Retrogression Math

Retrogression — as people imprecisely call the visa wait times resulting from oversubscription — is my least favorite EB-5 topic. The problem threatens my market, and I’d love for it to go away. There are two ways to make the retrogression problem go away: solve it or ignore it. Solving retrogression requires convincing Congress to give EB-5 more visa numbers, or to change allocation. More visas = smaller backlogs = shorter wait times. Different allocation = spreading out the backlog impact = shorter wait times for some.  But solving retrogression is hard because of Congress, so that leaves ignorance. Ignoring retrogression is easiest if one shrouds it in mystery and doubt.  If EB-5 visa availability and wait times seem impossibly complicated and uncertain, then it’s natural to ignore the issue because what else can one do. But that’s not responsible. In fact, retrogression is in the realm of math, not of myth. China is exceptional (the future demand factor introduces need for a crystal ball, and results in variable/unreliable timing forecasts for China), but future EB-5 visa availability and wait times for other countries are calculable. Investors from countries nowhere near demanding 700 EB-5 visas annually need not fear retrogression. For countries that are over (Vietnam) or near (India) the approx. 700 limit, the risk from retrogression can be calculated from the accruing excess over that limit.

For India, we have ballpark figures for number of visas already spoken for as of the end of 2018, and know something of priority dates within this backlog. The fixed number of annual visas available to India simplifies the calculation for wait times implied in past and potential future demand. The math isn’t fun – especially when calculating the wait time for a particular priority date, because of course people at different places in line face different waiting times, and variables vary over time. But still, workable estimates can be made based on available data, with areas of variation and uncertainty accounted for with math plus judgment. “We just can’t know, no one can really predict” gave an alibi for China wait times and backlog buildup, but that excuse is not available for India.  We can’t know exactly but we can generally predict how long someone investing today from India will need to wait for conditional permanent residence. We can predict the result of looking to India for billions of dollars in EB-5 investment, so long as fewer than 700 EB-5 visas are available per year for India.

I collect all relevant data that comes to my attention in my Backlog Calc file, available to anyone undertaking his or her own analysis.  And do undertake your own analysis, because who is motivated and able to do it well for you? (Even some industry veterans have misconceptions.)

I put several analysis worksheets into my Backlog Calc file as a starting point.  For example, here’s a screenshot of the India Calc tab.

This sheet breaks down the data, assumptions, and equations behind Charles Oppenheim’s estimate for the India backlog and wait time as of Q1 2019, and offers models for calculating scenarios and the impact of future EB-5 capital raises in India. Being in the realm of math, when you doubt a conclusion, you can examine the variables, trace assumptions to underlying data, rethink the equations, and test alternate assumptions. My spreadsheet is your spreadsheet. Download the Excel and play with it on the big screen. Let clients play with it and reach their own conclusions. Just don’t tell prospective EB-5 users “we can’t know, it’s a mystery,” because predictions are possible and necessary.

We must try to be realistic about timing, because EB-5 isn’t only about waiting for a visa. It’s about tying up investor capital, and putting issuers on the line to deploy and redeploy capital for as long as it takes investors to get visas. Projects care whether they have to deal with EB-5 investors for 5 years or 10 or 20. Investors care whether their life savings are deployed at risk with negligible interest for 5 years or 10 or 20.  And lawmakers need to know if our current EB-5 visa limits soil the past, and gut the present and future economic potential of EB-5.

We need “real visa capacity relief,” as IIUSA says in a recent blog post. I’ll be interested to hear more about what specifically IIUSA can and will do toward visa capacity relief, which has historically not been a plank of the advocacy platform. (Not that the industry hasn’t wanted it, but that Congress hasn’t been willing to hear about it.) Certainly, the issue has become central to the long-term health of the EB-5 program.

 

2018 in Review

A reader asked me this question a couple weeks ago: Is EB-5 still a choice?  Can it be a good option today for project companies or prospective immigrants? The answer: yes, though it’s complicated. In 2018, we felt the sting of legislative, regulatory, and policy uncertainty, and the pressure of limited visa numbers and associated wait times. Limited visas mean that EB-5 is no longer a good choice for the ones who used it most in recent years: China-born immigrants and mega-projects. EB-5 can still work well today on a small scale – for immigrants from not-backlogged countries (or not in a hurry), and for projects that don’t rely on massive EB-5 raises. Uncertainty remains an issue, as regional center program authorization depends on Washington’s ability to pass funding bills, and basic EB-5 program terms are subject to change from new regulations and policy. This post looks back at major developments reported by this blog over the past year.

Regional Center Program Authorization

EB-5 itself is permanent, but the regional center program was established in 1992 with an initial five-year term, and has required reauthorization since then.  Authorization has typically been attached to appropriations bills — a blessing when the appropriations process goes smoothly, and a curse when it doesn’t. Congress did not intend to harm the RC program in 2018, but drama over government funding meant that the RC program faced five sunsets this year, and temporarily lost authorization twice: with the 3-day government shutdown in January 2018, and with the current shutdown since December 22. The choppy history of RC program authorization is really just the dismal history of appropriations bills and Washington’s struggle to agree on government funding.

The regional center program needs permanent or at least long-term authorization to put it on a stable footing, no longer vulnerable to every unrelated funding dispute over health care or abortion or The Wall or whatever. IIUSA has been advocating this since 2005, but without significant success so far. There was one stab at EB-5 legislation in 2018 – the “EB-5 Reform Act” negotiated behind closed doors by Grassley, Goodlatte, Cornyn, and Flake, and revealed in draft form to the industry in March 2018. I saw the bill as flawed and pandering to New York City interests, but reportedly the NYC interests didn’t like it either and prevented its inclusion in the March appropriations act. The EB-5 Reform Act would’ve given the RC program a welcome five-year authorization, but also made the program broadly unusable. We missed that opportunity and dodged that bullet. Since then, I’ve heard no report that anyone in Congress is working on EB-5 legislation. When the Senate Judiciary Committee held a hearing on EB-5 in June, most senators ignored EB-5 and just talked about the southern border. Senator Grassley, previously a force behind EB-5 legislation, turned his energy to writing letters urging action on regulations. At least until border security and DACA are out of the way, we apparently can’t depend on Congress to go beyond the minimum for EB-5: to keep regional center program authorization in the funding bills. (1/3/2019 Update: IIUSA says in its Year in Review post that “We are working productively with the EB-5 Investment Coalition (EB5IC) to further a true ‘industry bill’ that, when introduced in the 116th Congress, will provide for a full five-year reauthorization of the EB-5 Regional Center Program.”)

Changes to EB-5 Requirements

We spent all of 2018 thinking that DHS was just about to finalize new regulations increasing the EB-5 minimum investment amount and changing TEA rules. The OMB Unified Agenda anticipated a Final Rule by 02/00/2018, and then by 11/00/2018, but neither of those targets were met. USCIS has had since April 2017 to consider public comments on the regulation and come up with a final rule, but the task is complicated. The public generally didn’t like the draft rule, and DHS has had staff turn-over in nearly every position responsible for the EB-5 regulation.

USCIS did make four updates in 2018 to the EB-5 section of the USCIS Policy Manual. The updates (1) reaffirmed that USCIS provides documentation of CPR status to those with pending I-829, (2) rescinded previous guidance on tenant occupancy methodology, (3) updated guidance on regional center geographic area requirements, and (4) clarified policy on debt arrangements.  USCIS did not issue or promise any new guidance on the most pressing policy grey area: redeployment.

EB-5 Visa Usage and Petition Volume

Some of us have been talking about EB-5 visa numbers and trying to crunch numbers for wait time estimates since 2015, but 2018 was the year when everyone joined the conversation. In 2018, Department of State lengthened its estimate for the EB-5 visa wait for China-born investors, gave a cut-off date to Vietnam for the first time, and predicted oversubscription for India. EB-5 visa availability and wait time estimates went from being a fringe topic for killjoys with confusing spreadsheets to being a primary and widely-discussed factor in marketing strategy, investment decisions, and litigation.

The best attempt in 2018 to alleviate the visa number problem came from a lawsuit pointing out Congress’s expressed original intent to grant 10,000 visas to EB-5 investors, and the error of applying that limit to investors plus family members. So far the judge denied a preliminary injunction in the case, but the plaintiffs are continuing to pursue the matter.  Meanwhile, proposed legislation suggested changes to visa number allocations, but not changes that benefited EB-5. Fortunately those proposals did not become law.

Demand for EB-5 continued fairly strong in 2018, with about 4,000 I-526 filed from January to October. Of these, about 1,000 were filed in a surge in September 2018, in advance of possible changes/sunset date, and over 850 were filed by people born in India. Overall, I-526 receipts were well below totals from previous years, and should continue to fall as people adjust to the hard limit imposed by the 10,000 annual EB-5 visa quota for investors plus family members.

Trends at IPO

In 2018, IPO got a new chief and (I think?) several new division chiefs, issued four policy manual updates, held no stakeholder engagements until three appearances in November, significantly improved I-526 processing volume and times, dropped the ball on I-829, further confused processing times reports, issued many RFEs on issues related to the “at risk” requirement, and terminated 138 regional centers (mostly for inactivity or not filing Form I-924A).

EB-5 on the Ground

In 2018 I wrote EB-5 business plans for new projects in hospitality, multi-family, retail, assisted living, manufacturing, distribution, and storage, as well as E-2 work. I enjoyed hearing good news from past clients with approved petitions, and tried to help clients struggling with timing issues, redeployment challenges, policy changes, and political uncertainty. This blog had 49 new posts in 2018, and received 407,967 views from 121,349 visitors. Of these visitors, 56 made a contribution to support the blog. I appreciate the people who work hard to make EB-5 work, and especially the clients who have let me be a part of the process. We shall see what 2019 brings.

Regional Center List Updates

Additions to the USCIS Regional Center List, 09/11/18 to 12/31/18

  • Ameri-Link Midwest Regional Center (Illinois, Indiana)
  • Ameri-Link Ohio Regional Center, LLC (Ohio)
  • American Equity Fund Texas, LLC (Texas)
  • BC Central Florida Regional Center LLC (Florida)
  • Brilliant EB-5 Regional Center, LLC (Nevada)
  • FCA South Carolina Regional Center, LLC (South Carolina): www.fcaeb5.com
  • Los Angeles International Regional Center, LLC (California)
  • Mayaguez Regional Center, LLC (Puerto Rico)
  • National EB-5 Wealth Center, LLC (Texas): www.eb5wealthcenter.com
  • Southern California EB-5 Fund, LLC (California)
  • York Resources RC Funding, LLC (Connecticut, New Jersey, New York)

Renamed:

  • Smith Western Regional Center (former name Western Pacific Regional Center) (California, Oregon, Washington)
  • Native American Regional Center, LLC FKA Native American EB-5 Corporation (Illinois, Indiana)

Removed from the approved list, but not listed as terminated:

  • US Access Florida Regional Center, LLC (Florida)

New Terminations:

  • Civitas Miami Regional Center, LLC (Florida) Terminated 9/6/2018
  • Live in America – Colorado Regional Center LLC (Colorado) Terminated 9/7/2018
  • Civitas Great Plains Regional Center (Kansas, Missouri, Oklahoma) Terminated 9/12/2018
  • Encore Colorado RC, LLC (Colorado) Terminated 9/24/2018
  • Northern Mississippi Regional Center, LLC (Arkansas, Mississippi, Tennessee) Terminated 9/7/2018
  • Civitas Alabama Regional Center (Alabama) Terminated 9/6/2018
  • Civitas Michigan Regional Center (Michigan) Terminated 9/6/2018
  • USHoldings Regional Center (Georgia, South Carolina) Terminated 9/24/2018
  • Civitas Laredo Regional Center, LLC (Texas) Terminated 9/6/2018
  • Civitas Atlanta Regional Center (Georgia) Terminated 9/6/2018
  • Civitas Rio Grande Regional Center (Texas) Terminated 9/10/2018
  • US Freedom Capital-Texas, LLC (Texas) Terminated 9/18/2018
  • E Development Corporation dba EDC (Island of Guam) Terminated 10/15/2018
  • Civitas Washington D.C. Regional Center (District of Columbia, Maryland, Virginia) Terminated 9/5/2018
  • Civitas Illinois Regional Center (Illinois) Terminated 9/5/2018
  • Central Arizona Regional Center (Arizona) Terminated 12/19/2018
  • American Dream Fund San Francisco Regional Center, LLC (California) Terminated 10/3/2018
  • Civitas Louisiana Regional Center (Louisiana) Terminated 9/11/2018
  • Golden State Economic Development Fund, LLC (California) Terminated 12/6/2018
  • Carolina EB-5 RTP Regional Center, LLC (North Carolina) Terminated 12/20/2018
  • San Diego Regional Investment Center, LLC (California) Terminated 11/16/2018
  • EB5 Affiliate Network Washington, D.C. Regional Center, LLC (District of Columbia, Maryland, Virginia, West Virginia) Terminated 9/13/2018
  • Mag Ventures 1, LLC (Ohio) Terminated 9/11/2018

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

–12/22 UPDATE–

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

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

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

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

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

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

The Department of State website has this notice:

Operations During a Lapse in Appropriations

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

–ORIGINAL POST–

Reauthorization or Shutdown

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

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

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

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

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

Source of Funds Victory

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

Visa Numbers Case Setback

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

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

Litigation

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

SEC Action

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

Regional Center Compliance

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

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

Preparing to file I-924A Annual Certification

It appears that a Continuing Resolution will extend regional center program authorization at least into December 2018. (I add detail and updates as available to my Washington Updates page.) Assuming business as usual, regional centers should think about preparing to file the Form I-924A annual report. Regional centers use Form I-924A to demonstrate continued eligibility for regional center designation. Regional centers that remain designated for participation in the program as of September 30 of a given year must submit Form I-924A with the required supporting documentation on or before December 29 of that same year.

FILING INSTRUCTIONS

Here are links to official information, instructions, and tips from USCIS:

CHOOSING TO TERMINATE

If a regional center does not file I-924A, or files I-924A that does not demonstrate eligibility for continued designation, then USCIS will respond with a Notice of Intent to Terminate, and eventually terminate the designation. The regulations at 8 CFR 204.6(m)(6)(vi) also offer a relatively tidy alternative for regional centers who do not wish to stay designated: “A regional center may elect to withdraw from the program and request a termination of the regional center designation. The regional center must notify USCIS of such election in the form of a letter or as otherwise requested by USCIS. USCIS will notify the regional center of its decision regarding the withdrawal request in writing.”

The active method (formal withdrawal request) and passive method (just don’t file I-924A) have the same outcome: termination of regional center designation. The active method has the advantage, for what it’s worth, of getting a relatively nice letter back from USCIS. (Representative letters for comparison:  termination based on withdrawal, and termination for failure to file I-924A.)  The word “fail” appears eight times in the no-I-924A termination letter, and not at all in the withdrawal termination letter. Only the withdrawal termination letter template points out that “the withdrawal and termination do not preclude the filing of a new regional center application” and  “the facts and circumstances of the prior designation, withdrawal, and termination may still be considered in the adjudication of future regional center applications.”

PRACTICAL ADVICE

The instructions and tips from USCIS (linked in the first section above) are quite practical and detailed, so do read those carefully. The following section has a few additional lessons derived from my reading of the 207 regional center termination letters posted so far by USCIS. (I also maintain and share an ongoing log of all terminations and associated letters – another bit of generous work for which I am not much thanked.)

Avoidable reasons that regional centers have been terminated despite filing I-924A

  • The I-924A was filed using the wrong edition of the form, to the wrong address, or missing the proper fee
  • The I-924A got lost, and the RC could not show proof of mailing to prove that this loss wasn’t its fault
  • The I-924A was not properly filed until after December 29

I-924A issues for active Regional Centers

  • If the regional center has experienced any changes for which an amendment is required (such as changes in name, ownership, or structure), file the I-924 amendment before filing I-924A.
  • Strive for clear consistency between the info provided in I-924A and the info reflected in the record of past filings, including past I-924A, I-924, and investor petitions. (I’ve seen multiple decisions that indicate that USCIS is cross-referencing I-924A with other filings, suspiciously watchful for any apparent inconsistencies. Of course projects and numbers change over time, but USCIS tends to see changes as aberrations and discrepancies that need explanation.)
  • Double-check that the regional center entity is still active in good standing, and with an active business license. Remind USCIS with which Secretary of State and municipality the regional center is registered, so USCIS doesn’t check in the wrong place.
  • Double-check the Regional Center website for any problematic material (such as images of the USCIS logo, any language that smells like a visa guarantee, or any apparent inconsistencies with the regional center information – e.g. name, ownership, managers – officially reported to USCIS)
  • Google the regional center name and project names, see if any negative media stories appear, and consider preemptively explaining those stories as part of the I-924A

I-924A issues for Regional Centers with no EB-5 investment yet

  • A regional center on its third year since initial designation with no EB-5 investment is in line for termination for failure to promote economic growth, unless it makes a compelling counterargument. (That three-year metric is not published anywhere, but evident in termination letters. USCIS takes 2-3 years just to adjudicate the application for initial designation – enough time in limbo for the RC to lose its originally-contemplated projects and partners – and then gives the RC only 2-3 years to start again from scratch before termination. Quite unreasonable, but the current practice.)
  • A compelling counter-argument requires project evidence. In termination letters, USCIS does not admit to being impressed by evidence of marketing and promotional activities for the regional center, by due diligence on potential projects, or by general industry involvement. USCIS most wants to see evidence of projects imminently likely to use EB-5 investment. They seem to want to see project evidence related to timing (such as registrations, licenses, permits) and evidence related to firm commitment to do the project and include the regional center and EB-5 investment (such as signed term sheets, signed purchase agreements, loan commitments). The goal is to avoid USCIS deciding that “the evidence submitted relate only to potential projects and future aspiration goals” and “thus these projects are not relevant examples of the regional center’s ability to continue to promote economic growth” (to quote language repeated in multiple termination letters).  USCIS seems particularly fixated on the idea of “binding contractual obligation” and to particularly like finalized contracts and signed term sheets as evidence. (Again this advanced-project evidence demand is hardly reasonable – calling for status and commitments not consistent with the fact that USCIS will likely delay projects with years-long I-526 processing times. But the injustice has yet to be recognized.) There’s some evidence that having filed an amendment (especially one with I-526 exemplar request) can help support the activity argument, in lieu of being able to report filed investor petitions.
  • These regional center termination letters discuss specific examples of project evidence provided to USCIS with Form I-924A, and why USCIS did not think the evidence of activity made for a compelling economic growth argument.

FORM I-924A REVISIONS

If you’d like to advise USCIS about how to make the next edition of Form I-924A less faulty, you have until 11/13/2018 to do so through the Federal Register rulemaking comment process.

PLUG

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Updates (I-829, Ombudsman, debt arrangements, PM, conference, Vermont, RC list changes)

Processing Times
The USCIS page to Check Processing Times was updated last week with minor tweaks to the I-526 and I-924 time calculations, and bad news for I-829. Someone can inquire today about an I-829 petition “outside normal” processing times if he or she filed the I-829 petition 1,175 or more days ago. Statute mandates the service to make a decision on the I-829 within 90 days of the filing date or interview, but it’s currently taking three to four years to make a decision. IPO faces pressure from increased volume of filings and an increasingly tough process. Conditional green cards maxed out the limit starting in 2014/2015, and that surge began maturing to the conditions removal stage in 2016/2017. Even as I-829 filings increase in number, IPO has implemented several time-consuming integrity measures: in-person interviews of all I-829 petitioners, and site visits to 100% of job-creating entities in I-829 petitions. IPO attempted to address processing times problems in 2017 by creating a new team of economists and adjudicators specifically to handle I-829, but this team obviously needs help now. (This post copies emails sent by USCIS last month regarding I-829 receipt notices.)

The USCIS processing times report has received three significant updates since it launched in March. (The report has a daily minor update: to add one more day to the Case Inquiry Date.)

2018 Ombudsman Report

The CIS Ombudsman’s 2018 Annual Report to Congress is a well-researched, well-presented document that I’d be proud to have written. The 2017 report made waves in EB-5 because it mentioned the 10+ year visa wait for Chinese investors, and many people in the industry found it expedient to imply that we didn’t know about the wait before that report. The 2018 report offers fewer occasions for real or feigned surprise, but does provide a solid summing up of the EB-5 program history and current status (page 48-56). I hope that Congress reads this report, as it gives a fair picture of challenges to EB-5 program effectiveness and integrity, and solid description and analysis of the substantial past, present, and planned steps taken to handle those challenges. Regarding the proposed EB-5 regulations, the Ombudsman makes a good point: “It remains to be seen whether these reforms will be sufficient to reassure those concerned about the increased oversight, or if they will have a chilling effect on participation.”

For anyone who has had problems with USCIS case processing and thought of contacting the Ombudsman for help, pages 3-5 of the report gives a nice explanation of how the Ombudsman handles inquiries. And I appreciated the detailed discussion of background checks on pages 28-32 and 57-58.

Debt Arrangements
USCIS continues to deny I-526 petitions based on finding that they include impermissible debt arrangements, while the industry continues to fight back to clarify what “invest” and “at risk”  mean. This article presents arguments and distinctions that will be helpful to anyone in midst of the battle:

Other relevant resources that I’ve previously linked here:

Conference
Suzanne Lazicki will be at the 2018 EB-5 Investors Conference in Los Angeles next week. I’ll be speaking on a panel at 1 pm on July 23 (“The Right Fit – How Current and Future EB-5 Projects are Changing with the Market”), and available to meet in-person on July 23 and 24. Look for me to chat, or use this calendar to fix a time.

Policy Guidance
In a new Policy Memorandum dated July 13, 2018, USCIS Updates Policy Guidance for Certain Requests for Evidence and Notices of Intent to Deny. The memo, which will become effective on September 11, 2018, “provides guidance to USCIS adjudicators regarding their discretion to deny an application, petition, or request without first issuing a Request for Evidence (RFE) or Notice of Intent to Deny (NOID) when required initial evidence was not submitted or the evidence of record fails to establish eligibility.” This isn’t a major change, and not exclusive to EB-5, but a good reminder. Petitioners need to establish eligibility at the time of filing, and may not be able to depend on correcting major omissions in response to RFE.

Regional Center Termination
To date, USCIS has terminated 244 regional centers, mostly for inactivity, or for not filing the I-924A annual report. A handful have been terminated in connection with problems, including, last week, Vermont Agency of Commerce and Community Development. I’m particularly interested in the Vermont RC case, because it’s hard to imagine anyone doing more than Vermont has done to try to compensate for and recover from the oversights that allowed project fraud to occur under its watch. Vermont’s response to the Notice of Intent to Terminate challenged USCIS to be more precise about a regional center’s responsibilities for monitoring and oversight, and pointed out all the positive and responsible things the RC has done — including a plan to wind down the RC in an orderly manner that protects existing investors and prevents future problems. In response, USCIS makes that responsible plan a major plank in the denial decision: no future projects means failure to actively promote economic growth. Vermont plans to appeal. For more detail, see this VTDigger article, which ends with a link to the full USCIS termination notice.

Regional Center List Changes
Additions to the USCIS Regional Center List, 06/05/2018 to 7/16/2018.

  • Allstates QSR Regional Center, LLC (Connecticut, District of Columbia, Massachusetts, New York, Pennsylvania)
  • American Dream Group, LLC Regional Center (Washington)
  • Art District Los Angeles Regional Center, LLC (California)
  • Beresford Regional Center (California)
  • Best Tire Center Regional Center, LLC (Texas)
  • BridgeForth Southeastern Regional Center, LLC (Florida, Georgia, South Carolina, Tennessee)
  • Gateway South Florida Regional Center, LLC (Florida)
  • Keystone Great Lakes Regional Center, LLC: www.keystoneeb5.com (Illinois, Indiana, Wisconsin)
  • Retail Equity Partners Regional Center Texas, LLC (Texas)
  • U.S. Immigration Fund – CA, LLC (California)
  • Xocolatl Xperience Regional Center, Inc. (Florida)
  • Zhielo, LLC (Florida)

New Terminations:

  • Charter Square Regional Center, LLC (California) Terminated 7/10/2018
  • RGV EB-5 Regional Center (Texas) Terminated 7/10/2018
  • Vermont Agency of Commerce and Community Development (Vermont) Terminated 7/3/2018 USCIS Termination Notice
  • Idaho State Regional Center LLC (Idaho) Terminated 7/3/2018
  • White Lotus Group Regional Center (Iowa, Nebraska) Terminated 6/26/2018
  • Rota EB5 Regional Center (Commonwealth of Northern Marianas Islands) Terminated 6/21/2018
  • AmerAsia EB5 Regional Center SF, LLC (California) Terminated 6/11/2018
  • Utah Invest Regional Center, LLC (Utah) Terminated 7/3/2018
  • California Pacific Regional Center, Inc (California) Terminated 6/7/2018

Constructive IIUSA response to bridge finance and other challenges

During the Q&A period at the EB-5 stakeholder meeting on November, 7, 2017, caller Carolyn Lee questioned IPO Deputy Chief Julia Harrison about recent adjudication of the bridge financing policy.

[transcription of time 01:01:27 – 01:10:11]
Ms. Lee: …We are concerned because we have been seeing what we think is a pattern of adjudications where qualifying bridge finance structures structured under the current written policy manual appear to be found to not qualify. …This comment is directed to urge you to please ensure that your examiners are trained on this policy, and are applying it correctly, because we have seen some very troubling NOIDs in this respect.

Ms. Harrison: Yes, thanks for that. I appreciate that you’re getting NOIDs that … there’s always going to be times when maybe we don’t agree. That happens. But if you are seeing something where you feel we may have messed up, follow the standard protocols to do the formal response. You can send an email to our customer service box and say we would appreciate it if the leadership team would take a look at this. It’s really hard for us… I mean I could take that back and have conversations with my team and say “Are you guys having some challenges with bridge financing? Have we done something different?” And they would all say “no.” Right, because they’re doing what they think is the right thing to do. And maybe they are. But it’s really hard for me to really kind of take a look into that unless you send me some examples. So I don’t want you guys to all flood me. Don’t go crazy. But, if you have a couple that you think are good examples of where you think we’ve gone astray – I’m not saying I’m going to agree with you, but I’m going to have some conversations with my team.  Please, though, do not take that as instruction to not follow the formal process.

Ms. Lee: Absolutely. Can we take that as an invitation to some sort of dialogue on these very complex issues?

Ms. Harrison: We can’t do that. We can’t go crazy. We can’t have a dialogue. [Laughs] We don’t want to violate any of the FACA rules. But, I will take a look at it and discuss with my team.

Finally after seven months, the industry has followed up on this exchange with a letter from IIUSA to USCIS regarding Major Issues Facing the EB-5 Industry. The letter starts by reopening the possibility of dialogue by addressing what FACA does and does not prohibit, and goes on to analyze six specific bridge financing challenges, as well problems associated with processing delays, third party guarantees, project financing structures, site visits, and redeployment.

This letter exemplifies what we should do regularly: respond constructively to misunderstandings at IPO with solid and documented clarifications based on our collective knowledge and resources. If examiners at IPO know little about bridge financing beyond what’s in Black’s Law Dictionary, and make incorrect determinations accordingly, that’s partly our fault. They have tough jobs and can’t be expert in every area of law and finance. The industry does have a comprehensive array of expertise, if only we organized to share it. IIUSA was late drafting this letter, and even later involving industry, but the product is solid. Anyone struggling with challenges to financing agreements and structures can use and build on this letter’s in-depth analysis. And I hope USCIS listens to the important points about processing delays, site visit missteps, and ambiguity around redeployment.

EB-5 Visa Waiting Line and Visa Allocation

People who use EB-5 face some tough facts:

  • Demand for EB-5 visas (annual I-526 filings) has been three to four times higher than EB-5 visa availability since 2011, resulting in a backlog now about a decade long. (For those not already familiar with the situation, here’s a simplified explanation.)
  • New investors from most countries today can still expect to receive a conditional green card fairly promptly after I-526 approval, but only due to exceptions that will allow their applications to skip ahead of (push back) other people stuck in the backlog. (Or the overall wait could be shortened if the visa quota changes, or many people drop out of line.)

We respond to these facts by (1) advocating for backlog relief (AILA’s White Paper: Solutions to the EB-5 Visa Waiting Line gives suggestions), and (2) figuring out how the exceptions work, because investors and projects want to avoid a decade-long wait if possible.

The past few years offered a simple exception that allowed jumping much of the queue: be born outside China, since China accounts for most of the backlog and was the only oversubscribed country. Now, people from Vietnam face getting stuck in the visa wait line behind the Chinese (the May 2018 Visa Bulletin will have a Vietnam cut-off date), other countries wonder whether the same could happen to them one day, and Congress threatens set-asides and other changes to visa availability. And so we feel the urgency to understand just how visa allocation works, and relevant numbers.

First, here’s the law related to EB-5 visa allocation, with linked citations. (Or you can download my Word doc to get the text with headings to assist navigation.)

  1. The annual worldwide level for all employment-based (EB) immigrants is effectively 140,000. INA 201(d)(1)(A)
  2. At most 7.1 percent of the employment-based worldwide level is made available to immigrants in the EB-5 category. INA 203(b)(5)(A)
  3. Available EB-5 visas are issued to eligible immigrants in the order in which the immigrant petition was filed. INA 203(e)(1)
  4. At least 3,000 EB-5 visas are reserved annually for immigrants based on investment in a Targeted Employment Area. INA 203(b)(5)(B)
  5. 3,000 EB-5 visas are set aside annually for immigrants based on investment in a Regional Center. PL 102-395 Section 610(b) as amended by PL 105-119 Section 116(a)
  6. The EB-5 visas made available to natives of any one country may not exceed 7 percent of the available worldwide total. But if one or more countries gets held back by this rule, resulting in available visas with no one else to take them, then those remaining visas can be made available again without regard to per-country numerical limits for that year. INA 202(a)(2) and INA 202(a)(3) and INA 202(e) and PL 106-313 Section 104
  7. EB-5 visa numbers available to China annually under the per-country limit are reduced by 700 to compensate for cases processed under the Chinese Student Protection Act of 1992. PL 102-404 Section 2(d)(B)

I imagine Charlie Oppenheim at the Department of State, sitting at his desk on October 1, 2017 with 30,000 EB-5 visa applications before him and tens of thousands more to come as USCIS approves pending I-526. How does he apply the above rules to decide who gets a visa in FY2018, and in what order? I hope he addresses this question during his keynote speech at the IIUSA EB-5 Advocacy Conference on April 23. (4/25/18 update: here are notes from Mr. Oppenheim’s presentation. 10/30/18 update: See slide 5 in this presentation, and my recording of a panel on EB-5 visa numbers.) In the meantime, here’s my understanding of how the rules get applied in practice.

  • #1 and #2 above give the target quota for EB-5 visa numbers in one year: 140,000*0.071=9,940.
  • #3 specifies the basic rule of order: first-in-first-out by priority date (applicants with oldest I-526 priority dates are first in line for a visa)
  • #4 to #6 are factors that can override the basic FIFO order principle. The applicant with oldest priority date gets the first visa number unless she’s held back by:
    • #4) being the 6,941st+ applicant that year (9,940-3,000) who invested outside of a TEA, in which case she’s held back for any TEA-based applications to go ahead (thus far, non-TEA applications have been too few to trigger this set-aside)
    • #5) being the 6,941st + applicant that year who invested outside of a regional center, in which case she’s held back for any regional center-based applications to go ahead (thus far, direct EB-5 applications have been too few to trigger this set-aside)
    • #6) being the 696th+ applicant that year (9,940*0.07) from a single country, in which case she’s held back for any applicants from not-oversubscribed countries to go ahead (China has been oversubscribed and triggered the per-country cap since 2015, and Vietnam will as of May 2018)
  • #6 does not mean that 7% of visas get set aside annually for each country in the world. It does not mean that any one country gets only 7% of visas annually. #6 just means that any one country’s allocation gets capped at 7% so long as other countries are also competing to use up available visas. When other countries aren’t competing, then any visas still on the table get allocated to the waiting line in FIFO order without regard to per-country limits. So in 2017, China in fact got 75% of visas, which is what remained after numbers had been allocated to qualified applicants from other countries. (If not for the Chinese Student Protection Act, China could’ve received 700 visas plus the 75% leftover.)
  • When total demand promises to exceed total available visas for the year, then DOS looks at individual countries to see which look likely to exceed the 7% per-country cap, and sets a cut-off date or final action date for each of those countries. When a cut-off date is in place, only people from that country with priority dates earlier than the cut-off date can proceed with visa applications; others are held back. DOS gradually advances the cut-off date to release just enough people to apply for available visas.  At the beginning of the year, different oversubscribed countries can have different cut-off dates. When each country is getting its 7% of visas for the year, DOS looks at each country individually when setting the cut-off dates. When per-country caps have been met, then all oversubscribed countries are just competing together for remaining EB-5 visas left by not-oversubscribed countries. That means they are all in the same line again and will have the same cut-off date. (In practice that puts China at the head of the line for leftover EB-5 visas, since it’s been held back for years and thus its applicants have the oldest priority dates. Vietnam will start being held back in 2018, and its more recent held-back applicants will find themselves behind many longer-pending Chinese applicants. If India or Brazil get held back next, their still-more-recent applicants will find themselves behind both China and Vietnam in the competition for leftover visas. )
  • Exceeding the 7% cap is scary because it puts a country in the same line as China for leftover EB-5 visas, and near the back of that line based on priority dates and the FIFO process. The saving grace for small countries is that they can at least get 7% of EB-5 visas every year, and probably won’t exceed that cap by very much. If I’m a Vietnamese applicant held back this year, I’ll be one of the older Vietnamese applications next year and thus well-placed to get one of 700 new EB-5 visas available to Vietnam then. What I can’t expect is to get an EB-5 visa left over after not-oversubscribed-countries took what they want, since tens of thousands of Chinese have earlier claim on any leftover visas. But small excess = small backlog = small need to compete for leftover visas, thus relatively short wait time. As an Indian, I’d be a bit more concerned and vigilant. India hasn’t had high EB-5 numbers before, but the companies that helped create the China backlog with giant EB-5 raises have turned to India. If Indians flock to big raises seeking 100s of investors, then they will end up needing many more than 700 visas per year,  thus creating a significant India backlog that needs leftover visas but won’t get them for ages because behind the earlier China/Vietnam backlog plus squeezed by any new rest-of-the-world applications.
  • Visas can only be issued to people with complete visa applications ready, not to people with I-526 investor petitions still pending at USCIS. But it’s important to keep an eye on I-526 petitions – on number of receipts, petitioner origin, adjudication speed, approval rates – to estimate how many of those petitions will become visa applications, and when. New visa applications from not-oversubscribed countries immediately reduce the number of leftover visas available to pending applicants from oversubscribed countries. New applicants from a country near the 7% cap could tip the balance into cut-off dates and backlogs for fellow-countrymen already in line. A major decrease in I-526 filings or increase in denials or withdrawals would reduce incoming pressure on the visa backlog, and shorten wait time projections. Estimates are tough with all these moving parts and limited data, but we must try. The China backlog ballooned quickly and came to many investors (and their projects) as a nasty surprise. They didn’t realize how many other Chinese investors were already in the system or entering at the same time, and what that would imply for future visa wait times. A cautionary tale.

To facilitate analyzing numbers relevant to country-specific visa availability, I’ve added a tab titled “Country Focus” to my ongoing Backlog Calc Excel file. (The numbers aren’t new, but highlight significant previously-reported I-526 and pending visa data. I even made a cartoon to assist in visualizing the numbers. The thumbnail image here gives a teaser of the new Excel tab.) I don’t offer conclusions, but information to assist your conclusions.

Additional reading:

Benefit from this blog? Please consider supporting the effort behind it. As the EB-5 industry changes, your contribution can help preserve this space for conscientious and freely-available EB-5 reporting. Donations go to Lucid Professional Writing (a for-profit business) to fund work on this blog. Thank you!

How long does I-526 take? (Part II)

Update: I have deleted this now-outdated post and replaced it with How long does I-526 take? (Part III)

I-526 processing time (Part I)

Update: I have deleted this now-outdated post and replaced it with How long does I-526 take? (Part III)

EB-5 Timing Issues and Visa Wait: Process and Data

[Updates: see also my 4/8/2018 post EB-5 Visa Waiting Line and Visa Allocation and my 4/23/2018 post Visa Numbers (China, Vietnam, India, Brazil, S. Korea, Taiwan)]

How long does it take to get an EB-5 visa? Before we look at numbers, consider this picture illustrating variables in the EB-5 process from initial application to conditional permanent residence.

The investor files an I-526 and receives a priority date, goes through I-526 adjudication, and proceeds along with family members to I-485 status adjustment (if already in the US) or consular processing (if outside the US) in order to get EB-5 visas. The system has two major constraints: USCIS capacity to process petitions, and the annual quota on EB-5 visa numbers. These constraints have produced pile-ups of pending petitions and applications, illustrated by the green bins in the picture.

We have data for many parts of this picture, such as how many people are in each of the pending bins, the historical rate of receipts and approvals and denials, and the annual visa quota. The simplest way to estimate the visa wait line (the time from priority date to green card) is to add up the pending bins and divide that number by the annual quota. As there are currently 90,000+ people associated with the pending bins, and the annual EB-5 visa quota is about 10,000, the current total waiting line is 9+ years long. (Maybe longer, depending on assumptions about the other variables). As recently as mid-2014, the line was only about three years long (as we know from the Visa Bulletin, which indicates that China-born investors with June 2014 priority dates started getting visas in May 2017).

Calculating the actual visa wait time for any given person is complicated. Where is that person in line, relative to other pending petitioners and applicants? Is that person from China (which is oversubscribed and subject to a per-country limit) or from an undersubscribed country that’s free to take the first available visas? How have/will other process variables such as per-country receipts and approval rates change over time and affect calculations?

If I were someone born outside China considering EB-5 now, I’d feel good about the per-country limit that allows me to skip ahead of most China-born applicants in line (i.e. about 87% of the line). For me, the time IPO takes to process I-526 is the major factor in my total wait time.

If I were a China-born prospective investor, I’d look at everyone in line ahead of me, and also try to estimate how many queue-jumping non-Chinese may enter from behind in the time I have to wait. That calculation could add years to the potential wait time, well exceeding 10 years, if the number of non-Chinese investors increases dramatically in the future and IPO processing speeds up. Or future circumstances could quell new EB-5 demand, encourage existing applicants to drop out, or apply the per-country limit to other countries, improving the wait time for China-born investors who stay in the system.

All past investors should consider the significance of the visa quota constraint and the possibility that it will change. Indeed, it could change for the better. For example, if the State Department recognizes that Congress intended the 10,000 visa quota to apply to 10,000 investors, not investors plus family members, this would loosen the constraint and cut about six years from the current visa wait time. Unfortunately, quota reduction is also a live possibility. Industry lobbyists are reportedly considering legislation with visa set-asides that would reduce the generally-available annual EB-5 quota from 10,000 to 7,000. This could be disastrous for past EB-5 applicants, adding about four years to the wait time. Visa set-asides have emerged as a compromise between the Senator Grassley camp, which wants to incentivize rural/urban-distressed investment somehow, and certain regional centers, who resist an incentive based on a significant investment differential that would make their future prosperous urban projects uncompetitive.  Tying the TEA incentive to visa set-asides rather than reduced investment would allow regional centers to keep attractive terms and options for future investors. Their past investors would suffer, but that cost seems not much counted. (My impression of the current legislation discussion comes from this webinar and this article.) Of course, maybe protections for past investors will be added to the legislation, or maybe there won’t be any deal and we’ll get new regulations instead. The regulations could significantly reduce new EB-5 demand, which would hurt the industry but benefit people who stay in the current visa queue.

And now, let’s get to the numbers. I’ve expanded and improved my backlog calculation spreadsheet, which now has multiple tabs that compile all the data I can find on each variable influencing the visa wait time for an EB-5 conditional green card. Keep the spreadsheet link, as I will update it whenever new inputs become available. (For those who don’t face backlog issues, see my posts on I-526 processing times Part I and Part II to help estimate the time between you and conditional permanent residence.)

Summary of EB-5 Visa Wait Time Variables

  1. I-526 petition variables
    • Number of petitions currently pending
    • Future petition filings
    • Number of petitions by country (how many China-born, how many born outside China)
    • Percent of petitions that will be denied or withdrawn
    • Number of family members to be associated with each petition
    • Time USCIS takes to adjudicate petitions
    • Investor’s priority date relative to others with pending petitions
    • The extent to which USCIS follows its first-in-first-out policy when adjudicating petitions
  2. Visa application variables
    • Number of I-485 adjustment of status applications for EB-5 pending at USCIS
    • Number of EB-5 visa applications pending at the National Visa Center
    • Number of pending applications by country (how many China-born, how many other)
    • Percent of applications that will be denied or withdrawn
  3. Political factors
    • Whether the rules and interpretation for the EB-5 visa quota remain unchanged
    • Whether new legislation introduces visa-set-asides that would reduce the annual visa quota generally available
    • Whether the regional center program remains authorized, and the impact of a sunset on investors in line for a visa
    • Whether new regulations or legislation include features that would change demand and/or affect past applications

Additional Reading

Benefit from this blog? Please consider supporting the effort behind it. As the EB-5 industry changes, your contribution can help preserve this space for conscientious and freely-available EB-5 reporting. Donations go to Lucid Professional Writing (a for-profit business) to fund work on this blog. Thank you!

Direct EB-5 FAQ, White House Immigration Principles

Direct EB-5 FAQ
The regional center program dominates EB-5, but the alternate direct EB-5 track remains significant. 846 EB-5 visas went to direct EB-5 investors plus family in FY2016, and this number will likely climb as petitions from the past couple years finally reach the visa stage. Direct EB-5 can be an attractive option for foreign investors and U.S. business owners who wish to avoid the uncertainty surrounding the regional center program. About half the business plans I write these days are for direct EB-5.

There remain, however, lingering misunderstandings about how EB-5 works outside the regional center program. I’ve prepared a new page, Direct EB-5 FAQ, that addresses questions about the nature and practical uses of direct EB-5.

Test your direct EB-5 knowledge.

  1. True or False? The direct EB-5 program will sunset unless re-authorized by Congress.
  2. True or False? A direct EB-5 investor must invest at the $1 million level.
  3. True or False? Real estate developments are the most common direct EB-5 project type.
  4. True or False? A majority of direct EB-5 investors have come from China.
  5. True or False? The direct EB-5 investor must majority-own the enterprise receiving investment.
  6. True or False? The direct EB-5 investor must have day-to-day managerial responsibilities in the enterprise receiving investment.
  7. True or False? If a direct EB-5 investor buys a business, that business and its employees will qualify as new for EB-5 by virtue of the new ownership.
  8. True or False? A new commercial enterprise can use direct EB-5 capital to invest in a separate job-creating enterprise.
  9. True or False? A direct EB-5 investor can count full-time equivalent jobs created by the enterprise.

Each of these statements is false. If you were surprised, then check out the Direct EB-5 FAQ page for direct EB-5 information, policy references, and case citations.

White House Immigration Principles & Policies

Just in time for Columbus Day, President Trump has sent Congress a list of Immigration Principles & Policies that 15th-century Americans could wish they’d had. The White House principles focus on border security and interior enforcement, and repeat the idea that legal immigration should feature a skills-based points system while reducing admissions for relatives, asylum seekers, and refugees. We shall see how Congress reacts to this guidance from the White House. The White House principles look positive for immigrant investment, but the points system would be fatal (at least in the scenario proposed by Tom Cotton, which would eliminate EB-5 and would not allow immigrant investment to support US entrepreneurs, but only immigrant-controlled business).

In the meantime, in honor of voyagers who continue to build our great nation as they bridge continents and pursue their dreams in face of doubt and adversity, I will quote the first paragraph of President Trump’s Columbus Day proclamation.

Five hundred and twenty-five years ago, Christopher Columbus completed an ambitious and daring voyage across the Atlantic Ocean to the Americas.  The voyage was a remarkable and then-unparalleled feat that helped launch the age of exploration and discovery.  The permanent arrival of Europeans to the Americas was a transformative event that undeniably and fundamentally changed the course of human history and set the stage for the development of our great Nation.  Therefore, on Columbus Day, we honor the skilled navigator and man of faith, whose courageous feat brought together continents and has inspired countless others to pursue their dreams and convictions — even in the face of extreme doubt and tremendous adversity.

Articles & Resources (Ombudsman, Visa Numbers, Investor Protection, Redeployment, RC Audits), Washington Updates, RC List Changes

Helpful Articles and Resources

Washington Updates
What is happening with EB-5 in Washington? I wish I knew. Immigration policy generally looks like an orphan child.  The top three leadership posts at USCIS are all still filled by “acting” people (Lee Cissna was nominated but still not confirmed as Director), and now we’re missing a DHS Secretary as well, until Congress can find time to confirm a replacement for John Kelly. That can’t facilitate significant USCIS action like finalizing regulations or hiring. The White House website listed immigration as a top issue a few months ago, and gave an immigration policy statement, but not anymore. (8/2 Update: The White House is now talking about immigration with the RAISE Act.) I hear rumors that lobbyists are still actively talking to Congressional staffers about EB-5 legislation and regional center program reauthorization, but don’t know where that will lead. Congress has so many fish to fry. We wonder whether Congress can even figure out funding the government past September 30, and there’s talk of another short-term Continuing Resolution, which could mean another series of hop-and-skip extensions of the RC program, whose current authorization is tied to the 2017 funding bill. But it’s hard to predict. Insights or insider information, anyone? (8/3 Updates: Senator Cornyn, author of the draft EB-5 legislation released most recently, has announced Building America’s Trust Act, a new immigration bill that doesn’t appear to address EB-5. Representative Brian Fitzpatrick has introduced H.R.3471 with the promising title “To amend section 203(b)(5) of the Immigration and Nationality Act to implement new reforms, and to reauthorize the EB-5 Regional Center Program, in order to promote and reform foreign capital investment and job creation in communities in the United States, and for other purposes.” I’ll report more fully when the bill text becomes available.)

Regional Center List Changes

Additions to the USCIS Regional Center List, 07/17/2017 to 8/1/2017

New Terminations:

  • Anacostia Regional Center (District of Columbia) Terminated 7/18/2017
  • AAA Florida Senior Living Regional Center, LLC (Florida) Terminated 7/12/2017
  • Allied Artist High Desert EB5 Regional Center (New Mexico) Terminated 7/12/2017
  • Rosti Capital Regional Center (California) Terminated 7/17/2017

IPO Suggested Order of Documentation

IPO has added a very valuable resource to the EB-5 Resources page on the USCIS website:

Suggested Order of Documentation

Form I-526

Form I-829

Form I-924

The links direct to pages that provide a suggested list and order of contents for each EB-5 form. The regulations and Form Instructions already describe the evidentiary requirements for EB-5 petitions and applications, and these new pages don’t add new requirements. Rather, they provide the content in handy checklist form and suggest a way to standardize submissions by arranging required documents in a predictable order. We keep asking IPO what we can do to help improve the adjudication process and processing times, and this is a very helpful response. Immigration lawyers take note! If we can widely adopt the suggested order of documentation for each form, and most petitions take on a standard shape, with the same tabs in the same order, this will certainly support operational efficiencies at IPO and should help reduce processing times. Julia Harrison flagged this resource at today’s Employment Visa engagement in San Jose. I’ll write another post with more complete report of helpful input from the IPO representatives Julia Harrison and Jan Lyons, Kurt Vicha of FDNS, and Charlie Oppenheim from Department of State.

RC Terminations, investor litigation victory, China trends, agent ethics, RC list changes

Regional Center Termination Reasons

USCIS has terminated 109 regional centers over the past decade, and 23 regional centers in May 2017 alone. This month USCIS also initiated a page for Regional Center Termination Notices, with most notices up to November 2016 posted so far. The page explains that “USCIS will remain consistent and committed to transparency in the EB-5 program by proactively publishing Regional Center termination notices as they become available. This is an important step in assisting investors, the EB-5 industry, and the public to understand the reasons why a regional center has been terminated and what types of regional center activities may trigger the end of a regional center’s designation.”

I’ve started a Termination Log spreadsheet (also linked to my RC List page for ongoing reference) to correlate USCIS’s terminations list with its notices list, and facilitate analysis. Pivot table analysis of this log provides a quick overview of termination reasons (from the 69 termination notices posted so far) and timing.

In fact the termination notices are not very informative (most reference Notices of Intent to Terminate, which are not attached, for specific reasons), but we can generally learn that about 77% of RC terminations from 2008 through November 2016 occurred for one of two reasons: failure to file an I-924A annual report, or the fact that the I-924A report reflected inactivity (i.e. no investor petitions in three or more years). Just 12% (notices for eight regional centers) referenced problematic behavior by the regional center as a basis for termination. Other reasons include the regional center’s voluntary request to withdraw from the program. One letter dated July 13, 2016 explains “USCIS notes counsel’s request to withdraw from the program. The mechanism to end a regional center’s designation, whether initiated by the regional center or USCIS, is termination of the designation.” (This particular letter could’ve raised on-going FBI investigation as a termination issue, but that’s another story.) The Final Fee Rule published 10/24/2016 confirms that a regional center may elect to withdraw from the program, but does not offer an exit more dignified than termination. “A regional center may elect to withdraw from the program and request a termination of the regional center designation. The regional center must notify USCIS of such election in the form of a letter or as otherwise requested by USCIS. USCIS will notify the regional center of its decision regarding the withdrawal request in writing.This is a pity, as the terminated regional center list looks like a walk of shame, and I think voluntarily withdrawal should be treated differently from termination initiated by USCIS.

Legal Win for EB-5 Investors

Investors who think they’ve fallen victim to errors by USCIS will be interested in this long but ultimately successful battle by a group of EB-5 investors.

  • 2013: Twelve EB-5 investors file I-526 petitions based on investment in a regional center hospital project that sought to qualify as a troubled business
  • 2013-2015: USCIS denies the I-526 petitions, and then denies Motions to Reopen filed by the petitioners. The petitioners appeal the denials to the Administrative Appeals Office.
  • March to May 2016: AAO posts decisions dismissing appeal of I-526 denials (for example, MAR252016_02B7203)
  • April 2016: Four petitioners file civil action against USCIS in district court: Wei Gan v. USCIS
  • May 2017: USCIS and the plaintiffs resolve the case
  • May 2017: AAO posts decisions sustaining appeal of the previously-denied I-526s (For example, MAY182017_01B7203. Other May 18 2017 decisions sustain appeals for other investors in the same project)

Trends, Pitfalls, and Ethics in Working with Overseas Agents

China Market Demand Trends
Ronald Fieldstone reflects on a recent China trip in his post EB-5 Marketplace Measurement – China and Beyond (May 25, 2017). We’re reminded of the extent to which demand shapes supply in EB-5 investment.

Agent Marketing Claims
The Kushner Companies EB-5 roadshow in China continues to reverberate, with Senator Grassley mining it for yet another press release, this one calling for investigation of the Chinese agent involved, and its sales claims. (Grassley Seeks Investigation of Companies’ Promises of Green Cards 5/25/2017.) The regional center has protested to journalists that the senator’s allegations are baseless in this case, but all regional centers can take the reminder to double-check what their agents overseas are saying and posting online. Also keep in mind IIUSA’s best practices for engaging with sales intermediaries.

Ethics for US Lawyers Retained by Migration Agents
Lawyers who deal with overseas agents in EB-5 may be interested in a March 2017 Ethics Opinion by the New York State Bar Association. The opinion discusses conditions under which a lawyer may enter into an arrangement whereby a nonlawyer “foreign migration agent” hires the lawyer on behalf of the client and assists the lawyer in communicating with the client. Cyrus Mehta explores the matter further in his post EB-5 Green Card, Ethics and Trump (May 22, 2017).

DHS Director and EB-5

Lee Francis Cissna, President Trump’s nominee for Director of USCIS, committed to finalizing EB-5 reforms in his Senate Judiciary Committee hearing last week. In other words, new EB-5 regulations are still on the table. Mr. Cissna spent much of the past two years working for Senator Grassley on immigration issues, and reportedly wrote dozens of the letters sent under the senator’s name to Homeland Security officials. This does not bode well for his attitude to immigration generally or EB-5, though he made a nice statement at the hearing.

Regional Center List Changes

Additions to the USCIS Regional Center List, 05/08/2017 to 05/30/2017

  • Atlantic Casino & Entertainment Group Regional Center (Delaware, Maryland, New Jersey, Pennsylvania)
  • New York Immigration Regional Center (Connecticut, New Jersey, New York, Pennsylvania): www.goeb5nyc.com/
  • American Family Regional Center (Washington)

New Terminations

  • Dallas Regional Center (Texas) Terminated 5/22/2017
  • East Plumas County Regional Center, LLC (California) Terminated 5/22/2017
  • Immigration Funds LLC (former name United States Investors Regional Center) (Maine, Massachusetts, New Hampshire) Terminated 5/22/2017
  • Ohio Regional Center, LLC (Ohio) Terminated 5/21/2017
  • EB5 Express Regional Center (California) Terminated 5/18/2017
  • Arkansas Regional Economic Development Center, LLC (Arkansas, Oklahoma) Terminated 5/16/2017
  • Art District Los Angeles Regional Center, LLC (California) Terminated 5/16/2017 (this RC was removed from the terminated list and added back to the approved list on 6/19/2017)
  • The Z Global Corporation Regional Center (California) Terminated 5/16/2017
  • Mariana Stones Corporation Ltd. (Guam) Terminated 5/15/2017
  • NatureAll Co., Inc. EB-5 Regional Center Terminated 5/15/2017 (New Jersey)
  • USA Regional Center, LLC (California) Terminated 5/15/2017
  • Eight Islands Regional Center, LLC (Hawaii) Terminated 5/3/2017
  • Diamond City Montana EB-5 Regional Center, LLC (Montana) Terminated 5/10/2017
  • New York Pioneer Regional Center (New York) Terminated 5/3/2017
  • Optima Arizona Regional Center, LLC (Arizona) Terminated 5/3/2017
  • Puget Sound RC, LLC (Washington) Terminated 5/3/2017

Goodlatte statement; IIUSA TEA Analysis

Two important new press releases:

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

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

Washington updates, articles, RC list updates

Washington Updates

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

Other Resources

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

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

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

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

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

New Terminations:

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

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

Articles (Project Oversight, Redeployment, TEA Changes), RC list changes

EB-5 Articles

What to do if you suspect your EB-5 project is in trouble (February 17, 2017) by Catherine DeBono Holmes, Esq., Daniel B Lundy, Esq. and Jeffrey E. Brandlin, CPA, CIRA, CFF
This article gives practical advice for managers and investors in EB-5 investment funds. It offers a checklist of warning signs that an EB-5 project may be in trouble, defines a role for a construction monitor/accountant and lists tasks that person should accomplish, describes monitoring systems that should be in place, suggests steps for investors to take if they are not satisfied with monitoring and reporting, and begins to address the question of what EB-5 investors should do in case of a fraud enforcement action. I particularly recommend this article to EB-5 investors, as a reminder of what they can demand and what they should do after investment. EB-5 managers are not necessarily motivated to meet a high and expensive standard for oversight (a manager affiliated with the project owner may not see the need, an unaffiliated manager may prefer to keep at arms length from the project, and the odd bad actor lives on opacity). EB-5 investors, however, certainly benefit from exercising their rights to active and on-going due diligence. People drafting EB-5 legislation and regulations may also be interested in this article, as they consider appropriate requirements for EB-5 managers.

Standards and Guidelines for Redeployment of EB-5 Investment Funds – A White Paper (February 21, 2017) by Klasko Immigration Law Partners, LLP, Arnstein & Lehr LLP, Jeffer Mangels Butler & Mitchell LLP
This article steps into the grey area that USCIS has left by failing to finalize or replace its DRAFT guidance on the Job Creation Requirement and Sustainment of the Investment for EB-5 Adjudication of Form I-526 and Form I-829 (8/10/1015). At issue is the question of what EB-5 enterprises can do with EB-5 money considering that (1) an EB-5 investor’s funds are required to remain at risk in the enterprise throughout the investor’s conditional residence period, (2) visa backlogs mean that the investor might not be reaching the I-829 stage until up to 10 or more years following the initial investment, and (3) most EB-5 deals involve loans due to be repaid to the enterprise in less than 10 years. The draft guidance memo suggested that “to the extent that all or some portion of the new commercial enterprise’s claim against the job-creating entity is repaid to the new commercial enterprise during the sustainment period, the new commercial enterprise must continue to deploy such repaid capital in an ‘at risk’ activity for the remainder of the sustainment period” and “the capital will not be considered ‘at risk’ if it is merely being held in the new commercial enterprise’s bank account or an escrow account during the sustainment period.” Although this suggestion is questionable, and not final policy, it’s the only indication we have of USCIS’s thinking, and the authors of the above-linked article suggest practical ways to satisfy that standard for sustained investment. The authors explain why investment in publicly-traded or privately-held securities or real estate investment should comply with the “at risk” requirement, and they suggest guidelines for making such investments in a manner that complies with Federal securities laws and state law fiduciary obligations.

EB-5 Proposed Regulations: A Missed Opportunity, Next Steps for Reform (Rev. 2/14/17) by NYU Scholar-in-Residence Gary Friedland, Esq. and Professor Jeanne Calderon, Esq.
In this article, the authors once again address the sticky issue of EB-5 Targeted Employment Areas from an academic rather than industry perspective. They discuss TEA changes in proposed regulations and proposed legislation with reference to their database of EB-5 projects, which is dominated by the kind of large big-city projects that make poster children for TEA reformers. The EB-5 industry will not join the authors in lamenting that the draconian proposed regulations appear doomed by timing, but it should account for and consider effective response to the evidence that the authors present in support of TEA reform.

Regional Center List Changes
Additions to the USCIS Regional Center List, 02/04/2017 to 02/22/2017

  • Invest Guam Regional Center (Guam)
  • Universal Regional Center (California)
  • Discovery Northeast, LLC (New Jersey, New York, Pennsylvania)
  • Star EB5 Group (Connecticut, Delaware, New Jersey, New York, Pennsylvania)

Understanding USCIS Processing Time Reports–Updated

How long does USCIS take to process EB-5 petitions and applications? We have two sources of data relevant to the processing time question: the IPO Processing Time report, which indicates the filing date of petitions currently being processed, and the Forms Data Page, which gives data for the number of received, approved, denied, and pending petitions by quarter. The first source is helpful for past petitioners, while the second source can be better for current/prospective petitioners estimating future processing times.

IPO Processing Time Report
Every month, the USCIS Processing Time Information page updates a chart titled “Average Processing Times for Immigrant Investor Program Office” that looks like this.
chartWhat does this chart mean?
The single unambiguous function of this report is to indicate when petitioners may begin to complain. A stakeholder email from USCIS in January 2017 explained,

We post case processing times on our website as a guide for when to inquire (service request) about a pending case. For the last several years, we have posted case processing times using two different formats: For cases that were within our production goals, we listed processing times in weeks or months; For cases that were outside of our production goals, we listed processing times with a specific date.
Always refer to your I-797C, Notice of Action, and look for “receipt date” to determine when we accepted your case. If the receipt date on the USCIS Processing Times web page is after the date we have listed on your notice, you should expect to hear from us within 30 days. If after those 30 days, you have not heard from us, you may make an inquiry on your case. We recommend using our e-request tool for all case inquiries.

With this in mind, the table can be read to mean “As of November 30, 2016, we were processing at least some I-526 cases filed as of August 7, 2015. If your I-526 petition was filed before 8/7/2015 and you haven’t heard from us, you may start making inquiries.”

The processing report also allows a general conclusion that the I-526 processing time for investors with an August 2015 priority date was 16 months (November 30, 2016 – August 7, 2015 = 16 months).  (Though we know of people who filed I-526 in August 2015 and got earlier decisions or are still waiting, thanks to one or another exception to the first-come-first-served principle.)

The processing report indicates expected times for past petitioners up to a certain date. (I’ve logged processing times/dates for petitions from 2013 to 2015 in this spreadsheet.) The report does not say anything about the future. Since August 2015, IPO capacity has grown and EB-5 demand has grown even faster. The fact that an August 2015 petition had a 16-month processing time does not promise that a 2016 or 2017 petition will have the same time.

Petition Data
As a prospective EB-5 investor, or someone who filed I-526 in 2016 or 2017, I would look at form filing data to estimate future processing times. For example, see this chart of I-526 data from the USCIS Immigration Forms Data page:

This report provides information commonly used in waiting line models: inventory (pending petitions in the system), arrival rate (petitions received) and flow rate (approved + denied petitions, aka completion rate or throughput).  For an example of how to use this data to make predictions with a simple waiting line model, see the Prediction tab of my I-526 times spreadsheet.

Further Discussion

My post EB-5 Timing Issues and Visa Wait: Process and Data discusses the process and wait time between I-526 filing and conditional permanent residence.

Here is a nice post reviewing options for investors with long-pending petitions: Options for EB-5 Investors When Form I-526 Petitions Are Pending Too Long (June 8, 2016) by Joseph M. Barnett, Esq.    If it comes to a mandamus complaint, here are examples: www.slideshare.net/BigJoe5/tag/mandamus

In the past, EB-5 investor readers have used the comments section of this blog to trade experience with processing dates, and I got a request to open up a discussion forum instead to facilitate this exchange. So I have set up http://eb5.freeforums.net/ as a platform for investors to share experience with and questions about EB-5 petition processing.

I-924A Resources

USCIS has kindly shared IPO Deputy Chief Julia Harrison’s Talking Points IIUSA and AILA Conferences October 2016. There isn’t any breaking news here, but I’ll repeat Ms. Harrison’s first point. “Regional Centers: Don’t forget to file your Form I-924A between October 1 and December 29.” All Regional Centers that were designated as of September 30 this year must file this annual report.

I-924A Resources for Regional Centers

Go to the USCIS website for the Form I-924A and Instructions: https://www.uscis.gov/i-924a. Note that there’s a significantly revised version this year, so don’t reuse last year’s form. USCIS gives additional guidance for completing the form in I-924A Filing Tips (2015) and I-924A Q&A (2011).

The deadline for I-924A filing this year is December 29, but plan to file by December 22 if you want to avoid the new $3,035 filing fee.

Remember that I-924A stakes are high. This form is at the center of an annual review in which USCIS reassesses whether each RC can keep its designation. In preparing to file, consider what we know about the review process. Form I-924A goes to the IPO Compliance Unit at USCIS, which takes the following steps.

  • IPO reviews the info provided in the I-924A for timeliness, accuracy, and completeness
  • IPO considers the Form I-924A responses (and any supplemental narrative and exhibits filed with the form) to determine whether the RC is fulfilling its basic mandate to promote economic growth. If the RC does not have investment or jobs to report in the Form I-924A, IPO will look to see whether the RC makes a compelling case for future activity and mitigating circumstances. (“For example, it is reasonable to provide greater flexibility to a regional center with a more recent USCIS designation whereas a regional center with a longer period of designation that has not shown any economic growth to the geographic area, may receive less flexibility. In addition; the regional center’s progress in developing actual projects should be taken into account, including the steps taken to identify and pursue developmental projects, how the projects have progressed in the pipeline, and the likelihood of those projects promoting economic growth in the immediate future. Moreover, USCIS may consider any reasonable, temporary delays, such as natural disasters or litigation, which may have prevented the regional center from promoting economic growth in a timely manner, and any alternative plans or actions taken as a result of unexpected delays. This flexibility, however, is not an open-ended allowance in which the regional center can indefinitely explore potential projects or remain stagnant on either a hypothetical or actual plan.” See RC Designation: Use it or lose it )
  • IPO checks the numbers and claims reported in the I-924A against other info that it has on file for the RC, and red flags any inconsistencies
  • IPO performs an Internet search and searches internal databases looking for derogatory information related to the RC and its projects and principals
  • IPO investigates the RC’s online presence (the RC’s website, online content from agents and promoters) and looks for any impropriety. IPO particularly looks for use of the DHS seal or USCIS signature; any claims about guaranteed returns, guaranteed approvals, or expedited treatment of petitions; and any language (including entity names) that implies a special relationship with USCIS, DHS, or the US government. Keep in mind Cautions on Names of Regional Centers and Enterprises, and Unauthorized Use of DHS Seal.
  • IPO will issue a Notice of Intent to Terminate if the RC fails to submit required information, or if IPO determines based on its I-924A review that the RC no longer serves the purpose of promoting economic growth, and no longer remains eligible for designation. 70 RC have been terminated so far (54 in 2015/2016 alone), so this is not an idle threat.

(My sources: EB-5 stakeholder meetings on 8/13/2015, 9/17/2015, 2/3/2016; AAO termination appeals in 2015 and 2016; and FOIA material)

A regional center that hasn’t been active and doesn’t see future prospects may consider taking this chance to proactively withdraw from the program, instead of waiting to be terminated.  The recent Fee Rule says that “A regional center may elect to withdraw from the program and request a termination of the regional center designation. The regional center must notify USCIS of such election in the form of a letter or as otherwise requested by USCIS. USCIS will notify the regional center of its decision regarding the withdrawal request in writing.”

8/29 USCIS meeting (policy timeline, minor petitioners, RFC, more), AAO decisions (exit, investors in terminated RC), legislation comments, NASAA advisory

EB-5 World kept busy during my annual wilderness week, so this post is a long one. Before I get into detail, here are a few headlines: No new EB-5 policy or guidance likely this year, IPO steps up scrutiny of parties involved in regional centers and emphasizes due diligence responsibilities, Minors face challenges in qualifying as EB-5 petitioners, Wyoming gets its first regional center.

8/29/2016 EB-5 Stakeholder Meeting

USCIS hosted an EB-5 stakeholder teleconference on 8/29/2016 – ostensibly to review content that we couldn’t hear in the 7/28 engagement, but stakeholders wisely took the opportunity to ask new questions. Nicholas Colucci and Julia Harrison made new statements supplementing the prepared remarks for the 7/28 engagement. IIUSA has shared a recording with members. I was not able to record the event, but have summarized highlights for you.

  • USCIS Timeline for New Policy and Regulations: USCIS expects to finalize the EB-5 chapters for the USCIS Policy Manual by the end of this fiscal year or at least calendar year, and to hold off on releasing new policy and guidance until after those foundational chapters on existing policy have been published. Mr. Colucci described the policy manual as “a compendium of all existing policy of the EB-5 program, putting it all into a single document. As we draft new guidance with respect to the EB-5 program, what we will do is generally put it out for notice and comment and then finalize it in that manual. So it will be a document that gets added to as it goes along.” It will be nice to have existing policy gathered in one place, but what we really want is new policy. In her statement for the 7/28 meeting, Lori Mackenzie promised that “Among the topics we hope to further expand upon are issues associated with the requirements for job creation and investment sustainment that apply to EB-5 investors and the impact of misappropriation of funds on those requirements.” But for now, Mr. Colucci and Ms. Harrison declined to make statements about sustaining investment or dealing with investors following regional center termination, saying that these points would wait to be covered in future policy manual amendments, after the foundational content is completed (ie after this year). The draft Guidance on the Job Creation Requirement and Sustainment of the Investment for EB-5 Adjudication of Form I-526 and Form I-829 (first posted for comment in August 2015, and urgently needed) is now off the table until it can be issued in revised form for comment as a policy manual amendment. Regarding revised regulations, Mr. Colucci said “We are working on an EB-5 regulation. We don’t have a timeline for the publication of that regulation, but we continue to actively work on it.” He did not say anything about a November 2016 target (mentioned last month by DHS Secretary Jeh Johnson).
  • I-924 Requests for Clarification (RFC): Mr. Colucci pointed out that IPO has been issuing a number of RFCs to regional center applicants who did not respond completely to Form I-924 Part III(D), which asks for a list of principles, agents, individuals and entities that are involved in the management, oversight, and administration of the regional center. “What we’ve been finding is oftentimes this is left blank when the form is submitted. But as we review the supporting documentation, we see in fact a number of other names that should’ve been included in this section. What we’re doing as part of this Request for Clarification is determining whether other individuals are involved with the regional center, and if so, we’re seeking their identifying information.” I think we can assume that USCIS wants that complete list and identifying information for broader vetting and accountability – perhaps proactively implementing reform proposals from reauthorization bills that Congress hasn’t managed to pass yet.
  • Customer Service Issues: Mr. Colucci stated that IPO would not respond to duplicate requests sent to the Customer Service Mailbox within 15 days of the original request, but reminded people of the escalation process. (See the EB-5 Customer Support page.) USCIS.gov has added a Chinese translation of the support page, and a FAQ page addressing common questions from investors. In response to Q&A, USCIS invited people to use the customer service mailbox to notify USCIS of factual errors in an RFE or NOID notice, and said that USCIS may issue a replacement notice.
  • Minors as EB-5 Investors: Julia Harrison responded to questions about minors under the age of 14 being able to invest in the EB-5 program. She said “Just to clarify, for USCIS the statute and regulations don’t have an age limitation. However, it is important to understand that a minor normally lacks the legal capacity to enter into the various types of contracts that are necessary to demonstrate the qualifying investment. So, while the eligibility for any minor to enter into the contract would depend on the specific facts of the particular case, it could be difficult for them to be the principle petitioner because of the concerns related to their capacity to contract and the presumptive voidability of contracts signed by minors. When a minor does enter into a contract, the petitioner bears the burden of demonstrating via preponderance of the evidence that the minor or legal guardian who enters into this agreement on their behalf will be – that it will be binding on the minor petitioner in the relevant jurisdiction. And again that’s up to the petitioner to demonstrate that evidence when they submit their application to USCIS. For a child less than 14 years old, a parent or legal guardian may sign on their behalf, but you also need to be prepared to demonstrate, with evidentiary requirements, proof of the parent-child relationship.” In response to questions, Ms. Harrison suggested that it might be acceptable for parents to transfer investment on behalf of a minor child, so long as it’s clear that the capital belongs to the minor petitioner, not the parent. She further stated that IPO was not in a position to specify the nature of proof required to overcome a presumption of voidability, or even to give general guidance, but would adjudicate on a case-by-case basis. I wonder if Ms. Harrison was basically saying: IPO currently does not see how it’s practically possible for a minor to be an EB-5 petitioner, but is open to being convinced otherwise. Catherine DeBono Holmes has written articles Using the Uniform Transfers to Minors Act for Minor Investors in EB-5 Investment Funds (September 23, 2016) and Suggested Procedures and Possible Options for Accepting Minors as Investors in EB-5 Investment Funds (June 23, 2016). See also blog posts by Klasko Law and Wolfsdorf Rosenthal on minors as primary EB-5 applicants. These articles take a positive approach, but note that I’ve heard other prominent EB-5 lawyers express strong questions and reservations about the practicalities of minors as EB-5 petitioners.
  • The Rent-a-Center model: I’ll quote this from Mr. Colucci’s published remarks for the 7/28 engagement, since it seems to be a warning shot: “To uphold the integrity of the program, USCIS is focused on ensuring that regional centers exercise due diligence in the oversight of the capital investment and job-creating projects they sponsor. As the program has become more popular, the paradigm of regional center relationships has expanded. But let me remind everyone in the EB-5 community that due diligence, monitoring and oversight are the obligations of the designated regional center entity, and central to the integrity of the program. When we become aware of any threats to the integrity of the program, we seek to take corrective action.” IPO appears to be giving notice that they don’t like a hands-off regional center relationship. Regional centers that use a “rent-a-center” model, licensing third parties to use their designation for projects, should take note and take care to implement sufficient due diligence, monitoring and oversight.
  • Other Points: The teleconference was unusually rich in good questions that solicited new answers – though the answers are marginally bankable since they’re just off-the-cuff in context of a call. But for what it’s worth, I heard: Yes, the first I-526 in a pooled direct investment case establishes deference for subsequent I-526s (and USCIS is considering process adjustments that will make this more workable in the direct context); Yes, IPO accepts a loan secured by equity investment in the petitioner’s own business as an acceptable source of funds (but note a different story in the Ibrahim case being litigated, Ed.); No, USCIS does not defer to previous source of funds determinations, but only to the items listed in the Policy Memo deference policy; No, USCIS does not necessarily require proof of non-EB-5 funding already in the bank but looks for general preponderance of evidence (e.g. things like letters of commitment and term sheets); Yes, it should be sufficient to sustain an investment during the 2-year conditional residence period (implying that the investment need not also be sustained during the period when I-829 is pending); No, I-526 petition processing is not exactly FIFO but happens in a range that’s pegged to when IPO received the first I-526 for that project; No, IPO is not considering new policy to implement the Child Protection Act (and specifically, declines to hold I-526s in abeyance to add time in order to help protect child eligibility); No, IPO does not think that CPA practices for I-130 family-based petitions can be applicable for EB-5.

New AAO Decisions

AAO continues to dismiss appeals of USCIS denials of I-526 cases. Here are the most recent issues.

  • Investor Exit Strategies: JUL272016_01B7203, JUL272016_02B7203, and JUL272016_03B7203 discuss three petitioners in the same deal whose petitions were sunk by these two sentences in the Operating Agreement: “Members who are holders of the Class B Interests may demand a return of the capital contributions upon receipt of the approval of the I-829 Petition by Entrepreneur to Remove Conditions by the U.S. Citizenship and Immigration Services” and “In the event of the denial of the I-829 Petition by Entrepreneur to Remove Conditions, at the end of the five-year compliance period, following the USCIS’s Request for Evidence in connection with their I-829 petition, the Company intends to refund that member’s $1,000,000 subscription amount paid within 120 days if feasible.” More specifically, the petitions were sunk by two words — “demand” and “$1,000,000” — which USCIS and AAO agree flagged an impermissible redemption agreement. Using the word “demand” (i.e. “claim as due” “require”) profiled the petitioner as effectively a lender (and the investment no more at-risk than a loan), and naming a dollar figure triggered the Matter of Izummi prohibition against assuring the petitioner of a set repurchase price from a willing buyer. (The three cases are identical except that _01 has an additional source of funds issue.)
  • Investors in Terminated Regional Center: AUG032016_01B7203 through AUG042016_04B7203 represent six additional petitioners in the same position as the JUL182016_01B7203 case. All these investors were in the stage between I-526 approval and receiving conditional permanent residence (CPR) when their regional center was terminated. All had their I-526 approvals revoked, with identical justifications based on the policy prohibiting material change during the period between I-526 approval and green card. AAO agreed with USCIS in these cases. I hear through the grapevine that USCIS has gone further and revoked CPR for investors who were further in the process when their regional center was terminated – a very serious development, if the rumor proves to be true and to represent general practice. Material change policy wouldn’t justify such revocations, but we may not be able to discover USCIS’s practices and justifications until we see decisions on investor appeals. In yesterday’s conference call, IPO said they “don’t have guidance yet” for how investors are treated in the event of RC closure – but obviously they do, since they’re busy sending out notices of intent to deny and revoke to some investors, and apparently just unwilling to publicly disclose the current logic guiding their actions. Do people at IPO not care about their own job security, at least? How much adversity and uncertainty do they think the EB-5 program and investors can take, and still be there to provide the “investor program” in “investor program office”? Please, give us some transparency!

Publications of Note

  • Regional Center Program Reauthorization: A group of securities attorneys got together and redlined proposed legislation with comments and corrections from a securities perspective, and have submitted the document to Congress. You can read the EB5 Securities Roundtable suggestions here. With so many arguable points in last years’ proposals, it’s hard to imagine Congress finalizing anything substantial in the next couple weeks, but we’ll take a deep breath and see what happens. We’re now just days away from September 30, the next deadline for Congress to reauthorize the regional center program.
  • International Entrepreneur Rule: USCIS is proposing a new International Entrepreneur Rule which would allow certain international entrepreneurs to be considered for parole (temporary permission to be in the United States) to start or scale a U.S. businesses. This rule is quite unlike EB-5 and not related to EB-5, but – if implemented – could provide a narrow alternate path to U.S. residence for foreign entrepreneurs. Michele Franchett of Stone Grzegorek Gonzalez has a helpful summary, and Ron Klasko comments on the rule’s (non)relevance for EB-5 investors.
  • Sanctions for Brokering EB-5 Investment: Three Immigration Lawyers Sanctioned by the SEC for Brokering EB-5 Investments (August 24, 2016) discusses how and why the SEC is making examples of immigration lawyers who appeared to receive transaction-based compensation in connection with recommending a regional center or assisting in purchase of an EB-5 limited partnership interest. The most recent cases involved minor violations and relatively little money, but the SEC perceives immigration lawyers as gatekeepers for EB-5 and is going after them accordingly.
  • NASAA EB-5 Investor Advisory: The North American Securities Administrators Association has published an investor advisory for potential investors in EB-5 projects. The notice provides a due diligence checklist that’s handy for investors, and also for people who think about how to structure and write up proposals that will satisfy investor questions and concerns.

Regional Center List Updates

Additions to the USCIS Regional Center List, 07/27/2016 to 08/29/2016:

  • America California Construction, LLC DBA American California Regional Center (California): www.madisonrealtycompanies.com
  • America Commonwealth Regional Center (Delaware, District of Columbia, Maryland, New Jersey, New York, Pennsylvania, Virginia, West Virginia): acrc.us
  • American Heritage Regional Center, LLC (District of Columbia, Maryland, Virginia)
  • American Immigration Fund Regional Center (Florida)
  • EB5 of Ohio, LLC (Indiana, Kentucky, Ohio): www.eb5ofohio.com
  • CanAm Texas Regional Center (Texas): www.canamenterprises.com
  • F2E Regional Center, LLC (Colorado, Nebraska, Wyoming)
  • USASIA Pacific, Inc (Washington): usasiapacific.com
  • WAHA EB-5 Regional Center of New Orleans, LLC (Louisiana, Mississippi)

Renamed:

  • Global Pacific Regional Center (former name American Sun Regional Center) (California)

New Terminations:

  • EB-5 South Florida Regional Center, LLC (Florida) Terminated 8/3/2016
  • Alabama EB-5 Regional Center, LLC (Alabama) ) Terminated 8/3/2016