation to discuss that aspect of redeployment, I’ve refreshed my post What is Material Change.  The post discusses the theory and links to most AAO decisions that have addressed material change in specific cases.

USCIS decision-making

AAO decisions on EB-5 appeals shed light on an important question: “If anything goes wrong with an EB-5 investment, is there any way to recover?” What if a principal goes rogue and makes off with some funds, but then there’s new management and funds are recouped and put to work again? What if a regional center was terminated, but currently well-placed to promote economic growth? What if a project did not develop as originally anticipated, but can succeed and create jobs in a new direction? These questions fall in policy grey areas, giving the agency leeway for positive flexibility or reflexive naysaying.  Unfortunately, recent AAO decisions show the later trend, and I hope that there will be pushback.

DEC102018_06B7203 Matter of L-X- is one of two decisions on appeal by investors who put money into an NCE originally managed by Emilio Francisco, who was charged by the SEC in December 2016 with defrauding investors. The NCE and other defendant entities went into receivership, it was determined that a portion of EB-5 investor funds had been diverted, and USCIS denied I-526 petitions for NCE investors. In an attempt to salvage the situation, several EB-5 investors executed an LOI with an institutional investor and amended the NCE’s LP agreement to replace the NCE manager, remove the NCE from receivership, provide necessary funding to the NCE, and complete and operate the project. USCIS/AAO claimed to be “sympathetic to the Petitioner’s situation,” but claimed that the investors still could not satisfy EB-5 requirements. Here’s the USCIS/AAO reasoning:

  • The petitioner could not satisfy the “at-risk” requirement if she replaced diverted capital with additional investment, because that new capital would not be her original capital, and Izummi requires showing that the full amount of “original capital” was made available to the NCE to create jobs. “Petitioner must establish the necessary job creation with capital invested at the time of filing, not based on later infusion of additional funds.” (I don’t quite follow the justification from Izummi, or the “original capital” idea generally. Is the thought that the very dollar bills first passed between the investor and NCE must be the same dollar bills used to pay employee salaries? USCIS sometimes talks about a “path of funds” from investment to job creation – as if cash flowed through a business with each note radio-tagged and leaving a colored path as it goes. In practice, investment goes together into a pool and economic activity and jobs and ROI come out of the pool. A “path of funds” from X original dollar to Y job never exists, and USCIS/AAO should not make demands that presume such a path.)
  • If the investor replaced $182,133.33 of diverted capital with $182,133.33 in additional investment, then the petitioner would be committing impermissible material change because that would effectively increase the minimum investment amount from $500,000 to $682,133.33. (Really, USCIS? How does investing more than the required minimum undermine eligibility?)
  • USCIS couldn’t tell whether the Petitioner had actually invested the additional funds, or only intended to do so. (This is a fair point, but why did USCIS raise this issue if against additional investment in principle?)
  • The Petitioner did not demonstrate that all approvals needed for the proposed NCE restructuring had been obtained, making USCIS doubt whether the restructuring could go forward. (Fair point, if true.)
  • The Petitioner did not file an updated business plan to describe the current status of the project and its current job creation potential. (I wonder if this was fundamentally the most important problem with the Petitioner’s appeal. A business plan is a chance to tell a compelling story about use of investment and job creation, reconcile apparent inconsistencies, argue that changes aren’t material, make an eligibility case, and pre-emptively address questions, doubts, and misconceptions that the reader might have. Don’t miss the prime opportunity to tell your story! As a business plan writer, I’m sensitive to the critical and delicate role of the business plan in presenting changed circumstances to USCIS.)

DEC042018_01K1610 Matter of P-A-K  is AAO’s third decision regarding the designation of  Path America KingCo regional center. This decision was compelled by US District Court, where the regional center filed a complaint after the AAO denied its initial appeal and motions to reopen and reconsider. AAO gives 21 pages this time to reiterate the denial, with arguments that can be summed up in this sentence that the decision quotes from INS v. Abudu: “The INS should have the right to be restrictive.” Path America KingCo presents a compelling case for its current and future potential to promote economic growth, but the AAO finds that this isn’t relevant to its current designation status. AAO rests on this technical claim: that appellate decisions are final, and cannot be reconsidered in light of new evidence, but only reassessed in terms of evidence that existed at the time the decision was made. One might think that Path America KingCo deserves designation if it is continuing to promote economic growth, but AAO says no – the relevant issue is whether it was promoting economic growth at the time it was terminated. A different agency might’ve looked at the fact pattern – a company that has good management (now), good projects, and committed investors dependent on the designation – and found a way to say yes. The so-called “balancing test” discussed in prior terminations claims that “we take into account a variety of factors, both positive and negative, that encompass past, present, and likely future actions.” However, it appears that this test does not apply on appeal, as USCIS does not consider positive present or likely future actions once a termination letter has been issued.

Letter to Senator Collins in the USCIS electronic reading room shows USCIS responding frostily to a plea from Senator Susan Collins regarding a small town in her constituency that planned to use EB-5 investment to rebuild after the catastrophic closing of a paper mill. The scenario sounds like textbook example of what Congress hoped EB-5 could do, but it did not move USCIS, which terminated the regional center purchased for the town before the town had a chance to use it, and just offered Senator Collins the cold comfort of filing an AAO appeal. Is this administering the Immigrant Investor Program in a fair and efficient manner? Fair and efficient, I suppose – the RC was apparently inactive prior to being taken over for Millinocket, Maine. But is the decision in tune with EB-5 program logic and objectives? No.

To be fair, AAO appeals sometimes work. JAN252019_01B7203 is an example of a denial that AAO remanded back to USCIS for more precision in identifying specific problems in credibility and eligibility, and for more rigor in assessing relevant evidence.

And as a reminder that court cases also sometimes work, EB-5 investors have another win on use of loan proceeds for EB-5 investment.

Approaching Feb 15

The regional center program authorization granted in 2018 is now active again, with another continuing resolution that extends previous funding and authorities for a few more weeks — through February 15, 2019. USCIS has updated its Regional Center program page to remove the language about lapse in authorization. My Washington Updates page has the detail on the legislation.

The shutdown from December 22 to January 25 turned out to be much gentler on EB-5 than it could’ve been, thanks to the USCIS decision to continue to accept regional center I-526 and I-485 filings during the lapse in RC program authorization. Adjudications were delayed, but not that much in the scheme of long processing times. So we survived the lapse and are reauthorized again, and the drama is just beginning.

Regional center program authorization got extended by default in the continuing resolution, and has to be included on purpose in a new funding bill for 2019. And immigration issues are at the center of appropriations negotiations. The White House says “Once the government is open and the immediate crisis is addressed, President Trump will hold weekly bipartisan meetings to reform our immigration system.” A group of 17 Congressional representatives has been appointed to work out a compromise on border security funding – a compromise that could implicate wider immigration issues and visa allocation. The White House statement mentioned these priority issues: “interior enforcement, asylum reform, worksite verification, the 11 million people living in the country unlawfully, and moving toward a merit-based immigration system.” If only someone would speak up in this negotiation for the EB-5 regional center program, and the need to put immigrant investment on a stable footing (ideally with more visas for these merit-full immigrants). But I’m not sure who in that group of 17 negotiators is a friend of EB-5. I hope that the group includes someone who knows positive stories to balance member Patrick Leahy, whose wounds from Vermont Regional Center disappointments are still fresh. Leahy used strong language to complain in 2018 that “The recently-passed omnibus spending bill included a clean extension of EB-5, and did not include any reforms to crack down on well-documented fraud, abuse and national security concerns.” The EB-5 regulations that Leahy called for then have still not been finalized (I keep checking the OMB site for evidence that they’re under review, but nothing yet). Will Leahy or others in Congress be motivated by DHS delay to address EB-5 again now? But then the border security negotiation is so large and EB-5 is such a tiny visa category. EB-5’s problems are dwarfed by the size of the program’s positive economic impact, and negligible in the big picture of immigration problems. When Congress can’t manage progress on a single major pressing issue – border security – how likely is it that the minor regional center program will earn a moment’s thought now, beyond the minimum necessary to keep the program going? We shall see.

IIUSA says that it is “active on Capitol Hill and will continue to visit offices and advocate on your behalf. As we learn more leading up to the next sunset date of February 15, we will keep you informed of progress made on a long-term reauthorization of the Program.” We certainly need such advocacy now.

In other news, a thank you to industry colleagues for recognizing me again this year as one of the Top 5 Business Plan Writers in EB-5. Blogging is a sideline but business plans are my profession, and I’m delighted to be honored by peers for excellence in my core work.

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

–12/22 UPDATE–

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

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

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

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

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

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

The Department of State website has this notice:

Operations During a Lapse in Appropriations

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

–ORIGINAL POST–

Reauthorization or Shutdown

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

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

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

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

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

Source of Funds Victory

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

Visa Numbers Case Setback

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

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

Litigation

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

SEC Action

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

Regional Center Compliance

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

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

Approaching Dec 7->Dec 21

— 12/7 UPDATE –

H.J.Res.143 – Making further continuing appropriations for fiscal year 2019, and for other purposes is a continuing resolution that replaces the previous 12/7 deadline for remaining government funding and authorizations with a new deadline: 12/21. IIUSA continues to press for longer-term regional center program authorization.

— ORIGINAL POST 11/26–

Washington has a deadline of December 7, 2018 to fully fund the government for FY2019, and to reauthorize programs (including the EB-5 regional center program) previously authorized by appropriations acts.

Those of us concerned with EB-5 wait with bated breath for language such as this, which may or may not get into legislation passed in the next few weeks:

  1. 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 ‘[future date]’ for ‘September 30, 2015.’
  2. Such amounts as may be necessary, at a rate for operations as provided in the applicable appropriations Acts for fiscal year 2018 and under the authority and conditions provided for in such Acts, for continuing projects or activities (including the costs of direct loans and loan guarantees) that are not otherwise specifically provided for in this Act, that were conducted in fiscal year 2018, and for which appropriations, funds, or other authority were made available in the following appropriations Acts: … title II of division M of Public Law 115-141
  3. Section 202(a)(2) of the Immigration and Nationality Act (8 U.S.C. 1152(a)(2)) is amended – (1) In the paragraph heading, by striking “AND EMPLOYMENT-BASED”; (2) By striking “(3), (4), and (5),” and inserting “(3) and (4),”’ (3) By striking “subsections (a) and (b) of section 203” and inserting “section 203(a)”;

To translate each statement into common English:

  1. The EB-5 regional center program is reauthorized to a future date past the current sunset date
  2. The FY2018 authorization of the EB-5 regional center program is extended into FY2019
  3. The EB-5 category will no longer have a per-country cap on visas (among other changes)

None of these statements are true yet; they may or may not be in forthcoming legislation. In order to reauthorize the regional center program past its current sunset date of December 7, 2018, either Statement #1 will need to appear in a funding bill for FY2019, or Statement #2 will need to appear in another continuing resolution extending part of FY2018 funding into FY2019.  In order to change the per-country visa cap, Congress would have to agree about Statement #3 (which was in the House version but not the Senate version of FY2019 DHS funding bills voted out of committee in June/July, as discussed here). Congress could potentially attach other EB-5 changes to the FY2019 spending bills, but I’ve heard zero chatter about any substantial EB-5 legislation in progress.

So what will happen? I guess that the next few weeks will be full of wall-funding arguments and shutdown threats, followed by another continuing resolution for DHS funding into January/February 2019, and finally a FY2019 appropriations act that will extend regional center program authorization to September 30, 2019, and will not change visa allocation. I guess this outcome because it’s most consistent with the assumption that Congress has no time right now for EB-5 or EB immigration generally, for good or ill. EB-5 is the least pressing of all immigration issues. I guess that few of our representatives can even parse Statement #1 or Statement #2, much less have motivation to block such statements from being included again, as per long-standing practice, in the next round of funding bills. Apparently, few people can interpret Statement #3 either, since even the House Appropriations Committee has it wrong on its website.  Statement #3 appeared in a controversial early version of the DHS funding bill that’s already in conflict with the Senate and won’t be loved overall by the incoming Democrat-controlled House either. I just can’t imagine partisans charged up to deal with border security and asylum and childhood arrivals having any interest in agreeing now, by the way, on a tweak to EB visa allocations.

I expect to hear no news about EB-5 concerns in connection with spending bills, but will update my Washington Updates page on the off chance of any reports, and when I see legislation. Note that the bottom of my Washington Updates page includes “what if” discussions for several scenarios, including what would happen in case of RC program sunset or government shutdown.

Meanwhile, I regularly check the OMB List of Regulatory Actions Currently Under Review, and have yet to see the EB-5 Modernization Regulation RIN 1615-AC07 progress to the OMB review stage. This makes me doubt the OMB Fall 2018 estimate that we’ll see a Final Rule by 11/00/2018.

PM Update (redemption agreements, debt arrangements)

USCIS has updated the USCIS Policy Manual immigrant investor section with a new subsection titled “Redemption Language” that clarifies policy on debt arrangements. This new language follows up on a flurry of denials in 2017/2018 based on  suspected debt arrangements, and subsequent successful litigation. I await analysis from experts, but the new Policy Manual language comes close to granting “okay, we were wrong and you were right.” Regarding redemption provisions only exercisable by the new commercial enterprise, the PM now states that “USCIS generally does not consider these arrangements to be impermissible debt arrangements,” and footnotes the Kurzban’s recent Chang v. USCIS case over call options. However, the PM language also adds several qualifications. We’ll see whether the lawyers now agree that the clarified policy is fully justified under the regulations and Matter of Izummi. (UPDATE: In her analysis of the New USICS EB-5 Redemption Policy Update, Carolyn Lee points out problematic language that could be interpreted to prohibit even denial-based repayments. She also notes that the PM update reinforces the flawed marriage analogy from Matter of Izummi.)

I’ve copied below the policy alert and the new policy language. As usual, I also made a new file for the current 6 USCIS PM G (saved in this folder), and performed document comparison with the previous version (dated August 24, 2018) to confirm that nothing changed besides the one new subsection under 6 USCIS PM G(2)A(2).

From: U.S. Citizenship and Immigration Services <uscis@public.govdelivery.com>
Sent: October 30, 2018 11:02 AM
Subject: USCIS Policy Manual Update

USCIS is revising guidance in the USCIS Policy Manual to clarify its policy on debt arrangements in Volume 6: Immigrants, Part G, Investors. Please see the Policy Alert for more detailed information:

Visit the Policy Manual for Comment page for more information on stakeholder review and comment.

***

New language added to USCIS Policy Manual Volume 6 Part G Chapter 2 Section A(2)

Redemption Language

The regulatory definition of “invest” excludes capital contributions that are “in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement.” [Footnote: The full definition of invest is provided at 8 CFR 204.6(e).]

An agreement evidencing a preconceived intent to exit the investment as soon as possible after removing conditions on permanent residence may constitute an impermissible debt arrangement. [Footnote: See Matter of Izummi22 I&N Dec. 169, 183-188 (Assoc. Comm. 1998).] Funds contributed in exchange for a debt arrangement do not constitute a qualifying contribution of capital.  [Footnote: EB-5 regulations contain two basic requirements in order to have a legitimate qualifying investment: (1) 8 CFR 204.6(e) defines “invest” to require a qualifying (that is, non-prohibited) contribution of capital; and (2) 8 CFR 204.6(j)(2) requires a qualifying use of such capital (placing such capital at risk for the purpose of generating a return). In order to satisfy the evidentiary requirement set forth at 8 CFR 204.6(j)(2), an investor must first properly contribute capital in accordance with the definition of invest at 8 CFR 204.6(e). If the contribution of capital fails to meet the definition of invest, it is not a qualifying investment, even if it is at risk for the purpose of generating a return.] In general, the petitioner may not enter into the agreement knowing that he or she has a willing buyer at a certain time and for a certain price.  [Footnote: See Matter of Izummi, 22 I&N Dec. 169, 186-187 (Assoc. Comm. 1998).]

Any agreement between the immigrant investor and the new commercial enterprise that provides the investor with a contractual right to repayment is an impermissible debt arrangement. In such a case, the investment funds do not constitute a qualifying contribution of capital.  [Footnote: See Matter of Izummi, 22 I&N Dec. 169, 188 (Assoc. Comm. 1998). Matter of Izummi addressed redemption agreements in general, and not only those where the investor holds the right to repayment. USCIS generally disfavors redemption provisions that indicate a preconceived intent to exit the investment as soon as possible, and notes that one district court has drawn the line at whether the investor holds the right to repayment. See Chang v. USCIS, 289 F.Supp.3d 177 (D.D.C. Feb. 7, 2018).] Mandatory redemptions and options exercisable by the investor are two examples of agreements where the investor has a right to repayment. The impermissibility of such an arrangement cannot be remedied with the addition of other requirements or contingencies, such as conditioning the repurchase of the securities on the availability of funds; the delay of the repurchase until a date in the future (including after the adjudication of the Petition by Entrepreneur to Remove Conditions on Permanent Resident Status (Form I-829)); or the possibility that the investor might not exercise the right. In other words, repayment does not need to be guaranteed in order to be impermissible. It is the establishment of the investor’s right to demand a repurchase, regardless of the new commercial enterprise’s ability to fulfill the repurchase, that constitutes an impermissible debt arrangement.  [Footnote See Matter of Izummi, 22 I&N Dec. 169 (185-86) (Assoc. Comm. 1998).]

The following table describes certain characteristics that might be present in agreements and explains whether their inclusion creates an impermissible debt arrangement.

Characteristics of Redemption Provisions
Type of Provision Description Impermissible Agreement?
Mandatory redemptions Arrangements that require the new commercial enterprise to redeem all or a portion of the petitioner’s equity at a specified time or upon the occurrence of a specified event (for example, once the conditions are removed on the petitioner’s permanent resident status) and for a specified price (whether fixed or subject to a specified formula). USCIS considers this an impermissible debt arrangement. Such impermissible obligations are not subject to the discretion of the new commercial enterprise (although it may have some discretion regarding the timing and manner in which the redemption is performed).
Options exercisable by the investor Arrangements that grant the petitioner the option to require the new commercial enterprise to redeem all or a portion of his or her equity at a specified time or upon the occurrence of a specified event (for example, once the conditions are removed on the petitioner’s permanent resident status) and for a specified price (whether fixed or subject to a specified formula). USCIS considers this an impermissible debt arrangement.
Option exercisable by the new commercial enterprise A redemption agreement between the immigrant investor and the new commercial enterprise that does not provide the investor with a right to repayment.

One example of such an agreement is a discretionary option held by the new commercial enterprise to repurchase investor shares. These options are typically structured similarly to options exercisable by the investor, except that the option is held and may be exercised by the new commercial enterprise. When executed, these options require an investor to sell all or a portion of his or her ownership interest back to that entity.

USCIS generally does not consider these arrangements to be impermissible debt arrangements. [Footnote: See Matter of Izummi, 22 I&N Dec. 169, 188 (Assoc. Comm. 1998). See Chang v. USCIS, 289 F.Supp.3d 177 (D.D.C. Feb. 7, 2018).]

However, such an option may be impermissible if there is evidence the parties construct it in a manner that effectively converts it to a mandatory redemption or an option exercisable by the investor (considered a debt arrangement). For example, an arrangement would be impermissible if ancillary provisions or agreements obligate the new commercial enterprise to either (a) exercise the option (at a specified time, upon the occurrence of a specified event, or at the request of the investor) or (b) if it chooses not to exercise the option, liquidate the assets and refund the investor a specific amount.

Regulations update (Fall 2018)

The Fall 2018 OMB Unified Agenda has been published with updated timetables for two EB-5 regulations in progress, and notice of a third EB-5 regulation to come.

  • RIN1615-AC07 EB-5 Immigrant Investor Program Modernization, with proposed changes to TEAs and the minimum investment amount:
    • Timetable for Final Rule updated to November 2018 (The Spring 2018 agenda had anticipated August 2018)
  • RIN 1615-AC11  Regional Center Program Regulation, with proposed changes to regional center designation requirements and process:
    • Timetable for Notice of Proposed Rulemaking is still March 2019 (same as in the Spring 2018 agenda)
  • RIN 1615-AC26 EB-5 Immigrant Investor Program Realignment, which “will solicit public input on proposals that would increase monitoring and oversight, encourage investment in rural areas, redefine components of the job creation requirement, and define conditions for regional center designations and operations”
    • Timetable for Advance Notice of Proposed Rulemaking announced for September 2019

We’re most concerned about RIN 1615-AC07, since that’s the one at the Final Rule stage. If it does actually become a Final Rule next month, then it could potentially take effect before the end of the year. (I understand that the effective date for a Final Rule is usually at least 30 days after its finalized.) We won’t know the content of the Final Rule until it’s published, but here, as a reminder, is a summary of what the draft rule 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.

When DHS opened the draft for comment in 2017, the industry told DHS how disastrous some of the proposals could be as written. We’ll see whether DHS listened and revised the draft. (My May 2017 post New EB-5 Regulations: Comments Discussion reviews the industry response.)

It remains to be seen whether the Fall 2018 Unified Agenda action dates will be more reliable than previous deadlines. I believe that RIN 1615-AC07 is still at at Step 7 in the Rulemaking Process, since I haven’t yet seen it listed by the OMB as a Regulatory Action Currently Under Review for Department of Homeland Security. But we may really see action this time, after DHS missed the previously-predicted deadlines of February 2018 and August 2018. USCIS Director L. Francis Cissna testified at the June 2018 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.” (UPDATE: Mr. Cissna told IIUSA on October 5, 2018 that “the proposed rule that has yet to go final, it is going to go final. We’re just not ready yet. We’re still working on it” and “The reg., it might take a while yet before it gets finally published.”)

As for the third new regulation, with an Advance Notice foreseen for a year from now, I don’t know whether to laugh or cry. The vague and sweeping precis and long lead time makes me suspect that DHS itself does not know yet what will go into this regulation. To the extent that its promised content overlaps with the content of the two regulations already on the table, it seems to question and undermine those regs. (AC07 already proposes to modify TEAs and AC11 is already about conditions for regional center designation. Why would AC26 propose to cover the same areas, unless judging those other regs faulty? We agree that those regs are faulty, at least in draft form, but then why are they still going forward, with vague promise of future correction? Is this about conflict among current/former policy staff at IPO and Office of Policy and Strategy?) AC26 apparently takes for granted that Congress will never act on EB-5, as it covers policy changes previously expected Congress. It also takes for granted that EB-5 will be a robust market to oversee into 2019 and beyond.

RC program authorization (12/7/2018)

FY2018 is ending with a Continuing Resolution that defers the deadline for unmade decisions about government funding and programs, including the regional center program, to December 7, 2018. (The relevant language from H.R. 6157 is on my Washington Updates page.) The history of regional center program authorization since 1992 now looks like this.

The Continuing Resolution means that the regional center program remains authorized as-is until December 7, 2018, or until the enactment of a new law that reauthorizes or excludes the regional center program going forward. We can’t expect more legislation until mid November at earliest, however, since the House has gone on recess as of September 28 and will not reconvene until November 13.

Meanwhile, EB-5 regulations have still not proceeded to the OMB review stage.

I speculate that Washington will persevere in ignoring and avoiding EB-5 because immigrant investment presents an inconvenient reminder that immigrants can bring a wealth of resources – even hard-to-deny resources such as dollars, economic growth, and job creation. There’s a will to brand immigrants as dangerous takers, and EB-5 investors contradict that image. Unfortunately, the EB-5 program still suffers – ignored by the right, and castigated by the left for being ignored even as new policies particularly harass materially-poor immigrants. Recent op-eds are unfortunately wrong in claiming that the Trump administration has made more EB-5 visas available. (In fact there’s been increased demand but no visa supply increase, resulting in backlogs that make EB-5 a slow track.) It’s hard to imagine any EB-5 relief in current political conditions. Perhaps the strategy pioneered at our southern border can be applied to EB-5, only instead of keeping children while deporting the parents, we keep the billions of dollars in EB-5 investment while fostering indefinite delays to issuing visas to the investors.  Or maybe, we’ll wake up one day and remember who we are and why it’s a good idea to open the door to the many forms of wealth represented by immigrants.  In the meantime, IIUSA at least has not given up and has filed an Amicus Brief in Support of Visa Backlog Litigation.

(For those interested in the new policies related to inadmissibility, see the June 2018 Policy Memo on inadmissible and deportable aliens, an ANPRM on proposed changes to the public charge ground of inadmissibility, and notes from a 9/27 stakeholder meeting on the June policy memo. The EB5 Insights blog discusses implications for EB-5 investors, and Wolfsdorf critiques the policy.)

I-924 exemplar appeal sustained (reserves, material change)

I read and log all Administrative Appeals Office decisions on EB-5 appeals, in an effort to keep up with EB-5 adjudication trends and be more than just another business plan writer with an English major and MBA. The AAO decisions illuminate and very occasionally question current thinking at USCIS about how to interpret and apply EB-5 requirements in practice.

AUG152018_01K1610 (Matter of A-C-R-C-) is a sustained appeal that challenges USCIS interpretation of the EB-5 at-risk requirement and material change policy. The appeal concerns an I-924 application to request approval of a proposed project as an exemplar.  The applicant filed the I-924 in 2015. When USCIS got around to adjudicating the application two years later, an adjudicator googled local media reports about the project, discovered changes (unsurprisingly) from the original plan, and sent the applicant a Notice of Intent to Deny. The applicant responded to the NOID by explaining the changes and submitting revised and amended documents. USCIS still denied the application for two reasons:

  • changes to the business plan and associated organizational and transactional documents represented impermissible material changes
  • the existence of a working capital reserve and interest reserve in the budget for the job-creating enterprise meant that the full amount of EB-5 investment capital was not available for job creation purposes, and therefore not at risk, and not reasonable as part of inputs to the economic model

AAO found fault with the USCIS analysis.

  • USCIS cited Matter of lzummi ‘s finding that “A petitioner may not make material changes to his petition in an effort to make his deficient petition conform to the Service requirements.” AAO found that Izummi is not apposite because the case in this appeal involved changes made in response to business reality, before USCIS even sent the NOID, and thus obviously not just in attempt to remedy a deficient petition. The changes in this case were significant but not material. (This is good news if it means AAO is tending toward the reasonably limited definition of material change suggested by Ron Klasko: “a change that makes an approvable project un-approvable, or makes an un-approvable project approvable.” This in contrast to the apparent general inclination by USCIS to treat any significant new set of facts as a material change.) At least in this case, AAO agreed with the applicant’s contention that its changes were not material because “while the location, the Borrower, and the JCE differ from the initial filing, these changes are permissible because the ____ hospital project is substantively similar to the management structure, construction and development entities, and economic analysis in the original 2015 business plan’s proposed project in _____,  and moreover, these changes were not an attempt to remedy a deficient petition.” (But this is a non-precedent decision, and thus sets no precedent for how USCIS or AAO will treat other cases.)
  • AAO points out that standards for an I-924 application with exemplar I-526 are not the same as those that apply to an investor I-526 petition. The USCIS Policy Manual, referencing Matter of Katigbak, says that an application cannot be approved with a different set of facts than those presented in the original filing. But this applies to visa petition proceedings, not applications filed by regional centers. The relevant Policy Manual guidance for regional center amendment applications and the Form 1-924 instructions recognize the evolving business realities that are reflected in regional center amendments, and require an amendment submission only for specific, limited changes. Furthermore, the fact that a change could be material for investor petitions already pending for the same project does not have implications for the exemplar I-526. The Form I-924 eligibility requirements are independent of future eligibility determinations for associated investor petitions.
  • USCIS saw a working capital reserve and an interest reserve in the budget for the job-creating enterprise, and determined that the Applicant had not established that the full amount of investor funds would be placed at risk for the purpose of job creation because a portion of the EB-5 capital could be placed in these reserve funds. USCIS cited Matter of lzummi’s findings that “Reserve funds that are not made available for purposes of job creation cannot be considered capital placed at risk for the purpose of generating a return on the capital being placed at risk” and “the full requisite amount of capital must be made available to the business(es) most closely responsible for creating the employment on which the petition is based.” AAO found that USCIS incorrectly interpreted Izummi and misapplied its findings. In Izummi, reserve funds were at the NCE level and created to satisfy the NCE’s potential future obligations and to return a portion of EB-5 capital. In the instant case, the reserve fund was owned by the JCE and for use by the job-creating project, not to facilitate any capital repayment to investors. “The record shows the JCE anticipates using these funds for its operations by the second year, and accordingly, has demonstrated that the full amount of the EB-5 capital would be made available for job creation purposes.” In Izummi, the requirement about capital available for job creation addressed a problem that EB-5 funds were being siphoned off by the NCE and subsidiaries even before reaching the job-creating entity. In the instant case, reserves were at the JCE level, and all EB-5 funds reached the JCE.  Furthermore, Izummi placed no limitations on how the entity most closely responsible for job creation used the funds. USCIS has historically agreed (in an engagement cited by AAO, and also in the Policy Manual 6(G)2(D))) that a JCE can use a portion of EB-5 funds for uses such as land purchase that aren’t in themselves job-creating activities. AAO concluded that “Thus, in the instant case, JCE’s use of EB-5 capital on business activities supported by the credible business plan, even where a portion of those expenditures do not directly result in job creation, does not violate Izummi.”
  • The USCIS denial contended, without explanation, that the record lacks sufficient verifiable details to support the job creation inputs. AAO reviewed the record and found a supporting letter from a major international construction company and a detailed feasibility study. AAO considered this significant documentation supporting the construction costs and operational revenues used as inputs into the RIMS II model. Therefore, “the Applicant has demonstrated that the revised business plan and economic analysis use acceptable inputs to support its job creation estimates.”

Ombudsman on new RFE and NOID policy, visa timing, RC list updates

New RFE and NOID Policy
Today is the effective date for the new USCIS policy memorandum on issuance of RFEs and NOIDs. Basically, the memo expands an adjudicator’s discretion to simply deny a petition, without first issuing an RFE or NOID to ask questions or request additional evidence. The policy since 2013 has been that straight denials were only allowed for statutory denials – i.e. when there was no possibility that the deficiency could be cured by submission of additional evidence. The new policy opens new ground for straight denial based on failure to establish eligibility based on lack of required initial evidence. The memo says that this is designed to “encourage applicants, petitioners, and requestors to be diligent in collecting and submitting required evidence,” and is “not intended to penalize filers for innocent mistakes or misunderstandings of evidentiary requirements.”

I listened into a Ombudsman’s teleconference on September 6, and heard representatives from USCIS answer questions about the memo. (UPDATE: Here are official notes from the engagement.) The answers indicated that the Office of Policy and Strategy, at least, seems fuzzy on what constitutes “required initial evidence” and “innocent mistakes or misunderstandings.” “Pages left on the copier” was the one example given of an innocent mistake. No examples of innocent misunderstandings – though USCIS clarified that having an attorney or not wouldn’t be a factor. In general, “required initial evidence” means evidence as required by statute, the regulations, and form instructions. But what does it mean specifically? Certainly in EB-5, we see a lot of variation among lawyers and adjudicators in their interpretation of the specific documents required in various situations to satisfy forms and regulations. Now adjudicators will be free to indulge their discretion to interpret requirements, with no chance for response before denial. Meanwhile, lawyers will likely start clogging the system with kitchen sink petitions that throw in every possible document and page in case it’s something that someone might want to see.

On the Ombudsman call, USCIS confusingly promised that they would be publishing “optional checklists of required initial evidence”(?) on September 11. If that’s happened for EB-5 yet, I can’t find it. Last year, USCIS published a suggested order of documentation for each EB-5 form, and two distinct sets of filing tips for each form. (These are on a phantom Resources page not linked to menus on the USCIS website.) The specific suggestions are helpful but not applicable to every case, so I hope they won’t end up getting treated as optionalrequired evidence. But who knows what adjudicators make of all this guidance. USCIS told the Ombudsman that adjudicators had received one day of training on the new policy, and may or may not have supervisory review for denials under the new policy. As before, adjudicators are supposed to fully explain the reasons for any denial in the denial notice, and petitioners have the same appeals recourse as before.

Response to Policy Manual Updates
Anyone not pleased about the August 24 Policy Manual update on Regional Center geographic area will appreciate the points made forcefully by AILA in its Comments on USCIS Policy Manual Guidance on the Geographic Area of Regional Centers (September 9, 2018). AILA dissects the policy itself and the suboptimal process behind it.

Gap between I-526 approval and visa allocation
I realize that my series of timing posts is missing an important piece: analysis of the steps and time factors (for countries with no cut-off date yet) between receiving the Form I-797, Approval Notice for the I-526 and claiming an EB-5 visa number. Especially Indians are trying to calculate: if I can count on receiving I-526 adjudication in the next few weeks, can I count on getting allocated a visa number in the advance of the Visa Bulletin giving a cut-off date for India? The point at which the visa number actually gets allocated, and the factors/timing between I-526 approval and that point, vary between I-485 and consular processing, and I don’t understand it all yet. But potential investors should include this in discussions with counsel, because delays can be considerable for consular processing anyway. I’m hearing reports of USCIS taking at least 3+ months and even 8+ months just to forward I-526 approvals to the National Visa Center. Ironically, it seems that the faster USCIS adjudicates I-526, the more it drags its feet on advancing that approval to the next stage. But this is a developing situation, and I have limited examples. Here is my background reading list so far FYI. Please email me any additional helpful articles and current timing information.

SEC Action
In recent years, the SEC has set examples by bringing complaints against people who misappropriated and misused EB-5 investor money. In its latest EB-5 action, the SEC reinforces a message that it’s also wrong to aid and abet fraud by others. SEC Charges Former Raymond James Branch Manager for Facilitating a Massive EB-5 Fraud (September 6, 2018)

Regional Center List Changes
Additions to the USCIS Regional Center List, 08/21/2018 to 09/11/18

  • Regional Center of Washington State, LLC (Washington)

New Terminations

  • Encore Pennsylvania RC, LLC (EPRC) (Pennsylvania) Terminated 8/20/2018
  • Gulf Coast Funds Management, LLC (Mississippi) Terminated 8/30/2018
  • The Mid-American Regional Center, LLC (Indiana) Terminated 8/30/2018
  • Citizens Regional Center of Florida (Florida) Terminated 8/24/2018
  • Central Texas Regional Center (Texas) Terminated 8/21/2018
  • California Global Alliance Regional Center c/o Lewis C. Nelson & Sons, Inc. (California) Terminated 8/31/2018
  • Invest Midwest Regional Center (former name Civitas Indiana Regional Center) (Indiana) Terminated 8/21/2018
  • L Global Regional Center, LLC (California) Terminated 8/20/2018

WA Updates, Visa Numbers, Ombudsman, RC List Updates

Washington Updates

August passed with no final rule for EB-5 regulations. OMB has not even received the regulations for review. USCIS Director Cissna told Congress in June that he thought it would be tough to finalize the regs before Sept 30, 2018, and I don’t expect any action soon.

The Regional Center program is currently authorized through 9/30/2018, pursuant to Consolidated Appropriations Act, 2018, Division M—Extensions, Title II—Immigration Extensions (PDF p. 702). The RC program could be extended beyond 9/30 explicitly (if Congress passes a 2019 appropriations act that mentions RC program authorization) or implicitly (if Congresses passes a Continuing Resolution that would postpone the deadline for 2018 appropriations, including the program authorizations in Division M Title II). 9/13 Update: The House has introduced a Continuing Resolution that would extend a number of 2018 authorities and authorizations, including Division M Title II, to December 7, 2018. I’m adding status updates to my Washington Update page.

The 2019 appropriations could be a vehicle for other immigration changes as part of the Department of Homeland Security Appropriations segment. The version of the DHS Appropriations Act 2019 voted out of committee in the House includes the Yoder amendment, which would eliminate the per-country limit for EB-5 visas. The Senate version of 2019 DHS appropriations includes no such provision. It remains to be seen what final version will be negotiated by the House and Senate.

Here’s my understanding of the current status, based on this article: Congress faces September scramble on spending (September 3, 2018) The Hill.

  • Spending legislation comprises 12 individual appropriations bills for different agencies. In 2018 these were all packaged together in one “omnibus” with miscellaneous other content; this year, lawmakers want to avoid an omnibus, instead sending individual bills to the President.
  • Senators have passed 9 out of the 12 individual appropriations bills for 2019, but the House and Senate have yet to sort out in conference any of the differences in their bills.
  • One of the three appropriations bills that has not passed the Senate, and that lawmakers do not want to touch until after the midterm election, is the Department of Homeland Security Appropriations Act (which concerns border wall funding, among other contentious issues). A Continuing Resolution may be passed as a stopgap to defer votes on 2019 DHS appropriations (and likely at least two other spending bills) until after November. The stopgap is likely to go into December, but leadership hasn’t yet worked out the details of a short-term bill. If a CR is passed for DHS appropriations, what would defer a decision on the per-country cap to December. (A CR for DHS appropriations would not affect regional center authorization, since RC program authorization is not in the 2018 DHS appropriations act, but rather in a different part of the 2018 omnibus.)
  • In 2018 appropriations, regional center program authorization is not attached to any of the 12 individual appropriations bills, but is in a 13th section – Division M – devoted to program extensions/authorization. The Hill reports that “In the Senate, Appropriations Committee Chairman Shelby and Vice-Chair Patrick Leahy agreed to keep authorizing language out of the appropriations process.” I’m not sure what that means exactly. Could Division M be folded into a continuing resolution to December, which would also extend the RC program sunset date to December? I look forward to advocacy alerts from IIUSA.

Visa Numbers

USCIS has responded to the lawsuit by Chinese investors over the issue of family members in the EB-5 visa quota. This article discusses and analyses the USCIS response: The Government’s Poor Defense of Counting Derivatives against Immigration Quotas (August 27, 2018) Cato Institute

Meanwhile, people from India have an on-going challenge to try estimating the visa queue and cut-off date timing by tracking news on EB-5 visa demand among Indians. China models a hard lesson: do not wait to be surprised by the Visa Bulletin! The visa wait time for an Indian investor filing I-526 today does not depend on today’s Visa Bulletin but on future Visa Bulletins, which in turn depend on the number of other Indians currently filing and currently waiting for I-526 processing at USCIS. 700 visas/year * 1 investor petition/about 3 visas = about 233 investors that can be accommodated per year per country considering the 7% per-country limit. Two groups active in India — Can Am and LCR Partners – each report having over 200 Indian investors in 2018, which means about two-years-worth of EB-5 visas available to India claimed just this year through just two firms. Something to watch.  The timing for a Visa Bulletin cut-off date for India depends on USCIS’s speed in adjudicating Indian petitions and advancing them to the visa stage. (My post from June explains the process in more detail.)

New RFE and NOID Policy

I plan to listen in on an Ombudsman Teleconference on USCIS Policy Updates on the Issuance of RFEs and NOIDs  September 6, 2018, from 2:00pm to 3:00pm EDT. The policy updates are not specific to EB-5, but significant for those of us who help prepare I-526 paperwork. As background, see USCIS Issues Two New Policy Memoranda on Notices to Appear and Denials in Lieu of RFEs and NOIDs – What This Means for You (July 16, 2018) GT Alert

Due Diligence

I frequently get emails from investors asking for investment advice, which I can’t give. But I will say that I appreciated the points in this article How Transparent are EB-5 Project Managers (July 11, 2018). If I were a prospective EB-5 investor, account transparency, communication, and independent oversight would be major factors in my investment decision. See also Friedland & Calderon’s article EB-5 2.0: Can Account Transparency Save the Program? (Draft December 6, 2016).

Updates from USCIS

After having hosted EB-5 engagements almost quarterly since 2010, USCIS is now on track to go an entire year with no EB-5 stakeholder meeting. Does this relate to leadership turnover at IPO, I wonder? A wish not to discuss the unfinalized regs, unwritten redeployment policy, and fluctuating processing times? One suspects that no news isn’t good news. Please talk to us, IPO. Maybe we can help.

Regional Center List Changes

Additions to the USCIS Regional Center List, 08/02/2018 to 08/21/2018

  • APRC Mesa Verde, LLC (Colorado)

New Terminations

  • APIC Regional Center, LLC (Oregon) Terminated 8/8/2018
  • Build America Capital Partners Regional Center LLC (California) Terminated 7/31/2018
  • Washington State Regional Center (Washington) Terminated 7/31/2018
  • American Bridge Seattle Regional Center, LLC (Washington) Terminated 8/1/2018
  • Saipan Regional Investment Center, LLC (Commonwealth of Northern Marianas Islands) Terminated 8/8/2018
  • American Altin Regional Center (California) Terminated 8/8/2018
  • Great Ocean Regional Center (Washington) Terminated 7/30/2018
  • Future Resources, Inc. (California) Terminated 8/15/2018
  • North American Regional Center (New Jersey, New York, Pennsylvania) Terminated 8/2/2018
  • Build America Fund 1, LLC (California) Terminated 8/9/2018
  • California International Regional Center LLC (California) Terminated 7/10/2018

Policy Manual update: Geographic Area

USCIS has now made its policy on geographic area amendments an official part of the USCIS Policy Manual. Before, to know the unofficial policy that’s been effective since February 2017, you needed to have been present at a March 2017 stakeholder meeting, noticed followup clarifications on the USCIS website, and been on the email list for a stakeholder alert. Now, at least the policy is set down in the Policy Manual where everyone can find it.

As usual, I copied the whole of today’s version of the Policy Manual EB-5 section, and saved it as a Word document in my folder of Policy Manual versions. I then did a document comparison with the previous version (current as of May 15, 2018) to see exactly what changed, and kindly share my redline.

In addition to adding language related to geographic amendments, the latest version of the PM clarifies the effective date for tenant occupancy guidance rescision, and specifies that changing regional centers after I-526 filing constitutes a material change.

For more in-depth analysis:

Here is the email from USCIS with links to the Policy Alert and feedback page.

From: U.S. Citizenship and Immigration Services <uscis@public.govdelivery.com>
Sent: Friday, August 24, 2018 9:13 AM
Subject: USCIS Policy Manual Update

USCIS is updating guidance in the USCIS Policy Manual regarding a regional center’s geographic area, requests to expand the geographic area, and how such requests impact the filing of Form I-526 petitions. The Policy Alert is available here:

Visit the Policy Manual for Comment page for more information on stakeholder review and comment.

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?

[1/2019 UPDATE: IIUSA has done a more granular analysis of the EB-5 impact of removing the per-country cap. The Yoder Amendment discussed in this post was not included in the 2019 DHS funding bill. A standalone bill introduced in 2019 (H.R. 1044 ‘Fairness for High-Skilled Immigrants Act of 2019) renews the proposal to remove the country cap for EB visas, but with a transition period and protections intended to avoid unduly harming past applicants from low-volume countries who are already in line for a visa.]

— ORIGINAL POST —

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 House amendment language may not get into a final bill (it’s not in the Senate version), 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.