Approaching December 21

— UPDATE —

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

— ORIGINAL POST 11/26–

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

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

  1. Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note) shall be applied by substituting ‘[future date]’ for ‘September 30, 2015.’
  2. Such amounts as may be necessary, at a rate for operations as provided in the applicable appropriations Acts for fiscal year 2018 and under the authority and conditions provided for in such Acts, for continuing projects or activities (including the costs of direct loans and loan guarantees) that are not otherwise specifically provided for in this Act, that were conducted in fiscal year 2018, and for which appropriations, funds, or other authority were made available in the following appropriations Acts: … title II of division M of Public Law 115-141
  3. Section 202(a)(2) of the Immigration and Nationality Act (8 U.S.C. 1152(a)(2)) is amended – (1) In the paragraph heading, by striking “AND EMPLOYMENT-BASED”; (2) By striking “(3), (4), and (5),” and inserting “(3) and (4),”’ (3) By striking “subsections (a) and (b) of section 203” and inserting “section 203(a)”;

To translate each statement into common English:

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

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

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

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

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

PM Update (redemption agreements, debt arrangements)

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

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

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

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

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

***

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

Redemption Language

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

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

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

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

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

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

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

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

Regulations update (Fall 2018)

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

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

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

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

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

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

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

RC program authorization (12/7/2018)

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

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

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

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

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

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

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

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

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

AAO found fault with the USCIS analysis.

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

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

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

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

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

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

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

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

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

  • Regional Center of Washington State, LLC (Washington)

New Terminations

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

WA Updates, Visa Numbers, Ombudsman, RC List Updates

Washington Updates

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

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

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

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

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

Visa Numbers

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

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

New RFE and NOID Policy

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

Due Diligence

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

Updates from USCIS

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

Regional Center List Changes

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

  • APRC Mesa Verde, LLC (Colorado)

New Terminations

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

Policy Manual update: Geographic Area

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

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

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

For more in-depth analysis:

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

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

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

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

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

Regional Center Terminations

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

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

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

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

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

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

SEC Action

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

Processing Times

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

Washington Updates

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

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

Regional Center List Changes

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

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

New Terminations

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

Per-country limits in question?

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

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

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

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

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

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

Pros and Cons

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

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

Additional Reading:

Visa Numbers (FY2018 Q3 and conference update)

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

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

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

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

DOS China Predictions:

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

DOS Vietnam Predictions:

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

Notes on visa availability:

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

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

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

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

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

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

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

Senate Judiciary Committee hearing on EB-5

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

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

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

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

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

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

Grassley: Are you getting the help of the Secretary?

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

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

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

Grassley: More time, hmm?

Cissna: I think so.

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

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

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

Cissna: Oh yeah.

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

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

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

Senate Hearing

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

Legislation

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

I-829 Notices

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

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

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

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

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

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

To learn more, visit our website.

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

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

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

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

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

For more information, visit our website.

Processing Report, Terminations, Regulations, RC List Changes

Processing Time Report Update

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

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

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

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

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

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

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

Regional Center Terminations

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

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

Examples:

Regulations

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

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

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

Regional Center List Changes

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

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

New Terminations:

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

5/15 Policy Manual Update (tenant occupancy)

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

–ORIGINAL POST–

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

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

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

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

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

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

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

 

Regulations Update (8/2018?)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

New Litigation and AAO Decisions (“invest” requirements)

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

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

Other recent AAO decisions of note:

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

Minor Investors:

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

Washington Updates:

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

Personal Update:

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

Regional Center List Changes:

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

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

New Terminations

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

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

Regional Center Program Authorization

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

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

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

Processing Times

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

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

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

Visa Availability

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

Regional Center List Updates

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

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

New Terminations:

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

EB-5 Reform: Missed Opportunity

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

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

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

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

Other reactions: