FY2020 Q1 EB-5 Processing Statistics

The USCIS Immigration & Citizenship Data page has posted the long-awaited EB-5 form data for October to December 2019 (FY2020 Q1).

The main questions in my mind before I saw the data:

  • Was there really a massive I-526 surge ahead of the November 2019 deadline to increase the investment amount?
  • Did IPO show any trend toward improved productivity?

I made my data summary charts go back to 2015 this time, to put recent trends in context. As the charts illustrate, there was a large but not historically large surge in I-526 receipts last quarter.  So far from clocking any productivity improvement, IPO once again broke its record for fewest adjudications of all time. Clearly, adjudication was not among IPO’s priorities in 2019.  IPO did not even accomplish the minimum of adjudicating sufficient I-526 over the past four quarters to claim a full annual visa quota. I-924 adjudications remain near 0, while I-829 adjudications continue at a steady low level. Now we’re left to hope for FY2020 Q2 data, which IPO Chief Sarah Kendall promised us last month would show some improvement — improvement we’ve been seeing anecdotally. To quote again from Kendall’s remarks about new processing procedures:

USCIS leadership views these initiatives as absolutely vital to the success of the EB-5 program. We acknowledge that case completion rates have decreased partly because of these activities, and we understand the concerns that raises for our stakeholders. With a lot of the infrastructure development now behind us, IPO is better situated to improve productivity. In fact, preliminary data for February shows a step in the right direction. The USCIS Office of Performance and Quality anticipates publishing new data in the coming month.

This quarter’s data release included a new table that I’ll analyze separately in another post.




EB-5 updates and resources under COVID-19

[Update: for newer information, see instead my 5/28 post EB-5 Impact of COVID-19 (processing, eligibility, visa numbers)]

As the war against COVID-19 heats up around the world, EB-5 work continues, but with some changes. A few notes on developments over the past two weeks:

USCIS continues to operate despite COVID-19, with modifications

USCIS offices have been closed to the public since March 18, but USCIS staff are continuing to perform duties that do not involve face-to-face contact with the public. (Except where otherwise noted, the information in this section is from uscis.gov/coronavirus, which gets updated regularly.)

That means IPO (which needless to say lacks public contact) is continuing to adjudicate I-526, I-829, and I-924, and to terminate regional centers. In fact, the latest processing times report (updated March 20) recorded a decrease to I-526 processing times. I’ve heard multiple personal reports of EB-5 decisions received. The USCIS list of regional centers got a significant update this week, recording three new approvals and 24 terminations. Service centers also continue to process I-485 status adjustments.

EB-5 investors at the visa stage will be affected by the fact that all biometrics appointments have been temporarily suspended since March 18 until at least April 7 May 3 June 4, with all appointments to be automatically rescheduled once USCIS again resumes normal operations.

On March 20, USCIS announced flexibility in submitting required signatures. “For forms that require an original “wet” signature, per form instructions, USCIS will accept electronically reproduced original signatures for the duration of the National Emergency.”

On March 27, USCIS announced flexibility for responses to Requests for Evidence and Notices of Intent to Deny. “For applicants and petitioners who  receive an RFE or NOID dated between March 1 and May 1, 2020, any responses submitted within 60 calendar days after the response date set forth in the RFE or NOID will be considered by USCIS before any action is taken.”

On March 30, USCIS expanded this flexibilty: “A response received within 60 calendar days after the response due date set forth in a Request for Evidence, Notice of Intent to Deny, Notice of Intent to Revoke, or Notice of Intent to Terminate will be considered before taking any action if such request or notice is issued and dated by USCIS between March 1 and May 1, 2020, inclusive.”(uscis.gov/coronavirus)

Other IPO Activities

The EB-5 Resources page on the USCIS website was updated on March 23 with Sarah Kendal’s prepared remarks from the 3/13 Public Engagement, as well as with Q&A on the Visa Availability Approach. The Q&A gives a detailed, clear, and helpful overview of the new visa availability approach to I-526 processing that will officially launch next week.

EB-5 visa applications and COVID-19

EB-5 visas are temporarily not being issued through consular processing. On March 20, 2020, DOS announced suspension of routine visa services. “In response to significant worldwide challenges related to the COVID-19 pandemic, the Department of State is temporarily suspending routine visa services at all U.S. Embassies and Consulates. Embassies and consulates will cancel all routine immigrant and nonimmigrant visa appointments as of March 20, 2020. As resources allow, embassies and consulates will continue to provide emergency and mission critical visa services. Our overseas missions will resume routine visa services as soon as possible but are unable to provide a specific date at this time.”

With applicants overseas temporarily unable to claim available visas, this may mean more visas available to applicants in the U.S., since I-485 status adjustments are still being processed (as of now). Depending on how long it takes overseas visa services to get back on track, Department of State faces a challenge to allocate all available visas for the fiscal year.  So long as consulate closures prevent people overseas from claiming visas, that could cause the Visa Bulletin final action dates to advance rapidly to accommodate those few who are placed to receive visas. At the beginning of the year, Department of State had anticipated issuing a total of 11,112 EB-5 visas, including 778 each to Vietnam and India, with an estimated 5,270 leftover for the oldest priority dates (i.e. China).  In the first five months of FY2020 (October to February), consulates had issued 237 EB-5 visas in India, 345 EB-5 visas in Vietnam, and just 1,088 EB-5 visas in China. (Data from adding up monthly tallies of EB-5 visas issued by consulate. Unfortunately USCIS does not publish data on EB-5-related I-485 approved and pending.)

Politico Rumor

Last week someone launched an EB-5 virus – an implausible story that Senator Lindsey Graham was pushing to increase EB-5 visas to 75,000 and decrease the minimum investment amount to $450,000 as part of the emergency stimulus bill. Politico published the story, Senator Graham himself responded publicly that the story was false (listen starting at minute 2:50 in this 3/19 Fox News interview), and yet the story continues to spread and mutate, inspiring a storm of media criticism of the EB-5 program and EB-5 investors. As IIUSA says “Although the EB-5 industry would like to see program reforms, it would never support these extreme and unfounded shifts. It did not do so last week, and it will not do so in the future.” I wonder which interest group planted the rumor, with what intent. Possibly it came from an anti-immigrant faction that’s now chuckling with glee at the backlash? Or a misguided industry insider hoping to stoke the market with false hopes? Certainly, this story has damaged EB-5 just when it’s in a position to be a helpful tool in our current economic state.

EB-5 risks and opportunities under COVID-19 conditions

Martin Lawler’s article COVID-19 Impact on EB-5 Hotel Projects (April 6, 2020) discusses issues related to maintaining EB-5 eligibility in an industry particularly threatened by COVID-19

Green Card by Investment continues to come out with EB-5 Talk podcasts on timely topics, most recently “Restructuring your NCE operating documents for redeployment” with Mark Katzoff (March 23), and “Investor options with troubled projects” with Robert Divine (March 17).

Matthew Galati has a helpful article on Filing I-829s During a Coronavirus Economic Downturn (March 26, 2020)

A reminder of my July 2019 article on Priority date retention and redeployment, which includes a flow chart to clearly illustrate the different project change and redeployment options at various points in the EB-5 process.

IIUSA has started to roll out a new Investor Market Webinar Series.

If no one else does, I will write in April about high-unemployment Targeted Employment Areas, and options for TEA analysis in response to our abruptly increasing unemployment.

EB-5 processing times and visa wait times remain a constantly moving target, but I’m still grappling with the timing estimate problem as well.

Meanwhile, my business plan service remains available to the brave few seeking to launch new ventures, and to the many who may need to describe how updated circumstances still support EB-5 investor eligibility.

Report from 3/13 USCIS Engagement on Visa Availability Approach

The March 13 EB-5 Immigrant Investor Program: Public Engagement provided a few program updates, and discussed the new visa availability approach to I-526 processing. IPO Chief Sarah Kendall mainly spoke, with additional input from DOS Visa Control Office Chief Charles Oppenheim.

As usual I am sharing my recording, so that anyone can review the meeting for themselves. (3/23 Update: Sarah Kendall’s prepared remarks and a Q&A on the Visa Availability Approach have now been posted in the EB-5 Resource Room on the USCIS website.)

Prior the meeting, my many questions boiled down to two: the priority question and the volume question.  How will IPO apply the visa availability approach to decide which I-526 to process when? How many I-526 does IPO have on hand and intend to process, going forward? I was indeed pleasantly surprised by detailed and helpful answers to the priority question. Thank you Sarah Kendall! Particularly, thank you for taking live audience questions, which proved very important. But no thanks for deflecting the volume question.

Key information from the engagement:

What is the visa availability approach? (VAA)

  • Consistent with the initial USCIS announcement, Kendall describes the VAA as an inventory management approach that will prioritize adjudications for I-526 petitions where visas are immediately available or soon to be available.

Who is affected by the visa availability approach?

  • Kendall said that the VAA will apply to all I-526 petitions not assigned as of March 31, 2020, including pending petitions currently in the pipeline, and including petitions to be filed after March 31, 2020. USCIS will continue to work on I-526 assigned for adjudication before March 31.
  • My comment: That is, the VAA will not limit decisions on cases that were already issued a Request for Evidence or Notice of Intent to Deny. The VAA does apply to all unassigned pending I-526, no matter when they were or will be filed.

Who will be held back by the visa availability approach?

  • Kendall said that in deciding which I-526 NOT to assign for adjudication, IPO will consult the monthly Visa Bulletin Chart B Dates for Filing. If a petition’s filing date is not within the dates that can file a visa application or I-485 according to that month’s Visa Bulletin Chart B, then the petition will not be assigned for I-526 adjudication that month.
  • My comments:
    • In practice, this means that for now, only pending I-526 from China will be limited by the VAA. (The April 2020 Visa Bulletin Chart B has a December 15, 2015 cut-off date for China, but current for all other countries.) It’s good news that IPO will at least look at Chart B, not Chart A, to determine visa availability for I-526 purposes.
    • The VAA will create a chicken-and-egg situation between Department of State and USCIS. The visa bulletin moves in response to demand for visas, demand for visas is created by I-526 approvals, and now I-526 adjudications will move in response to the visa bulletin.
    • Vietnam and India will benefit from the VAA in the near term, since they are current in Visa Bulletin Chart B. They will eventually be held back by VAA, since the number of pending I-526 from Vietnam and India exceed the annual visa limit. When they will be affected depends on the rate of I-526 approvals for Vietnam and India. If many Indian and Vietnamese I-526 shortly get assigned for adjudication and soon approved by USCIS, then many visa applications will soon result, creating excess demand that triggers DOS to put cut-off dates in the visa bulletin Chart B, triggering USCIS to stop assigning I-526 for adjudication.  Alternatively, if USCIS continues to approve just a few I-526 for Indians and Vietnamese, then the visa bulletin will stay open due to low visa demand, and the trickle of India and Vietnam I-526 adjudications can continue unchecked by the VAA.  (DOS apparently anticipates the second scenario, according to Oppenheim’s comments on the call.) Either way, whether the flow of I-526 adjudications is limited by the visa bulletin or by IPO’s natural slowness, the VAA would allow USCIS to, in theory, only adjudicate as many I-526 for India and Vietnam per year as needed to produce a years-worth of visa applicants. That would mean about 350 annual I-526 adjudications for India and 250 adjudications for Vietnam (considering Oppenheim’s most recent ratio of pending I-526 to visa applicants). If USCIS used the VAA as an excuse to keep to such minimum volume, within the visa caps, then long I-526 waits for India and Vietnam would result (considering that there were about 2,500 India I-526 pending and 770 Vietnamese I-526 pending as of 10/1/2019).
    • However, Sarah Kendall did not specifically say that I-526 adjudications would be limited to visa availability. The VAA just allows such limitation, as needed to prioritize as many petitions as have a visa available. And this competitive rest-of-the-world demand has historically been low, and likely to remain so considering the EB-5 price increase. China, Vietnam, and India will only have I-526 adjudications limited to visa availability to the extent that IPO can maximize its I-526 capacity with other-country adjudications.
    • The VAA guides which petitions will NOT be assigned for adjudication; it does not promise which petitions WILL be assigned for adjudication. As of 10/1/2019 (most recent available data), there were 7,472 pending I-526 from countries other than China. Those 7,472 petitions won’t all be immediately assigned for adjudication, even though they’re prioritized based on having visas available for them, unless IPO improves its volume from the FY2019 average of 390 I-526  adjudications per month.

Will IPO make any exceptions to the visa availability approach?

  • Kendall stated that:
    • Petitions with approved expedite requests will continue to be promptly assigned for adjudication, regardless of the petitioner’s country of origin.
    • If the Petitioner is from a country that would be held back by the VAA, but could have a visa available due to the spouse’s nationality, then the petitioner should email IPO to explain the situation, and IPO may assign the case based on the spouse’s nationality. Listen starting at minute 25:45 of the recording for detail.
    • Aside from the above two circumstances, IPO does not contemplate offering opportunity for petitioners to opt out, opt in, or request to be treated as an exception to the VAA policy.
    • USCIS currently plans to continue the VAA approach indefinitely.

Will the visa availability approach affect visa distribution, and number of visas available?

  • The VAA does not change the rules for visa availability. The EB-5 quota and per-country cap remain the same. The variable component in visa availability is the number of “leftover” visas available to the oldest priority dates (in the EB-5 case, to Chinese) after demand under the country caps has been satisfied. The VAA is explicitly designed to reduce the number of leftovers (being intended to help rest-of-world applicants to maximize their available visas), but Oppenheim opined that the number of leftover visas would remain unchanged for about the next 12 to 18 months.
  • My comment: When Oppenheim estimates that the number of visas available to any one country will not change for the next 12 to 18 months, he must be assuming that USCIS will not, near-term, approve more rest-of-the-world I-526 than it would have otherwise, without the VAA approach. Visas available to China are a function of rest-of-the-world visa demand, and rest-of-the-world visa demand is a function of number of I-526 approvals. Apparently, Oppenheim expects IPO to actually reduce I-526 completion rates under the VAA (since if completion rates stayed the same, fewer China I-526 completions would be counterbalanced by more rest-of-the-world completions, resulting in fewer visas available to China). I wonder if Oppenheim’s assumption is based on anything Sarah Kendall told him?

Will the visa availability approach improve I-526 completion rates and processing times?

  • Processing times are a function of backlog, processing priority, and processing volume. The VAA changes priority in a way that will benefit petitioners from low volume countries. The size of that benefit depends on what happens concurrently with processing volume (completion rates).
  • Sarah Kendall declined to answer questions about the size of the I-526 backlog, and the number of petitions that could benefit. “As a general matter, we refrain from discussing any kind of numbers with the public outside of our OPQ posting process.”
  • Kendall repeated the same reasons for low I-526 completion rates that she gave in 2019 (recorded in my previous post). Most are related to extreme vetting efforts to seek out signs of fraud and abuse. Kendall stated that “USCIS leadership views these initiatives as absolutely vital to the success of the EB-5 program. We acknowledge that case completion rates have decreased partly because of these activities, and we understand the concerns that raises for our stakeholders. With a lot of the infrastructure development now behind us, IPO is better situated to improve productivity. In fact, preliminary data for February shows a step in the right direction. The USCIS Office of Performance and Quality anticipates publishing new data in the coming month.”
    • I take this to be saying that IPO expects to adjudicate a few more I-526 in 2020 than in 2019, but not many more. IPO’s per-quarter productivity would have to be seven times higher than it was in FY2019 Q4 just to regain 2018 productivity levels. “A step in the right direction” from recent performance is good news, and Kendall mentioned later in the call that she expects such incremental improvement to continue – also good news. But this does not sound like a promise of exponential improvement to counterbalance last year’s exponential productivity loss. Kendall emphasized that the lengthy new review procedures requiring time-consuming multi-agency coordination are “absolutely vital” to program integrity, suggesting that she does not intend to change those factors in long processing times. There will be some improvement this year from the mere fact that the procedures are at least set up, while last year included time lost due to setup/training.
  • In response to my question about number of adjudicators assigned to I-526, Kendall reported that IPO had about 240 dedicated personnel as of the beginning of the fiscal year – a record high number. “This number includes support staff, adjudicators, economists, fraud detection and national security personnel, and other positions vital to the IPO mission. The number of personnel and adjudicators assigned to each EB-5 form type varies according to workload demand and agency priorities.”
    • My comment: I note that Kendall pointedly did not answer the question about I-526 resources. The VAA reduces workload demand for I-526 by reducing the number of petitions that require prompt adjudication, which may be a sign for I-526 resource allocation. I wonder how much of the fees petitioners pay for adjudication actually funds adjudicative staff, and how much goes to staff devoted to seeking fraud.
  • Kendall gave an ambiguous answer to a question about whether or not we can expect to see a reduction in rest-of-the-world I-526 processing times as a result of the VAA. (minute 54 in the recording)

Will IPO provide transparency about its processing under the visa availability approach?

  • Kendall said that the Office of Performance and Quality would revise the I-526 processing times report to reflect the VAA change, but she also said that there’s no plan for the report to show country-specific processing times – the only possible way to reflect the VAA change for EB-5. So it’s hard to visualize how helpful the report could be. As noted above, she also declined to provide any I-526 data (and the IPO Customer Service email continues to refuse or ignore my requests for per-country I-526 data).
  • Note to IPO: you could be commended for a change that moves the EB-5 constraint to the beginning of the process, rather than leaving people to pile-up midway at the visa stage. But only if you are transparent. When you keep I-526 processing a black box, you leave people to file I-526 in ignorance, unable to assess the nature of the backlog, and inventory pileups will still occur. To avoid this, you must give the public timely data about the country composition of the I-526 backlog, and  country-specific information in the processing times report. If you make I-526 processing transparent in this way, you will actually move the constraint to the start of the process, thus improving the whole process. With transparency, demand will self-regulate as people can make informed decisions about filing I-526.  Otherwise, you have made no improvement and the process will remain broken.
  • If petitioners whose cases are not ripe for adjudication under the VAA try to make a case inquiry, they will be sent a stock response that refers them to the visa bulletin.

Other Updates regarding India, China, and regional centers:

  • Regarding the Visa Bulletin Final Action Date for India, Charles Oppenheim said “at this time, I believe that India will become current some time in the summer, and once it becomes current it would stay for the foreseeable future, pending receipt of larger volumes of approved petitions at our National Visa Center.” (Minute 33 and 44 of the recording) (My comment: apparently, Oppenheim expects USCIS to continue low productivity, with the visa bulletin to open for India due to few Indians making it past the I-526 stage and to the visa stage. See my comments above on the connection between I-526 adjudication volume and visa bulletin movement.)
  • A caller asked Charles Oppenheim about the impact of the current shutdown of consular processing in China due to COVID-19, and whether that could result in EB-5 visas that would have been given to China going to Vietnam instead. Oppenheim said: “This is a very unique situation where there is not a lack of applicants which is preventing the numbers from being used, but the situation where at this time the consulate is closed. So this will continue to be monitored throughout the year, and we’ll just have to do the best we can. But again, if it does appear that all the numbers would not be used, then we would go to the next country in line, which would be Vietnam, which is oversubscribed.” (minute 43-44 of the recording) No one asked about other potential visa impacts of COVID-19 (i.e. closures of other consulates besides China, or possible interruptions to service center operations in the U.S.)
  • USCIS has sent out 100 Notices of Intent to Terminate so far in 2020 to regional centers that did not file I-924A in FY2019.
  • Sarah Kendall announced the regulations FAQ that I flagged last week: Questions and Answers: EB-5 Immigrant Investor Program Modernization Rule.

I worked hard on this post, trying to record and explain answers, as available, to many of the questions that I anticipate regarding the visa availability approach. Regarding personalized EB-5 timing estimates, it’s difficult. The timing complications are so many at this point, and limited data makes any estimate time-consuming and not definitive. The best I can offer now, as time permits, is personalized conversations about timing, with some data support. I will soon be announcing a schedule to allow reserving appointments, for those who would like to discuss individually.

And as always, my PayPal link is open. If my work is helpful and time-saving for you, consider making a contribution to support the work. Thank you!

I-526 processing times: volume and priority (Comment 1 on the “visa availability approach”)

I’m in my car at the terminal, waiting to board the ferry. There are 15 cars waiting.  The ferry can hold 15 cars. The deck hand comes out and tells the cars to reorganize. “We’re not doing first come first up anymore – today we’re boarding day-trippers first.”  I’m puzzled – why this bother? Why are they troubling to rearrange the cars, when in any case there’s room for everyone to board? Are they fussing about priority because they’re reducing the ferry capacity, and preparing to leave some cars behind?

I’m an EB-5 investor today with an I-526 pending. Say there are about 15,000 other I-526 petitions pending now. (There were just 13,763 pending at last report as of 9/30/2019.) We know IPO adjudicated over 15,000 I-526 petitions in FY2018. 15,000/15,000 = 1. Calculating from IPO’s proven capacity for adjudications, all pending I-526 can be processed and to the visa stage in about one year.  Whether the adjudications are in FIFO order, or in order by country, or alphabetical, or totally random, I-526 wait times from today will all be about a year at very most for anyone and everyone in the current backlog (and even shorter for new petitions in an era of low receipts), if IPO does its job and uses its capacity.  In that case, all minority country petitioners will reach the visa stage in time to claim annual visas, regardless of how IPO orders I-526 from China, Vietnam, and India. If IPO has proven capacity to clear the entire current backlog in a year, why does it now announce a new policy for choosing which I-526 get “approved in a more timely fashion to receive consideration for a visa,” going forward? Why not adjudicate everyone in a timely fashion, when that’s a plausible option? Are they fussing about priority because they’ve reduced capacity, and gathering excuses to leave petitions behind?

Today’s press release “USCIS Adjusts Process for Managing EB-5 Visa Petition Inventory” provokes us to focus on the order of I-526 processing, and who should get attention first. But why even accept that discussion before pointing out the more significant factor: volume of processing. Petitioners from traditionally underrepresented countries are not threatened by pending I-526 petitions from China, Vietnam, or India, when there’s room on the I-526 ferry for everyone. The threat is the processing volume trend line. USCIS has not explained how it’s fair to reduce the size of the ferry, and carry fewer and fewer people to the visa stage.

For people from China, Vietnam, and India, a potential perceived benefit from a “visa availability approach” is extended child status protection. (Such a benefit could emerge if USCIS is proposing to not only prioritize not-backlogged countries, but actually to shelve I-526 from backlogged countries until visa availability, be that 1 year or 15 years. regardless of other country demand. The press release isn’t clear on this point.) Some people might welcome an artificial delay for the children. But think about it: how much do frozen children benefit when the petition upon which they depend becomes less and less possible to approve – or indeed, even to adjudicate – as the years pile up? Businesses do not freeze, financial records don’t last forever, USCIS policy continues to evolve, and every year adds to the changes of fact and circumstance that can cause an I-526 to be denied. Such factors may contradict this point: “For many nationals of countries subject to retrogression, the I-526 petition processing time is largely irrelevant unless the primary applicant has a dependent child approaching the age of 21, in which case, this new processing approach can be extremely helpful.” The adjudication time is relevant when it make a significant difference in whether or not the petition will be approved, when it’s finally adjudicated. Not only that, but I-526 approvals bring some protection – they establish priority dates, open the possibility of priority date retention with project change, and offer protection in case of legislative changes. Those benefits are especially important to people facing long visa waits regardless. And furthermore, timely I-526 adjudications judge the petition on its merits at the time of filing, and consistent with its very nature as  preliminary-stage filing. Delayed adjudications effectively create a new stage with new requirements – as we see today from RFEs on delayed petitions that request years of documents not available at the time of filing, and traditionally belonging to the I-829 stage rather than preliminary I-526 stage. Meanwhile, for China, a “visa availability approach” has the further complication that it’s explicitly designed to maximize rest-of-the world demand reaching the visa stage, which directly minimizes visa available to China. And India, with its recent visa bulletin jumps due to “low demand” i.e. few I-526 approvals, exemplifies the complication that delays at USCIS actually skew visa availability.

For pending I-526 petitioners who are not from China, Vietnam and India, let’s consider what would help your processing times. If there are 15,000 pending I-526 now, I estimate there are about 5,000 of you. Consider which adjustment you’d rather have USCIS make:

  1. Address priority: Keep FY19 Q4’s dismal processing volume of 550 adjudications, but prioritize your petitions over the 10,000 from countries that aren’t current. 5,000 minority-country petitions divided by 550 adjudications per quarter equals 9 more quarters to finish processing.
  2. Address volume: No change to priority, but return to FY18 Q4’s processing volume of 4,000 adjudications. 15,000 worldwide petitions divided by 4,000 adjudications per quarter equals less than 4 quarters to finish processing.

The main point of this post: we should be talking about volume, before priority.

And not only that, but what’s this claim about a “visa availability approach” (a term that made its world premier today, according to Google) aligning with “congressional intent” for EB-5 and with “other visa-availability agency adjudications processes.” I’d like chapter and verse on this “Congressional intent” and how the approach has worked out for other Forms pending at USCIS. And additionally…. But even kind bloggers have to sleep sometimes, and keep time for the day job.

For everyone asking me individual timing questions, please be patient. I’ll get a paid service up as soon as I can, to explain as much as I can individually. With both volume and priority up in the air, it’s complicated and time-consuming.

3/13 EB-5 Engagement Invite

From: U.S. Citizenship and Immigration Services <uscis@public.govdelivery.com>
Sent: January 29, 2020 12:21 PM
Subject: EB-5 Immigrant Investor Program: Public Engagement, March 13, 2020

EB-5 Immigrant Investor Program: Public Engagement
Friday, March 13, 2020
11:00 a.m.-12:00 p.m. Eastern

U.S. Citizenship and Immigration Services invites you to participate in a public engagement meeting on Friday, March 13 11:00 a.m.-12:00 p.m. Eastern on the Immigrant Investor Program, also known as the EB-5 program.

This engagement is part of our ongoing efforts to enhance dialogue with the public on the EB-5 program. USCIS will address program updates, including the agency’s change from a first-in, first-out case-processing approach to a visa availability approach for Form I-526, Immigrant Petition by Alien Investor. You will have an opportunity to ask questions during the engagement.

Participation Details:
You may attend this engagement either in person at USCIS, 111 Massachusetts Ave. NW, Washington, D.C., or by teleconference. [UPDATE: now by teleconference only.]

If you wish to attend in person, please email us at public.engagement@uscis.dhs.gov. Seating is limited, so we encourage you to email early to request in person registration. Once we process your registration, you will receive a confirmation email with additional details.

To submit non-case-specific questions as agenda items before the engagement, email us at public.engagement@uscis.dhs.gov by 5 p.m. Eastern on Tuesday, Feb. 11.

To join the event via teleconference:
Call in Toll Free number: (888) 946-7792
Toll number for international callers: (517) 308-9375
Participant Passcode: 3996336

We recommend calling in 10 to 15 minutes before the teleconference begins.

To request a disability accommodation:
Email public.engagement@uscis.dhs.gov, and put “EB-5 Engagement” in the subject line.

Note to media

This engagement is not for press purposes. Please contact the USCIS Press Office at 202-272-1200 for any media inquiries.

We look forward to engaging with you!

USCIS Adjusts Process for Managing EB-5 Visa Petition Inventory

USCIS has officially announced an I-526 priority change I saw coming. People from China, Vietnam, and India with pending I-526: you need to organize to inform IPO how you feel about this. I plan to write about an aspect I doubt IPO recognizes: how USCIS adjudication order can create and skew EB-5 visa availability, with particular reference to the examples of China and India. I also have to go back and revise the new I-526 timing estimate service that I’d been almost ready to post.

From: U.S. Citizenship and Immigration Services <uscis@public.govdelivery.com>
Sent: January 29, 2020 8:33 AM
Subject: USCIS Adjusts Process for Managing EB-5 Visa Petition Inventory

Change Addresses Fairness Issues in Visa Allocation

WASHINGTON— U.S. Citizenship and Immigration Services today announced a process change for Form I-526, Immigrant Petition by Alien Investor, from a first-in, first-out basis to a visa availability approach.

This new operational approach aligns with other visa-availability agency adjudications processes, is more consistent with congressional intent for the EB-5 Immigrant Investor Program, and increases fairness in the administration of the program.

“Changing our approach from a first-in, first-out adjudication process to one that prioritizes petitions connected to individuals from countries where visas are currently available better aligns the EB-5 program with congressional intent and makes it more consistent with other USCIS operations,” said USCIS Deputy Director Mark Koumans. “This new approach increases fairness, allowing qualified EB-5 petitioners from traditionally underrepresented countries to have their petitions approved in a more timely fashion to receive consideration for a visa.”

This operational change is consistent with the agency’s processing of Form I-130, Petition for Alien Relative, in cap-subject categories. The new visa availability approach simply gives priority to petitions where visas are immediately available, or soon available, and will not create legally binding rights or change substantive requirements. Applicants from countries where visas are immediately available will now be better able to use their annual per-country allocation of EB-5 visas. The new visa availability approach will apply to petitions pending as of the effective date of the change. USCIS will implement the visa availability approach on March 31, 2020.

USCIS will hold a public engagement on March 13, 2020, from 11:00 a.m. to noon Eastern, to provide information and answer questions from the public about these operational changes to the management of Form I-526 petition inventory.

10/29 Kendall remarks for IIUSA

The USCIS website has published Immigrant Investor Program Office 2019 IIUSA EB-5 Industry Forum Sarah M. Kendall Remarks October 29, 2019. (I also recorded the remarks, but my recording adds nothing of significance. Kendall followed the script.)  This post highlights what I did and did not learn from Kendall’s remarks.

I-924A Tips

Kendall helpfully offered specific tips for avoiding questions on the Form I-924A Annual Report:

  • Avoid inconsistencies with information previously provided to USCIS (and when something is different, explain)
  • Remember to provide government-issued photo ID for all regional center principals, as required
  • Remember that changes to a Regional Center’s name, ownership, organizational structure, principals, and geographic area must be reported separately with a Form I-924 amendment; RCs cannot simply notify USCIS of such changes on an I-924A.

Processing Times

Sarah Kendall mentioned three factors behind low production and high processing times in 2019: the lapse in regional center program authorization from 12/22 to 1/25 that disrupted processes, a training session for I-526 adjudicators and economists, and a greater focus on program integrity. The first two factors each cost a few isolated weeks of adjudicative time, so presumably the third factor is the major reason for a massive 60% drop in production. “In 2019, IPO focused on enhancing the integrity of the program and working to find ways to protect the program from abusive actors. This has meant greater coordination with agencies in the law enforcement community and with other partners, including at the Securities and Exchange Commission. …We have also invested in building more robust quality assurance and control programs to ensure consistent adjudication practices. …All of this has some impact on processing times.” Kendall referenced “understandable concern in the community” regarding processing times, but did not otherwise apologize for low production or foresee improvement.  And why would she, if the processing slowdown resulted from an enforcement focus that she does not regret? “We have a dedicated and hard-working staff who continue to handle this complex caseload with diligence and integrity. …IPO has made structural changes to ensure continued program integrity. …we continue to place importance on continually assessing and improving of the EB-5 program’s integrity. … Safeguarding the integrity of the EB-5 program is of paramount importance to USCIS and to the public. We seek to effectively administer the program and guard against abuse.” Kendall concluded by stating that “the expectations we have for ourselves are to run this program with efficiency and with integrity.” But the efficiency expectation does not appear anywhere else in her remarks. Nor does Kendall indicate any awareness that efficiency is also an integrity issue. She may not realize that USCIS’s posted 2-5 year processing times serve to attract abusive actors, promising time for fraud to flourish, while discouraging responsible actors who want their projects and investors to succeed.

Other notes

Otherwise, Kendall’s remarks largely follow the principle expressed by that exemplary civil servant Sir Humphrey Appleby: “So long as there is anything to be gained by saying nothing, it is always better to say nothing than anything.”

  • TEA determinations: Kendall restated what’s stated in the regulations, without adding clarification or interpretation.
  • Partial investment before November 21: Kendall restated existing policy related the “actively in the process of investing” option, and reiterated the regulation provision that petitions are subject to the rules effective as of the date they were filed. Her comments did not break any ground on this topic, as discussed in my previous post.
  • Redeployment: Kendall briefly referenced existing guidance in the Policy Manual, and stated that IPO still continues to work on clarifications (with public input still welcome).
  • Protection for innocent investors: Kendall generally summarized policy that constrains the flexibility USCIS is able to offer innocent investors when a regional center or project encounters problems.
  • Regional Center oversight: Kendall argued that requirement for regional centers to engage in monitoring and oversight is not new.
  • Premium processing: As always, USCIS is not considering a premium processing option for I-526.

 

Conference Rumors (partial investment, visa wait times)

I heard IPO Chief Sarah Kendall and Department of State Visa Control Office Chief Charles Oppenheim speak last week at the IIUSA conference in Seattle.  I’ll blog in detail about these talks and other news and insights from the conference as time permits, but first to quickly address a couple misconceptions that may affect current decision-making.

Rumor credits Kendall’s talk with announcing that it’s now acceptable to file I-526 with less than $500,000 before November 21, and Oppenheim’s talk with announcing that EB-5 backlogs have fallen. These impressions are not quite accurate, in context.

Sarah Kendall confirmed a point related to TEA requirements as they intersect with the “investing or actively in the process of investing” requirement. Her comments did not create or change the “actively in the process of investing” alternative to investing the full amount prior to I-526 filing.  Partial investment remains an option that’s just as available, narrow, and risky as it has always been. For discussion, see Joey Barnett and Vivian Zhu’s article “EB-5 Minimum Investment Amount Increases to $900,000 November 21, 2019 – Can an EB-5 Applicant Invest Less Than the Full $500,000 Now and Still Qualify?” and Robert Divine’s article “Member Perspective: EB-5 Implications from IIUSA Conference Leading up to November 21 Effective Date of Regulations” (and his previous cautionary words about skeletal filings.) Personally, I would not file I-526 with less than $500,000 invested because USCIS makes it so tough on the business side to prove that funds not actually in the enterprise account still qualify as “at risk” in the enterprise, as required. For examples of petitioners who invested less than the minimum amount before I-526 filing, and specific problems that they faced, see: FEB012017_01B7203, Oct262009_01B7203, Apr162009_01B7203, Nov032008_01B7203, OCT072005_01B7203. The official policy is here in the policy manual.

In his presentation on October 29, 2019, Charles Oppenheim estimated EB-5 visa wait times for current investors from China, India, and Vietnam that are shorter than the wait times he had estimated back in April 2019. This reflects a reduced estimate of the total backlog of EB-5 applicants (visa applications+ estimated applicants associated with pending I-526). However, the number of investors in line for an EB-5 visa has likely not fallen since April 2019, considering the number of of I-526 filings and adjudications and visa issuances since then. Oppenheim’s total backlog estimate fell due to revised assumptions about the number of visas to eventually be claimed by those investors. Specifically, he’s now estimating fewer visa applicants associated with pending I-526, because he increased the I-526 denial rate assumption for all countries, and decreased the family size assumption for some countries. I’ll blog and spreadsheet the detail when IIUSA publishes the slides, which Oppenheim promised would include some data not in the conference presentation. But to the bottom line: Oppenheim’s revised estimates are mixed news.  Considering the surge of people starting the race, it’s worrisome to see Oppenheim looking at the finish line and estimating that a reduced number of people will make it to the end to claim a visa.  For EB-5 investors considering risks, they must assume (a) solid success rate with associated long wait times, or (b) shorter wait times predicated on high failure rate. It’s one or the other, considering demand. (B) is unfortunately plausible, considering IPO’s recent behavior, so I don’t necessarily question Oppenheim’s revised predictions with shorter wait times.

Insights from AAO Decisions (debt arrangements, currency swap, diverted capital, regional center activity, project progress)

So far in 2019, the Administrative Appeals Office has published 80 decisions on I-526 appeals and motions, and 16 decisions on I-924 appeals. As someone who prepares documents for USCIS review, I read the AAO decisions to keep up with current adjudication trends and unspoken policy. This post highlights a few EB-5 cases of particular interest.

Debt Arrangements

In MAY302019_01B7203 and MAY302019_02B7203, the AAO reopened previously dismissed appeals and approved the I-526 petitions based on the USCIS Policy Manual October 2018 correction regarding redemption agreements. I wonder if this offers hope for other I-526 that were denied in 2017 and 2018 due to suspected debt arrangements that USCIS has since clarified are acceptable.

Currency Swaps and SOF Investigations

A number of recent appeals focus on the recently-controversial issue of currency swaps. In a currency swap, the EB-5 investor sends local currency to the local account of an intermediary, and the intermediary then wires an equivalent amount in US dollars to the investor’s offshore account.  In late 2016/early 2017 USCIS started questioning this previously-accepted practice, and began requesting source-of-funds documenation for the intermediary (as discussed for example by Hermansky and Klasko). Lawyers questioned USCIS’s reasoning, and embattled cases are now reaching the AAO decision stage. JUL052019_01B7203 is particularly interesting, because AAO sustained the appeal. “Here, the Chief has not questioned the validity of the agreement with ___ nor identified discrepancies or irregularities in the record…. Without any identified negative considerations, we find the evidence in the record sufficient to establish, by a preponderance, that the funds transferred to ___ originated with ___’s lawful business activity, and relatedly, that the Petitioner had invested the minimum amount of required capital.” In the following cases, however, AAO agreed with USCIS that source and path of funds were not sufficiently documented in currency swap scenarios: OCT252019_01B7203, OCT172019_02B7203, OCT152019_01B7203, OCT112019_02B7203, OCT012019_02B7203, SEP192019_01B7203, AUG302019_02B7203. These cases were denied for lack of evidence that the intermediary was legally able to make the exchange, lack of evidence that the intermediary used lawful funds to make the exchange, and timing problems. Distaste over an arrangement “designed to circumvent local banking regulations” also appears to be a factor.

AUG302019_01B7203 is another rather interesting source of funds case, being a denial based on information that emerged when “In October 2017, USCIS officials conducted an overseas investigation during which they interviewed the Petitioner and others regarding the source of funds used in his investment.”

Recovering from Fraud

In the wake of SEC activity to weed bad actors out of EB-5, we’re left with the question of whether viable projects, innocent investors, and any good partners/successors of the bad actors can possibly recover and get back on track after a fraud incident.

OCT172019_01B7203 Matter of W-Z- tests the question of whether a petitioner can, after I-526 filing, make additional investment to replace diverted capital. The petitioner had invested $500,000 in the NCE, but $185,000 of that amount never made it to the project thanks to a rogue principal. With that principal out of the way, the petitioner offers to replace the diverted capital with another $185,000, so that the project has the full amount of investment and can proceed with job creation. But AAO says no, because “the foreign investor must show that his or her investment of at least $500,000, in its entirety, has been made available, without interruption, to the NCE for job creation.” The operative words in this statement are “without interruption.” AAO says that this statement rephrases this Matter of Izummi/policy requirement: “the full amount of funds made available to the businesses most closely responsible for creating the employment upon which the petition is based.”  But that doesn’t look like a simple restatement to me. Is “without interruption” really intrinsic to the Matter of Izummi analysis? The AAO indicates that for the petitioner’s additional $185,000 investment to qualify, he would have to establish that he had invested or was actively in the process of investing that additional amount before he filed I-526. “The replacement of EB-5 capital with other funds does not equate to a return of the original capital attributed to the investor, even if both originate from the same source. His intention to replace the diverted funds, thus, does not establish that $500,000 of his capital has been made available since 2015, without interruption, to the NCE for job creation purposes.” Does the EB-5 “at-risk” requirement actually justify this hard “without interruption” line?  The decision goes on to give additional reasons for denial, but speaks against supplementary investment as if it’s wrong in principle, regardless of other circumstances.

SEP252019_01K1610 Matter of V-A-O-C-A-C-D-R-C- tests the question of whether a regional center with the most reputable of operators (State of Vermont) can recover from the bad actions of previous partners. The state fought hard, on behalf of past investors and on-going projects, to keep designation at least long enough to complete current EB-5 projects and implement an orderly wind-down of operations. But AAO dismisses the appeal of Vermont Regional Center’s termination. Ironically, the determinative reason seems to be the state’s responsible intent to not sponsor any new EB-5 projects. The unspoken rule seems to be, new I-526 filings = promoting economic growth, while no new I-526 filings = no longer continuing to promote economic growth.

Regional Center Activity

USCIS claims that “When determining whether a regional center continues to promote economic growth, we consider the totality of the circumstances, weighing positive and negative factors to reach a conclusion.”

However, as pointed out in one of this year’s termination appeals, it appears that in fact “USCIS has, sua sponte, determined that the only acceptable evidence of promotion of economic growth is the filing of Form I-526 petitions by investors in projects affiliated with a regional center within three years of receiving its designation.” This is evident from my log regional center terminations, which shows that 103 regional centers have been terminated so far for not having had any I-526 filings during a period of time (the metric varies by decision – most often three years, sometimes two, four, or five years). The appeal MAR152019_01K1610 pointed out that “this temporal requirement does not appear in any statute, regulation, or USCIS policy guidance,” which makes it a bit unfair, and that “the statute and regulations related to termination of a regional center’s designation are impermissibly vague.” But the AAO spends no time on this procedural issue, merely saying that the Applicant didn’t make a constitutional point, and if he had, constitutional points are outside AAO jurisdiction.

Instead, the AAO decisions on termination appeals tend to follow this shape: (1) review the applicant’s evidence of activity in developing projects and promoting investment opportunities, and (2) conclude yes, that’s positive activity, but there haven’t been any recent I-526 filings for this regional center.  No investor petitions means no data on EB-5 investment resulting in increased export sales, improved regional productivity, job creation, increased domestic capital investment, or other positive indicia of promotion of economic growth. The regional center is not promoting economic growth in the only way we can measure – I-526 filings – and therefore must be terminated. It starts to feel petty and hyper technical. In AUG302019_01K1610, A-G-C-R-C got terminated (1) because the I-924A filing fee amount was written on the check as “three thousand three hundred thirty five,” not “three thousand thirty five” (and USCIS was not able to accept a check with the corrected lower amount because it post-dated the filing deadline), and (2) because no I-526 had yet been filed within 21 months of the regional center’s designation. A-G-R-C applied to be a regional center in 2014 and didn’t get approved until 2016. USCIS didn’t even give the RC as much time to secure investors as it gave itself to review the application.

Many of the termination appeals in 2019 include this language: “The evidence discussed above demonstrates the Applicant’s pursuit of new projects, an action which in and of itself serves as a positive factor in determining whether the regional center continues to promote economic growth. However, it does not show that these actions resulted in increased export sales, improved regional productivity, job creation, increased domestic capital investment, or other positive indicia of promotion of economic growth.” How to make such a showing remains a challenge for regional centers that are now preparing Form I-924A, and need more time to secure investment. If USCIS doesn’t manage more nuance, its blind three-year metric will end up eliminating all the regional centers that Congress actually wants in EB-5 – the ones in rural/distressed/low-profile areas that will inevitably have relatively low volumes and long lead times. (For additional discussion, see my 2018 post on Preparing to File I-924A.)

Project Delays

Many I-526 decisions in 2018 and 2019 are associated with just a couple regional center projects with many investors who each filed all possible appeals and motions. The Arizona international trading mall case and the cellulose-to-sugar conversion factory case have a simple moral: when a project does not move forward according to plan, instead suffering multi-year delays, it’s tough to demonstrate that the plan was/is reasonable.  AAO dismissed all the appeals, denied all the motions to reopen and reconsider, and went further to revoke I-526 approvals that had been made before  project delays became apparent. I feel sorry for the investors, and envious of the lawyers who earned fees from this blizzard of repetitive AAO activity. (I’m not including links to all the cases, but open a few entries at random in the 2018 or 2019 folders of I-526 decisions, and you’ll encounter them.)

Other decisions

Other decisions that may be of interest to people who follow these topics: JUN062019_02B7203 (bridge financing problem considering the length of the bridge), SEP232019_01K1610 (remands an Exemplar project denial based on USCIS’s unreasoned claims of unreasonableness), JUL222019_01K1610 (makes an issue about source of funds for a regional center applicant), MAR152019_01B7203 (discusses material change specifically as an issue of rectifying a deficiency in the original petition).

9/9 EB-5 Stakeholder Non-Engagement

In today’s EB-5 Immigrant Investor Program Listening Session:

  • IPO Chief Sarah Kendall made a statement that sounded promising in outline (IPO Overview, IPO updates, and comments on implementation of the proposed rule) but that proved insubstantial and unhelpful in fact. The statement was in very general terms, with no specific answers to the specific questions that I at least submitted in advance. Even the single data point — that IPO has 212 dedicated staff as of July 2019 — was unhelpful as Kendall never specified whether these staff are actually working on EB-5, or among those on “temporary assignment to other agency priorities.” The statement then wasted time by regurgitating what’s written in the regulation without telling us anything specific about how IPO interprets or plans to implement the regulation. This ungenerous statement will eventually get posted online. (UPDATE: here it is.)
  • Stakeholders, having been invited before the call to submit written questions that USCIS chose not to answer, were then further invited to press *1 and ask questions live for USCIS to not answer. I do not understand what this was supposed to accomplish. Why have a call at all, if it’s to be like this? The only reason to have a live engagement, instead of just soliciting email input, is if there’s going to be any engagement. There was zero engagement in this call.

USCIS said so little that I must resort to analyzing what was not said. If USCIS had any hope of turning around the catastrophically long and continually worsening processing times, which must have occupied at least half the advance questions, wouldn’t they have expressed such hope or at least intent? If USCIS knew how they would implement the priority date retention and TEA designation process in the new regs (likely the other half of advance questions) wouldn’t they have said something helpful on these topics? But the call offered no such support or encouragement.

Here is my recording of the call. I do not recommend it.

August Updates (IPO Processing, Terminations, Marketing, Regs & Legislation, Visa Bulletin)

USCIS Investor Program Office Updates: There’s evidence of increased activity at IPO.

  • Processing Times: The report on the USCIS Processing Time page improved this week for all EB-5 forms, with the “Case Inquiry Date” formula moving forward 76 days for I-526, 62 days for I-829, and 1,097 days for I-924. The months in the “Estimated Time Range” also dropped somewhat, and reduced their spread. I make regular spot checks of the daily report and enter them in this log. Making charts from this log, I note a possible rationale behind the recent fluctuations and slowdowns. Could the USCIS objective be to get all adjudications focused on the same date? Message to USCIS: what we need most of all is predictability within each form type (with productivity maintaining a reliable baseline or trending up). No one would cheer at the odd goal of making I-526, I-829, and I-924 equally slow. We are happy to see processing times finally trending down rather than up, though still with far to go.
  • Regional Center Terminations: In the email to USCIS copied in my last post, I noted that just 11 regional centers had been terminated so far in 2019. But USCIS proceeded to terminate a whopping 62 more regional centers in one week of August. Apparently, the regional center compliance team is back to work with a vengeance, though I-924 volumes remain low.

Other Updates

Regional Center Program Authorization: Regional center program authorization is currently attached to 2018 appropriations that expire on September 30, 2019. It appears likely that Congress will, per usual, fail to finalize 2019 appropriations in advance of the September 30 deadline, and instead defer the deadline with one or more Continuing Resolutions (CR). In the IIUSA Midyear Association Update Webinar, the government affairs panelist said he’d been assured that regional center program authorization will be included in the CR, if there is a CR.

EB-5 Reform/Change Regulations or Legislation: The IIUSA Midyear Association Update Webinar indicated that draft EB-5 legislation continues to circulate among select industry leaders, and to be discussed with Congressional offices. The webinar did not offer any timeframe estimate for such legislation to be advanced toward a vote. IIUSA did state that EB-5 has “Champions in Congress,” though the champions are not yet ready to be named and go public with EB-5 support. EB5 Investors Magazine reports that Senator Rand Paul is trying for a joint resolution that would withdraw the EB-5 regulation – but Senator Paul has not promoted this (or his backlog elimination bill) on hiswebsite. It looks unlikely that there will be any EB-5 program changes before the end of the year, beyond the changes that will result from the EB-5 Modernization Regulation taking effect on November 21, 2019. If only politicians and industry would allow for healthy enhancements and effective reforms for EB-5!

EB-5 Future: How much future does EB-5 have after November 21, 2019, when investment amounts will have increased and when – perhaps more to the point — and there’s no more deadline threat to hustle investment decisions and obscure visa availability and other issues? The industry is divided between people who are making a last mad rush and expecting to abandon the field after November, and people seeking a sustainable path into the future.

EB-5 Marketing and Oversubscription: I hear from multiple sources of significantly increased investment activity from Brazil, South Korea, and Taiwan in recent months, threatening backlogs for those countries. Unfortunately USCIS has not shared any per-country I-526 data since October 2018, so we can only guess at the likelihood that those countries are becoming oversubscribed in 2019. Prospective investors, you’ll want to monitor your markets while keeping in mind this rough metric: an additional year of visa wait for every additional 230 or so EB-5 investors from your country (assuming 700 annual visa cap and a 3:1 ratio of visas demanded to filed I-526). (If you want a more fine-tuned analysis that looks at country-specific historical trends and existing backlog, and explains how to model future waits from current assumptions, my timing estimate service is available.) The visa wait for any given investor is determined by the size of the backlog on the day she invests, so we try our best to estimate current volumes.

Visa Bulletin for India: Section D of the September 2019 Visa Bulletin includes this statement: “There has been a combination of a dramatic change in the USCIS demand pattern for adjustment of status applicants during July, and a larger than anticipated return of unused numbers which had been provided to consular offices for July use.  As a result, it has been possible to advance the Employment First and Second preference September final action dates for most countries, as well as the India Employment Fifth preference. ” The India Final Action Date for EB-5, which hadn’t been expected to move this month, advanced to September 1, 2017.

What does this mean for India EB-5 applicants in line? The Visa Bulletin just tells us that there were fewer-than-expected visas issued through consular processing in July, and different-than-expected demand in July for visas through I-485. I assume that must mean (1) a processing hold-up that resulted in fewer-than-expected people with old priority dates reaching the finish line in time to be able to claim a visa in July, or (2) more denials/withdrawals than expected. If (1), then the future visa claimants are still there, just held up by USCIS/consulate delays, and thus the total backlog picture/timing picture for India doesn’t change much. In that case, the September visa bulletin jump is an anomaly reflecting a temporary phenomenon, not a signal for the future.  If (2), then the total India backlog has actually become smaller, which means that people still in line advance more quickly than expected, with visa bulletin dates moving ahead accordingly.  On a down side, such attrition would signal problems with I-485, visa interviews, or sentiment among past investors.

I’m happy to see that Charles Oppenheim of Department of State Office of Visa Control has consented to speak at the IIUSA EB-5 Industry Forum in Seattle in October.  Let’s try to ask him the right questions.

Regional Center List Updates

Changes to the USCIS Regional Center List, 05/28/19 to 08/27/19.

New Regional Center Approvals


Name Changes

  • Smith Atlantic Regional Center LLC (former name Atlantic Coast Regional Center, LLC) (Connecticut, Delaware, District of Columbia, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia)
  • Smith Central Regional Center LLC (former name Central Western Regional Center LLC) (former name USA Midwest Regional Center LLC) (Illinois, Indiana, Kansas, Kentucky, Michigan, Missouri, Ohio, Pennsylvania, Wisconsin)
  • Smith South Atlantic Regional Center (Florida, Georgia, North Carolina, South Carolina) former name: South Atlantic Coast Regional Center LLC

New Terminations in August 2019
(Too many to list here. Visit the USCIS Regional Center Terminations page and sort by date, or see my Excel file for terminations.)

9/9 Engagement Invitation

USCIS has emailed an invitation to EB-5 Immigrant Investor Program: Listening Session: EB-5 Listening Session_Invite_09092019_PL_OCC GovDel.pdf

EB-5 Regulation Published

The EB-5 Immigrant Investor Program Modernization Regulation (RIN 1615-AC07) has been published today in the Federal Register as a Final Rule. The final rule is effective in 120 days, on November 21, 2019. For every investor who files I-526 on or after November 21, 2019, the required minimum investment amount will be at least $1.8 million, or $900,000 in a Targeted Employment Area, with TEAs being subject to redefined rules. Those are the headlines. The final rule also retains the limited priority date retention provision, I-829 process tweaks, and minor clarifications as proposed in the Notice of Proposed Rulemaking (NPRM) in 2017.

For a solid summary of the rule’s content and implications, I recommend Robert Divine’s 5-page article for IIUSA The Rush is On: New EB-5 Rule Nearly Doubles Minimum Investment in 120 Days (July 23, 2019).

For those concerned to understand the rule and its background in detail, I recommend reading all 61 pages of the final rule itself. The actual regulatory amendments can be found on the final three pages. The rest of the document explains the final rule, how it differs from the NPRM and current regulations, DHS thinking behind the rule, and why the agency did or did not agree with industry comments.

My post will not duplicate Divine’s excellent analysis, or obviate the need to read the rule itself to know what it contains. But I’ll consider a few basic questions.

1. Will this rule actually take effect?

The rule will take effect in November, unless there is litigation against USCIS to stop the regulation, or Congress passes a new EB-5 law that would overrule the regulation. Both litigation and legislation have been bruited in the past. 120 days gives the industry a bit of time to pursue such alternatives, given inclination and opportunity. I guess that inclination depends on a calculation by the regional centers with budgets for lawyers and lobbyists. Their new markets will be damaged by the regulations. But does this matter to them, in light of the damage already resulting from oversubscription and wait times? Do they see sufficient long-term potential for new EB-5 demand to keep fighting for marketable investment amounts supported by TEA flexibility? The opportunity for a successful lawsuit does not look wide, considering the care DHS put into this regulation. I doubt imminent legislation, considering the political climate, and I would not want legislation based on the scandalous so-called industry consensus with TEA set-asides. But I do not discount these possibilities in the next few months, so long as the motivation exists to fight for an alternative to the regulations.

2. Should I hurry to file an I-526 petition before November 21, 2019?

I would ask a couple questions first. (A) Is it important to you that the investment amount is $500,000 rather than $900,000 or $1.8 million? and (B) Is it important to you that the investment result in a visa? If the answer to (A) is yes, then file. If the answer to (B) is also yes, then don’t hurry too much. Skipping due diligence, skimping on source of funds analysis, risking incomplete investment, pushing premature projects, neglecting to consider backlogs and timing issues … these timesavers are likely to leave you with a faulty petition that never results in a visa due to I-526 denial, and/or to visa wait problems not to mention investment problems. So waste no time, but don’t be hustled. Heed experienced lawyers like Robert Divine and Dan Lundy, who warn against skeletal filings. As a business plan writer, I aim to work twice as hard over the coming months to accommodate accelerated deadlines without sacrificing quality.

3. Will it be practically possible to raise EB-5 funds after November 21, 2019?

You know best whether your market has any taste for a $900,000 or $1.8 million investment, under current conditions. The IIUSA TEA mapping tool can help give a general idea of whether your project location could qualify at the $900,000 level going forward. (The tool was designed for the NPRM proposal, but the TEA provisions in the final rule are essentially the same as in the NPRM. A precise determination would require examining the underlying data and guessing how USCIS will implement the rule.) The final rule makes very clear that investment amount and TEA changes apply to all I-526 filed from the rule effective date onward, with no exceptions. (e.g. regardless of whether the project is in the middle of a raise, or has I-924 approval under the old rules). I do not think that EB-5 will die entirely, unless changes to visa allocations make the visa wait unacceptably long for all countries. But certainly, demand has not been and will not be remotely close to the numbers in Figure 1 and Table 3 of the final rule. And new EB-5 investors will want to consider the likelihood that the project they’re investing in will be able to successfully complete the capital raise before November 21, or risk a very tough market after November.

4. What did DHS spend two years doing with the EB-5 rule? Did they listen to industry input? Whose input and interests swayed their thinking?

The discussion in the final rule shows that DHS did indeed read the hundreds of public comments submitted on the NPRM in 2017, and engaged seriously with them. I can judge this because I also read all the comments. Most of the final rule consists of methodical response to the specific points made by the public. Sadly DHS dismissed many good ideas just for lack of supporting data and analysis, but at least they recognized the ideas. The content of the final rule shows that DHS was not manipulated by the much-maligned “powerful moneyed interests”. For example, Related NYC Metro Regional Center submitted over a hundred pages of comments personally and through proxies and had two in-person meetings with OMB about the regulations. The final rule acknowledges the arguments but does not soften any of the TEA restrictions or incentives opposed by Related. On the other hand, the final rule makes a major change from the NPRM – changing the TEA investment amount from $1.35 million to $900,000 – based on good input from someone of no importance. I can judge this, because I wrote the four-page comment that’s extensively cited in the final rule’s discussion of investment differential. (If only I’d written as compellingly about TEA designation! I didn’t occur to me DHS might decide to eliminate both itself and states from the designation business, and just leave petitioners and adjudicators with individual unguided judgment regarding which unemployment data and methodology make most sense.)

5. What does the rule mean for people who filed I-526 prior to November 21, 2019, and still making their way through the immigration process?

Changes to the investment amount and TEA rules do not apply to anyone who filed I-526 prior Nov. 21, 2019. Starting on Nov. 21, people between I-526 approval and conditional permanent residence may be able to take advantage of the rule’s new priority date retention provision. (Update: see my post on this topic.) Starting on Nov. 21, the relatively minor I-829 clarifications/changes will affect anyone reaching the I-829 stage. The rule includes no change to redeployment policy, material change policy, or visa availability.

6. Where do I go with my questions?

Your immigration lawyer and regional center should be there for you. Many webinars will be hosted. For example, Wolfsdorf Rosenthal have a webinar on Thursday, Klasko Law has a webinar on Monday, and ILW has a webinar on Tuesday. I will write additional blog posts as time permits.

And finally FYI, a copy of the email sent out by USCIS.

From: U.S. Citizenship and Immigration Services
Sent: July 23, 2019 10:16 AM
Subject: New Rulemaking Brings Significant Changes to EB-5 Program

Minimum Investments, Targeted Employment Area Designations Among Reforms

WASHINGTON—U.S. Citizenship and Immigration Services (USCIS) will publish a final rule on July 24 that makes a number of significant changes to its EB-5 Immigrant Investor Program, marking the first significant revision of the program’s regulations since 1993. The final rule will become effective on Nov. 21, 2019.

New developments under the final rule include:

  • Raising the minimum investment amounts;
  • Revising the standards for certain targeted employment area (TEA) designations;
  • Giving the agency responsibility for directly managing TEA designations;
  • Clarifying USCIS procedures for the removal of conditions on permanent residence; and
  • Allowing EB-5 petitioners to retain their priority date under certain circumstances.

Under the EB-5 program, individuals are eligible to apply for conditional lawful permanent residence in the United States if they make the necessary investment in a commercial enterprise in the United States and create or, in certain circumstances, preserve 10 permanent full-time jobs for qualified U.S. workers.

“Nearly 30 years ago, Congress created the EB-5 program to benefit U.S. workers, boost the economy, and aid distressed communities by providing an incentive for foreign capital investment in the United States,” said USCIS Acting Director Ken Cuccinelli. “Since its inception, the EB-5 program has drifted away from Congress’s intent. Our reforms increase the investment level to account for inflation over the past three decades and substantially restrict the possibility of gerrymandering to ensure that the reduced investment amount is reserved for rural and  high-unemployment areas most in need. This final rule strengthens the EB-5 program by returning it to its Congressional intent.”

Major changes to EB-5 in the final rule include:

  • Raising minimum investment amounts: As of the effective date of the final rule, the standard minimum investment level will increase from $1 million to $1.8 million, the first increase since 1990, to account for inflation. The rule also keeps the 50% minimum investment differential between a TEA and a non-TEA, thereby increasing the minimum investment amount in a TEA from $500,000 to $900,000. The final rule also provides that the minimum investment amounts will automatically adjust for inflation every five years.
  • TEA designation reforms: The final rule outlines changes to the EB-5 program to address gerrymandering of high-unemployment areas (which means deliberately manipulating the boundaries of an electoral constituency). Gerrymandering of such areas was typically accomplished by combining a series of census tracts to link a prosperous project location to a distressed community to obtain the qualifying average unemployment rate. As of the effective date of the final rule, DHS will eliminate a state’s ability to designate certain geographic and political subdivisions as high-unemployment areas; instead, DHS would make such designations directly based on revised requirements in the regulation limiting the composition of census tract-based TEAs. These revisions will help ensure TEA designations are done fairly and consistently, and more closely adhere to congressional intent to direct investment to areas most in need.
  • Clarifying USCIS procedures for removing conditions on permanent residence: The rule revises regulations to make clear that certain derivative family members who are lawful permanent residents must independently file to remove conditions on their permanent residence. The requirement would not apply to those family members who were included in a principal investor’s petition to remove conditions. The rule improves the adjudication process for removing conditions by providing flexibility in interview locations and to adopt the current USCIS process for issuing Green Cards.
  • Allowing EB-5 petitioners to keep their priority date: The final rule also offers greater flexibility to immigrant investors who have a previously approved EB-5 immigrant petition. When they need to file a new EB-5 petition, they generally now will be able to retain the priority date of the previously approved petition, subject to certain exceptions.

FY2019 Q2 EB-5 Petition Processing Report

USCIS has updated the Immigration & Citizenship Data page with data for petitions processed in FY2019 Q2 (January to March 2019).

The results are shocking. Instead of recovering from the already-dramatic 37% decrease in processing volume last quarter, IPO processing volume fell another 60% in Q2. To look at raw numbers, IPO was processing over 4,000 I-526 per quarter this time last year, but processed less than a 1,000 I-526 in FY2019 Q2. Four times fewer! USCIS apparently does not deign to hold EB-5 stakeholder meetings anymore, so we do not know what is happening behind the scenes. But a huge reduction in output has a limited number of possible explanations: drastic reduction in staff at IPO, drastic increase in time spent per petition, and/or decision to limit output. Has IPO lost resources in recent months? Is there just a pause on adjudications, for some reason? Perhaps IPO is focused, as it should be, on the oldest case in the backlog, and taking an unconscionable time over those cases?

We care about output, because processing volume determines processing times. If IPO is processing four times fewer petitions per quarter than last year, then obviously the backlog will reduce more slowly than we’d thought in 2018, and processing times will increase accordingly. The following scary chart allows visualizing how many quarters would be required to process the backlog, if FY2019 Q2 volumes were to continue going forward.

Nevermind the 25-40-month range for I-829 in the current USCIS processing times report; the average I-829 filed on top of the backlog in January 2019 would take 93 months to process if FY19 Q2 volumes continue. But surely this exponential output reduction must be an unnatural aberration and cannot continue indefinitely! In all its history, IPO has never shown such meager performance across the board as in the last two quarters. Meanwhile, note that receipts remain low.


See my EB-5 Timing page for links to past reports, and the EB-5 Timing Estimates page for customized timing analysis. Considering recent fluctuations, I’ve updated my estimate templates to facilitate modeling alternate scenarios.

Petition Processing Times Report Change, RC List Updates

The USCIS page to Check Case Processing Times, which updates at irregular intervals, has just published dramatic new time estimates for EB-5 forms.

  • I-526 Processing: Estimated time range of 29 to 45.5 months (the previous update gave a range of 22 to 28.5 months)
  • I-829 Processing: Estimated time range of 25.5 to 40.5 months (the previous update gave a range of 30 to 38.5 months)
  • I-924 Processing: Estimated time range of 22.5 to 44 months (the previous update gave a range of 16.5 to 21.5 months)

These charts picture the latest update in context of past reports (which I’ve logged in this file since 2014).

 

What’s the story behind the changes to estimated processing times? I have a few thoughts.

  • All we know for sure is that the report changed. Actual processing times may or may not be changing.
  • The major report change is in the spread between the high and low end of the “estimated time range.” Previous processing time report updates since early 2018 had around a 6-month spread; today’s report shows a 15+ month spread. I guess that USCIS is motivated here to redefine what counts as normal processing times by including outliers in the average. The high end of the estimated time range always roughly corresponds to the “Receipt date for a case inquiry” in the processing report. The report page states this purpose for the case inquiry date: “to show when you can inquire about your case.” By suddenly adding 1-2 years to their estimate of what can be considered “outside normal processing time,” USCIS effectively cuts the number of petitioners who can hassle them with inquiries about overdue petitions. An understandable possible reason, even if the processing speed and backlog have not in fact changed.
  • The new report gives these receipt dates for case inquiry: I-526: 9/15/2015; I-829: 2/2/2016, I-924: 10/25/2015. How many petitions filed before those very old dates could possibly still be in the system? We roughly know the answer for I-526, thanks to a report of forms pending as of 10/2018: up to 412 Form I-526 filed before September 2015 could still be pending. That was only 3% of total pending I-526 (though the number ought to be 0).
  • After several quarters of improvement, IPO reduced processing volume in the last reported quarter (Oct-Dec 2018), with 37% reduction from the previous quarter in number of EB-5 forms adjudicated. Lower adjudication volume drives longer processing times. On the other hand, lower receipt numbers (another recent trend) should eventually result in faster processing times.
  • IPO has not engaged with stakeholders since October 2018, when IPO Chief Sarah Kendall praised IPO’s progress thanks to additional resources, reported that IPO was fully staffed with over 200 personnel, and indicated that IPO would be working toward additional backlog reductions in FY19. (I keep a log of communications related to processing times here.)  There’s been no explanation for the overall processing slowdown evident since that positive report.
  • A May 2019 letter from L. Francis Cissna to Senator Tom Tillis discusses recent processing delays across USCIS, and gives EB-5 one mention. “Another cause for delays in processing can be increased litigation. For example … the USCIS Field Operations Directorate is complying with court orders related to the EB-5 program…” (on PDF p. 7) I assume that refers to the Zhang Class Action. Perhaps IPO is slowing new I-526 adjudications as it backtracks to deal with all the petitions that it denied in error over loan proceeds. And USCIS has been targeted by numerous other lawsuits over questionable denials involving the EB-5 “at-risk” requirement. (In other news, this letter is one of Cissna’s last actions as USCIS Director.)
  • We can see what IPO is not doing since October 2018 – not adjudicating many I-526, and not approving or terminating many regional centers. The question: what is IPO doing? IPO is processing more I-829, if the lower low end of the estimated time range in the new processing report gives any indication. That’s a good thing. I hear that IPO has been issuing lavish RFEs, which potentially doubles the work involved in each form processed. That’s less excusable, especially since many RFEs don’t even target problems, but basically just request that originally-filed documents be resubmitted to reflect developments during the adjudication delay.
  • Back in 2011/2012, a processing slowdown presaged a policy shift. At that time USCIS turned against tenant occupancy methodology, and delayed decisions on affected cases while it figured out how to define its objections. The current slowdown makes me wonder if USCIS is again shelving certain cases while it brews more new policy guidance. (Only the policy won’t be called “new,” when announced, since then it couldn’t apply retroactively to pending cases.)

NOTE: Having written so much about timing issues, I’ve now added a EB-5 Timing page to collect links to data and posts related to processing times, visa wait times, and visa availability and allocation. I’ve also created a new service for people who would rather not wade through all the detail themselves, but want to request my timing estimate for their specific situation. See the EB-5 Timing Estimates Page.

RC List Changes

Speaking of reduced activity at IPO, here’s another sparse regional center list update. Just four regional centers have been terminated so far this year, as compared with 79 terminations in the first five months of 2018, and 38 terminations in the first five months of 2017. Just three new regional centers have been designated since January 2019. Is this a new period of welcome stability after the frantic growth and culling of 2016-2018? Or an unnatural calm?

Additions to the USCIS Regional Center List, 04/20/19 to 5/28/2019

  • No new regional center designations
  • Interestingly, four regional centers that were terminated last year have now been restored to the approved list, demonstrating that it’s possible to overcome a termination: EB5 United West Regional Center, LLC, EB5 Affiliate Network Washington, D.C. Regional Center, LLC, Art District Los Angeles Regional Center, LLC, and Greystone EB5 Southeast Regional Center LLC. (No decision documents have yet been posted for these RCs. For Greystone, USCIS has posted the termination reason but not the sustained appeal.)

New Terminations

  • America Commonwealth Regional Center (terminated 5/10/2019)
  • American Opportunities Regional Center, Inc. (terminated 2/15/2019)

FY2019 Q1 EB-5 Petition Processing Statistics

USCIS has updated the Immigration & Citizenship Data page with data for petitions processed in FY2019 Q1 (October to December 2018).

The data shows that the Investor Program Office had an unproductive first quarter, with the fewest EB-5 forms processed since 2016. No wonder processing times remain long. Sometimes the data reflects a workload trade-off (e.g. fewer I-526 but more I-829 processed), but FY19 Q1 just had very low output overall. What’s up, IPO? Are you losing staff? Burning time with extreme-vetting RFEs? I-526 and I-829 receipts were up from the previous quarter, but still relatively low.

The All Forms report is interesting as a reminder of just how small EB-5 is in the grand scheme of employment-based petitions, and because the report now has separate line items for I-924 and I-924A.

All regional centers that want to remain in good standing should file the I-924A annual report between October and December, yet the report shows only 322 I-924A receipts for Oct-Dec 2018. Did the rest of the 885 currently-approved regional centers decide that designation isn’t worthwhile anymore? Or does the report not capture actual I-924A submissions? Certainly I-924 filings remain very low. No surprise considering the high form fee, the difficulty of operating in the current environment, and the fact that exemplar approvals have no value if they come too late to be usable.

UPDATE: I’ve added a EB-5 Timing page to collect links to data and posts related to EB-5 visa availability, visa allocation, and wait times. If you would like to order a personalized timing estimate, see the EB-5 Timing Estimates Page.

RC List Updates

There has been little activity on the USCIS regional center list since the beginning of the year.

Additions to the USCIS Regional Center List, 12/31/18 to 04/19/19

  • BC East Coast Regional Center LLC (Pennsylvania)
  • EB5 Affiliate Network Washington, D.C. Regional Center, LLC (District of Columbia)
  • Pride Capital, LLC (New York)
  • Greystone EB5 Southeast Regional Center LLC (former name Greystone Florida Regional Center LLC) (Florida) (This RC had previously been terminated for inactivity — termination letter here.)

Removed from the approved list, but not added to the terminated list

  • Three Streams Mid-Atlantic Regional Center (Maryland)

New Terminations

  • San Francisco Regional Center (California) Terminated 2/13/2019
  • Midwest Investment Fund, LLC (Indiana, Kentucky, Ohio) Terminated 2/5/2019

USCIS email: Zhang Class Action

From: U.S. Citizenship and Immigration Services <uscis@public.govdelivery.com>
Sent: February 12, 2019 3:55 PM
Subject: Class Action Member Identification Notice

On Nov. 30, 2018, in Zhang v. USCIS, No. 15-cv-995, the U.S. District Court for the District of Columbia certified a class that includes any individual with a Form I-526, Immigrant Petition by Alien Entrepreneur, that was or will be denied on the sole basis of investing loan proceeds that were not secured by the individual’s own assets. The U.S. District Court for the District of Columbia vacated these denials and ordered USCIS to reconsider the petitions.

If you believe you have received an I-526 denial solely on this ground and would like to identify yourself as a potential class member, please email USCIS.ImmigrantInvestorProgram@uscis.dhs.gov, using the subject line “Zhang Class,” and provide the following:

  1. Name
  2. Alien Number (if any)
  3. Date of birth
  4. I-526 receipt number (if available)
  5. Date of I-526 denial
  6. Copy of I-526 denial (if available)

Note: Identification as a potential class member is subject to USCIS verification and does not grant any immediate rights, as immigrant petitions must meet all eligibility requirements and the court’s decision is presently under consideration for appeal.

USCIS has also posted a notice at https://www.uscis.gov/eb-5

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

Updates (reauthorization, visa cap, redeployment, AAO decisions)

Reauthorization

There seems to be optimism that Congress and President Trump will agree before February 15 on a deal to fund the government for 2019. I assume and trust that the deal, when unveiled, will include extension of regional center program authorization at least to September 30, 2019. [Update: H.J.Res 31, which became law on 2/15, has regional center program authorization to 9/30/2019 in Division H, Title 1, Sec. 104 (PDF page 463), and no other changes that affect EB-5.]

Luckily for EB-5, the case against it has been taken up by the pariah Rep. Steve King. Last month he introduced H.R.773 – To terminate the EB-5 program, proposing that EB-5 be erased from the INA, and that DHS cease to accept new petitions and dismiss all pending petitions and applications. The bill has gained 0 cosponsors, reflecting what other lawmakers think of this proposal and/or of supporting anything associated with Steve King.

Visa Availability

The per-country cap for EB visas continues to be an issue in the new Congress, with at least two new bills proposing to eliminate it: H.R. 1044 ‘Fairness for High-Skilled Immigrants Act of 2019 and S.386 – A bill to amend the Immigration and Nationality Act. These bills have quite a few cosponsors. This time around, IIUSA has taken a stand on the issue. “While the elimination of per-country caps may make sense for some categories, the elimination of the per-country caps for EB-5 will be to the detriment of the program,” stated IIUSA Executive Director Aaron Grau. [2/18 Update: IIUSA has expanded on its statement. 7/1/2019 Update: See my post on Country Cap discussion.]

EB-5 Activity at USCIS

Here’s what USCIS has done publicly so far for EB-5 in 2019:

  • Not finalized EB-5 regulations (or at least, not yet advanced them to OMB for review)
  • Not approved or terminated any regional centers
  • Not published petition processing data for July-Sept 2018 (I expected this to happen by December 2018)
  • Not held or announced any stakeholder engagements
  • Made a couple tweaks to petition processing time reports, each time adding or subtracting a few days. Currently, petitioners can be considered “outside normal” processing times if they are 796 days from I-526 filing, 1,077 days from I-829 filing, or 715 days from I-924 filing.  Dear me. However, I’m hearing anecdotally of I-526 adjudicated within a year.
  • Published a number of AAO decisions on EB-5 appeals (a few of which I discuss below)

Material Change and Redeployment

I have something to add to the redeployment discussion, as a business plan writer who has spent years grappling with the intersection of EB-5 theory and business practice. But until I have time to actually write the post I have in mind, here FYI are two planks to my thinking on the redeployment issue:

  • Carolyn Lee’s analysis of the EB-5 at-risk requirement and its misapplication in redeployment policy. USCIS, be sure to read this article, which helps explain why applying redeployment policy is so hard for us. When a policy makes sense theoretically, then we don’t have to badger you with questions about how to apply it. Then we can figure it out ourselves with reference to the statue/regs/precedents etc., with the help of our smart lawyers. As it is, we do hassle you with questions because there’s a broken link to the established rules, giving us and you no firm foundation to stand on in applying the policy, and leaving us all vulnerable to capricious case-by-case determinations.
  • A number of redeployment complications and constraints arise from the fact that redeployment policy is a subset of the material change policy. In preparation to discuss that aspect of redeployment, I’ve refreshed my post What is Material Change.  The post discusses the theory and links to most AAO decisions that have addressed material change in specific cases.

USCIS decision-making

AAO decisions on EB-5 appeals shed light on an important question: “If anything goes wrong with an EB-5 investment, is there any way to recover?” What if a principal goes rogue and makes off with some funds, but then there’s new management and funds are recouped and put to work again? What if a regional center was terminated, but currently well-placed to promote economic growth? What if a project did not develop as originally anticipated, but can succeed and create jobs in a new direction? These questions fall in policy grey areas, giving the agency leeway for positive flexibility or reflexive naysaying.  Unfortunately, recent AAO decisions show the later trend, and I hope that there will be pushback.

DEC102018_06B7203 Matter of L-X- is one of two decisions on appeal by investors who put money into an NCE originally managed by Emilio Francisco, who was charged by the SEC in December 2016 with defrauding investors. The NCE and other defendant entities went into receivership, it was determined that a portion of EB-5 investor funds had been diverted, and USCIS denied I-526 petitions for NCE investors. In an attempt to salvage the situation, several EB-5 investors executed an LOI with an institutional investor and amended the NCE’s LP agreement to replace the NCE manager, remove the NCE from receivership, provide necessary funding to the NCE, and complete and operate the project. USCIS/AAO claimed to be “sympathetic to the Petitioner’s situation,” but claimed that the investors still could not satisfy EB-5 requirements. Here’s the USCIS/AAO reasoning:

  • The petitioner could not satisfy the “at-risk” requirement if she replaced diverted capital with additional investment, because that new capital would not be her original capital, and Izummi requires showing that the full amount of “original capital” was made available to the NCE to create jobs. “Petitioner must establish the necessary job creation with capital invested at the time of filing, not based on later infusion of additional funds.” (I don’t quite follow the justification from Izummi, or the “original capital” idea generally. Is the thought that the very dollar bills first passed between the investor and NCE must be the same dollar bills used to pay employee salaries? USCIS sometimes talks about a “path of funds” from investment to job creation – as if cash flowed through a business with each note radio-tagged and leaving a colored path as it goes. In practice, investment goes together into a pool and economic activity and jobs and ROI come out of the pool. A “path of funds” from X original dollar to Y job never exists, and USCIS/AAO should not make demands that presume such a path.)
  • If the investor replaced $182,133.33 of diverted capital with $182,133.33 in additional investment, then the petitioner would be committing impermissible material change because that would effectively increase the minimum investment amount from $500,000 to $682,133.33. (Really, USCIS? How does investing more than the required minimum undermine eligibility?)
  • USCIS couldn’t tell whether the Petitioner had actually invested the additional funds, or only intended to do so. (This is a fair point, but why did USCIS raise this issue if against additional investment in principle?)
  • The Petitioner did not demonstrate that all approvals needed for the proposed NCE restructuring had been obtained, making USCIS doubt whether the restructuring could go forward. (Fair point, if true.)
  • The Petitioner did not file an updated business plan to describe the current status of the project and its current job creation potential. (I wonder if this was fundamentally the most important problem with the Petitioner’s appeal. A business plan is a chance to tell a compelling story about use of investment and job creation, reconcile apparent inconsistencies, argue that changes aren’t material, make an eligibility case, and pre-emptively address questions, doubts, and misconceptions that the reader might have. Don’t miss the prime opportunity to tell your story! As a business plan writer, I’m sensitive to the critical and delicate role of the business plan in presenting changed circumstances to USCIS.)

DEC042018_01K1610 Matter of P-A-K  is AAO’s third decision regarding the designation of  Path America KingCo regional center. This decision was compelled by US District Court, where the regional center filed a complaint after the AAO denied its initial appeal and motions to reopen and reconsider. AAO gives 21 pages this time to reiterate the denial, with arguments that can be summed up in this sentence that the decision quotes from INS v. Abudu: “The INS should have the right to be restrictive.” Path America KingCo presents a compelling case for its current and future potential to promote economic growth, but the AAO finds that this isn’t relevant to its current designation status. AAO rests on this technical claim: that appellate decisions are final, and cannot be reconsidered in light of new evidence, but only reassessed in terms of evidence that existed at the time the decision was made. One might think that Path America KingCo deserves designation if it is continuing to promote economic growth, but AAO says no – the relevant issue is whether it was promoting economic growth at the time it was terminated. A different agency might’ve looked at the fact pattern – a company that has good management (now), good projects, and committed investors dependent on the designation – and found a way to say yes. The so-called “balancing test” discussed in prior terminations claims that “we take into account a variety of factors, both positive and negative, that encompass past, present, and likely future actions.” However, it appears that this test does not apply on appeal, as USCIS does not consider positive present or likely future actions once a termination letter has been issued.

Letter to Senator Collins in the USCIS electronic reading room shows USCIS responding frostily to a plea from Senator Susan Collins regarding a small town in her constituency that planned to use EB-5 investment to rebuild after the catastrophic closing of a paper mill. The scenario sounds like textbook example of what Congress hoped EB-5 could do, but it did not move USCIS, which terminated the regional center purchased for the town before the town had a chance to use it, and just offered Senator Collins the cold comfort of filing an AAO appeal. Is this administering the Immigrant Investor Program in a fair and efficient manner? Fair and efficient, I suppose – the RC was apparently inactive prior to being taken over for Millinocket, Maine. But is the decision in tune with EB-5 program logic and objectives? No.

To be fair, AAO appeals sometimes work. JAN252019_01B7203 is an example of a denial that AAO remanded back to USCIS for more precision in identifying specific problems in credibility and eligibility, and for more rigor in assessing relevant evidence.

And as a reminder that court cases also sometimes work, EB-5 investors have another win on use of loan proceeds for EB-5 investment.

11/19 Stakeholder Meeting with USCIS (redemption, redeployment)

Anyone not already depressed and frustrated is welcome to my recording of today’s EB-5 stakeholder teleconference with USCIS.

A commenter asked: can you please clarify what was expected outcome of this teleconference and what did not go well. That’s an excellent question, and makes me admit that the teleconference was no worse than could have been expected. This was the first public engagement with IPO in over a year, and absence makes the heart forget how public engagements work. Public engagements are not the right venue for delivering new policy guidance, so we can’t expect interesting answers to important questions. IPO can’t limit who asks questions, so much time gets wasted in obvious responses to ignorant inquiries. The call did provide some nice program updates and input that didn’t interest me because I’m well-informed and already knew and previously reported on them. But I can’t blame IPO for repeating the information for the general public.

Here’s what I learned:

  • A few pieces of information:
    • “The agency has considered public comments on USCIS’s Immigrant Investor Program Modernization Regulations (NPRM) and is working to finalize this NPRM soon.” (I-829 Division Chief Tisa Weatherall in minute 15) In follow-up questions, IPO declined give any time estimate for EB-5 regulations, or comment on whether they expect the OMB Fall Agenda estimate of 11/00/2018 to be met. The regulations are “moving forward through the formal process.”
    • IPO will put additional resources on I-829 in FY2019
    • “In terms of redemption agreements, we also received questions regarding new language in the recently published Policy Manual, specifically regarding redemption provisions with respect to those I-526 petitions or immigrant visa applications that have been denied. To clarify, agreements allowing redemptions of investors’ equity whose I-526 petitions or immigrant visa applications have been denied are not permissible are not impermissible.” quoting Division Chief Chris Mason at minute 20-22 of the recording. This resolves an ambiguity pointed out by Carolyn Lee in her incisive comments on the New USCIS EB-5 Redemption Policy Update.
    • Division Chief Ricky Murry clarified that the Policy Manual updates on geographic area amendments and regional center boundaries were intended to be separate updates, and were not intended to impose new requirements. IPO thinks that the addition of the word “contiguous” to the geographic area section of the Policy Manual simply harmonizes with the I-924 Form and Instructions, which have used the word “contiguous” since 2010. (at minute 21-22)
    • When a project is completed before the investor achieves conditional permanent residence, the NCE may, can, but above all must redeploy the capital. (at minute 43)
    • IPO has not seen any recent increase in active criminal investigations, and has noted decrease in Requests for Information from law enforcement partners. But it encourages the public to report any known or suspected fraud or abuse. IPO Chief Sarah Kendall pointed out this page on Combating Fraud and Abuse and email address for tips.
    • FYI here are links to other resources mentioned on the call:
  • IPO’s division chiefs sound fresh and sweet, and capable of reading aloud from the policy manual, the USCIS website, and past stakeholder meeting notes. Additional powers were not on display, except from our old friend Jan Lyons who dared at one point to interpret policy in direct answer to a simple question (starting at minute 37), only to have his comments shut down and thoroughly retracted (several times later in the call).
  • These appear to be the available answers to policy questions: (1) let us read to you the current public written guidance, with no comment on what we think it means; (2) the current statutory scheme and regulatory framework limit our ability to address, clarify, or fix this policy, sorry; (3) we make decisions from the gut on a case-by-case basis, and therefore cannot generally state how policy could apply to a fact pattern, sorry; or (4) send an email to the public engagement mailbox and we’ll think about it.
  • IPO has not publicly clarified its policy on further deployment because IPO itself is not sure how to interpret the policy at this time. IPO has not agreed or decided such basics as whether further deployment needs to be in the same geographic area as the original deployment (within the original regional center geographic area or not), whether it needs to be in the same form as the initial deployment (e.g. whether preferred equity must be followed by preferred equity, or could be followed by a loan), whether the redeployment must be in the same type of project (e.g. whether initial deployment in hotel must be followed by another hotel investment), whether the redeployment must be new money in a project or could replace existing financing, what about municipal bonds makes them an option, and when, and how the sustainment rules apply in case of bankruptcy after the job creation requirement was met. IPO at least clarified on this call that these answers do not yet exist – that they’re all points that they still “need to look into,” and about which they have yet to agree internally. Here’s how the call ended at the one hour mark.
    • Public: So can I make one further comment? So a lot of these redeployment deals, they’re going on now, right. So we would like USCIS to apply whatever policy it comes up with prospectively and not retrospectively. Because we’re redeploying now, because we have no choice. We don’t want all of our investors to later get denied because we guessed wrong about what we thought you were ultimately going to come out with. To the extent that we’re redeploying before you come out with a policy, we would greatly appreciate if you don’t, you know, later deny all of our investors for not meeting the policy that hadn’t been promulgated yet.
    • USCIS: So, duly noted. No promises, but duly noted.

USCIS meeting with IIUSA (regs, redeployment, processing times), Analysis of Litigation

Report on USCIS Meeting with IIUSA

Thank you USCIS for posting a complete transcript of the USCIS Meeting with IIUSA on October 5, 2018. Such transparency is so helpful. Program integrity suffers from general lack of information, and from the industry’s inclination to promote asymmetry for what little info is given.

At the meeting, USCIS Director Cissna spoke about current developments in EB-5, IIUSA representatives described areas of concern for the industry, and new IPO Chief Sarah Kendall commented on IPO performance.

The entire transcript is worth reading, but here are the most newsworthy elements from my perspective:

  • Regulations: Director Cissna, speaking in October, did not make it sound as of the EB-5 Modernization regulations (regarding investment amounts and TEAs) were on the brink of finalization. He said: “So on the main one, the proposed rule that has yet to go final, it is going to go final. We’re just not ready yet. We’re still working on it. You might have seen, I testified in front of the Senate a few months ago, back in June, and I got screamed at because Senator Grassley was wanting that regulation to be final even quicker. So I told him what I’ll tell you is the answer hasn’t changed. We are going to finalize it; just we’re not done yet. It’s a lot of work to finalize a regulation. But that should come soon.” And then later “Well, I think, I mean, you asked, you know, what are our priorities for the next fiscal year. I think, you know, putting aside the regulations which we already discussed, I think the main one is continuing to ensure the integrity of the program. That’s what it’s about. The reg., it might take a while yet before it gets finally published.” This is a grain of salt to go with the “last chance in November 2018” marketing pushes currently fueled by the OMB Fall 2018 Unified Agenda, which estimated 11/00/2018 for a final rule.
  • Redeployment: IIUSA representatives spoke strongly for the need to clarify policy around redeployment. USCIS sounded receptive but vague — not as if they are currently working on redeployment policy. Kathy Neubel Kovarik, Chief of the USCIS Office of Policy and Strategy, threw out a couple ideas:  that the industry might submit suggestions for how to clarify the policy, and what if USCIS published the details of approved redeployments for industry reference. IIUSA pointed out pros and cons.
  • Processing Times/Petition Backlog: The USCIS website has only published EB-5 petition data through March 2018, and we desperately want to know numbers for filing and adjudication volume for the year. This meeting transcript includes charts with completion information at least. The charts show a heartening increase to processing volume across all EB-5 forms in 2018 vs 2017: +21.9% for I-526, +2.5% for I-829, and +72.5% for I-924. Ms. Kendall acknowledged that I-829 (or as the transcriber tellingly heard it, “oh, no, we’re not,” haha) has “a bit of a bump going on.” She indicated that “in the next year we anticipate putting additional resources to the [I-829] so that we can address the needs of that particular line of adjudication.” She reports that IPO is now fully staffed with 200+ personnel, spread across FD&S, Fraud Detection and National Security, and Adjudications Management, plus “an excellent support team.”

I will report further when IPO Chief Sarah Kendall speaks at the AILA/IIUSA conference in Chicago next week.

Litigation in EB-5

I’m behind in reporting on litigation and enforcement actions in EB-5, but Friedland and Calderon have picked up the slack with a paper analyzing the couple SEC actions and flurry of investor-initiated litigation this year. Here is their helpful introduction to the paper.

In December 2017 when we released the first edition of “Understanding EB-5 Securities: NYU Stern Database of SEC EB-5 Securities Enforcement Actions,” we were skeptical as to whether there would be sufficient developments in this area to justify annual updates. However, any doubts were removed during the first 10 months of 2018.

Below is a link to our latest paper, entitled “EB-5 Securities – New Developments and Updated NYU Stern Database – 2018 Edition,” with the updated database as an appendix.

Topics covered by this paper include:

  • The pending litigation in the CMB Century Park Hotel case, with a detailed analysis of the Investment Company Act of 1940 aspects of the case, as well as discussing the relevance to this case of the recent SEC Order against CMB even though the Order relates to unrelated projects
  • The 2018 SEC enforcement action, the DOJ prosecution and the pending bankruptcy auction of the Palm House Hotel where an affiliate of the Related Companies is apparently the stalking horse bidder
  • The immediate impact of the 2017 U.S. Supreme Court decision in SEC v. Kokesh based on recent SEC testimony before Congress
  • The SEC settlement with Ariel Quiros, the mastermind of the Jay Peak fraud; a comparison of the distribution of proceeds with the distribution under the Raymond James Financial settlement; and possible SEC Whistleblower awards
  • The pending litigation against USIF alleging a secret restructure of the EB-5 investors’ capital, in its atypical role as an in-house regional center
  • DOJ criminal prosecutions in 2018, as well as expected future prosecutions
  • Unregistered broker-dealer actions, including the recent enforcement action against an immigration attorney wearing multiple hats, and a 2018 US Supreme Court decision prompting a rehearing of aspects of the Hui Feng decision
  • The pending litigation against People’s United Bank for its role in Jay Peak and its potential impact upon other banks’ willingness to establish and maintain EB-5 subscription escrows
  • Updates to our SEC EB-5 Securities Enforcement Action Database
  • Our dim outlook on the likelihood of enactment of EB-5 integrity reform measures, although a recent announcement by OMB, DHS and USCIS provides a glimmer of hope

Link to new paper: EB-5 Securities – New Developments and Updated NYU Stern Database – 2018 Edition

Link to webpage on NYU Stern CREFR site listing our EB-5 research:
EB-5 Research Papers and Articles by Gary Friedland and Jeanne Calderon