EB-5 updates and resources under COVID-19

[Update: for newer information, see instead my 5/28 post EB-5 Impact of COVID-19 (processing, eligibility, visa numbers)]

As the war against COVID-19 heats up around the world, EB-5 work continues, but with some changes. A few notes on developments over the past two weeks:

USCIS continues to operate despite COVID-19, with modifications

USCIS offices have been closed to the public since March 18, but USCIS staff are continuing to perform duties that do not involve face-to-face contact with the public. (Except where otherwise noted, the information in this section is from uscis.gov/coronavirus, which gets updated regularly.)

That means IPO (which needless to say lacks public contact) is continuing to adjudicate I-526, I-829, and I-924, and to terminate regional centers. In fact, the latest processing times report (updated March 20) recorded a decrease to I-526 processing times. I’ve heard multiple personal reports of EB-5 decisions received. The USCIS list of regional centers got a significant update this week, recording three new approvals and 24 terminations. Service centers also continue to process I-485 status adjustments.

EB-5 investors at the visa stage will be affected by the fact that all biometrics appointments have been temporarily suspended since March 18 until at least April 7 May 3 June 4, with all appointments to be automatically rescheduled once USCIS again resumes normal operations.

On March 20, USCIS announced flexibility in submitting required signatures. “For forms that require an original “wet” signature, per form instructions, USCIS will accept electronically reproduced original signatures for the duration of the National Emergency.”

On March 27, USCIS announced flexibility for responses to Requests for Evidence and Notices of Intent to Deny. “For applicants and petitioners who  receive an RFE or NOID dated between March 1 and May 1, 2020, any responses submitted within 60 calendar days after the response date set forth in the RFE or NOID will be considered by USCIS before any action is taken.”

On March 30, USCIS expanded this flexibilty: “A response received within 60 calendar days after the response due date set forth in a Request for Evidence, Notice of Intent to Deny, Notice of Intent to Revoke, or Notice of Intent to Terminate will be considered before taking any action if such request or notice is issued and dated by USCIS between March 1 and May 1, 2020, inclusive.”(uscis.gov/coronavirus)

Other IPO Activities

The EB-5 Resources page on the USCIS website was updated on March 23 with Sarah Kendal’s prepared remarks from the 3/13 Public Engagement, as well as with Q&A on the Visa Availability Approach. The Q&A gives a detailed, clear, and helpful overview of the new visa availability approach to I-526 processing that will officially launch next week.

EB-5 visa applications and COVID-19

EB-5 visas are temporarily not being issued through consular processing. On March 20, 2020, DOS announced suspension of routine visa services. “In response to significant worldwide challenges related to the COVID-19 pandemic, the Department of State is temporarily suspending routine visa services at all U.S. Embassies and Consulates. Embassies and consulates will cancel all routine immigrant and nonimmigrant visa appointments as of March 20, 2020. As resources allow, embassies and consulates will continue to provide emergency and mission critical visa services. Our overseas missions will resume routine visa services as soon as possible but are unable to provide a specific date at this time.”

With applicants overseas temporarily unable to claim available visas, this may mean more visas available to applicants in the U.S., since I-485 status adjustments are still being processed (as of now). Depending on how long it takes overseas visa services to get back on track, Department of State faces a challenge to allocate all available visas for the fiscal year.  So long as consulate closures prevent people overseas from claiming visas, that could cause the Visa Bulletin final action dates to advance rapidly to accommodate those few who are placed to receive visas. At the beginning of the year, Department of State had anticipated issuing a total of 11,112 EB-5 visas, including 778 each to Vietnam and India, with an estimated 5,270 leftover for the oldest priority dates (i.e. China).  In the first five months of FY2020 (October to February), consulates had issued 237 EB-5 visas in India, 345 EB-5 visas in Vietnam, and just 1,088 EB-5 visas in China. (Data from adding up monthly tallies of EB-5 visas issued by consulate. Unfortunately USCIS does not publish data on EB-5-related I-485 approved and pending.)

Politico Rumor

Last week someone launched an EB-5 virus – an implausible story that Senator Lindsey Graham was pushing to increase EB-5 visas to 75,000 and decrease the minimum investment amount to $450,000 as part of the emergency stimulus bill. Politico published the story, Senator Graham himself responded publicly that the story was false (listen starting at minute 2:50 in this 3/19 Fox News interview), and yet the story continues to spread and mutate, inspiring a storm of media criticism of the EB-5 program and EB-5 investors. As IIUSA says “Although the EB-5 industry would like to see program reforms, it would never support these extreme and unfounded shifts. It did not do so last week, and it will not do so in the future.” I wonder which interest group planted the rumor, with what intent. Possibly it came from an anti-immigrant faction that’s now chuckling with glee at the backlash? Or a misguided industry insider hoping to stoke the market with false hopes? Certainly, this story has damaged EB-5 just when it’s in a position to be a helpful tool in our current economic state.

EB-5 risks and opportunities under COVID-19 conditions

Martin Lawler’s article COVID-19 Impact on EB-5 Hotel Projects (April 6, 2020) discusses issues related to maintaining EB-5 eligibility in an industry particularly threatened by COVID-19

Green Card by Investment continues to come out with EB-5 Talk podcasts on timely topics, most recently “Restructuring your NCE operating documents for redeployment” with Mark Katzoff (March 23), and “Investor options with troubled projects” with Robert Divine (March 17).

Matthew Galati has a helpful article on Filing I-829s During a Coronavirus Economic Downturn (March 26, 2020)

A reminder of my July 2019 article on Priority date retention and redeployment, which includes a flow chart to clearly illustrate the different project change and redeployment options at various points in the EB-5 process.

IIUSA has started to roll out a new Investor Market Webinar Series.

If no one else does, I will write in April about high-unemployment Targeted Employment Areas, and options for TEA analysis in response to our abruptly increasing unemployment.

EB-5 processing times and visa wait times remain a constantly moving target, but I’m still grappling with the timing estimate problem as well.

Meanwhile, my business plan service remains available to the brave few seeking to launch new ventures, and to the many who may need to describe how updated circumstances still support EB-5 investor eligibility.

Report from 3/13 USCIS Engagement on Visa Availability Approach

The March 13 EB-5 Immigrant Investor Program: Public Engagement provided a few program updates, and discussed the new visa availability approach to I-526 processing. IPO Chief Sarah Kendall mainly spoke, with additional input from DOS Visa Control Office Chief Charles Oppenheim.

As usual I am sharing my recording, so that anyone can review the meeting for themselves. (3/23 Update: Sarah Kendall’s prepared remarks and a Q&A on the Visa Availability Approach have now been posted in the EB-5 Resource Room on the USCIS website.)

Prior the meeting, my many questions boiled down to two: the priority question and the volume question.  How will IPO apply the visa availability approach to decide which I-526 to process when? How many I-526 does IPO have on hand and intend to process, going forward? I was indeed pleasantly surprised by detailed and helpful answers to the priority question. Thank you Sarah Kendall! Particularly, thank you for taking live audience questions, which proved very important. But no thanks for deflecting the volume question.

Key information from the engagement:

What is the visa availability approach? (VAA)

  • Consistent with the initial USCIS announcement, Kendall describes the VAA as an inventory management approach that will prioritize adjudications for I-526 petitions where visas are immediately available or soon to be available.

Who is affected by the visa availability approach?

  • Kendall said that the VAA will apply to all I-526 petitions not assigned as of March 31, 2020, including pending petitions currently in the pipeline, and including petitions to be filed after March 31, 2020. USCIS will continue to work on I-526 assigned for adjudication before March 31.
  • My comment: That is, the VAA will not limit decisions on cases that were already issued a Request for Evidence or Notice of Intent to Deny. The VAA does apply to all unassigned pending I-526, no matter when they were or will be filed.

Who will be held back by the visa availability approach?

  • Kendall said that in deciding which I-526 NOT to assign for adjudication, IPO will consult the monthly Visa Bulletin Chart B Dates for Filing. If a petition’s filing date is not within the dates that can file a visa application or I-485 according to that month’s Visa Bulletin Chart B, then the petition will not be assigned for I-526 adjudication that month.
  • My comments:
    • In practice, this means that for now, only pending I-526 from China will be limited by the VAA. (The April 2020 Visa Bulletin Chart B has a December 15, 2015 cut-off date for China, but current for all other countries.) It’s good news that IPO will at least look at Chart B, not Chart A, to determine visa availability for I-526 purposes.
    • The VAA will create a chicken-and-egg situation between Department of State and USCIS. The visa bulletin moves in response to demand for visas, demand for visas is created by I-526 approvals, and now I-526 adjudications will move in response to the visa bulletin.
    • Vietnam and India will benefit from the VAA in the near term, since they are current in Visa Bulletin Chart B. They will eventually be held back by VAA, since the number of pending I-526 from Vietnam and India exceed the annual visa limit. When they will be affected depends on the rate of I-526 approvals for Vietnam and India. If many Indian and Vietnamese I-526 shortly get assigned for adjudication and soon approved by USCIS, then many visa applications will soon result, creating excess demand that triggers DOS to put cut-off dates in the visa bulletin Chart B, triggering USCIS to stop assigning I-526 for adjudication.  Alternatively, if USCIS continues to approve just a few I-526 for Indians and Vietnamese, then the visa bulletin will stay open due to low visa demand, and the trickle of India and Vietnam I-526 adjudications can continue unchecked by the VAA.  (DOS apparently anticipates the second scenario, according to Oppenheim’s comments on the call.) Either way, whether the flow of I-526 adjudications is limited by the visa bulletin or by IPO’s natural slowness, the VAA would allow USCIS to, in theory, only adjudicate as many I-526 for India and Vietnam per year as needed to produce a years-worth of visa applicants. That would mean about 350 annual I-526 adjudications for India and 250 adjudications for Vietnam (considering Oppenheim’s most recent ratio of pending I-526 to visa applicants). If USCIS used the VAA as an excuse to keep to such minimum volume, within the visa caps, then long I-526 waits for India and Vietnam would result (considering that there were about 2,500 India I-526 pending and 770 Vietnamese I-526 pending as of 10/1/2019).
    • However, Sarah Kendall did not specifically say that I-526 adjudications would be limited to visa availability. The VAA just allows such limitation, as needed to prioritize as many petitions as have a visa available. And this competitive rest-of-the-world demand has historically been low, and likely to remain so considering the EB-5 price increase. China, Vietnam, and India will only have I-526 adjudications limited to visa availability to the extent that IPO can maximize its I-526 capacity with other-country adjudications.
    • The VAA guides which petitions will NOT be assigned for adjudication; it does not promise which petitions WILL be assigned for adjudication. As of 10/1/2019 (most recent available data), there were 7,472 pending I-526 from countries other than China. Those 7,472 petitions won’t all be immediately assigned for adjudication, even though they’re prioritized based on having visas available for them, unless IPO improves its volume from the FY2019 average of 390 I-526  adjudications per month.

Will IPO make any exceptions to the visa availability approach?

  • Kendall stated that:
    • Petitions with approved expedite requests will continue to be promptly assigned for adjudication, regardless of the petitioner’s country of origin.
    • If the Petitioner is from a country that would be held back by the VAA, but could have a visa available due to the spouse’s nationality, then the petitioner should email IPO to explain the situation, and IPO may assign the case based on the spouse’s nationality. Listen starting at minute 25:45 of the recording for detail.
    • Aside from the above two circumstances, IPO does not contemplate offering opportunity for petitioners to opt out, opt in, or request to be treated as an exception to the VAA policy.
    • USCIS currently plans to continue the VAA approach indefinitely.

Will the visa availability approach affect visa distribution, and number of visas available?

  • The VAA does not change the rules for visa availability. The EB-5 quota and per-country cap remain the same. The variable component in visa availability is the number of “leftover” visas available to the oldest priority dates (in the EB-5 case, to Chinese) after demand under the country caps has been satisfied. The VAA is explicitly designed to reduce the number of leftovers (being intended to help rest-of-world applicants to maximize their available visas), but Oppenheim opined that the number of leftover visas would remain unchanged for about the next 12 to 18 months.
  • My comment: When Oppenheim estimates that the number of visas available to any one country will not change for the next 12 to 18 months, he must be assuming that USCIS will not, near-term, approve more rest-of-the-world I-526 than it would have otherwise, without the VAA approach. Visas available to China are a function of rest-of-the-world visa demand, and rest-of-the-world visa demand is a function of number of I-526 approvals. Apparently, Oppenheim expects IPO to actually reduce I-526 completion rates under the VAA (since if completion rates stayed the same, fewer China I-526 completions would be counterbalanced by more rest-of-the-world completions, resulting in fewer visas available to China). I wonder if Oppenheim’s assumption is based on anything Sarah Kendall told him?

Will the visa availability approach improve I-526 completion rates and processing times?

  • Processing times are a function of backlog, processing priority, and processing volume. The VAA changes priority in a way that will benefit petitioners from low volume countries. The size of that benefit depends on what happens concurrently with processing volume (completion rates).
  • Sarah Kendall declined to answer questions about the size of the I-526 backlog, and the number of petitions that could benefit. “As a general matter, we refrain from discussing any kind of numbers with the public outside of our OPQ posting process.”
  • Kendall repeated the same reasons for low I-526 completion rates that she gave in 2019 (recorded in my previous post). Most are related to extreme vetting efforts to seek out signs of fraud and abuse. Kendall stated that “USCIS leadership views these initiatives as absolutely vital to the success of the EB-5 program. We acknowledge that case completion rates have decreased partly because of these activities, and we understand the concerns that raises for our stakeholders. With a lot of the infrastructure development now behind us, IPO is better situated to improve productivity. In fact, preliminary data for February shows a step in the right direction. The USCIS Office of Performance and Quality anticipates publishing new data in the coming month.”
    • I take this to be saying that IPO expects to adjudicate a few more I-526 in 2020 than in 2019, but not many more. IPO’s per-quarter productivity would have to be seven times higher than it was in FY2019 Q4 just to regain 2018 productivity levels. “A step in the right direction” from recent performance is good news, and Kendall mentioned later in the call that she expects such incremental improvement to continue – also good news. But this does not sound like a promise of exponential improvement to counterbalance last year’s exponential productivity loss. Kendall emphasized that the lengthy new review procedures requiring time-consuming multi-agency coordination are “absolutely vital” to program integrity, suggesting that she does not intend to change those factors in long processing times. There will be some improvement this year from the mere fact that the procedures are at least set up, while last year included time lost due to setup/training.
  • In response to my question about number of adjudicators assigned to I-526, Kendall reported that IPO had about 240 dedicated personnel as of the beginning of the fiscal year – a record high number. “This number includes support staff, adjudicators, economists, fraud detection and national security personnel, and other positions vital to the IPO mission. The number of personnel and adjudicators assigned to each EB-5 form type varies according to workload demand and agency priorities.”
    • My comment: I note that Kendall pointedly did not answer the question about I-526 resources. The VAA reduces workload demand for I-526 by reducing the number of petitions that require prompt adjudication, which may be a sign for I-526 resource allocation. I wonder how much of the fees petitioners pay for adjudication actually funds adjudicative staff, and how much goes to staff devoted to seeking fraud.
  • Kendall gave an ambiguous answer to a question about whether or not we can expect to see a reduction in rest-of-the-world I-526 processing times as a result of the VAA. (minute 54 in the recording)

Will IPO provide transparency about its processing under the visa availability approach?

  • Kendall said that the Office of Performance and Quality would revise the I-526 processing times report to reflect the VAA change, but she also said that there’s no plan for the report to show country-specific processing times – the only possible way to reflect the VAA change for EB-5. So it’s hard to visualize how helpful the report could be. As noted above, she also declined to provide any I-526 data (and the IPO Customer Service email continues to refuse or ignore my requests for per-country I-526 data).
  • Note to IPO: you could be commended for a change that moves the EB-5 constraint to the beginning of the process, rather than leaving people to pile-up midway at the visa stage. But only if you are transparent. When you keep I-526 processing a black box, you leave people to file I-526 in ignorance, unable to assess the nature of the backlog, and inventory pileups will still occur. To avoid this, you must give the public timely data about the country composition of the I-526 backlog, and  country-specific information in the processing times report. If you make I-526 processing transparent in this way, you will actually move the constraint to the start of the process, thus improving the whole process. With transparency, demand will self-regulate as people can make informed decisions about filing I-526.  Otherwise, you have made no improvement and the process will remain broken.
  • If petitioners whose cases are not ripe for adjudication under the VAA try to make a case inquiry, they will be sent a stock response that refers them to the visa bulletin.

Other Updates regarding India, China, and regional centers:

  • Regarding the Visa Bulletin Final Action Date for India, Charles Oppenheim said “at this time, I believe that India will become current some time in the summer, and once it becomes current it would stay for the foreseeable future, pending receipt of larger volumes of approved petitions at our National Visa Center.” (Minute 33 and 44 of the recording) (My comment: apparently, Oppenheim expects USCIS to continue low productivity, with the visa bulletin to open for India due to few Indians making it past the I-526 stage and to the visa stage. See my comments above on the connection between I-526 adjudication volume and visa bulletin movement.)
  • A caller asked Charles Oppenheim about the impact of the current shutdown of consular processing in China due to COVID-19, and whether that could result in EB-5 visas that would have been given to China going to Vietnam instead. Oppenheim said: “This is a very unique situation where there is not a lack of applicants which is preventing the numbers from being used, but the situation where at this time the consulate is closed. So this will continue to be monitored throughout the year, and we’ll just have to do the best we can. But again, if it does appear that all the numbers would not be used, then we would go to the next country in line, which would be Vietnam, which is oversubscribed.” (minute 43-44 of the recording) No one asked about other potential visa impacts of COVID-19 (i.e. closures of other consulates besides China, or possible interruptions to service center operations in the U.S.)
  • USCIS has sent out 100 Notices of Intent to Terminate so far in 2020 to regional centers that did not file I-924A in FY2019.
  • Sarah Kendall announced the regulations FAQ that I flagged last week: Questions and Answers: EB-5 Immigrant Investor Program Modernization Rule.

I worked hard on this post, trying to record and explain answers, as available, to many of the questions that I anticipate regarding the visa availability approach. Regarding personalized EB-5 timing estimates, it’s difficult. The timing complications are so many at this point, and limited data makes any estimate time-consuming and not definitive. The best I can offer now, as time permits, is personalized conversations about timing, with some data support. I will soon be announcing a schedule to allow reserving appointments, for those who would like to discuss individually.

And as always, my PayPal link is open. If my work is helpful and time-saving for you, consider making a contribution to support the work. Thank you!

I-526 processing context, 2017-2019

On Friday 3/13, USCIS will hold a meeting (now by teleconference only) that promises to “address program updates, including the agency’s change from a first-in, first-out case-processing approach to a visa availability approach for Form I-526.”

I look forward to being pleasantly astonished when USCIS provides substantive, detailed information at the meeting, and answers questions. (By the way, USCIS recently posted an unannounced new page with Questions and Answers: EB-5 Immigrant Investor Program Modernization Rule. Note that this page includes some guidance not previously provided regarding targeted employment area analysis.)

In the meantime, as we face the visa availability approach to take effect as of April 1, 2020, another post with context for the I-526 processing adjustment.

EB5 Diligence/EB5 Marketplace has posted a helpful podcast: Analysis of Visa Availability Processing and March 13 USCIS Stakeholder Meeting. The discussion features a wide range of industry perspectives on what the visa availability approach means, and its potential benefits and downsides in practice.

As additional background, I’ve created a compendium of things that USCIS has disclosed about EB-5 processing leading up to the change.

First, a picture of the data for EB-5 form processing in recent years.

And a log of recent statements made by USCIS/DHS to explain what’s happened to date with I-526 processing.

  • Factors related to long processing times and low volume of I-526 adjudications in 2019:
    • “Complying with court orders related to the EB-5 program” (5/13/2019, USCIS letter)
    • “Temporary assignment of IPO staff to other agency priorities” (9/9/2019, Kendall)
    • Adjudication time lost due to I-526 training in May 2019 (10/29/2019, Kendall)
    • Disruption to processes due to regional center program sunset (12/22/2018-1/25/2019) (10/29/2019, Kendall)
    • “IPO has made structural changes to ensure continued program integrity” (10/29/2019, Kendall)
    • “More robust quality assurance and control programs” (10/29/2019, Kendall)
    • “A growing number of cases where we have worked with our law enforcement and other partners, including the SEC, related to civil and criminal investigations” (10/29/2019, Kendall)
    • “We also work with USCIS and Department of State officials abroad to perform overseas verification checks on various questions that arise in our petition pool, such as for source of funds and other key elements of the program” (10/29/2019, Kendall)
    • “In the next year [2019] we anticipate putting additional resources to the I-829 so that we can address the needs of the particular line of adjudication.” (10/5/2018, Kendall)
    • The average touch time per I-526 had increased to 8.65 hours by 2019 (+33% since 2016) (2019 fee rule as compared with 2016 fee rule)
  • Factors in the higher volume of adjudications in 2018:
    • At the end of 2017, IPO launched multidisciplinary teams of cross-trained economists and adjudicators to focus on I-526 adjudications (11/7/2017, Harrison)
    • In 2018, IPO focused on standardizing and better managing assignment of EB-5 cases (5/11/2018 USCIS response)
    • “I believe that this [increase in our productivity in 2018] represents that it was a good decision for the leadership here to invest additional resources in the program. We are fully staffed now. And with the normal continuing rotation of having to hire to replace people that are moving on, right? But we are fully staffed and we anticipate that we will continue to be as productive and we’re aiming to be more productive. I say that within the limits of the parameters for integrity that the Director has laid out and that you all have embraced in your discussion with us. So the productivity on the 526s was very good this year. But we’re not sitting on our laurels. We recognize that this is a business community. There are business There are people, the individuals behind every application. And that the credibility of that application’s likelihood of being adjudicated in a timely way is important. So we hear you. And the agency has made long-term investments to make sure that we can reasonably manage the work load that comes in.” (10/5/2018, Kendall)

Other context factors:

  • The IPO staffing level has increased from 110 as of February 2016 to 185 as of July 2017 to 212 as of September 2019.
  • Government Executive reported in February 2020 that “The Trump administration has issued a hiring freeze for non-asylum officers at U.S. Citizenship and Immigration Services.”
  • The latest fee rule, which sets filing fees to fund resources for adjudications, did not propose significant increases to EB-5 form fees. (2019 fee rule)
  • IPO mentioned the idea of a visa availability approach in 2017, and asked for stakeholder input. (11/7/2017, Harrison) The data from Department of State and USCIS does not show that IPO started to implement a visa availability approach before this year, though obviously adjudications have not been simply FIFO.
  • The theory of FIFO processing for immigration forms goes back to the Operations Instructions of legacy-INS at OI 103.2(q), which provided: “(q) Chronological processing of applications and petitions. To deal fairly and equitably with applicants and petitioners, it is Service policy that cases be processed in chronological order by date of receipt.” The Check Case Processing Times page for I-526 still says “We generally process cases in the order we receive them.” And the Adjudicator’s Field Manual instructs careful receipting for petitions because “The receipt date is important to ensure fair, chronological processing.”
  • Since 2015, I have kept a log of public comments by USCIS about I-526 processing factors in this Word file and a log of monthly processing times reports for I-526, I-829, and I-924 in this Excel file.

Questions for USCIS about the Visa Availability Approach (revised)

On March 13, USCIS will hold a public engagement to discuss and field questions about its recent announcement that “USCIS Adjusts Process for Managing EB-5 Visa Petition Inventory.” Here are my questions, so far. I may revise in response to reader comment. The deadline for submitting questions is February 11.

— Revision —

I attempted to condense my questions, hoping that will maximize the likelihood that USCIS may answer any of them. Here’s the revised list that I’m actually sending to USCIS:

  1. Why is USCIS proposing an operational change to select just a few petitions to be processed “in a timely fashion” instead of using available resources to process all I-526 in a timely fashion?
  2. In 2018, IPO had about 50 adjudicators working on I-526 and processed over 15,000 I-526 petitions. After implementing the “visa availability approach,” how many adjudicators will IPO allocate to I-526, and how many I-526 does IPO aim to process per quarter?
  3. If IPO has reduced staff committed to I-526 adjudications, and downgraded its productivity goals, why?
  4. The “visa availability approach” could appear to be an excuse to reduce I-526 adjudication volume from 2018 levels – is it?
  5. How does IPO plan to identify the “individuals from countries where visas are currently available, or soon available”? (Does “available” look at the current visa bulletin Chart A or Chart B, visa bulletin projections, or long-range visa availability projections? Will “individuals” account for the fact that the family may claim visas based on the nationality of the petitioner’s spouse?)
  6. Does the visa availability approach aim to limit adjudications to individuals with visas immediately or soon-to-be available? (In other words, does IPO aim to match a petition’s I-526 wait time to the visa wait time, however long that may be?)
  7. Does the visa availability approach aim to adjudicate only enough I-526 annually to claim annual visas available under the country caps? If so, what processing time and visas-to-I-526 assumptions will IPO use to choose how many I-526 to adjudicate?
  8. How far in advance of visa availability will IPO assign an I-526 for adjudication, considering the processing times associated with I-526 and I-485 or consular processing?
  9. How will IPO change the processing times report for I-526, after March 31, 2020?
  10. After March 31, 2020, will the visa availability approach apply to pending petitions that were issued an RFE or NOID prior to March 31?
  11. What meaning will Exemplar I-526 approval have after March 31, 2020?
  12. What meaning will an approved Expedite request have after March 31, 2020?
  13. How does IPO intend to ensure fairness for petitioners who invested at the same time in the same project, but who will not get concurrent adjudication due to the visa availability approach?
  14. A FIFO approach aims to minimize the time between the EB-5 investment and USCIS review. This is important for program integrity, giving IPO opportunity to catch frauds as early as possible, trigger investigations while there’s still time to act, and investigate source and path of funds before trails have gone cold. The “visa availability approach” aims to defer USCIS review for some countries. How does IPO intend to help protect security in EB-5 investments and source of funds, under conditions of deferred review?
  15. As described in the USCIS Policy Manual, the I-526 stage is, by its nature “the preliminary filing stage,” with eligibility requirements defined by the preliminary stage. Will USCIS revise the Form I-526 if the form will, as a matter of policy, often not be adjudicated in time to assess the preliminary stage?
  16. In what sense does USCIS consider I-526 comparable to I-130?
  17. Under a visa availability approach, I-526 processing times depend on the country composition of the I-526 inventory. USCIS does not currently publish data on the country composition of the I-526 inventory. When will it start to publish this data?

— Original Post —

Original question list:

1. Inventory management is not only about priority. There’s also the question of resources and productivity.

  • In FY2018, IPO had about 50 adjudicators assigned to I-526, and completed over 15,000 I-526. That same resource commitment and volume could clear the entire current backlog of pending petitions in about a year. What staffing allocation and specific volume goals does IPO have for I-526 in FY2020? If I-526 resources, commitment, and volume are much lower in FY2020 than they were in FY2018, what is the explanation and justification?
  • The visa availability approach intends to “give priority to petitions where visas are immediately available, or soon available.” Does it also, conversely, intend to delay I-526 for petitions where visas are not soon available – not only incidentally as a side effect of taking current countries first, but as a strategy to match I-526 wait time to visa wait time, providing a justification to reduce the volume of petitions that call for timely attention from IPO? If IPO clears the backlog of pending petitions from current countries, will it move resources away from I-526 adjudications, leaving I-526 from non-current countries to wait, pending visa availability?

2. How will IPO will balance visa availability priority with other forms of priority? Consider the following hypothetical scenarios. The answers should not be case-specific, but should express the general guidelines that would clear up the ambiguities illustrated by practical example.

  • The I-526 petition has an approved expedite request, but it’s for a Chinese petitioner with 2019 priority date that won’t be current for over a decade. The backlog of pending petitions includes many petitions with no expedite requests, but current visa availability.
  • The petition is for a project that has Exemplar approval, but it’s for a Chinese petitioner with 2019 priority date.
  • Two Vietnamese have identical 2019 priority dates. One invested in a project with Exemplar approval; the other invested in a project without Exemplar approval.
  • The petitioner is Chinese with a 2017 priority date that won’t be current for at least a decade. He’s part of a pooled investment in project for which IPO has already reviewed all the project documents, and denied all I-526 for other investors in the project.
  • The petitioner is Chinese with a 2017 priority date. He’s part of a pooled investment in project for which IPO has already reviewed all the project documents, and approved all I-526 for other investors in the project.
  • The petitioner is Chinese with a 2017 priority date. The petition was issued a Request for Evidence prior to March 30, 2020, but a decision has not yet been made.
  • The petition is affected by a court order, but it’s for a Chinese petitioner with 2019 priority date.

3. The visa availability approach will result in petitioners in a pooled investment who file I-526 at the same time but come from different countries potentially reaching adjudication at very different times. How will this affect the policy that “The 2-year period is deemed to begin 6 months after adjudication of Form I-526. The business plan filed with the immigrant petition should reasonably demonstrate that the requisite number of jobs will be created by the end of this 2-year period. ”

4. Which metric will IPO use to select the “petitions where visas are immediately available, or soon available.” Will the decision be based on public predictions by Charles Oppenheim for visa availability in the coming 12 months? If so, will USCIS look at his “best case scenario” or “worst case scenario” prediction for visa availability? Or will USCIS wait to react to the monthly visa bulletin? If so, how will it respond to monthly fluctuations and retrogression? Or does IPO plan to rely on private and undisclosed information about future visa availability? Or does IPO simply plan to shelve all I-526 from countries that are not current, regardless of petitioner priority date, in favor of adjudicating current-country petitions when the volume of current-country petitions is large? What assumptions does IPO make about I-526 touch time and visa application and I-485 processing times, when IPO decides how far in advance of visa availability an I-526 should be assigned for adjudication? How will IPO recognize the issue of cross-chargeabiltiy, and the fact that a visa may be available to the petitioner based on the spouse’s nationality?

To assist in answering these questions, the following scenarios highlight areas of ambiguity. The answers need not discuss the specific hypothetical examples, but the answers should express practical guidelines that resolve the practical ambiguities illustrated by the specific examples. (The answers would only be case-specific if IPO plans to implement the visa availability approach on an arbitrary case-by-case basis, lacking generally-applicable principles.)

India

  • Circumstances:  India has been “current” in the Visa Bulletin Chart B Dates for Filing, which means that Department of State considers all Indian priority dates to be “within a timeframe justifying immediate action in the application process,” and USCIS has been accepting I-485 for all India priority dates. Meanwhile, the Visa Bulletin Chart A Final Action Date for India is September 1, 2018. Charles Oppenheim predicted that in the next few months, this date could either progress to being “current” (best case scenario) or retrogress to November 1, 2017 (worst case scenario). [1]
  • Implications: Considering this, starting in April 2020, will IPO:
    • Let all India I-526 stay in the queue together with current countries for FIFO adjudication, since the Visa Bulletin Chart B signals that that all Indian priority dates are  currently“within a timeframe justifying immediate action,” and Oppenheim predicted that India could be current in the Visa Bulletin Chart A in October 2020; or
    • For now, shelve India I-526 with priority dates more recent than November 1, 2017, since Department of State predicted that could be the worst case cut-off for India visa availability by October 2020; or
    • For now, shelve India I-526 with priority dates more recent than September 1, 2018, since these dates are not authorized for visa issuance per the current visa bulletin. Then react month-by-month to future visa bulletin date shifts; or
    • For now, prioritize India I-526 with priority dates older than September 1, 2018, since these dates are authorized for final action per the current visa bulletin (in the spirit of the stated goal to make each country “better able to use their annual per-country allocation of EB-5 visas”).

Vietnam

  • Circumstances:  Vietnam is included in the “all chargeability areas except those listed” in the Visa Bulletin Chart B Dates for Filing. This category has been “current,” and USCIS has accepted Chart B for Vietnam I-485 so far in 2020. This indicates that Department of State and USCIS consider all Vietnamese priority dates to be “within a timeframe justifying immediate action in the application process.” Meanwhile, Vietnam has a Final Action Date of December 15, 2016 in the February 2020 Visa Bulletin. Charles Oppenheim predicted that by October 2020, the Vietnam Final Action Date will progress to either June 1, 2017 (best case) or April 1, 2017 (worst case).
  • Implications: Considering this, starting in April, will IPO:
    • Let all Vietnamese I-526 stay in the queue together with current countries for FIFO adjudication, since the Visa Bulletin Chart B signals that that all Vietnamese priority dates are “within a timeframe justifying immediate action,” and USCIS has been accepting I-485 for all Vietnamese priority dates; or
    • For now, shelve all Vietnamese I-526 with priority dates before June 1, 2017, Oppenheim’s outside estimate for final action visa availability for October 2020? If so, how will USCIS decide when to advance the “adjudication date” cut-off for Vietnam?

China

  • Circumstances:  China has a Final Action Date of December 1, 2014 in the February 2020 Visa Bulletin. Charles Oppenheim predicted that by October 2020, this date will progress to February or March 2015.  Meanwhile, If Charles Oppenheim’s past predictions are correct, China priority dates since 2016 all face long waits to visa availability:
    • 2016 priority dates may have visas available around 2023[2]
    • 2017 priority dates available around 2027[3]
    • 2018 priority dates available around 2032[4]
    • 2019 priority dates available around 2035[5]
  • Implications: Considering this, starting in April, will IPO:
    • Even contemplate the option of leaving China I-526 unadjudicated for a decade or more, to free bandwidth for other work?
    • If so, what kind of “preliminary stage” adjudication and security checks does IPO think would be possible for the I-526 a decade or so after the investment was made and the project implemented? In other words, would the I-526 be possible to adjudicate as an I-526 after such extended delay?
    • Assuming it would be unthinkable to defer any currently-pending petitions to the 2030s, how will IPO decide when to adjudicate China I-526? Assuming there will be a continual inflow of new current-country I-526, how will IPO decide when to take not- current China I-526 off the shelf and give them attention? What is the principle of fairness applied to pending I-526 from China?
    • What if the primary applicant is China-born with a 2018 priority date, but the spouse was born in Europe, and thus visas would be currently available to the family based on her place of birth, were the China petition approved?

South Korea, Taiwan, and Brazil

  • Circumstances:  South Korea, Taiwan, and Brazil are all “current” in the February 2020 Visa Bulletin, and expected to still be current in the October 2020 visa bulletin. [6] However, Charles Oppenheim stated that as of October 1, 2019, each country had sufficient applicants on pending I-526 petitions to exceed the approx-700 annual visa quota: 1,900 for South Korea, 1,241 for Taiwan, and 765 for Brazil). [7]
  • Implications: Considering this, starting in April, will IPO:
    • Let all South Korea, Taiwan, and Brazil I-526 stay in the queue together with other current countries for FIFO adjudication, since they are current in the Visa Bulletin and expected to remain so at least through October 2020; or
    • Actively prioritize I-526 from South Korea, Taiwan, and Brazil this year, since they have potential to reach the visa quota per Oppenheim’s calculations, if only IPO can adjudicate enough of the pending petitions in time (in the spirit of the stated goal to make each country “better able to use their annual per-country allocation of EB-5 visas”); or
    • Demote petitions from South Korea, Taiwan, and Brazil behind petitions from countries that are not even on Oppenheim’s radar to exceed the annual visa limit?

Countries other than China, Vietnam, India, South Korea, Taiwan, and Brazil

  • Circumstances Any country becomes not current if annual visa demand reaches about 700. The USCIS press release for the “visa availability approach” indicates that a goal of the I-526 priority change is to make countries “better able to use their annual per-country allocation of EB-5 visas.”
  • Implications: Considering this, starting in April, will IPO:
    • Keep a certain I-526-to-visas multiplier in mind for each country, and adjudicate only a maximum number of I-526 per year per country to avoid exceeding the per-country visa allocation?
    • Publish timely data on I-526 receipts by county, so that the market is able to judge if countries are meeting or in danger of exceeding the annual per-country allocation, and moderate or encourage demand accordingly?
    • Consider any factor other than/in addition to priority date order, when adjudicating I-526 for countries with visas immediately available? For example, whether the project has Exemplar approval?

[1] IIUSA Conference presentation October 2019 https://wolfsdorf.com/blog/2019/11/01/important-updates-on-eb-5-from-u-s-department-of-state-indian-eb-5-estimates-reduced-prepare-to-file-last-chance-cases-before-november-21-2019/

[2]IIUSA Panel with Charles Oppenheim https://event.crowdcompass.com/la2016/page/rFpfQUiXJw

[3] 2017 CIS Ombudsman Report (EB-5 visa backlog calc on p. 32-33) based on data and calculations from Charles Oppenheim https://www.dhs.gov/publication/2017-annual-report-congress

[4] Charlie Oppenheim presentation at AILA/IIUSA conference https://iiusa.org/blog/wp-content/uploads/2018/11/EB-5-AILA.IIUSA-Visa-numbers-panel-for-EB-5-Conference-October-2018.pdf

[5] Charlie Oppenheim at IIUSA Conference https://iiusa.org/wp-content/uploads/2019/10/IIUSA_Visa-Update-w-Charlie-Oppenheim-and-Roundtable-Discussion.pdf

[6] IIUSA Conference presentation October 2019 https://wolfsdorf.com/blog/2019/11/01/important-updates-on-eb-5-from-u-s-department-of-state-indian-eb-5-estimates-reduced-prepare-to-file-last-chance-cases-before-november-21-2019/

[7] Charlie Oppenheim at IIUSA Conference https://iiusa.org/wp-content/uploads/2019/10/IIUSA_Visa-Update-w-Charlie-Oppenheim-and-Roundtable-Discussion.pdf

 

EB-5 form filing fees

We have opportunity to review and comment on the U.S. Citizenship and Immigration Services Fee Schedule. The proposed rule was published on 11/14/2019, and comments are due by 12/16/2019.

The proposed rule appeared at a busy time in EB-5 and I haven’t heard much talk about it. But this could be important. Future processing times could depend on today’s fee decisions. And EB-5 processing is a major factor in the future survival and integrity of the EB-5 program.

The fee review asks this important question: what resources does USCIS need to provide adequate service? Considering what has changed since the existing fees were set in 2016, how do filing fees need to change?

The fee review reports that the work associated with EB-5 forms has increased significantly since the last fee adjustment in 2016, but the 2019 rule proposes only minor increases to EB-5 filing fees.

Proposed Rule Table 6 — Completion Rates per Benefit Request*
Form  in May 4, 2016 Proposed Rule in November 14, 2019 Proposed Rule Change
I-526 6.5 hours 8.65 hours +33%
I-829 5.5 hours 8.15 hours +48%
I-924 40 hours 34.95 hours -13%
I-924A 5 hours 10 hours +100%
Proposed Rule Table 19 — Proposed Fees by Immigration Benefit
Form Current Fee (Proposed May 4, 2016) New Fee (proposed November 14, 2019) Change
I-526 $3,675 $4,015 +9%
I-829 $3,750 $3,900 +4%
I-924 $17,795 $17,795 0%
I-924A $3,035 $4,470 +47%

* Completion rates “reflect what is termed ‘touch time,’ or the time an employee with adjudicative responsibilities actually handles the case.”

How do we feel about this fee proposal? To me, that small fee increase over 2016 looks like bad news. A 9% fee increase for I-526 does not look equal to addressing the 33% increase to per-form touch time, not to mention the 100% increase to I-526 processing times and 50% decrease to processing volume that occurred between 2016 and 2019. If the labor to adjudicate Form I-829 has nearly doubled since 2016, how will a 4% fee increase give resources to handle that? Does the 0% increase to the I-924 fee indicate that USCIS considers the currently-posted 62 to 115-month I-924 processing time acceptable?

The fee rule aims “to determine the USCIS resources needed to process benefit requests within established adjudicative processing goals.” The rule does not disclose what processing goals it uses. But the goals can’t differ much from the status quo, if the rule expresses little need for additional resources for EB-5.  (To review the dire status quo: according to the current Check Case Processing Times page, a petition is only “outside normal processing” after 1,527 days for I-526, 1,339 days for I-829, and 3,452 days for I-924. But, side note for people filing Mandamus complaints, note that the Historical Processing Times page has a quite different statement of average processing times in 2019.)

I don’t only worry that proposed fee increases are not proportional to the reported increase in work per form. Total revenue is also a concern. Revenue equals price times quantity. If form fees stay about the same, and receipts plummet, then USCIS will have a smaller and smaller EB-5 budget to work with. The fee review estimates $83 million average annual revenue from proposed EB-5 fees, assuming about 19,000 EB-5 forms get filed in FY2019/2020. (This is summing I-526, I-829, I-924, and I-924A.) In reality, annual average EB-5 receipts were only about 10,000 for FY2018/2019 per USCIS data, and will be even lower going forward assuming that the law of demand holds following the doubling of the EB-5 investment amount. The picture won’t be pretty, if IPO ends up having less than half the new fee revenue that it expected, while still needing resources to adjudicate years-worth of pending forms on top of new receipts.  I wonder if the terrible performance we saw at IPO in 2019 wasn’t linked in part to low revenue due to dropping receipts, even as workload remained heavy due to pending petitions. (Sadly, there’s apparently no GAAP revenue recognition principle for USCIS accounting.) And the fee-setting methodology employed by USCIS apparently assumes that for any given year, receipt volume = workload volume. That’s not the reality for EB-5, given long processing times and fluctuating but generally falling demand.

In commenting on the proposed rule, I’m inclined to advocate for much higher EB-5 form filing fees. That considers the current unacceptable processing situation, and assumes that future resources depend on future fee revenue.  But I can see other arguments. EB-5 fees are linked to EB-5 adjudication costs in theory, for calculation purposes, but not necessarily in reality. If EB-5 fee revenue increased, that might buy more resources to improve EB-5 adjudications. Or the added revenue might help subsidize fee-exempt forms, get appropriated for ICE, or cover other USCIS shortfalls and overhead.  Even if the increased EB-5 fees stayed with EB-5, a new petitioner wouldn’t technically be paying the cost of her own adjudication, but helping to cover the cost of adjudicating the 20,000+ EB-5 petitions still pending from previous years. I see the unfairness in calculating fees for the incoming few at a rate needed to subsidize the cost of adjudicating the many still pending. (Though I also don’t see an alternative.)  Furthermore, one could argue that the longer completion times and ballooning processing times aren’t due to lack of adjudicative resources, but to bad policy and management that should be addressed before increasing fees. And finally, it’s possible that although the proposed rule invites public comment, it’s actually to late too influence decisions about resource allocation. I don’t know. But for those interested in this topic, I welcome your thoughts. Here is a draft of a comment that I wrote, and shared with IIUSA. This comment has not been submitted to USCIS, and I welcome input, objections, corrections, and improvements before the submission deadline. At least I’m sure that we shouldn’t miss the chance to speak to USCIS about the critical issue of processing. USCIS has long way to go to achieve its goal “to recover the full operating costs associated with administering the nation’s immigration benefits system, safeguarding its integrity, and efficiently and fairly adjudicating immigration benefit requests, while protecting Americans, securing the homeland, and honoring our country’s values.”

Targeted Employment Areas from November 21

The EB-5 Immigrant Investor Program Modernization Regulation Final Rule took effect on November 21, 2019, and  changed USCIS Policy for Targeted Employment Area (TEA) definitions and process.  Rather than reacting with questions and complaints, I carefully review the specific content of current TEA policy, place changes in context, and address the theoretical background and practical implications. This simple post took a great deal of work and thought.

POST AGENDA

A. Who is affected by the new TEA rules?

B. What areas can now qualify as a TEA?

C. What data can now be used to qualify a TEA?

D. Who determines TEAs, and how and when?

DISCUSSION

A. Who is affected by the new TEA rules?

New TEA rules apply specifically and only to all I-526 petitions filed on or after November 21, 2019. (The final rule for the EB-5 regulation gave a 120-day implementation/transition period: that period started upon publication of the final rule on July 24, and ended when the rule took effect on November 21.)

“Applies to Form I-526 filed on or after Nov 21” is a hard and fast rule. This is very clear in the final rule text, and confirmed by subsequent comments.  The new TEA rules apply to every I-526 filed from 11/21 – no matter if the project had previous investors or an Exemplar I-526 approval pre-11/21, and no matter if the investor is seeking to retain a pre-11/21 priority date when filing the new I-526. The new TEA rules do not apply to any I-526 filed before 11/21, even if the investor funds had not been fully invested in the NCE or deployed to the JCE before 11/21. IPO Chief Sarah Kendall reassured the IIUSA conference that her staff have been trained to adjudicate each pending I-526 based on the rules in place at the time that I-526 was filed. People who filed I-526 before 11/21/2019 are only indirectly affected by the new TEA rules, to the extent that open offerings must now be amended. But policy specifies that such conforming amendments will not count as material change for past investors.  As always, TEA qualification is not an issue at the visa application or I-829 stages.

While the new EB-5 regulation applies to all I-526 filed going forward, it does not apply entirely new rules. Rural areas, for example, have the same definition before and after November 21. The standards for a high-employment MSA TEA are no different now than they were under previous policy. Data recommendations remain unchanged. This post goes on to review what is and is not new.

B. What areas can qualify as a TEA?

The old rules gave the states authority and flexibility to designate geographic areas for TEAs. The new rules instead specify a limited list of possible TEA areas defined by DHS. From now on, a job-creating entity is in a TEA if it is in one of the following defined areas:

  1. A rural area, defined as an area that is not in a standard Metropolitan Statistical Area as defined by the Office of Management & Budget, and not within the outer boundary of any city or town having a population of over 20,000 or more based on the most recent decennial census; or
  2. A high unemployment area, defined as an area that has experienced unemployment of at least 150 percent of the national average rate. For high unemployment, “area” can only mean:
    1. A Metropolitan Statistical Area (MSA)
    2. A county within an MSA
    3. A county that contains a city or town with 20,000+ population
    4. A city or town with population of 20,000+ or more which is outside an MSA
    5. A single census tract, and/or
    6. A group of census tracts comprising the census tract where the job-creating entity principally does business, plus any or all directly adjacent census tracts (PDF p. 11-12 of the NPRM illustrate specifically what DHS has in mind.)

Option 2.4 and 2.6 were revised by the regulations; other options match previous policy. The new list of geographies that can qualify excludes several areas that states were willing to designate as TEAs: census blocks, census block groups, and sprawling groups of census tracts.

As before, the EB-5-funded job-creating entity must principally do business and create jobs within the TEA area.

If you have an EB-5 project in mind, how can you find out the potentially qualifying “areas” to which it belongs?  You can get a quick sense of geography just by looking up the city/town name on Wikipedia, which will tell you to what county and MSA (if any) the place belongs, and give ballpark population data. From there I’d go and enter the project address in the government’s FFIEC mapping system, which will identify the census tract for that address, show the directly adjacent census tract numbers, and confirm whether or not the address is in an MSA. Once having identified the possible geographic areas for a TEA determination, you’re ready to think about data.

C. What data can be used to qualify a TEA?

Since November 21, USCIS does not automatically approve any particular unemployment dataset for TEAs. Before November 21, USCIS also did not offer deference for unemployment data and methods. Regarding TEA data, the regulation simply repeats language that was introduced back in the May 30, 2013 EB-5 Policy Memo, and that has been included in (6)(G)(2)(A)(5) of each Policy Manual iteration since: “USCIS will review determinations of the unemployment rate” and “acceptable data sources for purposes of calculating unemployment include U.S. Census Bureau data (including data from the American Community Survey) and data from the Bureau of Labor Statistics (including data from the Local Area Unemployment Statistics).”  BLS data was specifically identified as acceptable in the December 2009 Neufeld Memo. By 2012, USCIS clarified that it would accept ACS data with census share methodology for subareas not covered by BLS. The point of this history lesson: we are not standing on new ground now, regarding data.  USCIS only changed its deference to state designations of TEA geographies — there never was deference for the data portion of TEA analysis, and suggested data sources remain unchanged. In fact, TEA requirements are, if anything, clearer now than they used to be.  To quote from discussion in the regulation final rule related to acceptable data:

  • The regulation “does not provide one specific set of data from which petitioners can draw to demonstrate their investment is being made in a TEA. Rather, the burden is on the petitioner to provide DHS with evidence documenting that the area in which the petitioner has invested is a high unemployment area, and such evidence should be reliable and verifiable.” [Consistent with previous policy.]
  • “The data necessary for the TEA designation determination is publicly available from the Bureau of Labor Statistics or U.S. Census Bureau. A TEA designation request alternatively can be supported with other data, public or private, provided that DHS can validate that data.” [Consistent with previous guidance.]
  • “Regardless of which reliable and verifiable data petitioners choose to present to DHS, the data should be internally consistent. If petitioners rely on ACS data to determine the unemployment rate for the requested TEA, they should also rely on ACS data to determine the national unemployment area to which the TEA is compared.” If considering state data, the rule cautions that “petitioners may not be able to compare the state census tract data to a national unemployment rate that utilizes the same methodology.”
  • To calculate the weighted average for a group of census tracts, the Final Rule opts to keep the cumbersome method described in Footnote 41 of the NPRM, except specifying that civilian labor force rather than total labor force should be used: (1) divide the labor force of a census tract by the labor force of the entire TEA area; (2) multiply this figure by the unemployment rate of that census tract to calculate a weighted unemployment rate for that tract; (3) repeat Steps 1-2 for each tract in the TEA area; (4) sum the weighted unemployment rates for all tracts in the group to calculate a total that can then be compared with the national unemployment rate.

The final rule optimistically states that the TEA process can be “easily navigated by any petitioner–whether associated with a regional center or not–for little or no cost,” because “unemployment data is readily available by which they can determine if an investment in a particular area satisfies applicable TEA designation requirements.”

The person who wrote the rule clearly never tried to pick an address, venture online, and find and interpret appropriate unemployment data for that location at the MSA, county, city, and census tract levels. It’s not easy.  In practice, most people will have to pay qualified consultants to help with the data portion of TEA determinations. But if you still want a sense of what’s available to the public, a few links:

  • Guidance for Labor Force Statistics Data Users, published by the U.S. Census Bureau, reviews the types and sources of unemployment data available for different types of geographic areas. The EB-5 regulation merely acknowledges that “no one dataset is perfect for every scenario”; Census Bureau guidance explains which dataset to use for which scenario.
  • The Bureau of Labor Statistics publishes monthly and annual unemployment data for the nation, MSAs, and counties. TEA designations have traditionally referenced the annual data –  one doesn’t want to update the TEA analysis every month, and annual data facilitates apples-to-apples comparisons across geographies. To find the annual average employment rate for an MSA or county, open the BLS Local Area Unemployment Statistics page to the section on Tables and Maps Created by BLS. Within that section, scroll down to the “Annual Average” subsection, and within that subsection to “Metropolitan Area Data” and “County Data.” (This link jumps directly to annual average county data.) Alternatively, perform a search using the Featured LAU Searchable Database. Either way, you will be directed to a table crammed with data that’s ugly and not convenient to print and share, but reliable and verifiable.  The nationwide annual average employment rate, for comparison, is on this page. Monthly data is less workable for TEA purposes, but has a benefit of coming in focused and print-friendly reports.  For county data, I like the BLS reports linked to the Geographic Information > Economic Summaries page. They’re in PDF format, and handily compare county unemployment with nationwide unemployment, as required for TEA designation. If my project were in a clear high-unemployment county covered by one of these reports, I’d consider this resource.  (Just keeping in mind that BLS refreshes these reports every month, and does not archive older versions, so they’re not directly verifiable over time. Archives of monthly MSA data can be found here, but monthly county data archives are tougher to locate.)
  • The U.S. Census Bureau’s American Community Survey comes in because BLS does not collect or report unemployment data at the census tract level, or for cities outside MSAs. One can search for ACS data for employment by geography, including at the census tract level, using the advanced search function in the old factfinder.census.gov or the new data.census.gov. The census bureau search functions are not friendly to casual human users, and their employment data is relatively outdated. State TEA designations would frequently update ACS employment data for census tracts with reference to the more recent BLS unemployment data at the county level using a method called census share (as described here by BLS and here in the EB-5 context, for example). But I don’t recommend trying this at home. You’ll want an experienced professional to crunch data for any TEA below the county level. But in the meantime, to get a preliminary sense of unemployment at the census tract level, try using one of the free mapping tools for EB-5, such as by IIUSA and Impact DataSource.
  • State workforce agencies also publish labor market information, as part of a nationally designed LMI infrastructure that connects BLS, the Census Bureau, and each state. Such state-reported data should also be acceptable, as it’s linked to the BLS and ACS data specifically name-checked by DHS as evidence that “should be reliable and verifiable.” The challenge is to determine which national unemployment rate is comparable to the state unemployment rate. (For example, should use the BLS national rate if the state is referencing BLS data or ACS data updated with census share methodology, the ACS 2017 5-year estimate unemployment rate if the state’s numbers are based on ACS 2017 5-year estimates, etc.)

D. Who determines TEAs, and how and when?

We’d gotten comfortable thinking about TEAs determined in advance by state agencies, via designation letters.  That TEA letter comfort was useful for marketing, but somewhat of an illusion.  In fact, TEA determinations were never fixed as of the date of a letter, because policy has required TEA status to be determined for each investor based on the date of investment or I-526 filing (whichever came first). As discussed above, state letters were not granted automatic deference; USCIS reserved the right to question the timeliness, data, and methods. We’ve long had to work with a degree of uncertainty and case-by-case discretion by USCIS when it comes to TEAs.  The new situation is not necessarily more ambiguous, just different.

Determining the geography component of TEAS

The regulations depart from previous practice primarily by eliminating state designation of TEA geography. The power to designate an “area” now lies with DHS, and DHS has made the geography determination once and for all in advance by specifying a limited and strictly defined list of possible areas in the final rule.  Petitioners just have to pick one of the defined area types (see the list in Section B above), and provide unemployment data for that area.

DHS intended for the new reg to eliminate ambiguity and individual discretion from the geography element of TEAs, and apparently succeeded.  There’s no need for anyone to “designate” the geography portion of a TEA; a list of acceptable geographic areas has already been defined.

Determining the unemployment data component of TEAs

As discussed above, the process for data remains unchanged in theory. Whoever provided the TEA data, USCIS has always reviewed and assessed that data in context of each investor petition, and determined as part of I-526 adjudication whether TEA requirements were met.

In the past, we’ve used letters from state agencies as a vehicle for presenting unemployment data to USCIS. Nothing in the regs would prevent us from continuing to do this. DHS has relieved state agencies of the extraneous responsibility of drawing boundaries for EB-5 incentive areas. DHS has not stripped state workforce agencies of their own mandate to supply workforce data.  State agencies may or may not be amenable to continued requests from EB-5 users for unemployment reports customized to DHS-defined areas. But state letters are a tidy and convenient vehicle for reliable unemployment data, and it doesn’t hurt to ask. State workforce agencies are subject to uniform, nationally-designed standards for Labor Market Information (LMI) reporting, so USCIS couldn’t suspect the agencies of being idiosyncratic or inventive with the data portion of a TEA determination.  At least, I would try the state workforce agency, before downloading hundred-column spreadsheets myself from the internet, and before requesting unemployment analysis from some former Uber driver Joe Smith now d/b/a TEA Designations, LLC.

In the past, we’ve used consultants, particularly EB-5 experienced economists, to help identify TEAs and approach states for letters. Now, we can ask those same consultants to prepare letters with unemployment analysis to present to investors and USCIS. We should demand that the consultant’s work product meet these standards: (1) define the geographic area with specific references to the latest EB-5 policy/regs, (2) identify the sources for population and employment data with sufficient specificity to allow the reader to go online and find the publicly-available data referenced, (3) show all the steps in any calculation, (4) explain, with references to the EB-5 regulation and BLS and/or Census Bureau guidance, why the analysis is reasonable. If you, as a reader, can verify the data and see that the analysis aligns with authoritative guidance, odds are the USCIS adjudicator will likewise find it reliable and verifiable. I’d demand more detail and footnotes from a consultant report than from a state letter. Compared with the Georgia Department of Labor, Joe Smith has a hurdle to prove his data and methods.

Whoever wrote the regulation seems to think that people can easily go online and get appropriate unemployment data to print out as evidence.  As briefly discussed above, BLS and ACS data is not that easy to navigate or interpret (or even print, for that matter), and info from third party mapping programs and other sources may or may not be up-to-date, reliable, and verifiable. It takes some expertise even to accomplish a simple task like choosing a national unemployment rate that’s internally consistent with a given local area unemployment rate. And it takes considerable expertise to bolster a TEA analysis with references and explanations that leave no crack for USCIS questions.  So I think we’re still in a world of securing TEAs using letters and reports – the only question is: who prepares them.

Some wondered whether DHS itself could start providing TEA designations in advance of investor petitions. The regulation states that “this rule does not establish a separate application or process for obtaining TEA designation from USCIS prior to filing the EB-5 immigrant petition and USCIS will not issue separate TEA designation letters for areas of high unemployment.” The regulation offers that a regional center may seek TEA determination by filing an exemplar petition, and “If the exemplar application is approved, the approval (including the TEA determination) will receive deference in individual investor petition filings associated with that exemplar in accordance with existing USCIS policy (for example, absent a material change in facts affecting the underlying favorable determination or its applicability to eligibility for the individual investor).” However, this offer is 100% useless and void, unless USCIS can start providing exemplar approvals in less than the time that it takes unemployment data to expire, and thus become inapplicable to individual investor eligibility.  The currently posted I-924 processing time is 62 to 115 months. No investor can claim TEA status at the time of investment or I-526 filing based on a TEA determination calculated five to ten years previously.

Regarding timing, the regulations do not imply a change from past practice.  A TEA determination has always needed to be valid at the time of an EB-5 investor’s investment or I-526 filing, whichever comes first. A TEA determination has always been valid so long as the underlying data is the most current available. Most state letters were effective for up to a year because they calculated unemployment rates from annual average data that is, naturally, updated just once a year. The regulations do not change what unemployment data is available, or when BLS and the Census Bureau publish updates. The regs do not suggest that DHS had a problem with the unemployment data and methods that states have used all these years, only a problem with how states were willing to gerrymander geographies. So I do not see any new policy or new ambiguity, when it comes to timing of TEA determinations.   When a consultant creates a TEA analysis, just be sure to specify the validity period for the underlying data, and point out that this defines the shelf life of the TEA determination.

11/21 Welcome to the New EB-5

The EB-5 Modernization Regulation takes effect today, November 21, 2019. As a reminder, the USCIS EB-5 Page summarizes what’s new, the full text of the final rule gives all the detail and background of the new regs, and the USCIS Policy Manual EB-5 section contains current policy as updated by the regs. It’s possible that rules will be changed again sooner or later by legislation, but that has not happened yet. (The regional center program’s most recent authorization also coincidentally expires today. It will be extended without affecting the regulation, assuming that the Senate and President sign off on the clean continuing resolution that the House passed on Tuesday. I track developments on my Washington Updates page.)

To recap what’s new beginning today, thanks to the effective regulations:

  1. I-526 filed from today through 2024 are subject to a minimum investment of $1.8 million, or $900,000 in a Targeted Employment Area (TEA). After that, investment amounts will be adjusted again based on inflation.
  2. I-526 filed from today have different TEA issues. The definitions are more restricted, and the process has changed. It’s no longer possible to simply order a TEA designation letter from the state, and expect USCIS to defer to that letter. Instead of pre-designation by the states or DHS, TEAs get confirmed on a case-by-case basis as part of I-526 adjudication, based on data provided by the petitioner. (This post discusses the detail.)
  3. From today, people can have the option of filing a new I-526 while retaining the priority date of a previously-approved I-526. (This post discusses the detail.)
  4. From today, people who are removing conditions can enjoy some process improvements related to I-829.

And that’s all. A few simple changes, but with significant consequences. EB-5 usage will be different now that the price tag is two to three times higher than it used to be, now that urban TEAs are more limited, and now that there’s no longer a deadline to hurry investment decisions.

EB-5 Legislation? (S.2778, S.2540)

Since 2015, when the last three-year regional center program authorization expired, there’s been much effort to get EB-5 legislation passed. At minimum, we need Congress to put the regional center program on a stable footing by giving it a long-term authorization. (Since 2015, the program has been extended 17 times, each time for just a few weeks or months.)  Other features that one faction or another hope to get into legislation: update the EB-5 minimum investment amounts, revise the Targeted Employment Area incentive, implement additional integrity measures, improve procedures, and provide visa relief.

However, the status quo has been profitable, and those who profited most have resisted change. Several times since 2015, negotiators were reportedly close to getting EB-5 legislation attached to a funding bill, but ultimately did not succeed. Reviewing the history gives perspective on where we are today.

  • December 2015: Senators Grassley, Leahy, Goodlatte, Conyers, Issa, and Lofgren drafted legislation that would have given the RC program a 4-year authorization, changed the EB-5 investment amount to $1.2 million ($800,000 in a TEA), restricted TEA definitions, and added integrity measures. According to Senator Grassley, “On that first day of December negotiations, there was a lot of discussion about how New York wouldn’t be able to compete with rural America if our reforms were enacted.  They thought the bill was unfair to urban areas.” Grassley claimed that he tried to compromise, but could not go far enough. ABC News reported that “the legislation was defeated by a group of lawmakers led by New York Democrat Chuck Schumer, who argued that security improvements were a good idea, but the way the reform was written would unfairly hurt investments in his home state.” ABC quoted a Schumer spokesman: “Sen. Schumer supports reforms that will bring transparency and accountability to the EB-5 program, but strongly believes that the EB-5 program should continue to act as a catalyst for thousands upon thousands of jobs throughout New York.”
  • December 2016: A version of the The American Job Creation and Investment Promotion Reform Act of 2016 originally introduced by Representatives Goodlatte and Conyers was seriously discussed for inclusion in the December 2016 funding bill. This legislation would have given the RC program a 6-year authorization, gradually increased the the TEA EB-5 investment amount to $800,000 while leaving the $1M standard unchanged, revised TEA definitions, and revised integrity measures. But this also proved unacceptable. Senator Grassley wrote a post listing the specific reasons for “why this package was not acceptable to some – notably the U.S. Chamber of Commerce that was the most rigid in not compromising” and complained again that “the industry love the status quo and the billions of dollars that pour in to affluent areas.” The Wall Street Journal reported that “Related Cos., a developer of massive mixed-use projects, has waged an aggressive campaign to head off proposed changes to the so-called EB-5 program in an apparent effort to keep low-cost money flowing to luxury urban projects such as its $20 billion Hudson Yards development in Manhattan.” A few million in lobbying dollars proved money well spent for Related, which eventually raised $1.2 billion in EB-5 investment for Hudson Yards. According to the WSJ article from January 2017, Related Companies “found support from a handful of key senators including Sen. John Cornyn (R., Texas) and Sen. Charles Schumer (D., N.Y.), who have been resistant to the changes opposed by the developers.” A spokesman told WSJ that Schumer believes good projects in EB-5 “should rise to the top based on how many jobs they’ll create,” and that the government shouldn’t be trying to direct development to specific parts of cities.
  • March 2018: The EB-5 Immigrant Investor Visa and RC Program Comprehensive Reform Act negotiated by Grassley, Goodlatte, Cornyn, Flake reportedly came close to inclusion in the March 2018 funding bill. This bill would have given the RC program a 5-year authorization, increased the EB-5 investment amount to $1.025 million ($925,000 in a TEA), revised TEA definitions, and revised integrity measures. I saw this bill as a generous compromise to urban interests. But the bill also failed, and Senator Grassley had an opinion as usual about what happened. “For the last year, my staff, along with Chairman Goodlatte, Senator Cornyn, and Senator Flake’s teams, has worked around the clock to produce an EB-5 reform package. Everyone made numerous concessions in order to reach a deal, and after more than twenty meetings and countless hours of drafting, we produced a reform package that was fair. These reforms weren’t acceptable to the big moneyed New York industry stakeholders who currently dominate the program. And because big money interests aren’t happy with these reforms, we’ve been told they won’t become law.”

This story gets repetitive. But now, circumstances have changed, due to the EB-5 Modernization Regulation to take effect on November 21, 2019. The regulations will create a new status quo of exclusive TEA definitions and investment amount increases that would tend to reduce the flow of EB-5 investment overall, and channel EB-5 investment away from many urban areas. That’s not the status quo that EB-5 protectionists want to protect, and now legislation offers the only path to change.

That brings us to S.2778 – Immigrant Investor Program Reform Act, introduced by Senators Mike Rounds (R-SD), Lindsey Graham (R-SC) and John Cornyn (R-TX). Charles Schumer (D-NY) has already signed on as an additional co-sponsor, pivoting from his traditional role as quasher of EB-5 bills. Robert Maples of Greenberg Traurig, who previously expressed Related’s objections to the EB-5 regulations, praises S.2778 for “proposing long overdue improvements to modernize the EB-5 program in alignment with industry and market principles.” IIUSA lauds “the EB-5 industry’s ability to work together and come to an agreement on many issues that until now left industry stakeholders divided.” Perhaps we finally have an EB-5 bill that can avoid being blocked.

S.2778 proposes Targeted Employment Area changes that would allow EB-5 capital to continue to flow to high-quality urban projects that naturally attract investment, instead of countering market principles by encouraging capital toward projects in less prosperous areas. The bill would shift TEA definitions to privilege the areas that major regional centers already favor (Opportunity Zones, closed military bases), and – more to the point – would minimize the incentive to choose a TEA investment over a standard investment.  In the regulations comment linked above, Related Companies argued that a $100,000 differential would be fair and reasonable (avoiding the problem — from Related’s perspective — of “financial incentive for foreign investors to invest in TEAs, regardless of the project”), and that’s what S.2778 proposes.  While past statute and the new EB-5 regulations offer a 50% TEA discount, S.2778 would offer a 9% TEA discount, with $1,100,000 standard investment and $1,000,000 TEA investment. This would essentially eliminate the monetary TEA incentive. As a concession, S.2778 offers two additional TEA incentives related to timing: expedited I-526 processing, and set-aside visas. These are safe concessions for New York City, because expedited processing is limited by USCIS’s ability to deliver such a benefit, and the visa set-aside incentive is limited to the number of visas offered (must stay under 3,000, or the incentive disappears) and to the few countries that need a visa incentive (China, Vietnam, India).  Current law already sets aside 3,000 visas annually for TEA investments (INA Sec. 203(b)(5)(B)), but people forget that because the existing TEA set-side has had zero incentive effect in practice. Set-asides only have any incentive value if limited to a few. The industry consensus proposal offered to give some potency to the new TEA set-asides by restricting them to TEA investors filing after the date of enactment. S.2778 does not specifically state such a restriction, however. I hope the restriction is not still implied, because reserving up 3,000 visas annually for incoming investors and their families would be at the direct cost of reducing visas available to the tens of thousands of past EB-5 applicants (mostly TEA investors) who are currently waiting for visas. To the extent that visa set-asides and expedited processing can work at all as incentives, they work by offering queue-cutting. That would not be fair to 70,000+ people in the queue before the rule was made. To the extent that the timing-related incentives would not work at all, they are unfair to parties in negotiation who accepted these concessions in faith that they would be effective TEA incentives to replace the monetary incentive.

Visa-limiting TEA incentives aside, S.2778 offers some  backlog relief. The bill would make no additional EB-5 visas available, but would soften the pain of waiting for visa availability. S.2778 offers the possibility of parole (entry to the United States) and work authorization for EB-5 applicants with I-526 approval who have been waiting over three years for a visa. This would extend to EB-5 investors abroad the benefit already available to applicants in the U.S. who file I-485 to adjust status. Otherwise, parole has been restricted to urgent humanitarian or significant public benefit reasons. (Links FYI that describe how parole currently works in the I-485 context and for applicants abroad.) I wonder about the politics of offering parole to EB-5 investors, since the administration cancelled parole for immigrant entrepreneurs and threatened to take it away from U.S. military families.  But if this benefit can be enacted (and DHS consents to implement it), parole could really help EB-5 investors stuck abroad waiting for visas – particularly direct EB-5 investors who struggle to manage their US businesses from afar. This is not a visa giveaway, does not change the EB-5 visa limit, and only offers the weak promise that DHS may “temporarily parole… on a case-by-case basis,” but at least it’s something. Besides parole, the bill offers to soften the pain of long wait times by permanently protecting children from age-out. I understand that IIUSA pushed very hard for the additional relief of applying the EB-5 visa limit to investors, as intended by EB-5 program architects, not investors plus family, but that provision did not make the final bill. Visa relief has never had much chance, considering that immigration politics does not favor increasing visa numbers, and that there’s little self-interest for the dominant regional centers in reducing the time they have to deploy and redeploy low-cost EB-5 capital.

Other positive features of S.2778 include 6-year authorization for the regional center program and recourse for investors and projects following termination of a regional center.

If I could choose three modest improvements on S.2778, I would suggest:

  • Authorize DHS to assess fees necessary to meet reasonable processing time goals for EB-5 investor petitions. This is one of the few good ideas in Grassley and Leahy’s S.2540 EB-5 Reform and Integrity Act, which defines targets (in days) for each form, and charges USCIS to set fees to allow meeting those targets. The latest proposed fee rule from DHS shows that DHS will not, on its own initiative, allocate resources to improve the current status quo of 2-4 year processing times for I-526 and I-829. Congress needs to step in to push DHS toward processing integrity, and to authorize the resources necessary. (S.2778 suggests premium processing with a fee, but only for regional center applications, amendments, and reports, not for investor petitions. S.2778 suggests collecting $51,000 in additional fees from investors, but specifies that these are to be used for enforcement activities, not processing improvements.)
  • Delete the $10,000 annual fee for regional centers that are not-for-profit or have fewer than 20 investors. If Congress wants to see at least a few face-saving EB-5 projects in distressed areas, it should keep the regional center option affordable to small entities, and open to areas that won’t have high-volume deal flow. A $20,000 annual fee – or $50,000 annual fee for that matter — is nothing to a regional center handling hundreds of millions of EB-5 capital. But a minimum a $10,000 fee (especially on top of all the other cumbersome red tape suggested by the bill) could eliminate small regional centers with modest and occasional EB-5 capital raises. The $10,000 minimum regional center fee is a handy as an anti-competitive measure, benefiting large, high-volume and established regional centers by helping to clear the deck of small players, but such a winnowing would not benefit EB-5’s potential or reputation.
  • Include at least one genuine integrity measure – i.e. at least one measure that involves something besides reporting to and making records available to DHS. At minimum, why not borrow another good idea in Grassley’s S.2540: require regional centers to make their annual statements available to their investors. Record-keeping, reporting, and certifications are fine activities in themselves, but not anti-fraud measures if just paper disappearing into the vaults at USCIS, along with all the other paper that doesn’t get read for years. But that’s as far as S.2778 goes. S.2778 excludes an integrity measure that’s been in other EB-5 reform bills, including S.2540: the requirement to have an independent fund administrator to monitor the deployment of funds into any affiliated job-creating entity, and keep alien investors informed about the deployment.  In the cover article to their 2018 database of SEC actions, Friedland & Calderon note that “virtually every SEC civil enforcement action involving EB-5 fraud the NCE did not have an independent fund administrator, escrow conditions were ignored, and periodic reports of the status of investor funds were not furnished to investors.” Effective integrity measures had better address such proven vulnerabilities. It’s hard to imagine that any of the specific SEC cases would’ve been forestalled just by enhanced reporting to and threat of sanctions from USCIS. If I were putting EB5 language into a funding bill, and serious about program integrity, I’d consider taking the fund administration language from S.2540.

I will not bother to say more about Grassley and Leahy’s S.2540 EB-5 Reform and Integrity Act — a bill that no one will support. S.2540 alienates prosperous urban interests by not replaceing the TEA rules in the EB-5 regulations, and excludes most everyone else with a blizzard of restrictions, requirements, and fees that would be too much for most stakeholders serving distressed urban and rural areas. S.2540 doesn’t propose to simply terminate the regional center program, but the effect would be pretty close. So S.2778 is what we have, a bill with enough benefits for enough people to win support. The industry is rallying round and making positive statements. There’s some hope that language from S.2778 will get included in a funding bill this year, trump unwanted regulations, and provide desperately needed long-term authorization for the regional center program. Perhaps I too should pretend that S.2778 is an excellent bill and represents fair compromise.

A few links to other perspectives on the legislation:

11/6 USCIS Policy Manual Update

The USCIS Policy Manual has been updated as of today with some edits to the EB-5 section in Volume 6 Part G,  and Adjustment of Status section in Volume 7 Part A. As usual, I saved the revised EB-5 section as a Word document in my folder of PM editions, and made a comparison document that redlines changes since the previous version.  I approached the policy manual update with some excitement, wondering (1) whether the PM update would add guidance or detail on TEA designation or priority date retention, and (2) whether USCIS would try to slip in any other policy changes under the cover of a regulations update. The answer to both questions is: no.  The PM says even less about new TEA rules and priority date retention than the reg says. The 11/6 PM update does not reflect all changes in the reg (i.e. does not include the new provision regarding evidence of property transferred from abroad, and does not mention most I-829 changes.)

Update: Robert Divine has written an article for IIUSA that reviews the changes.

Here is the update notice email from USCIS.

From: U.S. Citizenship and Immigration Services <uscis@public.govdelivery.com>
Sent: November 6, 2019 9:41 AM
Subject: Policy Update Notice on EB-5 Modernization Final Rule

USCIS is revising its policy guidance in the USCIS Policy Manual to align with the EB-5 Immigrant Investor Program Modernization Final Rule, published on July 24, 2019, and effective Nov. 21, 2019.

We are updating the USCIS Policy Manual to conform with the final rule’s provisions, which include:

  • Priority date retention for certain EB-5 immigrants;
  • An increase in minimum investment amounts;
  • Reforms to targeted employment area designations; and
  • Clarification of USCIS procedures for the removal of conditions on permanent residence.

Please see the Policy Alert for more detailed information on this update.

Conference Rumors (partial investment, visa wait times)

I heard IPO Chief Sarah Kendall and Department of State Visa Control Office Chief Charles Oppenheim speak last week at the IIUSA conference in Seattle.  I’ll blog in detail about these talks and other news and insights from the conference as time permits, but first to quickly address a couple misconceptions that may affect current decision-making.

Rumor credits Kendall’s talk with announcing that it’s now acceptable to file I-526 with less than $500,000 before November 21, and Oppenheim’s talk with announcing that EB-5 backlogs have fallen. These impressions are not quite accurate, in context.

Sarah Kendall confirmed a point related to TEA requirements as they intersect with the “investing or actively in the process of investing” requirement. Her comments did not create or change the “actively in the process of investing” alternative to investing the full amount prior to I-526 filing.  Partial investment remains an option that’s just as available, narrow, and risky as it has always been. For discussion, see Joey Barnett and Vivian Zhu’s article “EB-5 Minimum Investment Amount Increases to $900,000 November 21, 2019 – Can an EB-5 Applicant Invest Less Than the Full $500,000 Now and Still Qualify?” and Robert Divine’s article “Member Perspective: EB-5 Implications from IIUSA Conference Leading up to November 21 Effective Date of Regulations” (and his previous cautionary words about skeletal filings.) Personally, I would not file I-526 with less than $500,000 invested because USCIS makes it so tough on the business side to prove that funds not actually in the enterprise account still qualify as “at risk” in the enterprise, as required. For examples of petitioners who invested less than the minimum amount before I-526 filing, and specific problems that they faced, see: FEB012017_01B7203, Oct262009_01B7203, Apr162009_01B7203, Nov032008_01B7203, OCT072005_01B7203. The official policy is here in the policy manual.

In his presentation on October 29, 2019, Charles Oppenheim estimated EB-5 visa wait times for current investors from China, India, and Vietnam that are shorter than the wait times he had estimated back in April 2019. This reflects a reduced estimate of the total backlog of EB-5 applicants (visa applications+ estimated applicants associated with pending I-526). However, the number of investors in line for an EB-5 visa has likely not fallen since April 2019, considering the number of of I-526 filings and adjudications and visa issuances since then. Oppenheim’s total backlog estimate fell due to revised assumptions about the number of visas to eventually be claimed by those investors. Specifically, he’s now estimating fewer visa applicants associated with pending I-526, because he increased the I-526 denial rate assumption for all countries, and decreased the family size assumption for some countries. I’ll blog and spreadsheet the detail when IIUSA publishes the slides, which Oppenheim promised would include some data not in the conference presentation. But to the bottom line: Oppenheim’s revised estimates are mixed news.  Considering the surge of people starting the race, it’s worrisome to see Oppenheim looking at the finish line and estimating that a reduced number of people will make it to the end to claim a visa.  For EB-5 investors considering risks, they must assume (a) solid success rate with associated long wait times, or (b) shorter wait times predicated on high failure rate. It’s one or the other, considering demand. (B) is unfortunately plausible, considering IPO’s recent behavior, so I don’t necessarily question Oppenheim’s revised predictions with shorter wait times.

Reauthorization, Country Caps, S.2540, Visa Bulletin

Since last writing, Congress gave the regional center program another short authorization, the Fairness for High-skilled Immigrants Act almost passed the Senate, Senators Grassley and Leahy introduced a new piece of EB-5 legislation, and the Visa Bulletin offered a surprise window for Indians and Vietnamese to file I-485 regardless of priority date. I’ve had to hop, trying to keep my Washington Updates page up-to-date.

On Friday President Trump signed H.R. 4378, a continuing resolution that keeps the government funded and the regional center program authorized through 11/21/2019 —  or until the next funding bill or (more likely) the next short-term continuing resolution. The history of regional center program authorization now looks like this.

The regional center program needs the stability of a long-term authorization — something it hasn’t gotten since 2012. So far as I know, IIUSA and EB5 Coalition are still marching in lockstep and arm-in-arm over a consensus wish list for legislation that combines long-term authorization with an investment threshold lower than what was set in 1990, a neutered TEA incentive, and a TEA set-aside provision to set aside visas for incoming investors at the inevitable cost of reducing visas available to past investors. Meanwhile, last week Senators Grassley and Leahy announced proposed EB-5 legislation that does not appear to have benefited from any EB-5 industry input. S.2540 – A bill to reauthorize the EB-5 Regional Center Program in order to prevent fraud and promote and reform foreign capital investment and job creation in American communities is an updated version of the EB-5 Reform Acts associated with Senator Grassley’s office since 2015. Unlike previous versions, the new bill does not treat investment amounts or TEA designations. It does attempt to define measures that would improve the integrity and security of the EB-5 program. I admire the intention, but wish that Senator Grassley’s office had consulted with anyone who knows EB-5 in practice. If S.2540 passed, it would sweep almost everyone out of EB-5 except a few big-city regional centers (the only ones who could afford the swathes of new red tape and fees proposed) and direct EB-5 (whose existence the bill apparently forgot). That’s not Senator Grassley’s objective. If I had more time, I would write an analysis for Grassley’s office to explain where and how the S.2540 proposals depart from their intent, and suggest fixes that would better support the laudable accountability and transparency goals. Even better if this task could be done cooperatively by the EB-5 industry. But it seems that industry has decided to put all its marbles in the hope of no-compromise backroom deals.

Speaking of a few billionaires trying to cut deals, the Fairness for High-skilled Immigrants Act keeps coming back in the Senate. As of today the bill is blocked by Senator Durban, Senators Grassley, Paul, and Purdue having been talked out of their opposition. The funding bill process offers another possible opportunity to get the legislation passed on the down-low, tucked into a thousand-page omnibus. Unfortunately I can’t find anyone but Breitbart to keep me informed about developments. (I record what I hear of the various versions and actions in this post.) If the Fairness for High-skilled Immigrants Act can pass the Senate and get signed by the President, then there would be no more country cap on EB visas. That means the people already in line for an EB-5 visa – somewhere around 70,000 – would simply receive visas in order by priority date, regardless of nationality. With 10,000 EB-5 visas available per year, that means about 7 years to issue visas to everyone already in line, and 7+ years for any new investors to get a visa. That would be more than fair to the Chinese in line, who invested under a country cap that promised 10+ year visa waits. It would be less than fair to people born elsewhere, who invested under a country cap that promised little to no visa wait.  The bill offers to protect people already in the visa queue by saying that no one with an approved immigrant petition shall receive a visa later than that person would otherwise have received a visa under previous rules. However, that doesn’t help EB-5 because most of the non-China backlog is still stuck in slow I-526 processing, and thus does not yet have petition approvals that would protect them. The EB-5 industry has been nearly silent on this legislation, thanks to interests divided between China and the rest of the world. The industry will collapse if the bill passes, with new EB-5 demand quelled by the threat of a worldwide 7+year wait to conditional permanent residence.

I made a couple charts to assist in visualizing the impact of the Fairness for High-skilled Immigrants Act. To estimate how many years a given priority date would need to wait for a visa under the act, just add up the number of applicants with earlier priority dates, and divide by 10,000. (The latest version of the legislation has no transition period for EB-5.) To estimate how many people would be retroactively affected if the Fairness for High-skilled Immigrants Act becomes law, look at the number of applicants represented on petitions still pending at USCIS. (These charts are rough estimates starting from data by country and priority date published by USCIS and DOS as of October 2018, and that I updated with estimates based on worldwide I-526 and visa data since then. I guess the charts may be undercounting by about 10,000. As a reminder, my EB-5 Timing Page collects all the data to which I have access.)

At least there’s one bit of happy news for past investors. USCIS announced that in October 2019, applicants from Vietnam and India who are living in the U.S. and have I-526 approval can file I-485, regardless of priority date. The Visa Bulletin has two charts for EB visas: Chart A Final Action Dates and Chart B Dates for Filing. USCIS has agreed to use the Dates for Filing cart in the October 2019 Visa Bulletin, and all countries except China are Current in that chart.  This doesn’t necessarily affect the total time to actually get a visa, but having the I-485 filed brings significant benefits.

The USCIS AOS page explains that it opens Chart B “If USCIS determines there are more immigrant visas available for a fiscal year than there are known applicants for such visas.” The fiscal year starts in October with 700 visas available each to Vietnam and India, and apparently there aren’t yet 700 people ready yet to take those visas. No wonder, when USCIS is only advancing about 200 worldwide I-526 petitions a month. As illustrated in the above chart, much of the effective line for EB-5 visas is still stuck in USCIS processing.

Reauthorization by CR

The Regional Center program is currently authorized through September 30, 2019 as part of 2019 appropriations. We depend on Congress to pass a 2020 appropriations bill that continues to carry regional center authorization. As usual, Congress has not yet figured out government funding for the new year, so there will be another one or more Continuing Resolutions to extended 2019 appropriations and defer the deadline. Today, the House passed H.R. 4378, which defers the expiration of government funding (and incidentally the regional center program sunset) to November 21, 2019 (or until there’s a new appropriations bill, whichever comes fist.) The measure now goes to the Senate, which will vote on it next week. Since the Senate has not come up with any alternative, I assume that the bill will pass, the government will not shut down, and the regional center program will remain authorized for now. When the reauthorization is passed, then final action dates for regional center EB-5 categories will no longer be “unavailable” in the October Visa Bulletin. (See Visa Bulletin Section D for an explanation.)

November 21, 2019 also happens to be the date for new EB-5 regulations to take effect, but I assume that Congressional appropriators were thinking about Thanksgiving vacation, not minor regulations, in choosing the date. And if history is any guide, there may be another CR with a new short-term deadline passed before November 21. And possibly a series of CRs.

Here, FYI, is the daisy chain of language related to regional center program authorization.

  • H.R. 4378 (p. 3-4, 7) “The following sums are hereby appropriated… namely: Such amounts as may be necessary…for continuing projects or activities… that are not otherwise specifically provided for in this Act, that were conducted in fiscal year 2019, and for which appropriations, funds, or other authority were made available in the following appropriations Acts: … (6) … title I of division H of Public Law 116–6…Unless otherwise provided for…  authority granted pursuant to this Act shall be available until whichever of the following first occurs:  (1) The enactment into law of an appropriation for any project or activity provided for in this Act. (2) The enactment into law of the applicable appropriations Act for fiscal year 2020 without any provision for such project or activity. (3) November 21, 2019
  • This language refers back to Public Law 116-6 Division H, Title 1 (PDF page 463) which has current regional center program authorization in this sentence: “Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note) shall be applied by substituting ‘September 30, 2019’ for ‘September 30, 2015.’”
  • This language refers back to Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (Public Law 102-395) Section 610(b) (PDF page 47), which originally established the regional center program.

August Updates (IPO Processing, Terminations, Marketing, Regs & Legislation, Visa Bulletin)

USCIS Investor Program Office Updates: There’s evidence of increased activity at IPO.

  • Processing Times: The report on the USCIS Processing Time page improved this week for all EB-5 forms, with the “Case Inquiry Date” formula moving forward 76 days for I-526, 62 days for I-829, and 1,097 days for I-924. The months in the “Estimated Time Range” also dropped somewhat, and reduced their spread. I make regular spot checks of the daily report and enter them in this log. Making charts from this log, I note a possible rationale behind the recent fluctuations and slowdowns. Could the USCIS objective be to get all adjudications focused on the same date? Message to USCIS: what we need most of all is predictability within each form type (with productivity maintaining a reliable baseline or trending up). No one would cheer at the odd goal of making I-526, I-829, and I-924 equally slow. We are happy to see processing times finally trending down rather than up, though still with far to go.
  • Regional Center Terminations: In the email to USCIS copied in my last post, I noted that just 11 regional centers had been terminated so far in 2019. But USCIS proceeded to terminate a whopping 62 more regional centers in one week of August. Apparently, the regional center compliance team is back to work with a vengeance, though I-924 volumes remain low.

Other Updates

Regional Center Program Authorization: Regional center program authorization is currently attached to 2018 appropriations that expire on September 30, 2019. It appears likely that Congress will, per usual, fail to finalize 2019 appropriations in advance of the September 30 deadline, and instead defer the deadline with one or more Continuing Resolutions (CR). In the IIUSA Midyear Association Update Webinar, the government affairs panelist said he’d been assured that regional center program authorization will be included in the CR, if there is a CR.

EB-5 Reform/Change Regulations or Legislation: The IIUSA Midyear Association Update Webinar indicated that draft EB-5 legislation continues to circulate among select industry leaders, and to be discussed with Congressional offices. The webinar did not offer any timeframe estimate for such legislation to be advanced toward a vote. IIUSA did state that EB-5 has “Champions in Congress,” though the champions are not yet ready to be named and go public with EB-5 support. EB5 Investors Magazine reports that Senator Rand Paul is trying for a joint resolution that would withdraw the EB-5 regulation – but Senator Paul has not promoted this (or his backlog elimination bill) on hiswebsite. It looks unlikely that there will be any EB-5 program changes before the end of the year, beyond the changes that will result from the EB-5 Modernization Regulation taking effect on November 21, 2019. If only politicians and industry would allow for healthy enhancements and effective reforms for EB-5!

EB-5 Future: How much future does EB-5 have after November 21, 2019, when investment amounts will have increased and when – perhaps more to the point — and there’s no more deadline threat to hustle investment decisions and obscure visa availability and other issues? The industry is divided between people who are making a last mad rush and expecting to abandon the field after November, and people seeking a sustainable path into the future.

EB-5 Marketing and Oversubscription: I hear from multiple sources of significantly increased investment activity from Brazil, South Korea, and Taiwan in recent months, threatening backlogs for those countries. Unfortunately USCIS has not shared any per-country I-526 data since October 2018, so we can only guess at the likelihood that those countries are becoming oversubscribed in 2019. Prospective investors, you’ll want to monitor your markets while keeping in mind this rough metric: an additional year of visa wait for every additional 230 or so EB-5 investors from your country (assuming 700 annual visa cap and a 3:1 ratio of visas demanded to filed I-526). (If you want a more fine-tuned analysis that looks at country-specific historical trends and existing backlog, and explains how to model future waits from current assumptions, my timing estimate service is available.) The visa wait for any given investor is determined by the size of the backlog on the day she invests, so we try our best to estimate current volumes.

Visa Bulletin for India: Section D of the September 2019 Visa Bulletin includes this statement: “There has been a combination of a dramatic change in the USCIS demand pattern for adjustment of status applicants during July, and a larger than anticipated return of unused numbers which had been provided to consular offices for July use.  As a result, it has been possible to advance the Employment First and Second preference September final action dates for most countries, as well as the India Employment Fifth preference. ” The India Final Action Date for EB-5, which hadn’t been expected to move this month, advanced to September 1, 2017.

What does this mean for India EB-5 applicants in line? The Visa Bulletin just tells us that there were fewer-than-expected visas issued through consular processing in July, and different-than-expected demand in July for visas through I-485. I assume that must mean (1) a processing hold-up that resulted in fewer-than-expected people with old priority dates reaching the finish line in time to be able to claim a visa in July, or (2) more denials/withdrawals than expected. If (1), then the future visa claimants are still there, just held up by USCIS/consulate delays, and thus the total backlog picture/timing picture for India doesn’t change much. In that case, the September visa bulletin jump is an anomaly reflecting a temporary phenomenon, not a signal for the future.  If (2), then the total India backlog has actually become smaller, which means that people still in line advance more quickly than expected, with visa bulletin dates moving ahead accordingly.  On a down side, such attrition would signal problems with I-485, visa interviews, or sentiment among past investors.

I’m happy to see that Charles Oppenheim of Department of State Office of Visa Control has consented to speak at the IIUSA EB-5 Industry Forum in Seattle in October.  Let’s try to ask him the right questions.

Regional Center List Updates

Changes to the USCIS Regional Center List, 05/28/19 to 08/27/19.

New Regional Center Approvals


Name Changes

  • Smith Atlantic Regional Center LLC (former name Atlantic Coast Regional Center, LLC) (Connecticut, Delaware, District of Columbia, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia)
  • Smith Central Regional Center LLC (former name Central Western Regional Center LLC) (former name USA Midwest Regional Center LLC) (Illinois, Indiana, Kansas, Kentucky, Michigan, Missouri, Ohio, Pennsylvania, Wisconsin)
  • Smith South Atlantic Regional Center (Florida, Georgia, North Carolina, South Carolina) former name: South Atlantic Coast Regional Center LLC

New Terminations in August 2019
(Too many to list here. Visit the USCIS Regional Center Terminations page and sort by date, or see my Excel file for terminations.)

Priority date retention and redeployment, with flow chart

Among other changes, the new final rule for EB-5 Immigrant Investor Program Modernization “provides priority date retention to certain EB-5 investors.” This post (1) discusses context for this change, (2) summarizes the content of the change, and (3) provides a flow chart to illustrate the various options for changing course with an EB-5 investment.

Context Summary

Priority date retention is one small fix toward a major problem in EB-5: the mismatch between policy and reality when it comes to EB-5 timing.

The EB-5 at-risk policy and material change policy depend on a relatively short EB-5 process.  An enterprise can be expected to sustain itself and keep EB-5 capital deployed for five years or so, and to closely mirror the original business plan predictions for a year or two.

But reality, for many investors, is a protracted EB-5 process with years upon years in which changes will inevitably occur. Projects will finish, loans will get repaid, plans may evolve, and problems may occur. The at-risk and material change policies are not flexible to accommodate such business developments over time. The longer the immigration process, the more vulnerable investors become to prohibited project-level changes or to difficulty in sustaining the investment at risk – and that despite having created jobs as required. A decade-long wait for a visa becomes particularly problematic when the visa depends on no material changes occurring with the investment over that period.  Thus the need for options for good-faith investors who may find themselves, at some point over the years, needing their funds to be moved from one project to another.

The “redeployment” policies are one attempt to accommodate change over time. The first redeployment policy, now described in Chapter 2(A) and Chapter 4(C) of the EB-5 section in the USCIS Policy Manual, creates some flexibility within the at-risk and material change requirements that apply to investors prior to conditional permanent residence. Moving EB-5 investment from one project to another would often be considered a fatal change at this stage, but Type 1 Redeployment defines a limited option for acceptable redeployment in a new project/use following completed job creation, within the scope of the enterprise’s business.  The second redeployment policy, described in Chapter 5(C), recognizes even more flexibility in the at-risk and change policies that apply to investors once they have received conditional permanent residence. Type 2 Redeployment recognizes options for acceptable redeployment even before completed job creation, and even outside the scope of the enterprise’s ongoing business. While succeeding and getting repaid too early could be a fatal failure to sustain investment, Type 2 Redeployment policy offers a path to keep investment sustained.

The redeployment policies have not been well-loved (1) because everyone is confused by them (with many people not even noticing that there exist two distinct redeployment policies, and with not even USCIS able to explain the parameters), and (2) because the policies are a limited work-around, not a solution to the fundamental problems: excessively long wait times, and flawed underlying material change and at-risk requirements. “Redeployment” was at least intended to help by creating paths to accommodate some change. The flow chart at the base of this post illustrates the project change options introduced by redeployment policies, and the conditions under which they apply as described in the policy manual. Without redeployment policy, more arrows in the flow chart would lead to the “you lose” result box.

Priority date retention now introduces another limited work-around for investors who face losing the chance for a visa due to changes over the course of long waits. It’s especially helpful for one category of people excluded from the redeployment recourse: those whose regional center sponsor is terminated or changed while they are still waiting for a visa.  These people still face I-526 revocation thanks to DHS’s faulty interpretation/application of material change policy. But at least, the new final rule provides them opportunity to salvage the priority date, saving the place in the visa queue in case they’d like to try again with a new I-526.

Content Summary: Priority Date Retention in the Final Rule

(All the answers in this section, except for my aside on data, come from the text of the Final Rule for EB-5 Immigrant Investor Program Modernization.)

What is priority date retention?

This provision of the Final Rule allows a petitioner to retain the priority date of an approved I-526 petition to use in connection with any subsequent I-526 petition filed by that petitioner.

Who are the “certain EB-5 investors” eligible to take advantage of priority date retention?

Eligibility for priority date retention applies to the population of people at any given time who meet all these conditions:

  • The person is the petitioner on an I-526 petition that USCIS approved
  • The person has not yet received an EB-5 green card (conditional permanent residence)
  • If USCIS subsequently revoked the I-526 approval, it was for reasons other than (1) fraud or a willful misrepresentation of a material fact by the petitioner; or (2) a determination by USCIS that the petition approval was based on a material error

[Aside: DOS and USCIS statistics do not directly count this population. But to give a ballpark, I estimate that at least over 24,000 investors are currently in this window between I-526 approval and visa, and eligible to take advantage of the provision. Consider that no Chinese who filed I-526 after FY2014 has a visa yet per the visa bulletin, that there were about 35,500 China I-526 filed from FY2015-FY2018, that about 8,000 of those China I-526 were still pending at USCIS as of the end of FY2018, and that the approval rate for China I-526 has been about 90%. (Stats from my collection.) That’s already almost 24,000, and not counting the number of Vietnamese and Indian investors who are or will soon be stuck in that window thanks to retrogression. It’s another question what percent of this eligible population may be incentivized to take advantage of priority date retention. The most likely user: someone whose I-526 approval with an old priority date has been or is likely to be revoked, who comes from an oversubscribed country, and who has sufficient funds and immigrant intent to invest again in a new project at the new investment level.]

Clarifications in the final rule:

  • The final rule becomes effective on November 21, 2019. Beginning on that date, eligible people may file a new I-526 while retaining the priority date from a previously-approved I-526. The rule specifies no restriction on when the previously-approved I-526 need have been filed. [9/30 UPDATE: Robert Divine said at the IIUSA conference that he also interprets no restriction on when the new I-526 can be filed — could be before 11/21.] “The changes in this rule will apply to any Form I-526 filed on or after the effective date of the rule, including any Form I-526 filed on or after the effective date where the petitioner is seeking to retain the priority date from a Form I-526 petition filed and approved prior to the effective date of this rule.”
  • A priority date can only be transferred between one approved EB-5 petition and a subsequent EB-5 petition filed by that same petitioner. The priority date cannot be transferred between people (including, not to the investor’s spouse/dependents), and cannot be transferred to petitions for other visa categories.
  • Priority date retention does not provide grandfathering under old rules. If someone chooses to file a new I-526 petition after November 21, 2019, he or she may keep the priority date of a previous I-526, but not the rules that applied that that previous I-526. The new I-526 filing will be subject to the increased investment amount and revised TEA provisions. “The regulatory requirements, including the minimum investment amounts and TEA designation process, in place at the time of filing the petition will govern the eligibility requirements for that petition, regardless of the priority date.”
  • The priority date retention option depends on having an I-526 approval, and on not having an EB-5 visa. The commentary on the final rule explains why DHS thinks that filing I-526 is insufficient in itself to establish a priority date, and that people with an EB-5 visa do not need the priority date protection.
  • The priority date retention option is available to victims of fraud by projects or regional centers. In fact, it was designed to help them. A petitioner is only excluded if an I-526 was revoked due to fraud by the petitioner.
  • The final rule does not require NCEs to facilitate investors who wish to make a change. Nor does it change the EB-5 “at risk” requirement. That is to say, the rule does not change the difficulty of salvaging capital from one investment and moving it to another. The rule simply reduces the pain of starting over by allowing petitioners to at least salvage the old priority date if they choose to make a new investment and new I-526 filing
  • DHS does not care how many I-526 you file. No matter how many priority dates you have for EB-5 petitions, you can use the oldest one associated with an approved petition when claiming a visa.
  • The final rule specifies that it does not make any change to application of the Child Status Protection Act. The rule does not explain, if a petitioner had multiple I-526 petitions, which petition’s pendency gets subtracted from the child’s age at the time of visa availability.
  • The final rule does not consider the question of how USCIS would treat a situation where the investor files a new I-526 after 11/21 in the same NCE/same project for which he had an approved I-526 from before 11/21. This situation could arise for someone whose I-526 approval was revoked only for loss of regional center sponsor, though the project was/is viable. So long as the original $500,000 was sustained in the NCE, presumably it would counted toward the investment amount required for the new I-526. But what if some of the initial capital had been lost/misappropriated — does it all still count in the new I-526 filing? Or what if the project had no particular use for the additional investment the investor would be required to make under the new minimum investment amounts — at least no use related to job creation? Maybe people drafting the rule just assumed that new I-526 would be based on fresh investments in new projects. At any rate there’s no guidance for situations in which the investor may be trying to salvage his or her original investment, original project, and original job creation as well as the original priority date.

Flow Chart

Considering that redeployment  (as described in the USCIS Policy Manual) and priority date retention (as described in the final rule) are a maze of if-then statements, I’ve attempted a picture worth a thousand words. The flow chart image highlights several points that are often forgotten in discussions about redeployment: the existence of different redeployment options/requirements at different stages, and the pivotal questions of material change and whether or not the initial deployment already met the job creation requirement. (This chart matches my careful reading of the Policy Manual. But lawyers please email me with references if you see anything that does not match your reading, and I may update the image.)

References:
USCIS Policy Manual https://www.uscis.gov/policy-manual/volume-6-part-g
New Regulation: https://www.govinfo.gov/content/pkg/FR-2019-07-24/pdf/2019-15000.pdf
Material change references and examples: https://blog.lucidtext.com/2015/11/05/what-is-material-change/

EB-5 Regulation Published

The EB-5 Immigrant Investor Program Modernization Regulation (RIN 1615-AC07) has been published today in the Federal Register as a Final Rule. The final rule is effective in 120 days, on November 21, 2019. For every investor who files I-526 on or after November 21, 2019, the required minimum investment amount will be at least $1.8 million, or $900,000 in a Targeted Employment Area, with TEAs being subject to redefined rules. Those are the headlines. The final rule also retains the limited priority date retention provision, I-829 process tweaks, and minor clarifications as proposed in the Notice of Proposed Rulemaking (NPRM) in 2017.

For a solid summary of the rule’s content and implications, I recommend Robert Divine’s 5-page article for IIUSA The Rush is On: New EB-5 Rule Nearly Doubles Minimum Investment in 120 Days (July 23, 2019).

For those concerned to understand the rule and its background in detail, I recommend reading all 61 pages of the final rule itself. The actual regulatory amendments can be found on the final three pages. The rest of the document explains the final rule, how it differs from the NPRM and current regulations, DHS thinking behind the rule, and why the agency did or did not agree with industry comments.

My post will not duplicate Divine’s excellent analysis, or obviate the need to read the rule itself to know what it contains. But I’ll consider a few basic questions.

1. Will this rule actually take effect?

The rule will take effect in November, unless there is litigation against USCIS to stop the regulation, or Congress passes a new EB-5 law that would overrule the regulation. Both litigation and legislation have been bruited in the past. 120 days gives the industry a bit of time to pursue such alternatives, given inclination and opportunity. I guess that inclination depends on a calculation by the regional centers with budgets for lawyers and lobbyists. Their new markets will be damaged by the regulations. But does this matter to them, in light of the damage already resulting from oversubscription and wait times? Do they see sufficient long-term potential for new EB-5 demand to keep fighting for marketable investment amounts supported by TEA flexibility? The opportunity for a successful lawsuit does not look wide, considering the care DHS put into this regulation. I doubt imminent legislation, considering the political climate, and I would not want legislation based on the scandalous so-called industry consensus with TEA set-asides. But I do not discount these possibilities in the next few months, so long as the motivation exists to fight for an alternative to the regulations.

2. Should I hurry to file an I-526 petition before November 21, 2019?

I would ask a couple questions first. (A) Is it important to you that the investment amount is $500,000 rather than $900,000 or $1.8 million? and (B) Is it important to you that the investment result in a visa? If the answer to (A) is yes, then file. If the answer to (B) is also yes, then don’t hurry too much. Skipping due diligence, skimping on source of funds analysis, risking incomplete investment, pushing premature projects, neglecting to consider backlogs and timing issues … these timesavers are likely to leave you with a faulty petition that never results in a visa due to I-526 denial, and/or to visa wait problems not to mention investment problems. So waste no time, but don’t be hustled. Heed experienced lawyers like Robert Divine and Dan Lundy, who warn against skeletal filings. As a business plan writer, I aim to work twice as hard over the coming months to accommodate accelerated deadlines without sacrificing quality.

3. Will it be practically possible to raise EB-5 funds after November 21, 2019?

You know best whether your market has any taste for a $900,000 or $1.8 million investment, under current conditions. The IIUSA TEA mapping tool can help give a general idea of whether your project location could qualify at the $900,000 level going forward. (The tool was designed for the NPRM proposal, but the TEA provisions in the final rule are essentially the same as in the NPRM. A precise determination would require examining the underlying data and guessing how USCIS will implement the rule.) The final rule makes very clear that investment amount and TEA changes apply to all I-526 filed from the rule effective date onward, with no exceptions. (e.g. regardless of whether the project is in the middle of a raise, or has I-924 approval under the old rules). I do not think that EB-5 will die entirely, unless changes to visa allocations make the visa wait unacceptably long for all countries. But certainly, demand has not been and will not be remotely close to the numbers in Figure 1 and Table 3 of the final rule. And new EB-5 investors will want to consider the likelihood that the project they’re investing in will be able to successfully complete the capital raise before November 21, or risk a very tough market after November.

4. What did DHS spend two years doing with the EB-5 rule? Did they listen to industry input? Whose input and interests swayed their thinking?

The discussion in the final rule shows that DHS did indeed read the hundreds of public comments submitted on the NPRM in 2017, and engaged seriously with them. I can judge this because I also read all the comments. Most of the final rule consists of methodical response to the specific points made by the public. Sadly DHS dismissed many good ideas just for lack of supporting data and analysis, but at least they recognized the ideas. The content of the final rule shows that DHS was not manipulated by the much-maligned “powerful moneyed interests”. For example, Related NYC Metro Regional Center submitted over a hundred pages of comments personally and through proxies and had two in-person meetings with OMB about the regulations. The final rule acknowledges the arguments but does not soften any of the TEA restrictions or incentives opposed by Related. On the other hand, the final rule makes a major change from the NPRM – changing the TEA investment amount from $1.35 million to $900,000 – based on good input from someone of no importance. I can judge this, because I wrote the four-page comment that’s extensively cited in the final rule’s discussion of investment differential. (If only I’d written as compellingly about TEA designation! I didn’t occur to me DHS might decide to eliminate both itself and states from the designation business, and just leave petitioners and adjudicators with individual unguided judgment regarding which unemployment data and methodology make most sense.)

5. What does the rule mean for people who filed I-526 prior to November 21, 2019, and still making their way through the immigration process?

Changes to the investment amount and TEA rules do not apply to anyone who filed I-526 prior Nov. 21, 2019. Starting on Nov. 21, people between I-526 approval and conditional permanent residence may be able to take advantage of the rule’s new priority date retention provision. (Update: see my post on this topic.) Starting on Nov. 21, the relatively minor I-829 clarifications/changes will affect anyone reaching the I-829 stage. The rule includes no change to redeployment policy, material change policy, or visa availability.

6. Where do I go with my questions?

Your immigration lawyer and regional center should be there for you. Many webinars will be hosted. For example, Wolfsdorf Rosenthal have a webinar on Thursday, Klasko Law has a webinar on Monday, and ILW has a webinar on Tuesday. I will write additional blog posts as time permits.

And finally FYI, a copy of the email sent out by USCIS.

From: U.S. Citizenship and Immigration Services
Sent: July 23, 2019 10:16 AM
Subject: New Rulemaking Brings Significant Changes to EB-5 Program

Minimum Investments, Targeted Employment Area Designations Among Reforms

WASHINGTON—U.S. Citizenship and Immigration Services (USCIS) will publish a final rule on July 24 that makes a number of significant changes to its EB-5 Immigrant Investor Program, marking the first significant revision of the program’s regulations since 1993. The final rule will become effective on Nov. 21, 2019.

New developments under the final rule include:

  • Raising the minimum investment amounts;
  • Revising the standards for certain targeted employment area (TEA) designations;
  • Giving the agency responsibility for directly managing TEA designations;
  • Clarifying USCIS procedures for the removal of conditions on permanent residence; and
  • Allowing EB-5 petitioners to retain their priority date under certain circumstances.

Under the EB-5 program, individuals are eligible to apply for conditional lawful permanent residence in the United States if they make the necessary investment in a commercial enterprise in the United States and create or, in certain circumstances, preserve 10 permanent full-time jobs for qualified U.S. workers.

“Nearly 30 years ago, Congress created the EB-5 program to benefit U.S. workers, boost the economy, and aid distressed communities by providing an incentive for foreign capital investment in the United States,” said USCIS Acting Director Ken Cuccinelli. “Since its inception, the EB-5 program has drifted away from Congress’s intent. Our reforms increase the investment level to account for inflation over the past three decades and substantially restrict the possibility of gerrymandering to ensure that the reduced investment amount is reserved for rural and  high-unemployment areas most in need. This final rule strengthens the EB-5 program by returning it to its Congressional intent.”

Major changes to EB-5 in the final rule include:

  • Raising minimum investment amounts: As of the effective date of the final rule, the standard minimum investment level will increase from $1 million to $1.8 million, the first increase since 1990, to account for inflation. The rule also keeps the 50% minimum investment differential between a TEA and a non-TEA, thereby increasing the minimum investment amount in a TEA from $500,000 to $900,000. The final rule also provides that the minimum investment amounts will automatically adjust for inflation every five years.
  • TEA designation reforms: The final rule outlines changes to the EB-5 program to address gerrymandering of high-unemployment areas (which means deliberately manipulating the boundaries of an electoral constituency). Gerrymandering of such areas was typically accomplished by combining a series of census tracts to link a prosperous project location to a distressed community to obtain the qualifying average unemployment rate. As of the effective date of the final rule, DHS will eliminate a state’s ability to designate certain geographic and political subdivisions as high-unemployment areas; instead, DHS would make such designations directly based on revised requirements in the regulation limiting the composition of census tract-based TEAs. These revisions will help ensure TEA designations are done fairly and consistently, and more closely adhere to congressional intent to direct investment to areas most in need.
  • Clarifying USCIS procedures for removing conditions on permanent residence: The rule revises regulations to make clear that certain derivative family members who are lawful permanent residents must independently file to remove conditions on their permanent residence. The requirement would not apply to those family members who were included in a principal investor’s petition to remove conditions. The rule improves the adjudication process for removing conditions by providing flexibility in interview locations and to adopt the current USCIS process for issuing Green Cards.
  • Allowing EB-5 petitioners to keep their priority date: The final rule also offers greater flexibility to immigrant investors who have a previously approved EB-5 immigrant petition. When they need to file a new EB-5 petition, they generally now will be able to retain the priority date of the previously approved petition, subject to certain exceptions.

Country cap discussion (H.R.1044, S.386, S.2091, S.Amdt.939. D/26-3)

— UPDATES —

12/17: David North thinks that this is the final language of Mike Lee’s renegotiated Fairness for High-skilled Immigrants Act. This version would still eliminate the country caps on all EB visas (including EB-5), with no transition period for EB-5, and no savings provision for people with pending I-526 petitions. It offers the chance to file I-485 before the visa is available, which would be nice. (I believe this offer applies to EB-5, though the text on exceptions is extremely difficult to read.) There will reportedly be another attempt to get this through the Senate by unanimous consent on 12/19.
10/16: Senator Durban, the senator most recently responsible for holding up Mike Lee’s S.386 proposal to eliminate the country cap on EB visas, has now introduced alternative backlog relief legislation: Resolving Extended Limbo for Immigrant Employees and Families (RELIEF) Act. The bill text for S.2603 has not been published yet, but I’ll report further when I’ve read it. Cato Institute has a nice analysis of the bill’s content, implications, and (extremely slim) prospects.
9/30: Cato Institute has published a quantitative analysis of the Fairness for Highskilled Immigrants Act. An excellent article by Ira Kurzban has also been brought to my attention.
9/26: Now Senator Durban has stepped up to block unanimous consent to the Fairness for Highskilled Immigrants Act
9/25: Senator Purdue has agreed to drop his opposition to the Fairness for Highskilled Immigrants Act. I wait with bated breath to see what happens next.
9/19: There has been another attempt to get Fairness for Highskilled Immigrants Act through the Senate by unanimous consent, temporarily blocked by Senator David Perdue. Apparently the country cap proposal still has life after all, with the enormous power of Silicon Valley campaign donations possibly even competitive with the enormous power of Congressional inertia. Here is my summary of the most recent language: S.Amdt.939 to H.R.1044. Like S.386, this most recent version removes all EB visas (including EB-5) from the per-country cap, but omits EB-5 from the transition period, and limits the no-harm provision to people who have approved I-526 petitions on the date of enactment.
7/22: Nothing seems to be happening with the country caps proposals anymore. There’s been no reported action in the Senate on S.386, and Rand Paul has not bothered to announce S.2091 or collect any cosponsors.
7/11: Rand Paul, one of the Senators responsible for blocking S.386 in the Senate, will reportedly introduce a country caps proposal of his own in S.2091 Backlog Elimination, Legal Immigration, and Employment Visa Enhancement Act (BELIEVE Act). As time permits I’ll make a spreadsheet for S.2091, which would be much better for EB-5 since it proposes to significantly increase visa availability in addition to changing the per-country limitation. Probably it is too good to be popular, however. (Update: I made this document to highlight/interpret EB-5-relevant language in S.2091.)
7/10: H.R. 1044 passed the House today. S.386 has also made progress thanks to the addition on 7/10 of an amendment with H-1B provisions designed to broaden its appeal. The Senate’s version of the The Fairness for High-Skilled Immigrants Act differs from the House version in omitting EB-5 from the transition period. I added a tab for S.386 to my Backlog Calc Excel file to attempt to model this effect. The calculations suggest that H.R. 1044 and S.386 would have about the same effect on people with 2018 and 2019 priority dates (in either bill, it looks as if 2018 priority dates would start receiving EB-5 visas around 2025, and 2019 priority dates around 2027). S. 386 would be 2-3 years better than HR 1044 for China-born applicants with priority dates up to 2017, and 2-3 years worse than H.R. 1044 for applicants from other countries. In both the House and Senate versions, The Fairness for High-Skilled Immigrants Act is good for everyone in EB-5 with an old priority date (China) and bad for everyone who doesn’t want to move back in line behind the China backlog. I regret to say that the most informative article I’ve read so far on the politics around The Fairness for High-Skilled Immigrants Act is Brietbart’s Kevin McCarthy, 140 GOP Reps Vote for Democrat Plan to Outsource Jobs (July 10, 2019). The article includes this interesting quote:

The Department of Homeland Security finally announced its opposition to the Senate’s version — S.386 — of the legislation…:

The Department of Homeland Security does not support S. 386. The bill would do nothing to move the current employer-sponsored system toward a more merit-based system. The adverse effect on immigrant visa wait times for nationals of countries currently with lesser demand would be an obstacle to any potential plan to promote or increase immigration from countries who immigrants present reduced risk, such as Visa Waiver Program countries, or any other class of countries which the Administration may desire to provide preferential treatment (e.g., countries with which the U.S. has negotiated favorable trade deals).

The statement was signed by Joseph Joh, Assistant Director and Senior Adviser for the Office of Legislative Affairs at DHS.

And additional analysis from the same source: Jeff Bezos, Mark Zuckerberg Try to Sneak ‘Country Cap’ Prize from President Donald Trump (July 18, 2019)

— Original Post from 7/3–

How many EB-5 visas are available today to offer prospective investors?

If visas were simply allocated in order by priority date, then the answer would be 0, until about the year 2027. That’s assuming 74,000+ EB-5 investors plus family already in line divided by 10,000 EB-5 visas available annually equals 7.4 years to clear the backlog and have visas available for new investors. If visas were simply allocated in FIFO order, then all past investors in the queue would be looking at a wait of less than 8 years, with timing graded by priority dates.

As it is, visas are allocated in order by priority date subject to per-country limits. Under current rules, 3,000 to 6,000 visas are practically available to new investors annually in the coming years. (=10,000 annual quota – 1,400 annually promised to past investors from India and Vietnam under the per-country limits – 3,000 to 5,000 to be claimed annually by past investors from miscellaneous countries that are under the limit and gradually emerging from the I-526 process.) Thanks to the Chinese Student Protection Act, past Chinese investors get no by-right allocation, but priority dates give Chinese first priority for whatever is leftover. The current rules of FIFO plus per-country caps mean that visa waits for past investors vary widely from no time at all to over 16 years.

The Fairness for High-Skilled Immigrants Act proposes to change the rules, and do away with country limits for employment-based visas and the China visa reduction. Normally I just disregard rumblings from Congress, assuming they’ll come to nothing, but there’s been significant movement on H.R.1044 – Fairness for High-Skilled Immigrants Act of 2019. This bill now has 311 co-sponsors — 75% of the House. Zoe Lofgren moved on June 18 to have HR 1044 placed on the Consensus Calendar, which means it could be brought to a vote (Update: now scheduled for consideration the week of July 8) although it hasn’t been reported out of committee. It’s likely that momentum will die in the Senate, whose a mirror bill S.386 has less traction so far. (Update: The Senate bill now has action as well, with an amendment to address H-1B concerns.) Since the proposal seems so popular, I discuss the EB-5 implications.

I suspect that the bill is mainly popular for its nice title – fairness for high-skilled immigrants – and that few people have undertaken the extraordinarily difficult task of reading it and thinking through the practical effects.

Here’s my attempt to interpret the H.R. 1044 text (which differs from the Yoder Amendment text we discussed last year, mainly by adding a three-year transition period). The new HR1044 tab in my Backlog Calc Excel shows my best attempt at a quantitative analysis of the EB-5 implications. Based on this work, I draw these conclusions about what H.R. 1044 would mean to a variety of EB-5 stakeholders:

  • Past EB-5 investors from China: Under HR 1044, would receive visas at least 3-5 years earlier than under current rules
  • Past EB-5 investors from India: Under HR 1044, priority dates in 2017 and earlier would not be much affected, but investors with 2018/2019 priority dates would receive visas 3-4 years later than under current rules.
  • Past EB-5 investors from Vietnam: Under HR 1044, priority dates in 2016 would not be much affected, but investors with 2018/2019 priority dates would receive visas 2-3 years later than under current rules.
  • Past EB-5 investors other countries: Under HR 1044, priority dates after 2017 would receive visas 3-5 years later than under current rules.
  • Future EB-5 investors from any country: Under HR 1044, EB-5 investors from any country who file shortly after the date of enactment would wait 7-8 years for visa.
  • EB-5 industry: Would likely go into hibernation, except for services to past investors, for 7-8 years (or not, if prospective investors are willing to face the wait times)

The bill attempts a “no harm” provision, providing that those with a petition approved before the new rules take effect would be given a visa no later than they would’ve received it under the old rules. That’s cold comfort for EB-5, however, because about half of the backlog of past investors is still stuck at USCIS, waiting for petitions to be adjudicated. (Also, I don’t know how Department of State would implement the provision – “would have beens” being impossible to calculate with precision in the EB-5 visa context.) As a reminder, here’s the last EB-5 visa backlog snapshot provided by Department of State, estimating where people were in line as of April 1, 2019. At least the 73,157 people represented on this chart would be affected one way or other by HR 1044, if it became law.

Here are EB-5 groups attempting to influence Congress one way or another on The Fairness for High-Skilled Immigrants Act:

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EB-5 reg nears publication

7/23 Update: The final rule is available at https://www.federalregister.gov/documents/2019/07/24/2019-15000/eb-5-immigrant-investor-program-modernization.

— Original Post —

On June 27, 2019, the regulation for EB-5 Immigrant Investor Program Modernization (RIN: 1615-AC07) completed OMB review (Step 8 in the rulemaking process). This advances the rule toward the final rule-making step: publication in the Federal Register.

USCIS will make an announcement when the Final Rule is published in the Federal Register. You can sign up on the USCIS Federal Register Announcements page to get notified by email. The announcement could come any time now. The announcement will link to final rule text in the Federal Register. (Filter for “Final” rules on the Announcements page to see examples of past rules.) Until publication, the content of the final rule is unknown. The provisions will bear on EB-5 investment amounts and targeted employment area matters, but we do not know the specifics. (We know the content of the proposed rule from January 2017, but not what changes USCIS and OMB have made to the rule since then.)

The final rule will stipulate an effective date. The effective date will likely be 30 days after publication, since the rule has not been classed as “major” or “significant.” It might be later. (According to “When do final rules go into effect?” on page 8 in The Rulemaking Process.)

Rules created by administrative agencies should only possess a prospective effect, according to the Federal Administrative Procedure Act. (See Prospective and Retroactive Effect of Rules.) The Proposed Rule version of the EB-5 regulation explicitly applied investment amount changes to future I-526 filings only: “Unless otherwise specified, for EB-5 immigrant petitions filed on or after [INSERT EFFECTIVE DATE OF FINAL RULE], the amount of capital necessary to make a qualifying investment in the United States is….”

During the period between Federal Register publication and effective date, the rule is sent to Congress and the Government Accountability Office for review. Congress has almost never disapproved a rule at this point, however. (See “How is the Congress in involved in reviewing final rules?” on p. 10 in The Rulemaking Process). The regulation can also be subject to court review, if someone sues in federal court to block the regulations, based on a claim of adverse effects from the regs. (See “When do the courts get involved in rulemaking?” in The Rulemaking Process and an example of this happening.)

For now, I am not placing bets on the content or timing of the EB-5 regulation. I will wait and see, and update my Washington Updates page with any news.

In the meantime, issuers will want to hustle to complete raises under the existing rules. Prospective investors will want to balance their interests, weighing the advantage of current investment opportunities and the risks in being part of a filing surge. ILW foresees a potential 2,000 EB-5 investments from Indians in the next month or so. If realized, that surge would add about six years to an India backlog already well over eight years long. Some investors have high tolerance for long waits, but must be informed about timing issues and the associated immigration risks and investment risks.  The future direction of the EB-5 program will depend on the changes included in the final rule – but we’ll have to wait and see what those may be.

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 might 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?