Goodlatte statement; IIUSA TEA Analysis

Two important new press releases:

  1. House Judiciary Committee Chairman Bob Goodlatte announces on behalf of House and Senate Judiciary Committee members that “Lawmakers Remain Committed to Good-Faith Talks to Reform Investor Visa Program Ahead of Expiration” (April 19, 2017)
  2. IIUSA announces First-Ever Comparative Analysis Report on EB-5 TEA Policy Reform (April 20, 2017). This very valuable report and mapping tool  takes a comprehensive look at the impact the different TEA policy proposals would have on the EB-5 Regional Center program at both a national and state-by-state level. For those of you who downloaded my TEA summary earlier, note that I erred in providing a link to an NMTC mapping tool based on old data. You should look instead at the IIUSA interactive mapping tool, which uses the dataset that would actually be required to determine TEA qualification under new proposals.

Meanwhile, a 4/19 post by Miller Mayer reports on a version of EB-5 reform legislation that I haven’t even seen, though Miller Mayer says “all major EB-5 industry representatives have agreed to this tentative compromise.”

Washington Updates (new draft bill), New Form I-526, RC list updates

Washington Updates
It’s still not clear what will happen in the next couple weeks before the next regional center program sunset date on April 28, and whether we’re likely to see EB-5 program changes first from legislation or from new regulations. In an advocacy update sent to members last week, IIUSA noted that the appropriations package to fund the government past April 28 is likely to be larger than a continuing resolution. Thus it could be a vehicle for EB-5 legislative reform, were any reform proposals ready. Right now there are three active bills – two that would terminate EB-5 entirely, and Rand Paul’s rosy wish list of improvements. Yesterday EB-5 Insights reported that the Senate Legislative Council is circulating another staff discussion draft of EB-5 reform legislation, and speculates that the RC program may get a short-term extension of a few weeks (with government funding) while Congress works out other appropriations details. I’ve added the staff draft dated 4/15/2017 to my Bill Comparison Table and updated my TEA Incentive Summary for reference. (4/20/2017 update: I’ve now revised the TEA Incentive Summary to correct a couple errors.) The new draft is basically the same document (with a few changes) as the 12/2/2016 staff discussion draft, which in turn was based on the Goodlatte/Conyers legislation from 09/2016. We shall see whether it goes anywhere this time around.
Meanwhile, the comment period on revised regulations closed last Tuesday, with 33 published comments on USCIS-2016-0008 and 289 published comments on USCIS-2016-0006. I haven’t had time to read everything yet, but will report back when I’ve gathered a sense of the message USCIS is receiving from such comments as people bothered to make. It may also be significant that the new appointee for DHS head, Lee Francis Cissna, has spent much of the last few years working on immigration issues, including on EB-5 at Chairman Grassley’s office (according to IIUSA).

New Form I-526
There’s a new edition of the Form I-526, which everyone must use starting June 9, 2017. Wolfsdorf Rosenthal and EB-5 Insights discuss what’s new in this version of the form.

Petition Processing
The new IPO processing times report does not look good, with the “processing petitions as of date” date having regressed for every category (back almost a week for I-829, back nearly 3 weeks for I-526, and back nearly 5 weeks for I-924). If you’re new to this blog, here’s a link to a post with everything I know about interpreting processing time reports.
Also, a sharp-eyed reader pointed out to me that the number of pending I-526 petitions that USCIS reports every year does not, as one would expect, equal the number of pending petitions at previous year-end plus current-year receipts minus current-year approvals and denials. (The quarterly numbers don’t add up either.) Anyone know why this is so? If not, I’m submitting a question for the next stakeholder meeting.

Regional Center List Changes
Additions to the USCIS Regional Center List, 04/03/2017 to 04/17/2017

  • Atlas Regional Center, LLC (California)
  • Hawaiian Palms Regional Center (Hawaii)
  • Hope Investment Regional Center (California)
  • Washington Free Life (Washington)

New Terminations

  • Leaf Fischer Investment Group, LLC (Florida) Terminated 3/6/2017
  • Idaho Global Investment Center, LLC (Idaho) Terminated 3/6/2017
  • FreeMind Films Regional Center (California) Terminated 3/15/2017
  • Green Card Gateway Regional Center (Illinois) Terminated 3/30/2017
  • Florida Gateway Regional Center, LLC (Florida) Terminated 4/12/2017

Preventing fraud in EB-5 (CIIF investigation)

In his testimony before the House Judiciary Committee in February 2016, Investor Program Office Chief Nicholas Colucci discussed how much USCIS has done to improve its administration of the EB-5 program, with particular focus on adding resources to prevent the kind of fraud and abuse that can come with investment and immigration.

Over the past few years, USCIS has taken a number of steps to improve the administration of the EB-5 program. In 2013, USCIS realigned the EB-5 program into the Immigrant Investor Program Office, and relocated it from USCIS’ California Service Center, which adjudicates various immigration benefits, to Washington, D.C., with a Chief dedicated exclusively to EB-5 adjudications. As the United States Government Accountability Office (GAO) noted in its August 2015 report to Congressional requesters on the EB-5 program, this move was part of a restructuring to help USCIS better detect fraud. USCIS also created a Fraud Detection and National Security EB-5 Division (FDNS EB-5) and embedded its personnel within IPO to work alongside adjudications officers. Additionally, a dedicated team of attorneys from the USCIS Office of Chief Counsel advise on program-related legal matters. In staffing the IPO, USCIS has, and continues to invest in the specialties needed to manage the complex EB-5 caseload by hiring staff with expertise in economics, law, business, finance, securities and banking to review cases and to enhance consistency, timeliness, and integrity within the program….
USCIS has taken its responsibility to administer the EB-5 program very earnestly, through its specialized staffing devoted solely to this program and its extensive efforts to regulate the quickly growing regional center program. However, no agency can do this alone. The EB-5 program necessitates collaboration with several other agencies, and the establishment of IPO in Washington, D.C. allows USCIS to work closely with partners such as the U.S. Securities and Exchange Commission (SEC), with whom IPO shares a robust collaborative relationship. USCIS also works closely with its sister agency, U.S. Immigration and Customs Enforcement (ICE), as well as with the Federal Bureau of Investigation (FBI) and the U.S. Department of State, in support of our oversight of the EB-5 program.

Improvements have covered staffing, inter-agency collaborations, and improved processes for important functions such as vetting lawful source of investor funds (as further explained in follow-up testimony — see especially Question 15 in response to Senator Grassley and Question 5 in response to Dianne Feinstein.)

This week’s breaking news story Feds raid San Gabriel, Arcadia locations over visa-fraud scheme involving criminals on China’s most-wanted list reminds us why those improvements were so important. The case, as described in an Application for Search Warrant filed by an FBI investigator, indicates that USCIS approved I-526 petitions from 2009 to 2012 that (if FBI evidence is correct) should never have been approved — including cases that involved people who did not invest their own funds, people who were promptly refunded their investments, and three individuals listed on China’s most wanted list for financial crimes. The good news is that the net since 2013 seems to be holding. The warrant does not indicate that any investors named in the investigation have been able to to get permanent green cards (though several have had I-829 petitions on file since 2012, possibly pending this FBI investigation which seems to have started in 2013), and the post-2013 I-526 petitions discussed in the warrant are likewise pending. The investigation stands as evidence that people may try to get away with fraud and abuse — but not that they get away with it. Investors who may have been complicit have not successfully completed the immigration process, and the regional center principals have had the FBI at their heels (sometimes literally: “at approximately 11:13 a.m., observed TAT exit SUBJECT PREMISES #2’s front door and walk across the street, after which he talked to a gardener, and then returned and entered SP#2. At 11:45 a.m. observed TAT exit SP#2 and go to the mailbox in front of the residence and retrieve mail. At 12:13 p.m. observed TAT walking from SP#2 carrying a black-colored briefcase-sized soft bag in his hands. TAT then walked across the street.”) and are now facing formal fraud investigation. Dozens of good faith investors in CIIF offerings and anyone with CIIF who’s innocent of fraud are unfortunate collateral damage, and I wish for their sake that the FBI had worked more quickly. The regional centers with Tat Chan as principal are California Investment Immigration Fund, Harris Investment Immigration Fund, and Harris Real Estate Fund.

Washington updates, articles, RC list updates

Washington Updates

  • Legislation: Another piece of EB-5 legislation has been thrown into the ring – this one from Rand Paul: S.727 Invest in Our Communities Act. Dianne Feinstein made an extreme bargaining statement with S.232, which threatens to eliminate the EB-5 program entirely, and Rand Paul’s bill takes the opposite pole – offering to make the regional center program permanent with more visas for everyone, better processing times, more investor protections, reasonably limited integrity measures, and no changes to the investment amount or Targeted Employment Area incentive. I’ve entered S.727 in my bill comparison chart, but I guess it lacks sufficient compromise to gain traction (and the similar S.2122 from Mr. Paul in 2015 didn’t go anywhere) . I can’t guess what will happen between now and April 28, but am following what The Hill has to say about prospects for a continuing resolution or omnibus spending bill. UPDATE: An April 6, 2017 letter from Senators/Representatives Grassley, Leahy, Conyers, Goodlatte, and Feinstein encourages Congressional leadership not to extend the RC program on April 28 unless accompanied by reforms. (Then why don’t any of these people introduce reform legislation??)
  • Regulations: Recall the April 11 deadline if you want to comment on USCIS proposed EB-5 regulations USCIS 2016-0006 and USCIS-2016-0008. So far, 0006 (with proposed TEA and investment amount changes) has 54 comments and 0008 (the advance notice requesting feedback on regional center designation issues) just 11 comments.

Other Resources

  • Wolfsdorf Rosenthal and EB-5 Insights have posts about a new kind of source of funds RFE that requests SOF evidence for people transfering funds on behalf of an EB-5 investor.
  • Carolyn Lee of Miller Mayer discusses the newly-unveiled regional center compliance audit program.
  • A journalist called to ask me for the story behind the surge of regional center terminations in 2015 and 2016. In case anyone else is interested in this topic, here are the sources I sent him.

RC List
Additions to the USCIS Regional Center List, 03/01/2017 to 04/03/2017:

  • Coastline Regional Center (Washington)
  • Extell Utah Regional Center (Utah): eb5extell.com
  • Mainsail Florida Regional Center (Florida)

Removed from the list of terminated RCs, and restored to the list of approved RCs:

  • South Dakota International Business Institute (SDIBI) (South Dakota)

New Terminations:

  • San Gabriel Valley Regional Center (California) Terminated 3/15/2017
  • Washington Center for Foreign Investment, LLC (Maryland) Terminated 3/28/2017

By the way I work hard to keep my blog Regional Center List complete and consistent with information from USCIS, but the task is not easy and I welcome regional centers to correct my information.

3/8 House EB-5 Hearing (TEA & Investment Amounts)

Today’s House Judiciary Committee hearing on The Department of Homeland Security’s Proposed Regulations Reforming the Investor Visa Program focused on changes to the EB-5 investment amount and TEA incentive proposed by USCIS in its Notice of Proposed Rule-making EB-5 Investor Program Modernization (DHS Docket No. USCIS 2016-0006).

The hearing opened with statements from the Congressmen responsible for two of last year’s reform bills – Senators Grassley and Leahy, and Representatives Goodlatte and Conyers. All four expressed support for USCIS’s proposed EB-5 regulations, though Leahy and Conyers also argued that there’s no substitute for a legislative solution. Leahy said that he and Grassley will soon reintroduce their reform legislation (an interesting development); Goodlatte and Conyers did not say anything about sponsoring legislation. All four made almost the same points as in last year’s House and Senate hearings, but sounded a darker note this year – turning “mend it or end it” from a question into a threat. Representatives Sensenbrenner and Lofgren followed with relatively positive statements, listing EB-5 successes and contributions, but both agreed on the need for modernization (higher investment amounts) and reform (TEA adjustments). The Committee then heard testimony from and questioned a panel including the GAO (recapping its Sept. 2016 study on TEA use in EB-5), regional center operators (ably represented by Angelique Brunner and Sam Walls III), an organization that specializes in property revitalization and blight prevention, and an anti-immigration activist. Oddly, USCIS was not represented. (Speaking of which, Colucci’s reponses for the record from last year’s Senate hearing are worth reviewing.)

I don’t have time report on all the details (you can watch the video and read the testimony), but conclude with a few general impressions. Not one of the Representatives who spoke opined that EB-5 is just fine the way it is – all expressed at least one concern, and sounded ready to support mending (if not ending) the RC program.Likewise, no one on the Committee side advocated for canceling the proposed Obama-era regulations – the only question was whether Congress should take back the policy-making ball and act first.  I heard little sympathy for the industry position that USCIS’s proposed investment amounts are too high and its proposed TEA incentive too restrictive. (Lofgren (D-CA) and Nadler (D-NY) spoke out for qualifications considering the urban context and investor demand, Goodlatte noted that he’d been willing to accept less drastic proposals, and Brunner advocated for market-based alternatives.) Goodlatte and Lofgren both raised the specter of retroactivity, which they didn’t call “changing the rules of the game midstream and thus derailing thousands of good-faith investors and projects and job creation” but rather “implementing reform now, instead of postponing it 7-8 years until the backlog is through the system (while not blaming ourselves for the legislative lollygagging that spurred the surges/backlogs)” Even David North was taken aback by the suggestion that Congress could impose a retroactive new investment amount, but apparently Mr. Goodlatte still hasn’t been shown how disastrous and counterproductive such a move would be.  What are you doing, industry advocates, besides earning a bad reputation for obstruction?  This hearing also suggested that Congress isn’t being informed about direct EB-5, and hasn’t considered the impact of investment amount, TEA, and job allocation changes outside the regional center context. Generally, I came away from the hearing with a sense that the House Judiciary Committee agrees about the need for some EB-5 program changes, recognizes program benefits but is more angry than before about flaws, and has progressed little since last year toward refining or agreeing about specific proposals for change.  (However a lobbyist speaking to The Real Deal pointed out that the hearing was not well attended by Judiciary Committee members, so the views expressed may not be representative.) There’s reportedly EB-5 reform legislation cooking behind the scenes, but we didn’t get any preview at this hearing, and the clock to the next regional center program sunset date on April 28 is ticking loudly.

S.232 Update, SEC & Attorneys, RC list changes

S.232 Update
Senator Feinstein and Senator Grassley have finally published text for and issued a joint press release on the long-shot S.232 – A bill to terminate the EB-5 Visa Program. The statement from Senator Grassley clarifies what this piece of legislation is really about: “For years, I’ve worked with bipartisan colleagues in good faith to reform it. Unfortunately, despite its many flaws, EB-5 proponents are apparently content with the status quo, and that’s unacceptable. I was hoping that it would not come to this point, but absent serious efforts to bring about reforms, we need to take the necessary steps to wind down the program and completely mitigate fraud, abuse and threats to our security.” S.232 expresses frustration at the progress of EB-5 legislation and makes a hardball negotiating statement: “if you don’t respond to my concerns, here’s what could happen.” The proposal to eliminate EB-5 entirely must be too drastic to gain much support or pass into law, but we should still take the frustration seriously. I can understand why EB-5 industry advocates in Washington DC would settle on a “protect the status quo” platform, that being the path of least resistance to industry consensus, but we cannot afford a reputation for being unserious about reform. We should address each of the concerns that Feinstein and Grassley raise in their press release. We can clarify points that are factually wrong (EB-5 is not green card sale and does not avoid waiting lines, as Feinstein assumes), respond constructively to valid concerns (for example support effective protections in response to past instances of fraud, address questions raised by GAO and Commerce studies on job counts), and have the leadership to offer some considered concessions on the fundamentally divisive issues (such how the targeted employment area incentive should be used, what investment amounts should be). We must not leave oxygen for S.232, or give it excuse to become anything more than a negotiating threat.

SEC Issues for Attorneys
IIUSA has reposted 10 Observations from Reviewing Evidence in an SEC Civil Enforcement Action, an article with good advice for attorneys based on the author’s review of documentary evidence in a civil enforcement action brought by the SEC against an attorney for taking commissions as an unregistered broker-dealer.

RC List Changes
Additions to the USCIS Regional Center List, 12/06/2016 to 02/04/2017

  • Health and Welfare EB-5 Regional Center, LLC (New Jersey, Pennsylvania)

Additions to the list of Terminated Regional Centers:

  • Medical Investment in Texas Regional Center (Texas) Terminated 1/23/2017
  • Pacific Proton Therapy Regional Center, LLC (California) Terminated 1/26/2017

Regulations freeze, SEC action (San Francisco), RC List Changes

Progress of Proposed Regulations
As EB-5 stakeholders process proposed new EB-5 regulations, they are thinking (1) how can I dissuade USCIS from the changes that would be most harmful for me personally; (2) how can I take best advantage of this golden opportunity to explain to USCIS how EB-5 works in the real world; and (3) how early could the proposed regulations become final, effective regulations? We know at least that regulations can’t proceed to the next step until after the public comment period closes on April 11, 2017, and now the new administration has put another hurdle in the road.

President Trump’s first Presidential Memorandum is addressed to the Heads of Executive Departments and Agencies with the subject Regulatory Freeze Pending Review (January 20, 2017). It does not put a moratorium on new federal regulations, but does require that any new or pending regulations be presented for review and approval of a Trump-appointed agency head before proceeding any further. This means that proposed new EB-5 regulations will need to go before General John Kelley, the newly-confirmed Secretary of Homeland Security. Would General Kelley allow new EB-5 regulations to move forward? The tireless Senator Grassley met with General Kelley on January 13, and reported that “In addition, we talked about new proposed regulations published by the Department today that would go a long way to restoring the EB-5 immigrant visa program to the way Congress intended it to be used: to help bring much-needed jobs and capital to rural and economically distressed areas. I [Grassley] expressed my strong desire that these rules be kept in place and allowed to go forward to ensure that this program fulfills its original intent.” I don’t know what input General Kelley may get from other directions, or whether the flood of lobbying dollars out of New York will have an impact. IIUSA indicates that its official comment submission to DHS will seek to demonstrate the negative effects that proposed changes would have on the industry.

New SEC Action
People drafting new EB-5 regulations and legislation are motivated, in part, to implement reforms that can help preempt the kind of situations that end in SEC action. When cases appear, we have a post-mortem opportunity to consider: what went wrong here, and how might problems have been prevented or at least detected earlier? Last week the SEC published a complaint against San Francisco Regional Center, Thomas Henderson, and related parties. This case has the usual allegations (commingling, misuse, and misappropriation of funds), but offers a relatively challenging “what-if” analysis. The regional center’s website and offering documents (as quoted in the suit) appear to make all the right representations about account transparency; it just happens that the RC apparently didn’t follow through on these representations, and a third-party co-owner with apparently every right and motivation to monitor proper use of funds had to resort to a lawsuit to claim his right to oversight and eventually apply the breaks. Retrospective armchair due diligence isn’t as easy for this case as for some others. I wonder – what different policy or different industry practices could have contributed to improved policing in this situation?

Regional Center List Changes
Additions to the USCIS Regional Center List, 11/29/2016 to 12/06/2016.

  • Advantage America Seattle Regional Center (Washington): www.aaeb5.com
  • CP Northern Regional Center (Michigan, Wisconsin)
  • California Agricultural Greenhouse Regional Center, LLC (California)
  • California Bond Finance Regional Center, LLC (California)
  • Greystone EB5 Northeast RC, LLC (Connecticut, Delaware, District of Columbia, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia): www.greystoneeb5.com
  • QueensFort Capital Texas Regional Center, LLC (Texas): queensforteb5.com
  • Texas Crown Regional Center, LLC (Texas)

Renamed:

  • Civitas Pacific Northwest Regional Center, LLC (former name Civitas Northwest Regional Center) (Oregon, Washington)

New terminations:

  • American Development and Investment Regional Center (California) Terminated 1/5/2017
  • Bay Area Regional Center LLC (California) Terminated 12/22/2016
  • Path America Sonoco, LLC (Washington) Terminated 11/23/2016

Proposed New EB-5 Regs (priority dates, investment amounts, TEAs)

On January 13, the Federal Register is publishing a Notice of Proposed Rule-making titled EB-5 Investor Program Modernization (DHS Docket No. USCIS 2016-0006). The notice proposes and explains the rationale behind new EB-5 regulations on priority dates, investment amounts, and targeted employment areas, among other changes. The Notice gives a comment period ending on April 11, 2017, and the regulation amendments could go live at any time after that point – though I assume not very soon thereafter, since the notice solicits and will presumably receive extensive public comment, may require another draft before the final, and will need to be greenlighted by the new administration.

Summary of Proposed Regulation Amendments in DHS Docket No. USCIS-2016-0006

  1. Priority Dates: Allow an EB-5 petitioner to use the priority date of an approved EB-5 petition for any subsequently-filed petition. (In other words, an investor with an approved I-526 in one project could choose to file a new I-526 in a different project while keeping the original priority date. This would benefit investors whose project or regional center has trouble after petition approval, but before the investor receives a visa number. The regulations do not restrict investor reasons for choosing to file a new petition.)
  2. Investment Amounts: Increase the standard minimum investment amount to account for inflation, reduce the differential between standard and TEA investment amounts, and implement automatic increases every five years based on inflation (rounded to the nearest 100,000).  Based on CPI increases since investment amounts were set in 1990, this means that the standard minimum investment would become $1,800,000 in 2017. The TEA amount, set at 75% of the standard, would be $1,350,000 in 2017. The investor would be required to contribute the minimum investment amount that is designated at the time the petition is filed.
  3. Targeted Employment Areas: Eliminate state designation of TEAs, and have DHS determine TEA qualification by applying its own uniform standards to evidence presented by investors and regional centers. For high-unemployment TEAs, DHS would only designate an MSA, county, city, or project tracts. (A project tract TEA is the census tract where the project is located, or a group comprising any or all census tracts that touch the tract where the project is located — but not a group including any indirectly connected census tracts). The regulations do not specify which unemployment data DHS would use or accept.
  4. Other technical changes: define a process by which derivatives may file Form I-829 if not included on the principal’s position; provide greater flexibility in selecting the I-829 interview location; remove the requirement that investors report to a district office in order to receive a permanent resident card; miscellaneous other changes (including clarifying that an investor can be sufficiently engaged in an NCE merely by virtue of being an equity holder, without requiring a management or other active role).

The notice goes into extensive detail about USCIS’s thinking and research behind the proposed changes (which is interesting in itself, even apart from context), and invites stakeholders to respond with equally substantial data and analysis. I look forward to IIUSA or others stepping up to help organize a serious stakeholder response. We need to do better than hundreds of individual stakeholders mailing to basically just say “this would hurt” and “we don’t like change.” (Update: IIUSA is inviting feedback from members; deadline January 31, 2017)

The regulators at USCIS and legislators in Congress share similar goals — to modernize the EB-5 program and change certain aspects of the program in need of reform — but so far the draft legislation and proposed regulations suggest quite different changes. I wonder whether Congressional staffers will be influenced by these Notices of Proposed Rule-Making as they continue to refine legislation. I note that the draft regulations frequently reference Congressional intent as expressed around 1990, but not current discussions in Congress. (As a reminder, here are the investment amount and TEA changes proposed in the most recent draft EB-5 bill I’ve seen.)

EB-5 Regs (Regional Centers), I-924 Process and 2015 Stats, Processing Times

I-924 Approval Data

I try to improve the accuracy of my Regional Center List by requesting regional center designation letters from USCIS through the FOIA process. So far I have logged all initial designations and amendments through 2015. I’m sharing summaries of data points gleaned from the most recent letters in my collection (2015 approvals) to help shed light on processing issues.  As we prepare to respond to the ANPRM, let’s think about what’s wrong with the following pictures, and how to improve the situation.

Status of Amended Regulations

USCIS has published an Advance Notice of Proposed Rulemaking (ANPRM) in the Federal Register. This notice “EB-5 Immigrant Investor Regional Center Program” (Docket No. USCIS-2016-0008) does not unveil any revised regulations, but instead generously solicits stakeholder input to help formulate new rules for regional center designation, the exemplar filing process, continued RC participation, and RC termination. (Docket #0008 references a separate notice “EB-5 Immigrant Investor Program Modernization” Docket No. USCIS-2016-0006 that may cover the other EB-5 topics that we expected to see addressed. 1/12 UPDATE: here is Docket No. USCIS-2016-0006, which proposes new regulations for EB-5 investment amount increases, TEA requirements, priority dates, and other EB-5 matters.)

The bad news about notice #0008 is that it suggests USCIS is in a preliminary stage of thinking about new regional center designation rules, hasn’t actually drafted any regulations on this topic, and doesn’t expect to start for at least another 90 days. (Though hustle might be useless anyway, if Trump makes good on his election commitment to issue a temporary moratorium on most new regulations.) The good news is that notice #0008 demonstrates genuine concern to understand and work with regional center reality, presents thoughtful analysis of the issues, and poses excellent questions. Answers prepared for USCIS in response to the ANPRM should be organized and shared with Congressional staffers as well, since draft EB-5 reform legislation covers the same issues that USCIS aims to resolve, and would benefit from the same input.

Processing Times

Speaking of processing times, here is an email that I should have shared last week.

From: U.S. Citizenship and Immigration Services [mailto:uscis@public.govdelivery.com]
Sent: Thursday, January 05, 2017 11:32 AM
Subject: USCIS Now Uses Specific Dates to Show Case Processing Times

Dear Stakeholder,

Starting on Jan. 4, 2017, we will post processing times using a specific date format rather than weeks or months. This is the first step in providing processing times that are timelier and easier to understand.

We post case processing times on our website as a guide for when to inquire (service request) about a pending case. For the last several years, we have posted case processing times using two different formats:

  • For cases that were within our production goals, we listed processing times in weeks or months.
  • For cases that were outside of our production goals, we listed processing times with a specific date.

Always refer to your I-797C, Notice of Action, and look for “receipt date” to determine when we accepted your case. If the receipt date on the USCIS Processing Times web page is after the date we have listed on your notice, you should expect to hear from us within 30 days. If after those 30 days, you have not heard from us, you may make an inquiry on your case.

We recommend using our e-request tool for all case inquiries. In addition, we have many other services and tools at my.uscis.gov

If you move, remember to update your address for each pending case and receipt number at uscis.gov/addresschange.

Kind Regards,
USCIS Public Engagement Division

Note that this change is cosmetic: processing “as of month” and “as of date” are the same information, just in a different form. But the change is helpful to clarify that the report does not give average processing times, but rather a metric for judging when it’s okay to inquire about case status. FYI here is my spreadsheet of historical IPO processing times with columns translating month to date and vice versa. (But whether considering month or date, keep in mind individual deviations as illustrated above in my scatter plot charts of actual I-924 processing in 2015.)

Proposed EB5 investment and TEA changes

The Regional Center program sunset date has been pushed back to April 28, 2017 by Public Law 114-254, but don’t count on the EB-5 status quo remaining unchanged through April. As I reported before, EB-5 filing fees are increasing from next week, there’s a new EB-5 Policy Manual, and Congress and USCIS might be about to unveil major EB-5 rule changes. USCIS signaled intention to post proposed new EB-5 regulations in the coming month, which could (at record speed) mean a final rule as early as March 2017. Congress reportedly came close to finalizing new EB-5 legislation behind the scenes last month and reportedly plans to introduce a new bill shortly. (USCIS has a history of dragging regulation revisions out over months or years or even decades, and Congress has a packed schedule for Trump’s first 100 days without mentioning EB-5. But still, there’s at least a chance of immanent EB-5 action.)

New regulations from USCIS promise to increase the minimum EB-5 investment amount, revise Targeted Employment Area requirements, clarify regional center designation requirements, and consider priority dates. We’ll have to wait for the proposed rule to learn more detail. (UPDATE: here is the detail.) New legislation promises to address those same issues while also adding new rules  for job creation, project pre-approval, investor source of funds, investor vetting and protections, fund administration, and many aspects of regional center operations.  My Bill Comparison Chart summarizes features from various iterations of proposed EB-5 legislation. I just added a column for a new “staff draft” bill dated 12/2/2016 that has been making unofficial rounds. This draft is a version of the H.R. 5992 released earlier this summer, with revisions that show the influence of good sense (clearer presentation, no more deadly retroactive effective dates, fewer practically impossible tasks for USCIS and regional centers) as well as good lobbying by large regional centers (lower fees and better incentives for the major players). This staff draft legislation is unofficial (I received the same document separately from three sources, but without much context, and it’s just a redline with many passages marked for further negotiation), but I’m analyzing it because I hear that a bill based on this document may be  introduced early next year.

To begin, I’ve outlined proposals in the recent staff draft legislation that would change the EB-5 minimum investment amounts and targeted employment area criteria. (Click on the link to access the document, which has tidy summary tables and some analysis of implications.) Future posts will address other big proposed changes that I consider particularly significant for my clients: proposed new rules for job creation, amendments, fund administration, ownership/management, and regional center operations. (I’ll also link to useful articles from others. For example Bernard Wolfsdorf’s informative webinar “EB-5: 12/23/16 Fee Increase & Preparing for 2017” discusses the staff draft legislation and other developments.)  We don’t know whether the proposals in the draft legislation will become reality, but it’s important to know what’s being discussed in Washington. Discussions in Congress may or may not affect the changes that USCIS proposes through regulation. Regulation rule changes from USCIS will be more limited than what Congress can enact, and might be more restrictive. (I hear that USCIS has been working closely with the hardliner Senator Grassley, which is not a good sign.) Let’s see who acts first.

1/12/2017 UPDATE: DHS has published its proposed changes to investment amounts and TEAs in a Notice of Proposed Rule-making: EB-5 Investor Program Modernization (DHS Docket No. USCIS 2016-0006).

Countdown to reauthorization (CR to 4/28/2017)

The next sunset date for the regional center program is coming up on Friday 12/9, and I’ll update this post with relevant news as I receive it. (See my 9/29 post if you’d like to review the history of RC program authorizations.)

UPDATES:

  • 12/10/2016: President Obama signed into law H.R. 2028, the “Further and Continuing and Security Assistance Appropriations Act, 2017.” It is now Public Law 114-254. This extends Regional Center program authorization together with government funding and other authorities through April 28, 2017.
  • 12/9/2016: The Senate is up late voting on the CR (HR 2028), and tomorrow should bring the good news of no government shutdown or RC program lapse.
  • 12/8/2016: The Hill reports that the CR passed the House today, and the Senate is expected to vote tomorrow. GOP leaders are confident that it will reach the President by the deadline, though it’s facing some opposition.
  • 12/7/2016: IIUSA has issued an advocacy alert welcoming the CR and the short-term reauthorization of the EB-5 Regional Center Program through April 28. “EB-5 stakeholders and congressional offices have engaged in meaningful discussions all year, particularly over the past few months, to reach consensus and compromise for the healthy future of the Program. With a tight deadline to fund the federal government and address other pressing legislative issues, there was simply not enough time for a reform package to be passed during this Congress. The short-term extension through April 28 will ensure that the industry and legislators will have the opportunity to agree upon a comprehensive reauthorization bill that provides necessary reforms to the Program while allowing the Program to continue to grow, thrive and endure in the long term.”
  • 12/6/2016: Quoted from a House Appropriations Committee Press Release: “House Appropriations Chairman Hal Rogers today introduced a short-term Continuing Resolution (CR) (H.R. 2028) to prevent a government shutdown and continue funding for federal programs and services until April 28, 2017. The legislation also contains funding for emergency disaster relief.  …The CR extends funding for operations for most federal agencies, programs and services until April 28, 2017. It maintains the current budget cap level of $1.07 trillion put into place under the Budget Control Act of 2011. The legislation continues policy and funding provisions included in currently enacted fiscal year 2016 Appropriations legislation. It does not include controversial riders, or major changes in existing federal policy.   ….For the full text of the legislation, please visit: http://docs.house.gov/floor/”  The Appropriations Committee has also posted a nice section-by-section summary.
  • 12/6/2016: Lawmakers haggle over funding bill as shutdown nears, says The Hill
  • 12/5/2016: I hear that Goodlatte and Conyers’ H.R. 5992 EB-5 Reform Act is still under active negotiation behind the scenes. A staff draft of the bill dated 12/2/2016, just forwarded to me by a kind reader, shows significant revisions from the original bill and suggests concessions to industry pressure on TEA definitions, visa set-asides, minimum investment amounts, foreign government involvement, and account transparency requirements. The matter of retroactive effective dates is marked as controversial and “unresolved” in this draft. Provisions on direct jobs, public bonds, and loan restrictions are highlighted as points for discussion. I will be astonished if a substantive EB-5 reform bill gets passed soon, but Congress might exceed expectations. This draft in progress does show a lot of recent work

Policy Manual EB-5 Section: What’s New

The EB-5 program just shifted onto a new and slightly different foundation. USCIS Policy Manual Volume 6, Part G, published today, is now the controlling source for EB-5 policy guidance. Usually we get a review and comment period before new policy goes live, but the effective date for this policy (which I’ll call PM 6G for short) is November 30, 2016.

PM 6G consolidates and replaces (and expands on) the May 2013 EB-5 Policy Memo, EB-5 sections in the Adjudicator’s Field Manual, and other related prior USCIS guidance. It’s intended as a compendium of existing policy, but it’s not identical to the previous guidance. Here are significant points that I notice (based on reading PM 6G side-by-side with the May 2013 Policy Memo, and consulting my memory).

PM 6G introduces a few new petition filing instructions:

  • Chapter 3(B)(3) states that a regional center I-526 petition for a project not previously reviewed by USCIS must identify the project “as an actual project being presented for the first time,” and  “should contain an affirmative statement signed by a regional center principal confirming that the regional center is aware of the specific project being presented for the first time as part of the immigrant investor petition.”
  • Chapter 4(A) states that a regional center I-526 petition for a project previously reviewed by USCIS must submit the previously-approved documentation together with the investor’s documents. This is required even though the regional center previously submitted the documentation with the Form I-924. The petition must also include a copy of the regional center’s most recently-issued approval letter.
  • Chapter 5(B) states that a I-829 petition must include relevant documents previously submitted with the Form I-526, including the comprehensive business plan and economic impact analysis, if the petitioner is relying on such documents to meet his or her burden of proof. “This information is necessary to indicate whether there are material changes that would impact deference.”

PM 6G includes a few items that might be arguable as new policy:

  • Chapter 2(A)1 has a section on “using loan proceeds as capital”
  • Chapter 2(D)4 says that “USCIS may request additional evidence that the indirect jobs created, or to be created, are full time.” (The May 2013 Policy Memo had stated the opposite:Due to the nature of accepted job creation modeling practices, which do not distinguish whether jobs are full- or part-time, USCIS relies upon the reasonable economic models to determine that it is more likely than not that the indirect jobs are created and will not request additional evidence to validate the job creation estimates in the economic models to prove by a greater level of certainty that the indirect jobs created, or to be created, are full-time or permanent.” We need to get PM 6G revised to reflect that reasonable approach.) Chapter 2(D)(4) also confusingly defines direct jobs in the context of regional center job creation and economic analysis as “those jobs that establish an employer-employee relationship between the new commercial enterprise and the persons it employs.” This should be revised or expanded to reflect the alternate meaning of a “direct” job that is in fact used by economic models.
  • Chapter 2(D)6 incorporates the content of the 12/20/2012 Operational Guidance on tenant occupancy
  • Chapter 3(D) says that amendments are optional for changing a regional center’s “industries of focus, business plans, or economic methodologies,” but does not say that amendments are optional for a change in geographic boundaries.  The May 2013 Policy Memo had included geographic boundaries on the list of changes for which an amendment was not required.
  • Chapter 5(B) defines a first-in policy for allocating jobs to EB-5 investors, absent other agreement  (departing from the recent practice of saying no investors get jobs if there aren’t enough for all and there isn’t a job allocation agreement)

PM 6G provides some new examples, clarifications, and re-emphasis:

  • Chapter 2(A)2 lists types of documents that can be used to help demonstrate source of funds
  • Chapter 2(A)2 lists “administrative fees, management fees, attorneys’ fees, finders’ fees, syndication fees” as examples of expenses that will be considered to erode capital made available to the job-creating entity, if paid out of the EB-5 qualifying investment amount
  • Chapter 2(A)5 repeats the old point that TEA qualification is determined for each petitioner based on the  project location’s TEA status at the time of that petitioner’s investment or I-526 filing, while re-emphasizing the implication that the project location is not necessarily a TEA for all time, and just because some early investors qualified for the reduced investment amount isn’t determinative for later investors in the same project
  • Chapter 2(D)3 lists examples of evidence to be provided for a job-sharing arrangement in order to show that it truly involves job share of a full-time position, and not combination of part-time positions
  • Chapter 2(D)5 re-emphasizes that a reasonable economic methodology must be based on reasonable inputs, and gives examples of economic model inputs and relevant documentation to help establish their reasonableness. This discussion is repeated in Chapter 5(B), with odd lack of distinction between evidence required at the I-526 and I-829 stage.
  • Chapter 3(A) describes new detail required of the operational plan filed with the I-924 Application for Regional Center
  • Chapter 3(B)1 suggests specific content for the “general proposals and predictions” in a regional center application relying on hypothetical projects
  • Chapter 3(E) describes the process and issues in regional center termination
  • Chapter 4(C) and 5(C) discuss material change in terms of the same principles but with different language and different examples from the May 2013 Policy Memo. Unlike the memo, the manual discusses and gives examples of changes that would NOT count as material.
  • Chapter 5(B) tries to discuss evidence for regional center job creation at the I-829 stage, but needs more work to clearly address issues specific to regional center as distinct from direct investments, and to differentiate what’s required at I-829 from what’s required at I-526
  • Chapter 5(B)1 gives examples of kinds of construction jobs that do and don’t count as intermittent

What is the significance of PM 6G?  For investors, I guess it doesn’t make much difference because it doesn’t include major policy changes (yet) and basically says what their consultants knew already. It will just be a handy place to find all EB-5 policy, being more comprehensive and better written than the May 2013 memo. Attorneys will want to get busy finding problems and commenting on details that need to be changed.  I’ll have to spend Christmas going through years of blog posts and other documents updating the content and citations to reference PM 6G instead of the various superseded guidance and policy sources (and maybe spend Easter the same way when PM 6G gets revised based on new regulations). I dislike the fluidity of the online Policy Manual, and for myself am copying the content into stable old-fashioned page-numbered documents with navigation.(Here is a link to my folder, which I expect will eventually include many dated versions. You’re welcome to share, keeping in mind that the online manual is the most reliable source for the most current content.)

I look forward to linking to other reactions on the manual here, and may modify my own comments in this post.

Policy Manual EB-5 announcement

From: U.S. Citizenship and Immigration Services [mailto:uscis@public.govdelivery.com]
Sent: Wednesday, November 30, 2016 9:29 AM
Subject: USCIS Message: Policy Manual Available for Comment Employment-Based Fifth Preference Immigrants: Investors

Dear Stakeholder,

USCIS seeks your input on the USCIS Policy Manual item listed below which contains either new or revised policy guidance. Please note that this item is effective as of the date shown below.

Type of Document for Comment: USCIS Policy Manual
Title of Document: Employment-Based Fifth Preference Immigrants: Investors
Related Documents: Policy Alert
Opening & Closing Dates for Comment: November 30, 2016 – December 14, 2016
Effective Date of Policy: November 30, 2016

Please send all comments to publicengagementfeedback@uscis.dhs.gov and be sure to include the following to make your comments clear:

State the title of the relevant volume and section in the subject line of your message;
Refer to a specific portion of the document;
Explain the reason for any recommended change; and
Include data, information, or authority that supports the recommendation.

If you are unable to access the document through the link provided above, please do the following:

  1. Go to www.uscis.gov/outreach
  2. Select “Feedback Opportunities” on the left side of the page
  3. Select “Policy Manual for Comment” on the left side of the page

Kind Regards,

USCIS Public Engagement Division

New EB-5 Regs in 2017?

01/11/2017 Update: USCIS published an Advance Notice of Proposed Rulemaking  “EB-5 Immigrant Investor Regional Center Program” (Docket No. USCIS-2016-0008)  and Notice of Proposed Rule-making EB-5 Investor Program Modernization (DHS Docket No. USCIS 2016-0006).

–ORIGINAL POST–

While we’ve been focused on how Congress might change EB-5, the immigration service is taking action. Since Spring 2015, DHS has published Rule 1615-AC07 (Improvement of the Employment Creation (EB-5) Immigrant Regulations) bi-annually as an agenda item in the Office of Management and Budget’s Rule list. Since the “stage of rule-making” just said “Long-Term Actions,” with no specified timeline, I didn’t actually hope to see action any time soon. But now, the Fall 2016 OMB Rule list has upgraded the status of 1615-AC07 to “Proposed Rule Stage” and has added a timetable date: Notice of Proposed Rulemaking on date 01/00/2017. That means that in just a couple months, we could be getting our chance to read and comment on new regulations that make significant EB-5 program changes (including increased investment amount), and those regulations could go live shortly after the comment period closes. (Or not — my post from June discusses the regulatory process and how it’s played out before.) The Fall 2016 version of the rule notice goes into more detail on what DHS intends to accomplish with the new regulations, and promises to address a point not mentioned in earlier notices: “providing the opportunity to mitigate the harsh consequences of unexpected changes to business conditions through priority date retention in limited circumstances.” While new legislation from Congress might primarily focus on the regional center program, new DHS regulations will affect all EB-5 investors, and this notice concerns everyone in EB-5.

DHS/USCIS RIN: 1615-AC07 Publication ID: Fall 2016
Title: Improvement of the Employment Creation Immigrant Regulations

Excerpted from http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201610&RIN=1615-AC07

Abstract:
DHS proposes to amend its regulations governing the employment-based, fifth preference (EB-5) immigrant entrepreneur category and EB-5 regional centers to modernize the EB-5 program based on current economic realities and to reflect statutory changes made to the program. DHS is proposing to update the regulations to include the following areas: priority date retention, increases to the required investment amounts, revision of the Targeted Employment Area requirements, clarification of the regional center designation and continued program participation requirements, and further definition of grounds for terminating regional centers.
Statement of Need:
The proposed regulatory changes are necessary to reflect statutory changes and codify existing policies, more accurately reflect existing and future economic realities, improve operational efficiencies to provide stakeholders with a higher level of predictability and transparency in the adjudication process, and enhance program integrity by clarifying key eligibility requirements for program participation and further detailing the processes required. Given the complexities involved in adjudicating benefit requests in the EB-5 program, along with continued program integrity concerns and increasing adjudication processing times, DHS has decided to revise the existing regulations to modernize key areas of the program.
Anticipated Costs and Benefits:
As a result of these amendments and resulting modernized program, DHS believes that regional centers, entrepreneurs, and the Federal each benefit. This rule would benefit regional centers by clarifying the requirements for designation and continued participation in the EB-5 program, making the application process more transparent for regional centers and streamlined to improve DHS operational efficiencies. The rule would benefit entrepreneurs seeking to participate in the program by providing the opportunity to mitigate the harsh consequences of unexpected changes to business conditions through priority date retention in limited circumstances. This rule would also provide a more transparent process for entrepreneurs seeking to participate in the regional center program by providing increased consistency and predictability of adjudications through the clarified regional center continued program participation requirements. These changes will also streamline the adjudication process and improve DHS operational efficiencies, resulting in improved adjudication times. Finally, the Federal Government will benefit from clarifications and enhancements to the EB-5 program to strengthen program integrity, reducing the risk of fraud and national security concerns in the program, as well as improving operational efficiencies to reduce overall program costs.

Election and EB-5 (updated), RC list changes

Political Changes and EB-5
In the new political climate, Regional Center EB-5 has an interesting position: it’s an immigration program whose strongest criticism has been that it unfairly benefits wealthy New York real estate developers. Perhaps we’re about to see EB-5 become an immigration program whose saving grace is its benefits to big developers (including President-elect Trump’s family). Or maybe EB-5 will be crushed between judiciary committee chairmen (still to be Senator Grassley and Rep. Goodlatte in the new Congress) who want reforms and a new administration that may aim to cut down on immigration generally? Maybe the Regional Center program will be simply ignored and punted down the road with more short-term extensions as the lame-duck Congress focuses on bigger spending bill issues and the Judiciary Committees get caught up in Supreme Court hearings? I don’t know. Preliminary comments on the election’s immigration and EB-5 impact: IIUSA letter to members, EB-5 Insights Post-Election Immigration Update, Klasko Law post on the Election Impact on EB-5. In the article Leahy to press ahead with EB-5 reforms in lame duck session (Nov. 16. 2016), VT Digger quotes sources saying that Senators Leahy and Grassley are continuing to push even now for any regional center reauthorization to be accompanied by reforms. However, the impression I get from reading political news is that Congress as a whole is determined to do and decide just as little as possible until Trump is President. House Republicans have already agreed it’s a good idea to extend government funding from December 9, 2016 into 2017 with another short-term spending bill, in order to defer big decisions until next year. It’s probable that the Regional Center program will piggy-back on that additional extension of existing appropriations and authorities, as it did before — if for no other reason than that Congress would have to make extra effort and go out of its way to specially exclude it. (Update: a CR has indeed extended the RC program with government funding through April 28, 2017.)

Regional Center List Changes
Additions to the USCIS Regional Center List, 10/03/2016 to 11/01/2016

  • EB-5 Fund CA, Inc. (California)
  • Home Paradise Texas Regional Center, LLC (Oklahoma, Texas): ushpic.com

Renamed:

  • CanAm Los Angeles County Regional Center, LLC (former name Los Angeles Film Regional Center) (California)
  • Central Southern Regional Center (previously USA South Regional Center) (Louisiana, Oklahoma, Texas)
  • Rural Economic Development Center LLC (former name 1900 Gulf Street Partners Regional Center LLC) (Kansas, Texas)

Removed, but not listed as terminated:

  • Los Angeles County Regional Center (California)
  • Mountain States Center for Foreign Investment (Utah)

New Terminations:

  • Montana Energy Regional Center LLC (former name USA Montana Energy Regional Center) (Montana) Terminated 11/1/2016
  • Dominion Mid-Atlantic Associates, Inc. (Virginia, Virginia) Terminated 10/20/2016
  • Mariana’s Investment Co, LLC (Commonwealth of Northern Marianas Islands) Terminated 10/27/2016
  • Northern Illinois Regional Center (Illinois) Terminated 10/13/2016

Final Fee Rule, Processing Updates, RC Withdrawal

Today the Federal Register published U.S. Citizenship and Immigration Services Fee Schedule, a final rule adjusting the fees required for most immigration applications and petitions. USCIS invites stakeholders to participate in a Fee Rule Engagement teleconference on November 2, 2016 from 3:30 to 4:30 PM EST. (To register, click on the USCIS registration page.)

The final rule is similar to the proposed rule that we reviewed this summer, with the addition of DHS response to public comments. Here are the portions of the rule particularly significant to EB-5 (summarized from PDF pages 17-20, 30-31, and 41 of the final rule).

Fee Increases

EB-5 petitions and applications become more expensive to file as of December 23, 2016.
newfees
The fee increase for Form I-924 is especially drastic, and I’m surprised to discover that USCIS apparently did not hear public feedback on its two most obvious problems: that it was assessed based on inaccurate assumptions about regional center revenue, and that it will discourage regional centers from voluntarily using I-924 to file the amendment requests and Exemplar I-526 that USCIS wants to encourage. IIUSA and AILA – did you drop the ball on commenting, or did USCIS just not pay attention? But the rule is final now, so we live with it. And Regional Centers, you might want to hustle to file any exemplars and amendments before December 23.

Processing Issues

  • The rule does not promise that fee increases will bring improved service for EB-5 petitions. The rule states that higher fees will be used to recover costs needed to sustain current operating levels, pay a share of services that DHS provides on a fee-exempt basis to others, bolster IPO’s fraud detection and national security capabilities, and make limited investments in technological improvements to bolster information security. These uses have merit, but none are directly linked to improved EB-5 processing times. But the rule does claim that the new I-924 fee “was, in part, calculated to allow USCIS to hire additional staff to process Forms I–924 and provide better and more thorough service.”
  • The rule includes in passing this interesting tidbit on how IPO currently handles I-829 adjudications:

DHS appreciates the suggestions for improving EB–5 processing times. DHS clarifies that USCIS already has processes in place to streamline adjudication of the business-related portions of multiple Forms I-829 associated with a single, new investment project. Specifically, when USCIS receives a regional center-associated Form I–829 that involves a new commercial enterprise, USCIS reviews the first two petitions associated with that new commercial enterprise to determine if there are specific project-related issues that would apply to all petitioners associated with the new commercial enterprise. After completing that review, USCIS commences adjudication of all Forms I–829 associated with that new commercial enterprise filed within a given period. Similarly, when USCIS receives a regional center-associated Form I–829 that involves a previously reviewed commercial enterprise, USCIS immediately assigns that petition for adjudication. In other words, USCIS currently adjudicates Form I–829 petitions in ‘‘first in, first out’’ order by new commercial enterprises.

  • The rule gives the welcome news that “USCIS is transforming how it calculates and posts processing time information to improve the timeliness of such postings, but more importantly, to achieve greater transparency of USCIS case processing.” To that end, “USCIS is evaluating the feasibility of calculating processing times using data generated directly from case management systems, rather than with self-reported performance data provided by Service Centers and Field Offices” and “USCIS is also considering publishing processing times using a range rather than using one number or date. This approach would show that, for example, half of cases are decided in between X and Y number of months.” (Or, as Sir. Humphrey Appleby might say: of course we understand that you want a usable processing report, and have convened an interdepartmental committee to conduct a feasibility study that will make recommendations at the appropriate juncture, in due course, when the moment is ripe, in the fullness of time. Rome wasn’t built in a day.)
  • The rule says that “USCIS does not have immediate plans to allow electronic filing for EB–5 requests, but appreciates commenters’ desire to avoid voluminous paper filings. USCIS plans to allow electronic filing for EB–5 requests in the future.”

Regional Center Withdrawal Procedure

The rule recognizes the problem that “Currently, there is no procedure for regional centers seeking to withdraw their designation and discontinue their participation in the program,” and offers to provide a withdrawal procedure to “allow a regional center to proactively request withdrawal without the need for the more formal notices sent out by DHS.” To this end, the rule amends the EB-5 regulations, replacing 8 CFR 204.6(m)(6) with the text I quote below. The new language is similar to the previous 8 CFR 204.6(m)(6) except that it adds failure to pay fees as a reason for termination and adds a rather vague paragraph stating that a regional center may notify USCIS by letter or other means if it wishes to withdraw from the program. The paragraph does not clarify what the letter should include, where it should be sent, what kind of decision USCIS has to make about the letter, and to what extent such a regional center will be treated differently from another whose designation is terminated involuntarily.

PART 204—IMMIGRANT PETITIONS
■ 8. Section 204.6 is amended by revising paragraph (m)(6) to read as follows:

  • 204.6 Petitions for employment creation aliens.

* * * * * (m) * * *
(6) Continued participation requirements for regional centers.
 (i) Regional centers approved for participation in the program must:

(A) Continue to meet the requirements of section 610(a) of the Appropriations Act.

(B) Provide USCIS with updated information annually, and/or as otherwise requested by USCIS, to demonstrate that the regional center is continuing to promote economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment in the approved geographic area, using a form designated for this purpose; and

(C) Pay the fee provided by 8 CFR 103.7(b)(1)(i)(XX).

(ii) USCIS will issue a notice of intent to terminate the designation of a regional center in the program if:

(A) A regional center fails to submit the information required in paragraph (m)(6)(i)(B) of this section, or pay the associated fee; or

(B) USCIS determines that the regional center no longer serves the purpose of promoting economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment.

(iii) A notice of intent to terminate the designation of a regional center will be sent to the regional center and set forth the reasons for termination.
(iv) The regional center will be provided 30 days from receipt of the notice of intent to terminate to rebut the ground or grounds stated in the notice of intent to terminate.
(v) USCIS will notify the regional center of the final decision. If USCIS determines that the regional center’s participation in the program should be terminated, USCIS will state the reasons for termination. The regional center may appeal the final termination decision in accordance with 8 CFR 103.3.
(vi) A regional center may elect to withdraw from the program and request a termination of the regional center designation. The regional center must notify USCIS of such election in the form of a letter or as otherwise requested by USCIS. USCIS will notify the regional center of its decision regarding the withdrawal request in writing.

Visa Usage, GAO TEA Report, RC List Updates

Visa Usage
Here is a chart that visualizes how EB-5 fits into the big picture of U.S. immigration. The main chart is lifted from a New York Times article this week that discusses immigration levels. I added the box with detail on numerical limits within EB preference visas.
greencards
It’s worth gazing at this chart and considering how we feel about the allocations. The pie is unlikely to get larger: the message I hear from Washington is that no one has the political will to push for a greater total number of immigrants to the U.S. The pie  could be divided differently, if Mr. Trump or Ms. Clinton gets a chance to make comprehensive immigration reform happen. EB-5 is currently limited to barely 1% of the annual total (7.1% of the EB category), and EB-5 investors get still fewer numbers since they share the allocation with family members. This wasn’t a problem for years when the program didn’t really work, but now is a shame as EB-5 is working overtime and thousands of people eager to invest in US business and bring their resources to the US are stuck in years-long waiting lines. (For sobering figures on wait times, and thoughts about how to alleviate the problem, see the slides from Symposium on EB-5 Visa Usage at the IIUSA EB-5 Industry Forum October 2016.) The employment-based category as a whole is bursting at the seams as it tries to accommodate needs from health care to Silicon Valley with only 15% of total visas, so EB-5 stakeholders aren’t the only ones agitating strongly and loudly for a better piece of the pie. As the New York Times points out, the current legal immigration system prioritizes family reunification over employment-based preferences. Mr. Trump says he wants “to choose immigrants based on merit, skill and proficiency” (so far so good for EB-5, though his idea of reducing total immigration could pull the rug from under EB-5 visa numbers), while Ms. Clinton’s immigration platform keeps the focus on families. One or the other will probably get elected next month, and we’ll wait with bated breath to see what happens next with immigration. Maybe either will solve the problem by reducing the likelihood that a million sensible people a year will even want U.S. immigrant visas. (FYI: my chart and NYT’s chart aren’t exactly in parallel, since theirs shows percentages used in a given year while mine shows numerical limits — percentages that may not match actual usage in 2014.)

GAO Report
The Government Accountability Office has another EB-5 report, this one titled Immigrant Investor Program: Proposed Project Investments in Targeted Employment Areas (September 19, 2016). The report is addressed to Senators Grassley and Leahy and Representatives Goodlatte and Conyers, and responds to their request for information on EB-5 projects in recent I-526 petitions, specifically “(1) proportion of petitioners that did or did not elect to invest in a TEA; (2) proportion of petitioners basing a high unemployment TEA on various types of geographic areas; and (3) EB-5 investment as a proportion of the total investment in petitioners’ TEA projects.” GAO answers these questions with statistics from a random sample of 200 I-526 petitions filed in FY2015 Q4. The report will interesting for people who don’t already know where most EB-5 money goes, in terms of geography and industry, and how EB-5 normally fits into a project’s capital stack. The report is a gift to journalists itching to write a headline with “gerrymandering” in the title (though it also indicates that the majority of combined-census-area TEAs are actually quite small areas, comprising fewer than 11 tracts). I’ve gathered that Grassley et. al.’s ideal EB-5 project is a business with no non-immigrant funding in a thoroughly blighted Midwestern town, and the GAO report reflects the fact that indeed few EB-5 petitioners have chosen such projects. Of course TEA incentives are only one factor in this reality. Market factors also determine the kind of project that entrepreneurs are willing to undertake and investors are willing to fund. But the GAO report will inform the talks on EB-5 legislation that need to resume before December 9.

Regional Center List Updates
Additions to the USCIS Regional Center List, 9/16/2016 to 10/03/2016:

  • Eagle EB-5 Regional Center (California)
  • McCormick Regional Center LLC (Washington)
  • NY Entrepreneurs Fund, LLC (Connecticut, New Jersey, New York)

Restored to list of approved RCs (apparently removed by mistake last week):

  • Benefield California Regional Center, LLC (California)
  • HS Regional Center, LLC (California)
  • SAA Cedisus EB-5 Projects – SW Indiana Regional Center, LLC (Indiana)
  • Western Energy Regional Center (Oklahoma)

Renamed:

  • American Islands Regional Center (former name United States Virgin Islands Regional Center) (U.S. Virgin Islands (USVI))

New Terminations:

  • Northern Illinois Regional Center (Illinois) Terminated 10/16/2016
  • Arizona Alternative Energy Center, LLC (Arizona) Terminated 10/6/2016
  • Detroit Immigrant Investor Regional Center (Michigan) Terminated 9/30/2016
  • Yellowstone Montana Regional Center, LLC (Montana) Terminated 9/28/2016

H.R. 5992 Account Transparency Requirement

The Account Transparency Requirement proposed in Goodlatte and Conyers’ H.R. 5992 American Job Creation and Investment Promotion Reform Act of 2016 (see pages 64-72) is probably the most important new idea in the bill. Commentary on the bill has focused on suggestions that people don’t like (retrogression, set-asides), but we should also be discussing account transparency because it’s genuinely relevant to program integrity. I don’t see national security threats in EB-5, but misappropriation of funds shielded by lack of transparency is a live problem — the major factor in most SEC enforcement actions so far on EB-5 offerings.  H.R. 5992 may not become law, but any EB-5 bill that does get passed will certainly have the words “reform” or “integrity” in the title, and we should be working to refine relevant and effective integrity provisions.  Let’s consider H.R. 5992’s account transparency proposal, the impact it would have if enacted, and how it might be improved.

Summary of the Account Transparency Requirement Proposed by H.R. 5992

  1. A new commercial enterprise (NCE) must place each EB-5 investor’s funds in a “separate account” with the following characteristics:
      • The account contains only pooled investment funds of EB-5 investors for a single project
      • The account is at an insured US financial institution
      • At least one signatory on the account is an independent third party with a position such as a bank officer, broker-dealer, attorney, or CPA

    A job-creating enterprise that’s affiliated with the NCE must likewise hold investor funds in a separate account satisfying the above requirements. The proposal does not place requirements on accounts for an unaffiliated JCE.

  2. Funds may only be transferred out of the NCE account for one of the following purposes:
    • Refund an investor’s investment
    • Transfer to another account that also meets the above qualifications for a separate account
    • Transfer to a job-creating entity
    • Deploy funds in the project for which they were intended
  3. The following oversight and reporting is required:
    • Whenever the NCE accepts investor funds into its account, it must immediately send a notice to the investor, the regional center, and USCIS that contains this account information: contact info for the financial institution, the name of the independent signatory, and access to view the account balance online on an on-going basis.
    • Whenever the NCE transfers funds out of the NCE account, the transfer must have prior written approval from the independent signatory, and the NCE must immediately send a notice to the investor, the regional center, and USCIS that specifies the amount and destination of the transfer.
    • When an affiliated JCE deploys funds into a project, the independent signatory or another attorney, broker-dealer, or CPA has 30 days to “verify that the funds were deployed in the project for which they were intended,” and notify the investor, regional center, and USCIS accordingly.

Analysis and Links

I wrote up some thoughts on the AT proposal, but I’m demoting them to a comment on this post because I’m more interested in what other people think. What’s the perspective from lawyers who specialize in securities law issues? How would H.R. 5992’s Account Transparency Requirement work for large NCEs that already implement fund administration and independent fiduciaries? How would it work for small businesses using EB-5, and direct EB-5 cases? Do investors and their advisors see effective protections in this proposal? What’s the perspective from regulators and receivers working to sort out past misappropriation cases? How could the AT proposal be better directed toward the ultimate account transparency goals of deterrence, detection, and discovery and recovery? What are the best protections we can afford, for investors and for the healthy future of the program?

Articles on H.R. 5992 Account Transparency Requirement

  • Gary Friedland and Jeanne Calderon of NYU have started the conversation with a detailed analysis of the H.R. 5992 Account Transparency Requirement in “EB-5 2.0: Can Account Transparency Save the Program?”  (October 6, 2016 draft). They describe the background that underlies the need for an AT requirement, unpack the H.R. 5992 proposal point by point and discuss its goals and implications, and suggest areas for further discussion and improvement. A few of my takeaways from the article and subsequent emails with Dr. Friedland: For improved effectiveness, the AT proposal might further define the role and duties of the third party signatory and verifier, bolster account transparency by adding account balance reconciliation to the Regional Center’s Form I-924A annual report, consider expanding the scope of reports to be provided to investors in an NCE (e.g. quarterly account statements, notice of transfer of funds from other investors in the NCE, a copy of the Regional Center’s Form I-924A filing), and craft AT requirements for the special cases of small EB-5 projects and direct EB-5.
  • I hope to link to other topical articles here soon.

Other relevant content

  • Assuming that the people drafting the H.R. 5992 Account Transparency Requirement were primarily motivated to avoid another Jay Peak situation, I made a chart (as best I could, based on detail in the legal complaints and news reports) that illustrates how and where exactly money got misappropriated in a Jay Peake project. Here is my simplified chart of where the money went (or see Vermont DFR for the complete, complicated picture). In my chart, related party transactions, single signatories, and multiple layers in the flow of funds stand out as fault lines. The chart also shows why it’s necessary to do more than watch funds safely out the door of the NCE account.
  • Angelo Paparelli’s article All Checks but No Balances — The Systemic Failure to Protect EB-5 Investors (June 24, 2016) diagnoses a lack of meaningful oversight in EB-5 and defines a role for independent fiduciaries representing investors.
  • Ron Klasko’s article Attention Receivers and Litigators: EB-5 Investors Are Not Your Typical Clients (July 11, 2016) addresses the unique position and interests of EB-5 investors when problems arise in an investment project.
  • The EB5 Diligence webinar on Structural Weaknesses in Path America’s Offering (September 12, 2015) considers controls and procedures that might have averted the self-dealing and misappropriation that happened in the Path America case. The discussion is important because it could apply as well to other SEC EB-5 actions, most of which similarly involve related-party scenarios.

RC program extension to 12/9, reauthorization history, new RCs

Regional Center Program Authorization
The regional center program has been reauthorized through December 9, 2016 as part of the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act signed today by the President. I held off on reporting this because I couldn’t find RC program reauthorization in the bill. But IIUSA assures me that they’ve gotten confirmation from multiple Congressional offices that RC program extension is in Division C (p. 125-127), so we’ll go with it. (UPDATE: If you’d like the detail, here are emails I received from a couple kind attorneys who explain how the language works. See also the article Congressional Research Service Analyzes Validity of EB-5 Program Extension.) The extension gives only a very short reprieve. Lawmakers are now leaving Washington and won’t be back until November 14, leaving just a few weeks to figure out what comes next — or (probably more likely) to redeploy short-term measures to defer substantial lawmaking to the next Congress.

For reference, I’ve compiled a timeline of regional center program legislation to date. Notice the varying authorization periods, the fact that new legislation has usually been finalized nearly on and sometimes after the sunset date, that RC program extension has usually been part of appropriations legislation, and that previous program extensions have been associated with few to no program changes.
rctimeline

  • 11/29/1990 – EB-5 is established as part of an immigration act (PL 101-649)
  • 10/6/1992 – RC program is established as a pilot within EB-5 and authorized for five years as part of an appropriations act (PL 102-395)
  • 11/26/1997 – RC program is authorized for an additional two years (with one small change) as part of an appropriations act (PL 105-119)
  • 10/30/2000 — RC program is authorized for an additional three years (with a couple small changes) as part of immigration-related legislation (PL 106-396)
  • 11/2/2002 – Significant changes are made to EB-5 as part of an appropriations act, but no change to the RC program sunset date (PL 107-273)
  • 12/3/2003 – RC program is authorized for an additional five years (with a few small changes) as part of standalone EB-5 legislation (PL 108-156)
  • 9/30/2008 – RC program is extended unchanged to 3/6/2009 as part of a continuing resolution (PL 110-329)
  • 3/11/2009 – RC program is extended unchanged to 9/30/2009 as part of an appropriations act (PL 111-8)
  • 10/28/2009 – RC program is extended unchanged to 9/30/2012 as part of an appropriations act (PL 111-83)
  • 9/28/2012 – RC program is extended (with one small change) to 9/30/2015 as part of immigration-related legislation (PL 112-176)
  • 9/30/2015 – RC program is extended unchanged to 12/11/2015 as part of a continuing resolution (PL 114-53)
  • 12/8/2015 – RC program is extended unchanged to 9/30/2016 as part of an appropriations act (PL 114-113)
  • 9/29/2016 – RC program is extended unchanged to 12/09/2016 as part of a continuing resolution (PL 114-223)

To be continued….(Note that Googling the PL number will readily bring up the legislation, and in most cases you can locate the RC program reference in the document by searching for 610(b).) We hope that the regional center EB-5 will eventually have the stability of a permanent program.

Regional Center List Changes

Additions to the USCIS Regional Center List, 09/12/2016 to 9/16/2016

  • American Southern Regional Center, LLC (Georgia)
  • California Bohong Premier Regional Center, LLC (California)
  • KCI Capital Limited (Colorado)
  • TLQ Partnership, LLC (California)
  • TriHaven Investment Group LLC (California)

Mysteriously re-added to the approved regional center list, though they’re also still listed on the page for terminated regional centers

  • Path America KingCo, LLC (Washington)
  • The Lawrence Economic Development Corporation (Ohio)

Removed from the regional center list (but not listed as terminated)

  • DC Partners Regional Center (Texas)
  • FP Advisors LLC (Colorado)

Regional center terminations:

  • American EB-5 Centers (Florida) Terminated 9/28/2016
  • Virginia Center for Foreign Investment and Job Creation (Virginia) Terminated 9/29/2016

About H.R. 5992 Reform Act proposals

As the 9/30/2016 deadline for regional center program reauthorization looms, we have so far (1) indication that short-term regional center program extension has been included in a continuing resolution to extend government funding through December 9, and (2) a new piece of EB-5 legislation to consider: H.R. 5992 American Job Creation and Investment Promotion Reform Act of 2016, sponsored by House Judiciary Committee Chairman Bob Goodlatte (R-VA) and co-sponsored by Ranking Member John Conyers (D-MI).

H.R. 5992 is basically Senator Grassley and Leahy’s S.1501 American Job Creation and Investment Promotion Reform Act of 2015 with additional content informed by the 2/11/2016 House Judiciary Committee Hearing “Is the Investor Visa Program an Underperforming Asset?” and the Jay Peak EB-5 disaster in Vermont. In the February House hearing, Goodlatte described his vision of what regional center EB-5 should be: a program that incentivizes a healthy percentage of EB-5 projects to locate in rural and depressed areas, and a program that attracts investors with entrepreneurial talent, not the merely wealthy. He expressed special concern about gerrymandering TEAs to benefit luxury projects, the fact that foreign investors can claim credit for all jobs created by their investment projects, and the deduction that, due to the backlog, “for [any reforms] to be effective, they would have to have some retroactivity if they are going to take effect in any way, shape, or form before 7 years from now.” Conyers, representing Detroit, likewise emphasized in the February hearing that “Steering investments to projects in our cities’ wealthiest neighborhoods at the expense of urban and rural communities that need it most is not what Congress intended when it established targeted employment areas and the lower investment level.” Conyers called for projects to locate within needy neighborhoods, not just in commuting distance of them, and for more clarity on the tangible job creation associated with regional center projects. We can sympathize with these genuine concerns, and yet they underlie the most counterproductive new proposals in H.R. 5992: retroactive application of new rules to petitions filed since 6/1/2015 (which would pull the rug from under at least $7 billion already deployed in US business), permanently accruing set-asides of already scarce visas for distressed urban and rural projects regardless of use, new requirements around direct job creation, and source of funds and age restrictions that would help change regional center EB-5 from a program that uses foreign investment to benefit U.S. entrepreneurs into one that asks the foreign petitioner to be both investor and entrepreneur. The Jay Peak fingerprints on H.R. 5992 are less controversial. We likely have Vermont to thank for pages of recourse options for innocent investors in case of project or regional center malfeasance, and for pages of new requirements for transparency and integrity in depositing and deploying investor funds.

It remains to be seen what will happen with H.R. 5992, which has no EB-5 industry support (in its current form) so far as I know. The bill has some good features, but eliminates most possible supporters by combining incentives that only really distressed players can use with administrative requirements and fees that only really wealthy players can afford, by promising USCIS a huge workload with impossible deadlines, and by proposing retroactivity that would harm a mind-boggling number of recent project and investors. H.R. 5992 was briefly scheduled for a committee markup session this week, but is off the Judiciary Committee calendar now and I haven’t noted either Goodlatte or Conyers talking about it. Don’t be too discouraged, Mr. Chairman and Ranking Member! We really could welcome reform legislation, just not quite this bill. I’ll update this post as I become aware of new developments related to H.R. 5992.

For additional reading: