EB-5 Construction Jobs?

USCIS has posted a few new 2010 AAO decisions. From March and June, the decisions (denials, of course) deal with standard EB-5 cases unaffiliated with regional centers. However I did find the March 15 cases interesting for discussion of the construction job issue. Technically direct construction jobs can be counted for EB-5 if they last for more than two years, but in practice it’s very difficult to count them.  Here is how the AAO explains the problem.

The petitioner submits evidence that the construction project should begin in 2009 and be completed in 201 1. The petitioner concludes that CIMC will employ the necessary employees for more than 24 months on this single project alone and will roll these positions over to new projects.

The director concluded that constructions workers utilized for a limited duration construction phase of less than three years could not serve to satisfy the employment creation requirement.

As stated above, the U.S. District Court for the Eastern District of California stated that the AAO had not abused its discretion “in construing full-time employment to mean continuous, permanent employment.” Spencer, 229 F. Supp. 2d at 1039. The alien in that case had not documented that the construction positions, while full-time for a given week, would be continuous rather than intermittent as the workers’ skills were needed. For example, the plan in that case indicated that the number of framers required would fluctuate month to month. The court concluded that the jobs “do not appear to qualify as permanent, full-time positions, but rather arise when building trade skills are needed during a phase of construction.” While only a district court decision, this decision was affirmed by the Ninth Circuit. 345 F.3d at 683.

The phrase “construction crew workers” is extremely vague. It is not known whether these employees include workers in concrete, framing, finish carpentry, masonry and roofing trades as in Spencer, 229 F. Supp. 2d at 1039. Solely for purposes of employment creation in the context of section 203(b)(5) of the Act, while the individual filling the position need not remain in the position, the position itself cannot be intermittent. Without a more detailed plan of which type of construction workers would be required in each phase, we cannot determine which of those positions, if any, are continuous rather than intermittent. In light of the above, the business plan is insufficient to establish that the petitioner has created or will create the necessary continuous positions.

Further clarifying the issue, here is a footnote that has been appearing on recent Requests for Evidence from USCIS. Though oddly written, the note does confirm that indirect and induced jobs from the construction phase can be counted even if the direct jobs are disqualified as intermittent. And your direct construction jobs may count if your project is “massive and expansive and major.”

USCIS does not accept or credit creation of direct temporary “construction jobs” within a business plan or economic job creation forecasts activities which involve a limited duration construction phase of less than 2 years unless the scope, complexity, and the ongoing construction phase must be fully sustained for all the construction phase jobs for 2 years or more with respect to the size, scope, nature, engineering/technology challenges and breadth of the project — for example a massive-scale nuclear power facility, or major Dam or a giant oil refinery, or similar type of massive and expansive and major engineering project. Shorter term construction jobs less than three years in duration have been determined to be of such a short term in nature as to not be sustained and to decrease and disappear as the initial construction activities wind down to completion. Such shorter term construction jobs in many locations are seasonal at best. Nevertheless, for all capital investment expenditures for the construction phase, all capital-induced “down-stream” support activities and “indirect” jobs impacted and associated with the construction activities such as suppliers, transportation, engineering, and architectural services, maintenance and repair services, interior design services, manufacturing of components and materials, etc., may be factored into the calculations for creation of indirect jobs.

Note that indirect and induced construction jobs can be counted in the Regional Center context. See the January 2009 letter from USCIS to Senator Cornyn regarding construction jobs and the July 2009 Neufeld Memo regarding Job Creation and Full Time Positions.

Form I-924 “Application for Regional Center”

[Note: See my 11/22 post for an update with links to the final forms.]
The bad news is that the new Form I-924, effective Nov. 23, will have a $6230 filing fee. The good news (for regional center applicants more than for lawyers and business writers) is that the Form might actually simplify the proposal and make it less expensive to prepare. I’ve been hesitating to comment on the Form I-924 since it will (we all hope) be significantly revised following another round of comments just provided to USCIS. But based on the 08/04/10 version (posted 9/27/2010 at www.regulations.gov), here are some possible changes to keep in mind:

1. The current I-924 doesn’t specifically request Targeted Employment Area analysis. USCIS recognizes that an area needs to be a TEA at the time of investment, which may make TEA analysis at other times irrelevant. The Form does ask the applicant to identify the anticipated capital investment threshold ($1 million or $500,000) for each investor, so maybe attorneys will think it advisable to include some unsolicited TEA documentation.
2. The current I-924 doesn’t request much information on the regional center’s geographic areas and industries, just a map and list of NAICS codes. The “Overall Plan” we used to include with proposals, a lengthy business plan of the target industries within the proposed area, seems no longer necessary. The I-924 only requests details on regional center operations and specific projects, not a profile of the regional center generally. This is a little odd considering that the economic analysis will need demographic and industry data for the regional center area as a whole, and USCIS repeatedly emphasizes that the economic analysis inputs are supposed to come from an underlying business plan. But anyway, the I-924 currently only requests a map and code list.
3. The current I-924 doesn’t explicitly offer the option to include an exemplar I-526 petition, which would include a Matter of Ho-compliant comprehensive business plan. Instead the I-924 requests an “underlying business plan for the determination of prospective EB-5 job creation through EB-5 investments in [each] industry category.” It appears that this plan for an “actual or exemplar capital investment project” can be fairly simple: just “contain sufficient detail to provide valid and reasoned inputs into the economic forecasting tools and demonstrate that the proposed project is feasible under current market and economic conditions.”

The first round of comments on the 06/2010 version of the I-924 and I-924A and USCIS’s response to the comments can be reviewed at www.reginfo.gov.  Last Friday IIUSA, a trade association for EB-5 of which I am a member, sent off another round of comments on the 9/2010 version. You may thank me for the following entry:

The I-924 Instructions should coordinate with the I-924 Form. Preferably align the numbering between Form and Instructions, but at least be sure that the content matches. On the Form/Instructions posted 9/27, for example, #4 on the Instructions calls for an operational plan to include content that is divided between Part 3 Question 5 and 3 Question 6 on the Form. Instruction #6 doesn’t have any corresponding mention or entries on the Form. Instruction #3 includes several items that don’t coordinate with the Form (ie the paragraph beginning “The application should be supported by a statement from the principal of the regional center…” doesn’t match instructions on Part 3 Question 4 of the Form). This is likely to be confusing for both attorneys and adjudicators as they try to clearly enumerate the required info and ensure it’s all included. Also, for consistency, decide whether to write “Regional Center” (as in the Instructions) or “regional center” (as on the Form).

Interesting new AAO decision

The most recently published EB-5 related Administrative Appeals Office decision (Oct. 26, 2009) is an illuminating read. The decision is a denial of a stand-alone EB-5 petition filed in 2008, and includes opinions that will interest professionals related to the “in process of investing” issue, how funds must be used in the new commercial enterprise, what terms make a “buy-back” agreement unacceptable, the “engaged in management” requirement (with specific reference to LLC membership), the “material change” hot button, and finally, the vital importance of the business plan. The decision also lives up to the USICS standard of entertainment with its apparently random black-outs of text here and there while leaving me with the names of most of the entities involved.

The definition of a business plan in Matter of Ho, you may be interested to know, was cited in 20 of the 40 most recently published AAO decisions (aka denials), from January to October 2009. By Oct. 26 the judge seems to be frustrated and goes on for paragraphs emphasizing the importance of business plans and even implying that the petitioner might have gotten away with having only six full time employees so far if only she had submitted that comprehensive business plan.

Counsel then states that the petitioner “may” submit a comprehensive business plan, implying that the submission of a comprehensive business plan is optional. Counsel then asserts that “the business plan need only indicate the approximate dates (e.g. through pro-forma income statements) during the following two years when the employees will be hired.” As GPP I1 is a “full-functioning business,” counsel states that it need not “absolutely” submit a comprehensive business plan. Rather, counsel concludes that a comprehensive business plans is more appropriate for businesses not yet in operation. Counsel states that GPP I1 “does not exist merely in vapor” and, thus, a comprehensive business plan is not required. The petitioner submits an employee list showing six active full-time employees and seven active part-time employees, ten Forms 1-9 and payroll records.

The petitioner has now demonstrated that the new commercial enterprise employs six full-time qualifying employees. The regulation at 8 C.F.R. 5 204.6(j)(4)(i), however, explicitly states that a petitioner “must” submit evidence of ten employees ” or ” a comprehensive business plan. As the petitioner has not documented ten employees, she must provide a comprehensive business plan. We are not persuaded that the comprehensive business plan requirement may be waived for operational companies. While GPP I1 does not exist in a “vapor” we will not presume that every operational company currently operating with fewer than ten employees will create at least 10 full-time jobs within two years. It is the petitioner’s burden to demonstrate the likelihood of this job creation through the submission of a comprehensive business plan. Moreover, pro-foma income statements cannot take the place of a comprehensive business plan. Such statements, while they may show an increase in projected wages, do not provide the information specified in Matter of Ho at 213. Specifically, income statements do not explain the business’s staffing requirements and contain a timetable for hiring, as well as job descriptions for all positions. In light of the above, the petitioner has not established that her investment will generate the necessary full-time employment.

REPAIR Proposal

Senators Reid, Durbin, Schumer, Leahy, Feinstein, and Menendez have announced a “conceptual proposal for immigration reform” including the recommendation that “The EB-5 program will be made permanent and adapted to increase foreign investment into the United States” (Section VI). The wide-ranging proposal calls for measures to strengthen border security and enforcement, strengthen employment verification, continue support for employment-based immigration policy, and implement a “tough but fair path to legalization for those already here.”

The press announcement does not detail how the EB-5 program should be “adapted” to increase foreign investment; the AILA summary of the proposal interprets this as “technical fixes.” The proposal if implemented would likely have a mixed effect on EB-5. On the one hand making the program permanent would give needed stability (the regional center pilot program is set to sunset again on September 30, 2012). On the other hand the proposal’s recommendation to expand access to high skilled immigration options and eliminate per-country employment immigration caps would likely reduce the market for EB-5, since it would put H1-B visas back within the reach of American-educated children of wealthy parents.