Investors in Terminated RC, Portfolio Investments

So long as USCIS persists in not publishing new regulations or policy, we have to keep looking at case-specific sources for hints at what it’s thinking. Here are a couple recent EB-5 insights from non-policy sources.

Investors in a Terminated Regional Center

If a project loses its regional center sponsor, can an investor still continue with the project and count the jobs it creates? The investor in the JUL182016_01B7203 case was not allowed to do so. This petitioner invested in early 2012 and received I-526 approval in 2014. Then USCIS terminated his project’s regional center sponsor in 2015, and issued a notice of intent to revoke his approved petition shortly thereafter. At this point three years had passed since the investment and petition filing, but the petitioner did not yet have conditional permanent residence and was thus still in that vulnerable no-material-change period. USCIS and AAO considered whether he should be able to continue with the process independently and count direct jobs as if he were a direct investor, but decided not. The reason: the jobs were in a job-creating enterprise separate from the new commercial enterprise (a structure only allowed for regional center projects) and changing that structure would be a material change. So the investor would have to start over with a new I-526 petition.

We can’t tell whether the decision might have been different had the project not been cited in the regional center termination decision, or had EB-5 investors secured a new regional center sponsor for the project. But the decision suggests a pretty hard line on the point that: “During the period of conditional residence, a petitioner is expected to implement the business plan underlying the original petition, and USCIS guidance acknowledges that a petitioner may need to adjust his or her plans during this time. But when such changes are material, USCIS policy requires the investor to file a new petition.” Expect to see this line challenged, as investors line up with their attorneys to complain about being punished for actions by RC principals – actions that do not necessarily implicate the investors and sometimes not the projects either. Long processing times, retrogression, and possible regional center program sunset add urgency to the material change issue for regional center investors. Klasko Law has a post on Path America Regional Center and Giving Innocent Investors a Way Forward (12/3/2015), and the State of Vermont is advocating for options for its investors (but no response from USCIS so far). In the meantime, I’ve added this case to an on-going log of material change examples in my material change post.

Portfolio Flexibility, Debt-Like Investments

USCIS has produced interesting documents as defendant in a suit brought by investors in Quartzburg Gold, LP, a Idaho State Regional Center project. You can find all the case material by Googling the LP name or the case number (1:15-cv-00273-CKK). I’m particularly interested in USCIS statements on two boundaries that investors and project companies naturally try to push: investor assurances and project flexibility. Investors want to get their money back eventually and demand security, while USCIS is on the alert for debt-like arrangements and guaranteed returns. Project companies like flexibility to work with unpredictable reality, while USCIS wants the I-526 business plan to specifically predict what will happen and then match what does happen.

The Quartzburg case addresses the grey areas of portfolio investment flexibility and re-deployment. [UPDATE: this offering is now subject to an SEC complaint targeting some apparently no-so-grey areas.] The Quartzburg Gold, LP Limited Partnership Agreement defined investment “Projects” to include four named mine projects (with one marked as tentative) and potential additional or replacement mine projects. The LPA provided that “The General Partner has authority to approve funding of other projects identified by Idaho State Gold Company, either in addition to or replacement of the preceding projects, to the extent appropriate based upon the capital requirements of the listed Projects, the General Partner’s ongoing due diligence, and contingencies that may arise in development of the foregoing Projects.” USCIS went on to deny a bunch of I-526 petitions for limited partners in this agreement, with one ground being the fact that “which mining projects ultimately would receive capital was uncertain at the time of filing.” In a 4/15/2016 statement for the court, USCIS argues that,

Plaintiffs cannot satisfy their burden of showing they will create the requisite number of jobs because they have acknowledged (and the past demonstrates) that their business plan is wholly speculative because the projects themselves are subject to change…. As such, it was not arbitrary and capricious for USCIS to conclude that a business plan analyzing a tentative list of possible projects is insufficient to show likelihood that 160 investors are likely to show their investments are each likely to create ten new jobs.

In a 5/2016 statement, USCIS protests further that,

Contrary to Plaintiffs’ claim, Defendants are not requiring the initial business plan to remain entirely static throughout adjudication. But, at a minimum, the petitioner must submit a business plan that is based on JCEs that are more than just possible projects. Whether the plan for one particular JCE may adapt over time is one matter; the complete overhaul of the entire business plan is another.

I quote all this because people are filing similar EB-5 deals right now. For example, I think of franchisees who offer investment in a pipeline of currently-identified plus potential future franchise locations. If USCIS applies its Quartzburg Gold arguments to such cases, they will be denied for depending on possible projects. But it’s hard to know with USCIS. Sometimes relatively speculative portfolio scenarios are not challenged as such. Even in Quartzburg Gold, USCIS denied a bunch of petitions for other reasons before raising the JCE uncertainty issue. Matter of Izummi treats an NCE with “actual and proposed loan activities” in multiple identified and potential companies, and finds fault with how the business model was implemented but does not challenge the model per se. And that’s a precedent decision. It will be interesting to see the outcome of the Quartzburg litigation. Meanwhile I’ve added this example to my on-going master post on portfolio investments.

I won’t go into the “at risk” part of the Quartzburg case, but you can read the documents to learn how USCIS smells an equity arrangement to determine whether it’s really a debt-like arrangement. I’d just like to point out this intriguing series of events.

  • 2/16/2010: USCIS designates Idaho State Regional Center
  • 12/22/2010: Reuters makes a splash with “Special Report: Overselling the American dream overseas.” The article begins “In a conference room in an office building in downtown Shanghai, Jason Lee is literally selling the American dream” and goes on to report the specifics of Mr. Lee’s sales pitch: invest in an Idaho State RC gold mine project with “a 100 percent money-back guarantee”; just lend $500,000 to the mine today and eventually be repaid with 500 ounces of gold. The Reuters journalists attended an event for Chinese investors, read a Mandarin brochure for the Idaho project, and then contacted USCIS to ask whether these promises didn’t violate fundamental EB-5 rules. “The immigrant investor’s investment cannot be guaranteed,” confirmed the USCIS spokesperson. Reuters also contacted the Idaho State RC principal, who protested that he did not have an agent in Shanghai and no redemption promises were being made to investors. EB-5 got little press back in 2010, and this Reuters article (which also covered other RC projects) attracted attention.
  • 6/9/2011: USCIS initiates a Government Motion to Reopen its approval of Idaho State RC, and issues an RFE notifying the regional center that it must remove all language from organizational documents that could be construed as redemption agreements. The regional center complies, and USCIS issues a new designation letter dated 9/13/2011 that cites its review and approval of revised organization documents dated 7/1/2011.
  • 2012-2013: Investors file I-526 petitions based on investment in the gold mine projects of Quartzburg Gold, LP, sponsored by Idaho State RC.
  • 2013: USCIS starts to issue Notices of Intent to Deny on the Quartzburg Gold, LP investors, with the first 69 all citing just one problem: a provision in the organizational documents that looks like a redemption agreement.

(I know about the first and third bullet points from the RC’s designation letters, the second from my brilliant memory, and the rest from the litigation paperwork. I don’t know how these events are linked, but we can speculate. Maybe the moral is that journalism has power and one can’t be too careful about what’s said – and overheard — in China. Also, that it’s unsafe to rely on the words “the following documents have been reviewed and approved” in a regional center designation letter.)

3/2017 UPDATE: Here is a decision on the case.

Reviewing EB-5 Business Plans

Here’s my conclusion from reading years of USCIS evidence requests and AAO decisions on EB-5 cases: the most common EB-5 business plan problems are basic and easy to catch. This post offers a simple three-step process that anyone can use to identify the few most common Request For Evidence and denial triggers in business plans. I also discuss paths to more in-depth review that can help preempt questions from investors and USCIS.

Short-Cut Review for I-526 Business Plans

  1. Does this EB-5 package include a business plan?

Quick Answer: Look for a document that says “Business Plan” on the cover and whose table of contents includes (at least) section headings like “Business Description,” “Market Analysis,” and “Financials.” If the package doesn’t have such a document, it doesn’t have a business plan.

Common problems: The I-526 petition may have a collection of relevant documents that aren’t gathered and clearly labeled as a business plan, or may have a document that is called a business plan but is really only a business description. The lack of market analysis or financial projections is a clear tip-off that this document is not a business plan.

For more depth: Analyze the purported business plan against the Matter of Ho definition of a comprehensive business plan and other business plan checklists, while considering which content is and is not essential in this specific case. (My business plan writing and review services are described on my service website.)

  1. Does the business plan describe a proposal that fits EB-5 requirements?

Quick Answer: Check the following:

  • Whether the plan states the amount of EB-5 investment and shows a budget whose total is no less than the investment amount
  • Whether the plan has a staffing section that anticipates 10+ new full time jobs created per EB-5 investor and includes words like “job descriptions” and “hiring schedule” (direct EB-5 cases), or whether the plan provides inputs for an economic model estimate of 10+ jobs per EB-5 investor (regional center cases)
  • Whether the plan describes an enterprise and jobs that are new following EB-5 investment (or handles preexisting business and pre-investment jobs in a compliant manner)
  • Whether the plan shows 100% of EB-5 investment channeled into job-creating enterprise(s), and (for direct EB-5) whether equity investment and job creation occur in a single enterprise
  • Whether the plan has a timeline that anticipates imminent plan implementation and use of investment and job creation within about three years

Common problems: An amazing number of supposed EB-5 plans don’t even try to show that the full EB-5 investment amount will be used and the required number of new jobs will be created. Such omissions guarantee an evidence request, or denial if the nature of the business can’t in fact accommodate the EB-5 minimums for investment and job creation. Many plans have also been denied for failure to deal with nuances in business acquisition/expansion scenarios, to link investment and job creation, or to establish that the plan is likely to be implemented and accomplished within a certain time.

For more depth: Have an expert analyze the plan with an eye to all EB-5 requirements that affect the subject business, from the “new” issue to the “at risk” issue. Assess whether the plan adequately addresses potential USCIS concerns (based on regulations and policy) and investor concerns (such as risk, return, and timing). My review service considers these factors.

  1. Is the business plan credible?

Quick Answer:  

  • Credibility from evidence: Turn to the business plan market analysis section and check for references and citations. Confirm that they exist and can be followed to the cited third-party sources, via web links or with reference to exhibits also included in the I-526 package. No credit for unsourced market data, cited but irrelevant data, or citations to unverifiable or weak sources. Extra credit if helpful citations also appear in the business plan sections on schedule, permits, budget, and financials. Exhibits (such as a separate third-party market study) can bear the burden of providing third-party evidence, but the business plan should still reference those exhibits while making claims. If the business plan does not reference any verifiable external evidence, then it does not establish credibility. Think “which claim or projection, if inaccurate, would be a deal-breaker” and ensure that those points are as well-supported as possible. It can be tough to find third-party support for some types of proposals, but the business plan is asking to be challenged if it fails to show off at least a modicum of verifiable detail.
  • Credibility from internal consistency: Make list of 5-10 important details in the business plan (e.g. for a hotel: owner name, number of keys, building square footage, construction start and end dates, total budget) and then spot check the business plan and supporting documents to confirm that those details are the same wherever they appear. If the spot check catches discrepancies, get them fixed or explained and look for more.
  • Credibility from external consistency: Google the entity names, the project/business name, the names of company principals, and the business address, and read the first few search results for each. The business plan had better preemptively address any significant apparent discrepancies with online information.

Common problems: The words “verifiable detail” or “inconsistencies” appear in nearly every RFE and denial decision that challenges EB-5 business plan credibility.

For more depth: Closely review the business plan and associated documents for numerical discrepancies, even minor ones (e.g. Year 1 ADR estimated at $126 in the business plan and $129 in the economic analysis) and logical discrepancies (e.g. a 40-full-time-employee call center with $300,000 annual payroll expense and a 2,000-square-foot office). Encourage the business owner to try to think about possible future discrepancies (e.g. whether the schedule in the plan is a safe bet or should be qualified for a better chance of fitting what eventually happens). Ask someone with strong research skills and sources to read the plan and suggest ways to strengthen third-party support and validation. Finally, consider how presentation might be improved. Cognitive bias makes people unconsciously assign credibility to attractive documents, and react negatively to material that is ugly or hard to read. I attempt to consider these issues in writing and review.


Avoiding I-526 Business Plan Problems

To avoid problems in business plan review, start by getting the EB-5 plan prepared by someone who knows something about EB-5 and – more importantly – about business. The faulty EB-5 plans I’ve seen can largely be traced to faults in two kinds of authors.

People who understand business but not EB-5 prepare business plans that have good content, just not quite the right content. The plan prepared by a passionate entrepreneur will describe the concept beautifully and at length, but may neglect the nitty-gritty detail needed to help outsiders grasp how and why the business will work. The plan prepared by a professional writer without EB-5 experience will explain the business well but may neglect detail needed to assess compliance with EB-5-specific requirements (e.g. whether the date and conditions of formation qualify the enterprise as “new,” whether the timing and nature of employment meet EB-5 requirements, whether the investment qualifies as being at risk, whether the structure is compliant). A writer unfamiliar with EB-5 is likely to omit content that’s needed to answer questions from EB-5 readers and may unwittingly describe a business that is not suitable for EB-5. A good general-purpose business plan can be a good start, however. An EB-5 attorney or a writer like me can advise on how to rework the plan for the EB-5 context.

People who understand EB-5 but not business prepare business plans that have a good table of contents, but fall apart on closer inspection. The writer knows the expected Matter of Ho categories for EB-5 business plan content, but lacks the background and resources to fill those sections with meaningful material. The writer may try to compensate by cutting-and-pasting, populating sections he or she is not sure how to handle with a patchwork of clips from more and less relevant sources, or by cleaving to a template, writing every proposal as if it were a typical EB-5 real estate project. This is how local demographics end up in the market analysis for an export company, hotel expense items in financials for a factory, legal jargon in a restaurant description, and an economic model in a discussion of marketing strategy. This is how readers get very confused. In general, clients should try talking business with an EB-5 service provider before paying for a business plan. I will not quote to write a plan if I lack the background and resources for the subject industry, and others should also respect their professional limitations. Little can be done to salvage a plan written by someone who didn’t understand the subject business, or how to write about business generally.

How long does I-924 take?

01/2017 Update: I have newer charts with data through January 2016 here.


USCIS reports a 8.5-month processing time for the Form I-924 Application for Regional Center as of December 31, 2015 (per the February 2016 IPO processing times report). This number does not distinguish between initial applications and amendment requests, and does not hint at the possible range of actual processing times. It has some base in averaged reality, but we don’t know how it’s calculated.

For more perspective, compare the average times USCIS reported from March 2014 to March 2015 (recorded from past IPO processing time reports) with the times for actual I-924 approvals from the same period (recorded from available regional center designation letters, which show approval date, filing date, and application type).


The numbers from designation letters suggest that I-924 amendments in 2014/early 2015 were processed much more quickly and predictably than initial designation requests (although USCIS has said there’s no separate workflow or special treatment for amendments), and that actual processing times have often far exceeded what one would expect from reported averages. The trend from 2014 into 2015 looks somewhat positive. A scatterplot of approvals shows an increasing number of approvals coming in under 10 months (but also that USCIS was still working on applications that had been in the pipeline for 2-3 years). I will be interested to see how the numbers change when I have more letters to add to the data set. USCIS designated 208 new regional centers in FY2015, and there were 902 Form I-924 applications pending at USCIS as of January 2016 (as reported by Mr. Colucci in statements on 2/2 and 2/3). I guess that many of the pipeline I-924s are amendments/Exemplar I-526 filed in mid-2015 ahead of anticipated program changes, not new RC applications, but still 902 is a big number. Regional center applicants filing Form I-924 today should not be too alarmed by the processing time outliers in 2014/2015 (many of those 2-3 year cases were caught up and delayed in the confusion over tenant occupancy, which has been cleared now), but they also shouldn’t count on finishing the process in nine months, considering the backlog and IPO’s past performance.


Portfolio investments, existing business

Noticing traffic to old articles about EB-5 investments that involve diversification and existing business, I’ve re-written the following posts with reference to more recent official and unofficial guidance from USCIS.

EB-5 business plan matrix

I’m preparing for a webinar next week that will discuss “What goes into an EB-5 business plan?” This is a good question, and depends on the further questions “What does the business plan need to accomplish?” and “In what context will the business plan be used?” The following matrix helps visualize the goals and contexts that can affect EB-5 business plan content.


People who talk about EB-5 plans tend to focus on just one quadrant – 1A, positive standards for success in USCIS review – and especially on Matter of Ho-compliance. But if you study examples of EB-5 plans gone wrong (AAO denial decisions, lawsuits, unfunded projects), you know that it’s not enough to simply follow the business plan definition in the EB-5 precedent decision Matter of Ho. A plan can be beautifully detailed, covering all the Matter of Ho points from business description down to income projections, but still fail USCIS review due to inconsistencies with external evidence or to mismatch with program requirements (for example describing an enterprise that isn’t “new” or jobs that aren’t “qualifying” as defined by the EB-5 regulations). A perfunctory, formulaic business plan written to satisfy bare minimum requirements can pass USCIS review, but that document will never reach USCIS if it needs to and fails to attract investors. USCIS won’t table a plan for being an ungainly document, or ignore it because the proposal isn’t sufficiently appealing, or cite it in a lawsuit for being misleading. Investors may well do all those things. In my documents detailing direct and regional center EB-5 business plan standards (linked from my service website), I consider factors in each quadrant of the above matrix of goals and contexts. Investor review is not always an issue (not all investors look to the EB-5 business plan to introduce the business), and review outside USCIS takes different forms depending on the advisors involved. But it’s generally wise to look beyond the Matter of Ho box when writing or reviewing an EB-5 business plan.

H.R.4530, Resources, RC List Update

H.R.4530 Introduced
Even as Representatives Goodlatte, Conyers, Issa, and Lofgren (who worked with Senators Leahy and Grassley on their legislation last year) were speaking in yesterday’s House EB-5 hearing about how they think EB-5 incentives are misused and need to be re-oriented, representatives Polis and Amodei introduced H.R.4530-EB-5 Integrity Act of 2016, a bill that proposes to keep current EB-5 incentives in place. I’ve added the bill to my comparison chart, but you don’t need to read it; H.R.4530 is a carbon copy of Senator Flake’s S.2415 (and FYI entirely different from the H.R. 616 American Entrepreneurship and Investment Act of 2015 introduced by Polis and Amodei last January). I don’t know whom to cheer in this legislative mix. The Grassley/Leahy camp bill included at least one provision that would touch and could hurt (sometimes even fatally) each segment of the regional center world, while the Flake/Polis camp bill is crafted to ensure that the current winners don’t get their boats rocked and keep winning, with TEA incentives and the investment amount the same and the kind of integrity measures that conveniently double as anti-competitive measures. Diversity in the regional center world can be a problem, because fragmented markets are hard to work with and small-scale players have a relative probability of being unprofessional if not rogue and causing trouble. On the other hand, diversity means that EB-5 is relatively likely to fund the kind of projects that Congressional representatives want to see to help justify the regional center program — the hotels in third tier cities, the logistics companies in blighted industrial areas, the affordable housing, the entertainment and agricultural projects in rural areas, and so on. If regional center investment becomes all small safe loans to luxury developments in gateway cities, then immigrant investors will benefit but the American public, media, and Congress may turn against what looks like essentially a low-bar green card purchase transaction plus jobs-neutral government subsidy for attractive projects that would’ve proceeded anyway, just more expensively without the green card incentive to lower capital costs. On the other hand, the cause of integrity would not be advanced by deciding to limit the regional center program to unattractive projects entirely dependent on hapless foreign investors, or providing too much leeway for issuers that lack resources to operate professionally. If I were called to testify, I don’t know what changes I’d suggest to maximize EB-5’s potential benefits and minimize risks.

This quarter’s editions of the Regional Center Business Journal and EB-5 Investors Magazine (so far just out in paper form, but to be posted here soon) both have a number of great articles. In RCBJ, I particularly appreciated “What we Learn From SEC Investigation” by Ronald Fieldstone and Jay Rosen, who provide a comprehensive review of the types of violations that get investigated by the SEC, the specific activities that are focus of investigations, and the SEC investigation process from subpoena through discovery, deposition, negotiation and settlement. Lili Wang writes helpfully in RCBJ about the question we all ask “What Do Chinese Migration Agents Really Want?”, and EB-5 Investors Magazine also takes up this theme with two interesting migration agent interviews. Gregory White, Mark Katzoff and Angelo Paparelli authored an article for v.3.3 EB5 Investors Magazine (that I hope will soon be available online) on the important topic of “Avoiding the Inadvertent Investment Company.” The article describes how a regional center or issuer may avoid (and what will happen if it doesn’t avoid) being tagged as an investment company, including possible rescission, ineligibility to satisfy the EB-5 “at risk” capital rules and a duty to register as an investment advisor. EB5 Diligence also had a webinar this week on the topic Are Regional Centers Acting As Unregistered Investment Advisors? Another hot topic is the “rent-a-center” model for regional center investment, which has become increasingly popular and has also appeared in the cross-hairs of some legislative reform proposals. Rohit Kapuria has posted a thoughtful article Is the EB-5 Regional Center “Pure” Rental Model Sustainable?, and EB5 Projects will host a free webinar on 2/23 concerning Immigration & Securities Issues with Renting Buying & Selling an EB-5 Visa Regional Center.

USCIS Engagement Notes
USCIS has updated the 2/3 EB-5 Stakeholder invitation page with copies of the written opening statements made by Nicholas Colucci, Julia Harrison, and Lori MacKenzie. Also FYI I keep a master directory of USCIS EB-5 stakeholder meetings and a handy searchable PDF compilation of all published meeting notes (for those times when you can remember USCIS discussing a topic but forget where and when).

Processing Times
Not that we put much stock in IPO processing time averages (at least not without keeping a 10-month or so standard deviation in mind), but USCIS Processing Time Information has been updated as of 12/31/2016: 16 months for I-526, 16.2 months for I-829, and 8.5 months for I-924 (all up about 0.5 months from the previous report).

Regional Center List Changes
Additions to the USCIS Regional Center List, 01/28/2016 to 2/10/2016.

  • Bluegrass International Fund, LLC (Indiana, Kentucky):
  • East Coast Regional Center, LLC (New Jersey, New York)
  • Howard Hughes Hawaii Regional Center, LLC (Hawaii)
  • Mid-Atlantic Regional Center (Connecticut, Delaware, Maryland, New Jersey, New York, Pennsylvania):
  • Yellow Rock Regional Center of Washington, LLC (Washington)


  • Florida East Coast EB5 Regional Center LLC (former name United States Growth Fund, LLC) (Florida)
  • Prosperity Regional Center (former name U.S. Prosperity Regional Center) (Florida)
  • Investus LLC (former name New Mexico Foreign Investments LLC) (New Mexico)
  • New York Dream Regional Center LLC (former name Tri-State USA Regional Center) (New York)

SEC Priority Review, RC List Update

SEC Review of EB-5 Offerings in 2016
The Office of Compliance Inspections and Examinations at the Securities and Exchange Commission has named EB-5 in its list of Examination Priorities for 2016. Specifically OCIE promises that “We will review private placements, including offerings involving Regulation D of the Securities Act of 1933 or the Immigrant Investor Program (“EB-5 Program”) to evaluate whether legal requirements are being met in the areas of due diligence, disclosure, and suitability.” To remind yourself of the particular due diligence, disclosure, and suitability requirements that pertain to a private placement, see the article Private Placements Under Regulation D published at This article gives a short and clear summary overview as well as links to government sources with additional information. Be sure you review your offering for compliance before the SEC does. For links to EB-5-specific commentary from consultants, see the Securities Issues & EB-5 section of my Resources page.

USCIS Regional Center List Updates

Changes to the USCIS Regional Center List, 12/22/2015 to 1/14/2016

Newly Designated:

  • American Lending Center New York Regional Center, LLC (New Jersey, New York, Pennsylvania):
  • American Pioneer Regional Center, LLC (Illinois, Indiana, Wisconsin)
  • Americas Green Card Regional Center (Maine, Massachusetts, New Hampshire):
  • Colorado Headwaters RC, LLC (Colorado)
  • Florida EB-5 Quantum Investments, LLC (Florida)
  • Future American Now Regional Center, LLC (Florida)
  • Savannah World Trade Center for Investment, LLC (Georgia)
  • VR EB-5 Express, LLC (Connecticut, Massachusetts, New Hampshire, Rhode Island)
  • West Virginia EB-5 Regional Center, LLC (West Virginia):


  • Immigration Funds LLC (former name United States Investors Regional Center) (Maine, Massachusetts, New Hampshire)
  • Mebo Property Development Regional Center, LLC (former name Mebo Property Development LLC ) (California)
  • New England Family Regional Center LLC (former name New England Federal Regional Center) (Connecticut)
  • Golden Gate Global (former name San Francisco Bay Area Regional Center) (California)


  • Chicago Regional Center (Illinois)

EB-5 Timing Issues: Not a Fast Track

October 2017 Update: I now have a new post specific to the process and wait between I-526 and the conditional green card.

May 2017 Update: I’m demoting my original post from January 2016 to an attachment, as people keep consulting the post but all the numbers I used to try calculating timing have changed significantly since then. It’s hard to answer the question “how long will the EB-5 process take.” It depends on where the investor was born, when the investor filed I-526 relative to filing surges, how many petitions and applications get denied or abandoned, how processing times change, how demand changes, and whether Congress agrees to make changes to visa numbers or allocations or the filing process. The bad news, in short, is that the sheer number of people already in line for an EB-5 visa, plus the annual visa quota and per-country limitation, currently means that new China-born investors could be waiting a decade just to get a visa number for conditional permanent residence. Just a few years ago, companies could think in terms of a 5-year exit strategy to comfortably cover EB-5 investors through I-829 approval, but that could look more like 15-year exit strategies in today’s bad-case scenario. But the bad case won’t be reality for everyone — or maybe no one, if legislative proposals are enacted. Or the bad case could get even worse (as it did since I first wrote this post in October 2016, when the visa backlog looked about six years long), if surges in I-526 petition filing continue without other changes. Here is a spreadsheet with my ongoing attempt to calculate the backlog effect. Note that this simplistic approach does not model the influence of filing surges that create different time horizons for investors from different periods. And of course, it doesn’t reflect the fact that new legislation could change the picture entirely. For background on visa timing — the main wild card in the EB-5 process — see Robert Divine’s article The Realities and Implications of Chinese EB-5 Investors’ Wait for Visa Numbers (January 4, 2016).

Stages in the EB-5 Process

 (A)  Planning, paperwork, investment Must commit investment and meet other requirements before filing I-526
 (B)   File I-526, receive priority date, and wait for USCIS to process I-526 petition Can’t make material changes to the petition or depart materially from the business plan during this period In 2015-2016, average processing time ranged 13-17 months (USCIS target is < 6 months)
 (C)  Receive I-526 approval, wait for visa interview or I-485 status adjustment (may include waiting for visa number) Can’t make material changes to the petition or depart materially from the business plan during this period From a few months to about 10 years from I-526 filing, if waiting for a visa number (variable depending on whether China-born, where in queue, and whether visa numbers or allocation change). This spreadsheet has the quantitative factors that I know of.
 (D)  Receive green card; begin two-year conditional permanent residence period Investment must be sustained and at risk; job creation must occur; material change may be ok 24 months exactly (file I-829 after Month 21)
 (E)   Wait for USCIS to process I-829 petition For petitions processed in 2015-2016, average ranged 12-29 months
 (F)  Receive I-829 approval and conditional permanent residence No longer subject to EB-5 program requirements

Notes on EB-5 Stages

  • Investment and Escrow: During Stage (A), the EB-5 investor’s full investment must be committed to the enterprise (in the enterprise account, escrowed, or otherwise contractually committed). If escrow is used, investor funds must be released to the enterprise at latest before (D) begins.
  • Sustaining Investment: The investment must be sustained from (B) through (D) and must be actively deployed in job-creating activities at least during (D). USCIS is drafting new policy to address how exactly funds need to be deployed during (D), but has not finalized it yet. (In the meantime, the industry has tried to figure out reasonable redeployment policies.) The EB-5 investor may not recoup or draw down his investment before (E) and may be wisest to wait until (F) to exit.
  • Material Change: The deal needs to be planned and structured carefully during (A), as the petitioner will have limited opportunity to fix any deficiencies after filing I-526. The EB-5-funded enterprise must closely follow the I-526 business plan at least during (B) and (C), when material changes are not permissible.  USCIS allows some flexibility to depart from the business plan during (D). (See also my post on what material change means.) Note that proposed regulations and proposed legislation both offer to relax the material change policy and protect priority dates in light of long waits.
  • Job Creation: The investor can claim job creation that occurs from (B) to (D), and following his investment in (A). Under limited circumstances, he can also claim jobs created before the date of his investment or after the date that he filed I-829. In principle, he should be able to claim jobs that no longer exist when he files I-829 provided that the jobs were created and sustained for more than two years.
  • Planning Horizon: USCIS policy requires the I-526 business plan to show that jobs can be created within 2.5 years of I-526 approval.  However, businesses and investors should keep in mind that investors might not actually be verifying job creation until a decade after I-526 approval, considering the visa backlog and retrogression effect for EB-5 investors, not to mention processing times. EB-5 investment must be sustained throughout the conditional residence period (D), so premature exits must be avoided and exit strategies should consider realistic timing. Five years used to be a standard target for investor exit, but can be dangerously early for the average investor today.

Potential changes that would affect the EB-5 process and wait times

  • Increase the EB-5 visa quota: I list this because it’s the most obvious/simplest solution for the current dire picture, but I’m told that it is a political impossibility. Increasing the EB-5 visa quota would require increasing the total US visas and/or reorganizing how the total visa pie gets divided among different types. That would require comprehensive immigration reform — something that’s not on the table at all now and not expected any time soon.
  • Increase EB-5 visa availability by counting investors only toward the EB-5 quota, not spouses and children. This is a live possibility, included in several versions of EB-5 reform legislation and suggested to DHS for revised regulation (see p. 22-29 of the EB5-IC comment). And indeed, there’s a good argument for this being the original intent of Congressional representatives who designed the EB-5 program. If about 10,000 investors can get visas per year, then about 30,000 people can get cleared from the backlog per year (average 3 visas per investor), and wait times would shorten dramatically. Currently, just over 3,000 investors get visas per year, with family members taking the remainder of EB-5 visas.
  • Increase EB-5 visa availability by allowing EB-5 to recapture unused visas (see p. 22-29 of the EB5-IC comment)
  • Lighten the burden on China-born EB-5 investors by removing the per-country cap for visas. This has been suggested by a couple recent bills. It wouldn’t speed up the visa queue overall, but would mean that China-born investors don’t get held back by retrogression, and other investors don’t get to jump ahead i.e. would share/mitigate the long wait.
  • Use visa set-asides to incentivize Targeted Employment Area investment. This has been proposed in several EB-5 reform bills, and would shorten the visa wait time for new TEA investors while pushing other investors even further back in line. However, it’s likely that most set-aside visas would shortly return to the general pool (since the reform bills make TEA status difficult to achieve and the set-asides temporary) and thus the impact could be limited.
  • Change the filing stages: Several legislative proposals suggest allowing investors to file I-829 after having sustained investment and job creation for at least 24 months, even if they are still waiting for a visa number. In this way, when they finally receive the green card, it can be permanent rather than conditional permanent residence (skipping Step D in the table above). Several EB-5 bills have also proposed to allow concurrent filing of I-526 and I-485.
  • Mitigate the negative impact of long waits by adding more flexibility to the material change policy: Several legislative proposals and revised regulations provide more options and recourse for investors in case of material change, recognizing that such changes are inevitable over the course of years.
  • Mitigate the negative impact of long waits by adding protection for children who would otherwise age out: Several legislative proposals offer to do this.
  • Improve petition processing times: IPO continues to reaffirm its commitment to bring down processing times through staffing and efficiencies. I-829 petition times in particular should see improvement soon, as IPO has launched a new team devoted to I-829 adjudication.

The Basics: Direct and Regional Center EB-5 Comparison

This post doesn’t break any news, but addresses a basic question: what is the difference between direct EB-5 and regional center EB-5?

In a nutshell, the answer is that a regional center investment is associated with a designated regional center and therefore may count indirect job creation, while a direct EB-5 investment is not associated with a regional center and may not count indirect jobs.

These two differences – regional center affiliation and indirect job creation – are the only fundamental differences between direct and regional center EB-5. The two tracks share the same basic EB-5 requirements: investment of capital in a new commercial enterprise that creates jobs. Contrary to popular misconception, direct and regional center EB-5 have the same minimum investment amounts, the same targeted employment area incentives, and (USCIS claims) about the same average petition processing times.

However, the two fundamental differences between direct and regional center EB-5 have implications that make direct and regional center investments quite different in practice. (Click on the images below to see full-size versions of the comparison charts, or click here for a PDF version.)
comparison chart_Page_1
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Some common scenarios will illustrate the differences, as described above, between direct and regional center investment:

  • Real estate development projects are the most common investment for regional center EB-5 but awkward-to-impossible for direct EB-5. Indirect job creation allows the regional center investor in a landowner to count construction contractor jobs, indirect impacts of supply purchases, and sometimes even jobs created by the tenants of the completed development. A direct investor who invests in the same landowner could only count the permanent W-2 employees of the landowner – but normally the landowner wouldn’t have any. Most construction work gets done by employees of a variety of contractors, none of which “indirect” jobs count for direct EB-5, and any direct employee positions lasting only the duration of the construction project may also be disqualified because they are not permanent.
  • Hotels are a common investment for both regional center and direct EB-5, but subject to different considerations. The regional center hotel investment has the luxury of segregating EB-5 investors in an entity that neither owns nor controls the hotel, but simply exists to raise EB-5 capital and make a debt or equity investment in the hotel. This entity can claim credit for hotel jobs, thanks to indirect job creation. Direct investors, on the other hand, can only get credit for direct jobs and so can’t be segregated, but must have equity interest in the hotel owner/employer. (This can bring up liability issues, and may mean that direct EB-5 investors have to be vetted as owners in the franchising and liquor license process.) It’s no problem for regional center EB-5 if one entity owns the hotel and a separate management company hires the hotel employees, since indirect job creation doesn’t take into account which name appears on payroll records. In direct EB-5, this is a problem. Direct EB-5 can’t separate investment from job creation, and therefore the entity that uses EB-5 capital to develop the hotel needs to be the same entity with new hotel employees on its payroll. (If multiple entities are involved in direct EB-5, they must be essentially united by a wholly-owned subsidiary relationship.) Furthermore, a hotel will be able to claim more job creation as a regional center project than as a direct project. A new-build 120-room Homewood Suites might subscribe two direct EB-5 investors based on a business plan anticipating creation of 23 full-time positions, or twelve regional center EB-5 investors based on an economist’s calculation that hotel construction and operation will result in 130 new jobs. Why are the two jobs numbers so different for the same hotel? First, the direct investor can only count hotel employees while the regional center investor can also count construction-associated jobs and economist-defined indirect and induced jobs (associated with supply purchases and employee spending). Second, the direct investor can only count payroll-record-verified full time positions, while an economic model is relatively generous in counting operating jobs. The economist’s multipliers are based on averages, cannot distinguish between full-time and part-time employment, do not consider who holds the jobs, and are not finely tuned to reflect labor variations among hotels of different flags and scales. The economic model calculates average direct employment for an average hotel with a given verified revenue, and this number usually exceeds the number of discrete, verifiable 35+ hour per week positions at an individual hotel. Finally, I-829 paperwork may be easier for the regional center investment than the direct investment. The hotel with direct investors needs to sign up for E-Verify, take special care that its employees are qualifying, maximize full-time employment, and prepare stacks of payroll records to verify job creation. The offering with regional center investors and an economic analysis using expenditure and revenue inputs can (in theory) not worry about individual employees but rather track expenditures and revenue, and prepare financial statements to verify employment by verifying economic model inputs.
  • Small businesses such as restaurants and gas stations are likely to use direct EB-5. Such businesses tend to require only a couple EB-5 investors and will have sufficient direct jobs to justify those investors without needing to rely on indirect job creation. They can generally accommodate EB-5 investors as equity members and don’t require the complex investment structures only possible for regional center EB-5. No regional center affiliation means no regional center fees, no geographic limitation, and no vulnerability to regional center program changes. Regional center investment could work for these projects too and has the attraction of flexibility. But these projects may not be attractive to regional centers, which are often unwilling to sponsor offerings that only need a couple investors, and direct EB-5 provides a viable alternative.
  • Investments involving multiple layers and diversification can work in the regional center context but not for direct EB-5. If a direct EB-5 case has multiple entities in the flow of EB-5 capital or in the staffing plan, then those entities must be united by a wholly-owned subsidiary relationship. If they aren’t so related, then the case will be denied. For example see OCT022015_01B7203 Matter of H-G- (direct investment in a new commercial enterprise that invests in a separate job-creating business), NOV122014_01B7203 and DEC042013_01B7203 (direct investment and job creation divided among several enterprises), JUN182013_01B7203 and JUN042013_01B7203 (job creation in partially-owned subsidiaries).

Regulatory Background
What rules underlie the practical differences between direct and regional center EB-5? To quote the EB-5 Policy Memo: “The EB-5 Program is based on three main elements: (1) the immigrant’s investment of capital, (2) in a new commercial enterprise, (3) that creates jobs.” Direct and regional center EB-5 investors share these elements and the requirement to contribute capital (equity not debt) to a (single) new commercial enterprise and create jobs. The difference comes in term definitions. “Employee” for a direct investor can only mean “an individual who provides services or labor for the new commercial enterprise and who receives wages or other remuneration directly from the new commercial enterprise.” The word has an additional sense for the regional center investor: “an individual who provides services or labor in a job which has been created indirectly through investment in the new commercial enterprise.” The EB-5 regulations at 8 CFR § Sec. 204.6(e) define terms:

  • Commercial enterprise means any for-profit activity formed for the ongoing conduct of lawful business including, but not limited to, a sole proprietorship, partnership (whether limited or general), holding company, joint venture, corporation, business trust, or other entity which may be publicly or privately owned. This definition includes a commercial enterprise consisting of a holding company and its wholly-owned subsidiaries, provided that each such subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business. This definition shall not include a noncommercial activity such as owning and operating a personal residence.
  • Employee means an individual who provides services or labor for the new commercial enterprise and who receives wages or other remuneration directly from the new commercial enterprise. In the case of the Immigrant Investor Pilot Program, “employee” also means an individual who provides services or labor in a job which has been created indirectly through investment in the new commercial enterprise. This definition shall not include independent contractors.
  • Invest means to contribute capital. A contribution of capital in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement between the alien entrepreneur and the new commercial enterprise does not constitute a contribution of capital for the purposes of this part.

Updates and RC List Changes


  • IPO Processing Times: Average I-526 and I-924 processing times both show marked improvement in the most recent IPO update from the USCIS website.
  • New AAO Decisions: A couple more AAO decisions on I-526 cases have been uploaded to the 2015 folder on the USCIS website. DEC042015_02B7203 (Matter of H-Y-) is particularly colorful. The petitioner took a path common to failed EB-5 petitions: apparently trying to put an existing business into a new shell and sell it as a new business with job creation. But she met with aggressive investigation from the USCIS adjudicator, who sorted evidence with a fine-toothed comb and searched out company information online and even called the business and talked to an employee.
  • The U.S. Securities and Exchange Commission has published a 118-page
    Report on the Review of the Definition of “Accredited Investor” (December 18, 2015)
  • EB-5 Legislation: I’ve decided not to give regular legislative updates, assuming that you have your own sources if you care about this topic, and that I should resist the comments I’m tempted to make. (There have been several recent additions to the legislative sausage factory– see the IIUSA blog for links. The EB5 Insights blog discusses a substantive new Manhattan-approved entry in detail.)

Regional Center List Changes
New approvals and name changes on the USCIS Regional Center List, 12/08/2015 to 12/22/2015

  • American Immigration Group-NYRC (Connecticut, New Jersey, New York):
  • American Lending Center Georgia, LLC (Georgia):
  • New Empire EB-5 Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • QueensFort Capital California Regional Center, LLC (California):
  • Seattle Pacific Area Regional Center, LLC (Washington)
  • South Pacific Regional Center, LLC (Hawaii)
  • Texas Coast Regional Center Corporation (Texas)


  • Continental Regional Center LLC (former name USA Continental Regional Center, LLC) (California)
  • Fleet New York Metropolitan Regional Center LLC (former name Federal New York Metropolitan Regional Center) (New York)
  • Invest Midwest Regional Center (former name Civitas Indiana Regional Center) (Indiana)
  • CUCC Business Regional Center, Inc (former name U.S. Business Regional Center Inc.) (New York)

Additions to the list of Terminated Regional Centers

  • Twin Development LLC Regional Center (Washington) terminated 12/8/2015

Legislative Update, Due Diligence, New I-485, New RCs

Legislative Update
We are now less than a month from December 12, when the Regional Center program will sunset if it doesn’t get another reauthorization. It’s possible that the program could get temporarily extended as part of the appropriations bill that also needs to get passed by December 11 (which would mean extension with no change through 9/30/2016), or there might be stand-alone legislation with some significant changes and reform as well as reauthorization, or our representatives might let the program lapse for a while because they haven’t worked out appropriate legislation in time but don’t want to see simple extension. Grassley, Corker, and Johnson sent a letter on 11/6 to Senate leadership saying that they oppose a straight reauthorization of the EB-5 Regional Center program in the anticipated appropriations bill that will cover fiscal year 2016, and advocate instead to continue the program together with measures to increase accountability and better guard against fraud and abuse. We wish they would hustle to formulate such measures. Grassley and Leahy have been quietly circulating a revised draft of S. 1501 (IIUSA has a copy, as do select real estate industry executives according to the Wall Street Journal Washington Wire blog). I’ve read the draft but decided not to comment here until it gets officially proposed. The new draft is significantly clarified and toned down from the original bill, though still a game-changer. But will passable legislation be proposed in time to make any difference? If only Washington worked more efficiently!

Due Diligence
I appreciated the article “EB-5 Due Diligence Matters” (November 3, 2015) by Douglas Hauer, John Nucci, and Peter Saparoff of Mintz Levin. The authors discuss the legal requirements for due diligence investigations and give practice pointers.

Form I-485 Update
USCIS has published new editions of the Form I-485, Application to Register Permanent Residence or Adjust Status and Supplements

New Regional Centers
Additions to the USCIS Regional Center List, 11/02/2015 to 11/12/2015

  • EB5 Capital Oregon Regional Center (Oregon, Washington):
  • Empire Regional Center, LLC (New Jersey, New York)
  • Great Southern Regional Center (Georgia, South Carolina)
  • North Valley Regional Center (California)
  • Proficiency Regional Center LLC (California)

What is material change?

The EB-5 process allows limited leeway for change in documents or in reality. Ideally and in principle, all EB-5 petitioners fully demonstrate eligibility in their original I-526 documents, and investment projects go on to develop exactly as foreseen in the I-526 business plan. In real life, there are new circumstances and unforeseen events, not to mention mistakes and omissions, and change happens. This post discusses how and when change is (and is not) a problem in EB-5. (Last update: 01/2019)

Before I wade into details and examples, here’s a rough metric.

Q. What kind of changes can be a problem in EB-5?
— A. Material changes that affect decision-making.
Q. When are material changes a problem?
— A. While decision-making is in process.

And here’s where to find the official policy on material change: USCIS Policy Manual, 6 USCIS-PM G Chapter 4(C) and Chapter 5(C).

What are the principles behind the material change issue?

  • In visa petition proceedings, a petitioner must establish eligibility at the time of filing and that a petition cannot be approved if, after filing, the petitioner becomes eligible under a new set of facts or circumstances. See, e.g., Matter of Izummi, 22 I. & N. Dec. at 176
  • The petitioner must continue to be eligible for classification at the time of adjudication of the petition. 8 C.F.R. § 103.2(b)(1)
  • Form 1-829 approval is predicted by Form 1-526 approval and successful execution of the approved plan. Chang v.United States of America, 327 F. 3d 91 1 (9″ Cir. 2003) (Current policy now states that “USCIS does not deny petitions to remove conditions based solely on the failure to adhere to the business plan contained in the Form I-526 immigrant petition.” 6 USCIS-PM G Chapter 5(C))
  • Black’s Law Dictionary defines “material” as “having some logical connection with the consequential facts” and of “such a nature that knowledge of the item would affect a person’s decision-making process; significant; essential.”

What kind of change is material?

  • A change that’s part of an effort to make an apparently deficient petition conform to USCIS requirements
  • A change that reflects a substantial alteration in circumstances on which USCIS is relying in making its decision, and that would tend to influence the decision
  • A change that asserts eligibility under a materially different set of facts that did not exist when the immigrant first filed the petition
  • All elements of a petition can be subject to material change issues (including the business plan, offering documents, and evidence of investment and source of funds)

What kind of change is not material?

  • A change that affects facts not related to the immigrant investor’s eligibility
  • A change that occurs in accordance with a business plan, as a natural progression of the business

At what point is material change a problem?

  • Material changes are generally NOT acceptable during the period between a petitioner filing I-526 and receiving conditional permanent residence (CPR). This period includes both I-526 processing and the consular or adjustment of status process. If material changes occur in this period, the petitioner must go back to square one and file a new I-526 petition with the new scenario. (Filing a new I-526 is painful thanks to loss of priority date. That will change if USCIS finalizes priority date protections proposed in the  draft regulations posted 01/2017.) Redeployment policy creates one exception/qualification to material change policy. Switching investment projects (under certain conditions) before CPR is not considered “material” provided that investor capital is being redeployed after the initial deployment already met job creation requirements. (6 USCIS-PM G Chapter 4(C))
  • Material changes CAN be allowable during a petitioner’s conditional residence period (after the investor receives the EB-5 visa, and before removing conditions). USCIS will not deny an I-829 petition solely based on failure to adhere to the plan filed with the I-526 Petition. The I-829 petitioner should still demonstrate that he filed the Form I-526 plan in good faith with full intention to follow the plan outlined in the petition, and must still show that he meets the requirements for removal of conditions. USCIS is currently formulating new policy concerning the circumstances under which EB-5 funds might be removed from a project or moved from one project to another during the petitioner’s CPR period (draft memo). The more closely a petitioner adheres to the I-526 plan, the more he can rely on receiving deference to USCIS’s prior approval of that plan. (6 USCIS-PM G Chapter 5(C))
  • Material changes CAN be made between I-924/exemplar I-526 approval and actual I-526 filing. However, USCIS will not show deference (will re-adjudicate) when a new filing involves a different project from a previous approval, or the same previously approved project with material changes to the project plan.

Examples of material change (with fact pattern source in parentheses)

Changes judged to be material

  • A change made belatedly to correct a deficiency in the original filing (making an un-approvable petition approvable)
    • A petitioner filed Form I-526 in 1996 with a partnership agreement containing certain provisions. In 1997, USCIS issues a memorandum objecting to such provisions. The petitioner then files partnership agreement amendments to remove those provisions from his documents. (Matter of Izummi)
    • A petitioner filed a Form I-526 based on investment in a troubled business. When USCIS points out that the business does not qualify as troubled, the petitioner abandons the troubled business claim and substitutes a plan to create a new business instead. (Matter of Izummi)
    • A petitioner filed I-526 with a business plan and operating agreement that anticipated investment in and job creation by two NCE subsidiaries. In RFE, USCIS noted that one subsidiary was not wholly-owned and thus would not create eligible jobs. In response to RFE, the NCE revised the business plan and operating agreement to indicate that investment and job creation would be concentrated in the wholly-owned subsidiary. AAO agreed that this constituted an impermissible material change because made to cure deficiencies noted by USCIS in its RFE (MAR192019_01B7203.pdf)
    • A petitioner filed I-526 with documents including a provision that USCIS judged to be an impermissible debt arrangement. In response to NOID, the petitioner relinquished her rights under those provisions. USCIS found that although the waiver addressed the concerns, the new evidence presented a set of facts not established at the time of filing, and resulting in a material change to the original petition. (JUN252018_01B7203)
    • A petitioner filed a Form I-526 with documents foreseeing a return on investment that did not derive from the underlying investment. USCIS judged this did not qualify as investment at risk for the purpose of generating a return on that investment. In response to NOID, the petitioner submitted amended organizational documents. USCIS found that the amended documents remedied the deficiencies, but represented material change because they presented a set of facts not established at the time the petition was filed. (FEB282018_02B7203)
    • A petitioner filed a Form I-526 describing a loan model for direct investment, which would not qualify. In response to RFE, the petitioner modifies the structure to equity investment in a job-creating new commercial enterprise. (APR232014_01B7203)
    • A petitioner filed a Form I-526 associated with investment in a portfolio of projects. In response to RFE questioning aspects of this structure, the petitioner identifies one project within the portfolio as the target for her investment. (MAY172013_01B7203)
    • A petitioner filed a Form 1-526 in 2012 with a redemption clause. In April 2013, in response to RFE, the petitioner signs Agreement of Waiver to remove that clause (MAY272014_01B7203)
    • A petitioner filed a Form I-526 that does not indicate a management or policy-making role for the petitioner. An amended Operating Agreement filed in response to RFE identifies the petitioner as managing member of the NCE (Oct262009_01B7203)
    • A petitioner filed a Form I-526 in October 2012 for investment in a business that also depends on funds from other investors. In response to RFE, the petitioner provides letters of commitment for the additional investment, but the letters are dated after October 2012. (MAY272014_01B7203)
    • A petitioner filed a Form I-526 in October 2012 for investment in a project not yet underway. In response to RFE, the petitioner provides some evidence of business activity (land purchase, contracts made), but the documents are dated 2013. (MAY272014_01B7203)
    • A petitioner filed a Form 1-526 with a plan for an export business. In response to RFE pointing out deficiencies in the plan, the petitioner submits a new plan for the export business plus a restaurant. (SEP052013_02B7203)
    • A petitioner filed a Form I-526 with Operating Agreement provisions that suggest funds might not be at risk for job creation. When challenged, the petitioner files an amended Operating Agreement that removes the problematic provisions. (Feb182010_04B7203)
    • The petitioner files a Form I-526 on June 1, 2008, based on a $400,000 investment. In response to an RFE, the alien provides proof of the remaining required amount being invested on July 15, 2008. (2008 USCIS adjudicator training)
    • A petitioner filed a Form 1-526 with an arrangement for half of the capital to be paid back to him as a guaranteed return. In response to an RFE, he declares the arrangement null and void. (2008 USCIS adjudicator training)
  • A change that creates a new deficiency (making an approvable petition un-approveable)
    • A petitioner filed a Form I-526 associated with investment in a new commercial enterprise that wholly owns an employment-creating subsidiary. After filing, the subsidiary was no longer wholly owned by the NCE. (Jan072011_01B7203)
  • Changing fundamental aspects of the business plan, particularly those that affect determinations about EB-5 eligibility
    • The petitioner’s I-526 petition and documents subsequently provided to USCIS indicate a shift from focus on retail sales to retail and wholesale, to realty and investment. AAO/USCIS found these changes to be material because “The Petitioner has not explained how this change in business focus (e.g. from retail to realty and investment services) is a natural progression of the business. Further, such a modification in the nature of the NCE’s business activities would be ‘predictably capable of affecting’ our determination of whether the Petitioner will prospectively create the requisite qualifying jobs.” A change of structure in the Operating Agreement is also material. AAO was also concerned that the shift in business focus could be associated with location change, which would also be material. “A change in the location of the NCE would ‘have a tendency to influence’ or would be ‘predictably capable of affecting’  our determination of eligibility for immigrant investor purposes as the location of the investment determines the required capital investment threshold.” (MAY102016_02B7203 dismisses the original appeal, while APR262017_02B7203 dismisses the motion to reopen and reconsider)
    • A petitioner filed a Form 1-526 with a plan for a grocery store. Later, she adds a plan for a restaurant not mentioned in the original filing. (FEB162005_01B7204)
    • A petitioner filed a Form 1-526 for investment a Regional Center project that owns and will redevelop a property. Subsequently, the property is lost to foreclosure and has to be re-acquired with new financing. This temporarily puts the project in doubt and permanently changes development budget numbers used in the economic impact analysis. (Feb182010_04B7203)
    • A petitioner filed Form I-526 for a regional center-sponsored project. After I-526 approval, but before the investor receives a visa, the regional center is terminated. The project did create jobs, but in a job-creating entity separate from the new commercial enterprise (OK for regional centers, not OK for direct EB-5). Proceeding without regional center involvement would require the NCE to absorb the JCE and make it a wholly-owned subsidiary. This structural change would constitute a material change to the original petition. (JUL182016_01B7203)
  • Changing or losing regional center sponsor
    • If a regional center immigrant investor changes the regional center with which his or her immigrant petition is associated after filing the Form I-526 petition, the change constitutes a material change to the petition.  (Language added for the first time on 8/4/2018 to the Policy Manual 6 USCIS-PM G Chapter 4(C))
    • The termination of a regional center associated with a regional center immigrant investor’s Form I-526 petition constitutes a material change to the petition (Language added for the first time on 6/14/2017 to the Policy Manual 6 USCIS-PM G Chapter 4(C))
    • A Petitioner invested in a project whose regional center sponsor was terminated. The petitioner wished to continue to pursue an EB-5 visa as an individual investor independent of a regional center. USCIS found that this would lead to material changes. Outside the RC program, the petitioner would need to demonstrate both the requisite direct job creation and that the JCE is the wholly-owned subsidiary of the NCE. But meeting those conditions would necessitate material changes and thus a new petition, because having insufficient qualifying jobs is a material change, and requiring the NCE to absorb the JCE would be a material change. (AUG032016_01B7203).
    • A petitioner filed a Form I-526 associated with a project sponsored by a Regional Center. Before I-526 was approved, the Regional Center lost its designation. The petitioner then amended the petition based on investment in a project within a different Regional Center. (AUG062014_01B7203)

Changes judged NOT material

  • Changes to aspects of the petition that don’t significantly affect the petitioner’s eligibility one way or another (ie changes not made to correct deficiencies in the original filing; changes that alter aspects of the business not fundamental to the petitioner’s eligibility)
    • “If the organizational documents for a new commercial enterprise contain a liquidation provision, that does not otherwise constitute an impermissible debt arrangement, the documents may generally be amended to remove such a provision in order to allow the new commercial enterprise to continue to operate through the regional center immigrant investor’s period of conditional permanent residence. Such an amendment would generally not be considered a material change because facts related to the immigrant investor’s Form I-526 eligibility would not change.” (6 USCIS-PM G Chapter 4(C) “Material Change”.)
    • A petitioner filed Form I-526 with a business plan that anticipated that the NCE would provide shuttle and tour services, with auto accessories sale as a sideline (about 10% of business). A subsequent site visit found little evidence of shuttle/tour service and auto accessories sale accounting for far more than 10% of the business. But AAO found that “Merely shifting the percentages of the types of services the Petitioner said the NCE would offer is not, by itself, a sufficient basis to deny the petition.” (JUN302017_01B7203)
    • The petitioner files a Form 1-526 and invests $1,000,000 in a business that is planning to operate a Chinese restaurant. In the RFE, it is revealed that the business has decided to operate a Peruvian restaurant instead. This is not a material change. (2008 USCIS adjudicator training)   [However, the petitioner in JUL062017_01B7203 tried to cite this training material to support an argument that she hadn’t committed a material change in changing from a fast food franchise restaurant to catering service to full-service seafood restaurant with catering. AAO did not accept the argument, finding that “The NCE’s business plans two and three constitute a material change to the original one because they represent far more than a change in food styles. …in addition to the type of food, business plans two and three include changes to the NCE’s nature of business, services offered, location, start-up costs, and staffing needs. These changes are material and are made to correct a deficiency in the original submission”]
  • Changes that are more modification of than departure from the original (revised documents that have strong continuity with documents originally filed)
    • The petitioner files Form I-526 with a partnership agreement and investment agreement that are inconsistent with each other. He subsequently files a set of amendments to the partnership agreement specifically to iron out those inconsistencies. (Matter of Izummi)
    • The petitioner files a Form 1-526 based on a Regional Center project that involves a loan agreement. In response to RFE expressing concern about a closing date already passed, the petitioner submits a renegotiated loan agreement extending the date. (JUL192005_01B7203)
    • A pending Form I-526 does not contain redeployment language, and the investment documents are subsequently amended to allow redeployment. “If the further deployment of capital is within the scope of the new commercial enterprise’s business activities in existence at the time the Form I-526 petition was filed, and amendments to the investment documents do not materially alter the facts in existence at the time of filing, such amendments, when considered under the totality of the circumstances, could likely not be considered a material change.” (7/19/2017 Talking Points)
  • Other examples of changes not judged material
    • “For example, if at the time of filing the immigrant petition, no jobs have yet been created, but after approval of the immigrant petition and before the investor has obtained conditional permanent resident status, the investment in the new commercial enterprise results in the creation of 10 jobs in accordance with the investor’s business plan as filed, such a change would not be considered to be material.” (6 USCIS-PM G Chapter 4(C) “Material Change”.)
    • The petitioner files Form I-526 based on investment in two hair salons. These salons use the investment but end up going out of business after 1.5 years, before I-526 adjudication. The petitioner intends to make additional investment and open new salons in the same TEAs with a different management company and different staffing plan. This is not judged a material change. (AUG152017_01B7203)
    • A regional center filed an amendment/exemplar request that USCIS initially denied, in part based on impermissable material changes from previous filings. AAO disagreed. “While the location, the Borrower, and the JCE differ from the initial filing, these changes are permissible because the hospital project is substantively similar to the management structure, construction and development entities, and economic analysis in the original 2015 business plans’ proposed project, and moreover, these changes were not an attempt to remedy a deficient petition.” For example, the petitioner showed that a new JCE was formed in response to evolving business needs before a NOID was ever received from USCIS. However, the decision notes the difference in material change standards for I-924 vs. I-526, and leaves unclear whether such changes would also be non-material for investor petitions. (AUG152018_01K1610)

Conclusion: What should we then do?

  • Try to file I-526 documents that fully demonstrate the petitioner’s eligibility (because if anything essential to demonstrating eligibility is missing from the original filing, or if some provisions/conditions in the filing would make the petitioner ineligible, those issues may not be possible to fix without committing material change)
  • Put EB-5 investment in enterprises/projects that are able to proceed predictably according to plan, at least for the first few years while the investor is waiting for conditional permanent residence (because the investor can get derailed by material change if the project departs significantly from the business plan while USCIS/DOS are still in process of reviewing the investor’s documents). Where aspects of the business are subject to short-term change and variation from plan, explicitly foresee that in the business plan and offering documents.
  • Try to choose a stable regional center sponsor. If the regional center loses its designation, every path to salvaging investor petitions may be blocked by material change problems.
  • Between filing I-526 and receiving an EB-5 visa, be careful when answering challenges and providing new evidence to USCIS/DOS. Points to make to support the case that any changes are NOT material:
    • Facts related to investor eligibility did not change
    • Change was not an attempt to remedy a deficient petition
    • Change was not in response to challenge by USCIS (change pre-dated RFE/NOID)
    • Change occurred as part of “natural progression of the business” and “in response to evolving business needs”
    • Fact pattern is “substantively similar” to original filing
  • Relax a bit once investors have conditional permanent residence, since material change won’t automatically derail them now, but don’t relax too much. Keep USCIS apprised of major new developments, and retain evidence of good faith efforts to follow the original business plan.

Additional Reading

  • In its Comment on Proposed EB-5 Regulations (p. 6-10), AILA explains why USCIS should specify that “a change is material if, after filing, the change causes the exemplar or EB-5 petition to no longer satisfy the eligibility requirements … Any other change may be significant or insignificant, but is not material to the ultimate approvability of the petition.”
  • A Business Plan is Not a Statue — Impacts of Business Plan Changes (Nov 17, 2016) by H. Ronald Klasko likewise argues that “A material change should be a change that makes an approvable project un-approvable, or makes an un-approvable project approvable.”

Update on RC Renewal, Articles (Retrogression, SEC), New and Removed RCs

Legislative Update
Last week Congress passed a two-year budget deal that raises funding levels and suspends the debt limit until 2017. This accomplishment eases the way for the spending package that needs to passed by December 11 to keep the federal government funded. And it could be good news for the EB-5 Regional Center program, if RC program reauthorization could be folded into the appropriations bill as has happened in the past. But we hear that powerful voices in Congress want standalone legislation with changes and reform, not just another reauthorization, and we aren’t hearing of progress toward making that happen. A couple bills came out in October, but we haven’t seen substantial new contenders – no work product from the negotiations by Grassley, Leahy, Goodlatte, and Issa; no new version of the leading Senate bill S. 1501; and nothing that looks like it has a serious chance of satisfying enough interests to pass. (EB5 Coalition has a bill comparison chart summarizing current offerings.) I am happy to report that IIUSA has just come out with an EB-5 legislative compromise proposal based on consultation with a broad base of stakeholders plus assessment of what could fly on Capitol Hill. For details, see the announcement: IIUSA Delivers Compromise EB-5 Legislative Proposal to Congress. We hope to inspire our representatives to engage in some compromising of their own, and avoid an impasse that would let the Regional Center program expire on December 11.

Articles (China Retrogression, SEC Actions)

New and Terminated Regional Centers
Additions to the USCIS Regional Center List, 10/19/2015 to 11/02/2015

  • City Connections Regional Center LLC (California must be USCIS error, presumably should be Connecticut, New Jersey, New York, Pennsylvania):
  • Deictic Investment Group LLC (California)
  • MCFI Southern California / Arizona (Arizona, California):
  • South Atlantic Coast Regional Center LLC (Florida, Georgia, North Carolina, South Carolina)


  • California Golden Pacific Regional Center, LLC (former name U.S. Golden Pacific Regional Center, LLC) (California)

Additions to the list of Terminated Regional Centers

  • USA Lifestyles Regional Center (Maine) terminated 10/13/2015
  • Spring Hill Homes LP Regional Center (Texas) terminated 10/22/2015

I-924 options: What are actual and hypothetical projects? What does exemplar mean?

This post doesn’t break any news, but replaces an outdated post from 2011 that I notice has been getting a lot of traffic. (Most recently updated January 2017 based on the 11/2016 EB-5 Policy Manual chapter.)

Regional Center application project types and actual, hypothetical, and Exemplar business plans

USCIS Policy Manual, 6 USCIS-PM G (November 30, 2016) Chapter 3 summarizes the requirements for an application for regional center designation,

A regional center seeking to participate in the Regional Center Program must submit a proposal using the Application For Regional Center Under the Immigrant Investor Program (Form I-924).

USCIS may designate a regional center based on a general proposal for the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment. The statute further provides that a regional center shall have jurisdiction over a limited geographic area, which shall be described in the proposal and consistent with the purpose of concentrating pooled investment in defined economic zones.

In addition, the establishment of a regional center may be based on general predictions, contained in the proposal, concerning the kinds of commercial enterprises that will receive capital from immigrant investors, the jobs that will be created directly or indirectly as a result of such capital investments, and the other positive economic effects such capital investments will have on the area.

The Policy Manual goes on to explain that “the level of verifiable detail required for a Form I-924 to be approved and provided deference may vary depending on the nature of the application filing,” and provides three options for type of application filing: hypothetical, actual, and exemplar. Table 1 summarizes each type as defined at 6 USCIS-PM G Chapter 3(B).


USCIS asks the applicant to label the project documents included in the I-924 application, identifying whether they are presented as hypothetical, actual, or examplar. One application may include a mix of project types, and USCIS may decide to re-classify and approve an “actual” project as “hypothetical” if it’s not sufficiently detailed.

The standard for actual/exemplar business plan content is clear and rigorous: the same “Matter-of-Ho-compliant” standard that applies to the I-526 business plan. The standard for hypothetical plans was not defined from 2013 to 2016, and appeared to be very low. The new Policy Manual introduced in November 2016, however, gives some positive guidance for hypothetical plan content.

General proposals and predictions may include a description of the project parameters, such as:

* Proposed project activities, industries, locations, and timelines;

* A general market analysis of the proposed job creating activities and explanation regarding how the proposed project activities are likely to promote economic growth and create jobs; and

* A description, along with supporting evidence, of the regional center principals’ relevant experience and expertise. (quoted from 6 USCIS-PM G Chapter 3(B))

A regional center applicant may classify its potential real project as “hypothetical” because it’s not sufficiently advanced for detailed description, or may submit business plans for projects that are purely hypothetical scenarios — just examples of the kind of thing the regional center might do. Hypothetical projects are relatively easy to write up, and applicants can apply for very expansive geographic areas by including many hypothetical projects in the application. My log of new regional center designations from 2013 to 2015 (based on RC designation letters) shows that about 85% of initial regional center designations have been based on hypothetical projects.  However, approval of “actual” or “exemplar” documents can be valuable, thanks to deference.  Once USCIS has granted an actual or exemplar approval in the I-924 context, it will not (generally) revisit those same documents when they appear in investor I-526 petitions. From 2013 to 2015, USCIS issued 122 letters formally approving actual projects that were filed with I-924 initial applications or amendment requests.

AAO decisions relating to 1-924 project issues

  • JUN272013_01B7203, DEC302013_01B7203, and FEB102014_02B7203 are examples of AAO decisions that require USCIS to reconsider I-526 denials that neglected to fully address deference to I-924 approvals. These decisions indicate that AAO (if not always USCIS) take the deference policy seriously.
  • A few AAO decisions indicate limits on what can be approved as a “hypothetical” plan.  FEB212014_01K1610 concludes that “While USCIS does not define the level of detail required for a general proposal, merely identifying the NAICS industry categories and the eventual input-output model without analyzing how the model would apply to a hypothetical project that falls under the industry categories is insufficient to meet the applicant’s burden within these proceedings.” In AUG222016_01K1610, AAO and USCIS refused to consider the actual, active project of another regional center, including the economic impact analysis, as the Applicant’s hypothetical project.
  • In JUL192013_01K1610, AAO withdrew a denial, finding that USCIS should not have required a proposal based on hypothetical projects to provide detail such as letters of intent from lenders, commitments from prospective partners, and extensive cost and location detail.

Finally, recall that an I-924 application for initial designation must include a business plan for the Regional Center itself in addition to the kind of project proposals described in this post. See the I-924 Instructions item #4 and #6 for ideas about what to include in a regional center operational plan. The AAO decision JUL092015_01K1610 discusses an application that was denied in part for failing to submit a sufficient operational plan.

EB-5 Timing Issues

See my updated versions of this post EB-5 Timing Issues: Not a Fast Track (January 12, 2016) and EB-5 Timing Issues and Visa Wait: Process and Data (October 13, 2017)

I-924A Reminder, Processing Times, New RCs

I-924A Reminders
As Regional Centers prepare Form I-924A annual report filings (due December 29th), here are a few points to keep in mind:

  • Use the I-924A Form and Instructions and the filing address posted on the USCIS website. For filing tips, refer to the Questions and Answers Form I-924A from 2011 and the September 17, 2015 engagement on Form I-924A (recording here).
  • Your purpose in filing Form I-924A is to show continued eligibility to participate in the Regional Center Program, specifically by demonstrating that the Regional Center is continuing to promote economic growth, improved regional productivity, job creation, or increased domestic capital investment in the approved geographic area. (As per Section 610(a) of the Appropriations Act and 8 CFR 204.6(m)(6))
  • Each Form I-924A will be reviewed by a new compliance group within IPO. As part of its review, this group will:
    • Review the info provided in the I-924A for timeliness, accuracy, and completeness
    • Consider both your Form I-924A responses and any supplemental narrative and exhibits that you choose to provide to determine whether your Regional Center did something to promote economic growth in FY2014
    • Check the numbers you report in the I-924A against other info USCIS has on file for your RC, and red flag any inconsistencies
    • Perform an Internet search and a search through internal databases looking for derogatory information related to your Regional Center and its projects and principals
    • Investigate your Regional Center’s online presence (RC’s website, online content from agents and promoters) and look for any impropriety (USCIS has said they particularly look 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 USCIS’s Cautions on Names of Regional Centers and Enterprises, and Unauthorized Use of DHS Seal)

    (Sources: 8/13/2015 stakeholder meeting, 9/17/2015 engagement, and FOIA material)
    Prepare the I-924A with this review in mind. Add narrative explanation to your I-924A as needed to avoid any questions about apparent inconsistencies, derogatory information, or inactivity. And review and fix any problems with your web presence now.

IPO Processing Times
For what it’s worth, here’s another chart tracking average processing times reported for IPO. Just keep in mind that anecdotal evidence suggests a huge standard deviation around these averages.
I think the real processing story is in volume of receipts and approvals, but we’ll have to wait a few months before USCIS publishes those numbers for the fourth quarter.

New Regional Centers
The USCIS Regional Center list has now exceeded a thousand entries, expanded in part by the large number of multi-state Regional Centers approved since late 2013. In allowing RCs to claim huge geographic areas, IPO has liberally interpreted Congressional intent that “a Regional Center shall have jurisdiction over a limited geographic area, which shall be consistent with the purpose of concentrating pooled investment in defined economic zones” (Section 610(a) of the Departments of Justice and Related Agencies Appropriations Act 1993).

Additions to the USCIS Regional Center List, 10/08/2015 to 10/19/2015

  • AGC California Regional Center, LLC (California)
  • Global America Regional Center (California)
  • MCFI – Northern California, LLC (California):
  • Invest CNMI, LLC (Northern Marianas Islands):
  • AGC New York Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • American EB-5 Properties Regional Center, LLC (Northern Connecticut, New Jersey, New York):
  • Ironstate Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • American National Immigration and Education Center LLC (District of Columbia, Maryland, Virginia, West Virginia)
  • Central Western Regional Center LLC (Illinois, Indiana, Michigan, Missouri, Ohio, Pennsylvania, Wisconsin) USCIS Designation Letter
  • Ashcroft/Sullivan/Baybridge Mid-Atlantic Economic Development Center (Maryland):
  • CMB North Dakota Regional Center (North Dakota):
  • Landy Resources Management, LLC (North Dakota)
  • EB 5 Capital-Texas Regional Center (Texas):
  • Lone Star EB-5 Regional Center (Texas)

The basics: Regional Center investment structure and direct and indirect job creation

With the EB-5 Regional Center program needing reauthorization by September 30 this year, and with the one piece of legislation on the table so far (the Leahy Grassley bill) offering to restructure it while reauthorizing it, I’d like to step back and look at what fundamentally characterizes the Regional Center program. What sets the RC program apart from regular “direct” EB-5 (which doesn’t need reauthorization)? What key features does any Regional Center program reauthorization bill need to protect?

The EB in EB-5 stands for employment based, and both direct and Regional Center EB-5 reward investment that results in job creation – 10 or more jobs per EB-5 investor. The major difference lies in which jobs can be credited to EB-5 investors, which in turn affects investment amount and structure and economic impact potential. Consider the following figures.
The key difference between Figure A and Figure B is indirect job creation, and the key benefit from this difference is that many more and much bigger projects can get funded with the Figure B structure. To elaborate:

  • The traditional “direct” EB-5 program only allows EB-5 investors to be credited with “direct jobs,” defined as W-2 employees of the new commercial enterprise (NCE) that receives EB-5 investor equity. This fact limits the countable jobs (and therefore the maximum EB-5 investment) and also possible structures. There can be only one pot in direct EB-5: all the EB-5 money goes in that one pot as equity and only the full time W-2 jobs in that one pot can be credited to investors. If your business involves multiple entities (for example a holding company for the property and a management company for operations), then you have two pots and direct EB-5 won’t work for you (unless the management company is a wholly-owned subsidiary of the holding company, making them essentially a single entity). If your project creates jobs for people who aren’t your W-2 employees (e.g. construction workers on your job site), the direct EB-5 program doesn’t allow counting those jobs. If you’d prefer to segregate EB-5 investors in a separate entity rather than giving them a management role directly in your business and mixing them with your non-EB-5 investors, it’s hard to do that with direct EB-5. If you’d like the EB-5 funds to eventually come into the business as a loan rather than equity, direct EB-5 doesn’t allow that either. All this lack of flexibility results from the fact that there can’t be more than one enterprise/layer involved, which in turn follows from the fact that the buck literally stops with the new commercial enterprise, thanks to the direct job limitation. The NCE is where the money has to be invested and spent and where the jobs have to be created; any associated job creation that’s not within that one new commercial enterprise is “indirect” by EB-5 definition and can’t be used to justify EB-5 investment.
  • The Regional Center program provides an attractive alternative to traditional direct EB-5 because Regional Center investors can be credited with “indirect” jobs, which EB-5 policy defines as “those that are held outside of the new commercial enterprise but are created as a result of the new commercial enterprise.” (Policy Memo p. 8) Indirect job creation opens up a new world of structure possibilities. Figure B shows a typical regional center investment with two pots: the new commercial enterprise (NCE) and the job-creating enterprise (JCE). The NCE is still subject to EB-5 requirements (must a single entity, must receive equity from the EB-5 investors, must give EB-5 investors a management role), but the business and job creation are separated in another pot that’s not so limited. The job-creating enterprise can encompass multiple entities, can receive investment from the NCE as debt or equity, can separate EB-5 and non-EB-5 investors, and can raise funds based on economic impact. If the Regional Center NCE has employees, it can verify them by submitting payroll records, just like a direct EB-5 NCE. However the typical Regional Center NCE has no business beyond investment and no employees. Instead, Regional Center investors in the NCE usually take credit for indirect jobs (i.e. the jobs created outside the NCE but resulting from the NCE’s investment – what’s in the green-shaded box in Figure B). These include impacts that an economic model would call direct (relating to the first round of inputs purchased by the subject industry) and indirect (relating to subsequent rounds of inputs purchased by supporting industries). If the job-creating enterprise funded by EB-5 investment is a hotel, the economic model would capture the employees required to build and operate the hotel and also some employment impacts of the hotel’s supply purchases. These new jobs could be on the payrolls of numerous third parties (the general contractor, the hotel manager, etc.), but it doesn’t matter because the NCE doesn’t have to control payroll records to verify job creation that happens outside it. EB-5 policy allows for using reasonable economic methodologies to calculate job creation outside the NCE but resulting from the NCE’s investment. For an example, the economist could use RIMS II Type II multipliers developed by the U.S. Bureau of Economic Analysis to calculate the employment impacts associated with the verified expenditures and revenues of a project funded by EB-5 investment.

Why is all this important? When you’re judging whether a piece of Regional Center reauthorization legislation is worth supporting, keep my Figure B in mind. Make sure that the legislation retains the possibility of the NCE and JCE as distinct entities, crediting EB-5 investors with job creation that’s outside the NCE aka indirect. If that core defining feature is compromised, then whatever the legislation would authorize, it’s not the Regional Center program. The Leahy Grassley bill is currently not clear on indirect job creation or the distinction between NCE and the JCE. The bill proposes regulating Regional Centers as if and assuming that they control JCEs, which is often not the case in the Figure B model (and not necessarily desirable either, considering potential conflicts of interest). A number of provisions are just confusing given the NCE/JCE distinction (ie do the provisions about non-EB-5 investors on p. 6 apply to the NCE or JCE?). Most critically, the bill proposes limiting indirect job creation. Maybe the section on p. 4 only intended to require investors to count some jobs beyond those generated from supply purchases, which is fair, but the terms are not defined and can just as well mean that at least 10% of jobs need to be direct jobs within the NCE, which would destroy the Regional Center model.

To avoid confusion, anyone using the term “indirect job” must specify if he means the EB-5 policy definition (see p. 8 of the Policy Memo) or an economic model definition, and if so which model, since RIMS II and others slice up the impact pie slightly differently (for example see p. 33 and 50 of the RIMS II Handbook). And he should think about the definition. Regional Center program critics tend to talk about indirect jobs as if they were mere mathematical phantoms. That’s not the case. The carpenter who installs the floor at the EB-5-funded hotel and the housekeeper who will clean it both have heads that you can go touch if you like, although they both can be indirect jobs by the EB-5 policy definition. Their existence is usually inferred using financial data and economic models rather than verified by payroll records, since the Regional Center EB-5 investor is at a remove and probably lacks access to the payroll records, but that doesn’t make their employment a fiction. Heads get harder to locate and to touch when you get down to economist-definition indirect jobs, which look at ripple effects beyond the project site, but they’re not fictional either. (Or at any rate you have to go up against the Bureau of Economic Analysis, the 1973 Nobel committee, and John Maynard Keynes himself to argue that multiplier effects are bogus. See the forthcoming July RCBJ for a good article on this topic: “Economic Multipliers in the EB-5 Arena: Voodoo Economics or Sound Economic Practice?” bu Scott Barnhart.)

The benefits that come with indirect job creation are many. It’s possible to raise more EB-5 money when you can count more jobs – not only the W-2 jobs in a single entity but the wider economic impact of a given project. It’s possible to fund larger and more complex businesses when you’re not limited to all spending and employment occurring within a single entity. It’s possible to be a Regional Center and raise money for various independent projects in the community when you can set up NCEs separate from the JCEs and can verify job creation using economic methodologies. Architects of the Regional Center program intended it to facilitate the concentration of EB-5 immigrant investor capital into larger projects deemed more likely to have significant regional and national impact. Indirect job creation has made this vision possible. A typical direct EB-5 venture raises less than $2 million, as compared with raises in the tens of millions per project possible with indirect job creation and a Regional Center structure. We wouldn’t be talking about EB-5’s $3.58 billion contribution to GDP if we didn’t have the Regional Center program.

The basics: Who are EB-5 investors, what are Regional Centers, what are EB-5 offerings?

Making good policy for EB-5 requires understanding what EB-5 is. I made the tables below to help people think about what EB-5 investors, Regional Centers, and EB-5 offerings are, and what place they occupy in the world. Panicky journalists (and recently, panicky legislation) appear to assume that EB-5 exists in its own special, isolated world where EB-5 regulations or lack thereof are the only rules and USCIS policing or lack thereof provides the only enforcement. If this assumption were valid, then Senators Leahy and Grassley would be right to propose burdening USCIS with extensive responsibilities for the securities compliance issues, investor market integrity factors, foreign direct investment issues, and national security considerations that could potentially be associated with an EB-5 investment. If EB-5-world were isolated from the jurisdictions of the SEC, OFAC, FINRA, the FBI, the State Department, and so on, then the Investor Program Office at USCIS would indeed need to hire lots more staff and make lots more regulations to compensate. USCIS would need to create in-house EB-5-world versions of those agencies and their regulations and oversight and enforcement activities. The job-creation impact would be huge – not only duplicating federal agencies but creating new categories of specialists in the private sector (the expert in USCIS EB-5-world securities regulations as distinct from the SEC’s securities regulations for everyone else, the expert in EB-5-world foreign investment limitations as distinct from regular-world foreign investment limitations, and so on.) But all this is unnecessary if the EB-5 investor, Regional Center, and EB-5 offering in fact belong to the wide world. And clearly, they do. “I am a petitioner for EB-5 benefits” is one descriptor of an EB-5 investor, and he’s unique to EB-5 and under USCIS’s watch to that extent. “I am an investor in a US business” is another statement he can make, and that puts him in a larger group under the SEC’s range of expertise and OFAC and FinCEN and such limitations as applicable. “I am an immigrant,” he will also say, and that makes him the State Department’s baby and subjects him to DOS’s specialization and resources related to national security. As a foreign investor, he’s a foreign investor like other foreign investors, and as an immigrant, he’s an immigrant like other immigrants – not unique to EB-5 in those capacities, not a greater or lesser security risk because of EB-5, and not isolated from the factors that apply to other investors and other immigrants generally. I argue that policy makers who want to improve EB-5 should focus on what’s unique to EB-5. Where a “who am I?” or “what am I?” statement below is particular to EB-5, the corresponding rules/oversight should involve USCIS and may be an area where USCIS or the EB-5 regulations can improve. If the characteristic isn’t EB-5-specific, neither should the policy be.
To read more about securities law applications to EB-5 investors, regional centers and offerings, see the notes from the USCIS/SEC engagement and articles on the Investment Law Blog, EB-5 Diligence, and EB-5 Insights. This IIUSA article describes levels of screening for EB-5 investors. I welcome corrections and additions to my tables.

2013 EB-5 Impact Study, New & Removed RCs

2013 EB-5 Impact Study
Every year IIUSA commissions an economist to analyze data on EB-5 investment amounts and job creation as reported by Regional Centers in their I-924A annual reports. The 2013 report was prepared by the Alward Institute for Collaborative Science, and has been just released — for free! See The Economic Impact and Contribution of the EB-5 Immigration Program 2013, prepared by David Kay. Past reports have been only available for purchase at a hefty rate; this one may be publicly available because IIUSA is hoping to get an updated version shortly based on 2014 annual report data. The report is a wonderful resource because it’s based on professional, peer-reviewed analysis of a comprehensive data set obtained via FOIA request, and helps translate the performance of individual Regional Centers into numbers for GDP and job creation by geographic area and sector.

New & Removed Regional Centers
Additions to the USCIS Regional Center List, 5/11/2015 to 5/22/2015

Additions to the USCIS Terminated Regional Center List 5/23/2015 to 5/22/2015

  • Front Burner Restaurants Regional Center – Southern California(California)
  • Louisiana Mississippi Regional Center (Louisiana, Mississippi)
  • New Jersey Liberty Regional Center, LLC (New Jersey)
  • Tennessee Regional Center, LLC (North Carolina)
  • Coastal Carolina Regional Center (South Carolina)

New & Removed RCs, Processing Times, Websites, Multifamily, NYT, Best Practices

New & Removed Regional Centers
Additions to the USCIS Regional Center List, 4/28/2015 to 5/11/2015

  • Golden State Economic Development Fund, LLC (California)
  • Encore Midwest Regional Center, LLC (Illinois and Missouri):
  • White Lotus Group Regional Center (Iowa and Nebraska)
  • Liberty Minnesota Regional Center (Minnesota and Wisconsin):
  • American Regional Center Opportunity Fund, LLC (New Jersey, New York, and Pennsylvania)
  • Vistar’s EB-5 Business Alliance of Texas LLC (Texas)

Additions to the USCIS Terminated Regional Center List 4/22/2015 to 5/7/2015

  • LaSalle County Business Development Center (LCBDC) (Illinois)
  • US HITEC Regional Center (Illinois)
  • Tennessee Regional Center, LLC (Tennessee)

Other Items of Note