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

EB-5 Engagement 11/19

From: “U.S. Citizenship and Immigration Services” <uscis@public.govdelivery.com>
Date: October 19, 2018 at 11:05:39 AM PDT
Subject: USCIS: EB-5 Immigrant Investor Program: Public Engagement, November 19, 2018
Dear Stakeholder,

U.S. Citizenship and Immigration Services (USCIS) invites you to participate in a public teleconference on Monday, Nov. 19, from 1 to 2 p.m. (Eastern) to discuss 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.

During the first part of this engagement, we will provide EB-5 program updates. The second part will be a question-and-answer session. We encourage the public to provide questions and comments on the EB-5 program in advance.

To register for this session, please follow the steps below:

  • Visit our registration page to confirm your participation
  • Enter your email address and select “Submit”
  • Select “Subscriber Preferences”
  • Select the “Event Registration” tab
  • Be sure to provide your full name and organization
  • Complete the questions and select “Submit”

Once we process your registration, you will receive a confirmation email with additional details.

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

Email public.engagement@uscis.dhs.gov by Thursday, Nov. 1, at 5 p.m. (Eastern) and put “EB-5 Engagement” in the subject line if you would like to:

  • Submit questions in advance; or
  • Request a disability accommodation to participate.

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!

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

Regional Center Terminations

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

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

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

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

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

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

SEC Action

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

Processing Times

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

Washington Updates

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

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

Regional Center List Changes

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

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

New Terminations

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

FY2018 Q2 EB-5 Form Processing Statistics

USCIS has updated its Immigration and Citizenship Data page with statistics on forms received, processed and pending in the second quarter of FY2018 (January to March 2018). Form I-526 and I-829 are in the Employment Based subsection, and Form I-924 is in the Forms subsection in the “All Forms Report.”

My charts below summarize FY2018 Q2 data compared with previous quarters, and highlight trends. A few notes:

  • IPO processed a few more forms in FY18 Q2 than ever before. It’s nice to see processing trend in a positive direction, and a new record set. Once could wish for more dramatic improvement. The chart of quarterly processing volume over the past three years shows a very gradual upward trend. I-526 and I-924 volume (approvals+denials) improved significantly in Q2, but net improvement remained low when considering reduced I-829 volume.
  • Form receipts at IPO reflect a gradual downward trend, driven by falling I-526 receipts. However I-526 receipts remain unsustainably high. The 10,000 annual quota of EB-5 visas means that the program can accommodate about 830 I-526 per quarter on average (assuming about 3 visas per investor). FY18 Q2’s unusually low 1,607 I-526 receipts is still almost twice the sustainable average: one quarter’s filings sufficient to claim half a year of visas.
  • Form I-924 receipts and processing were both significantly elevated in FY18 Q2. No wonder I-924 processing times look better than expected. I-924 denial rates remain high.
  • I-829 receipts grew in FY18 Q2, even as processing volume fell again, with fewer I-829 processed in Q2 than in any of the previous three quarters.
  • If we could predict processing times by dividing number of pending forms in Q2 by number forms processed in Q2, then I-526 would take 17 months, I-829 36 months, and I-924 16 months. This prediction differs from the month ranges currently in the USCIS Processing Times Report: 20-26 months for I-526, 30.5-39.5 months for I-829, 19.5-25.5 months for I-924. I tried several equations with the pending and volume numbers, and (unlike last quarter) didn’t find one that neatly replicates the USCIS processing time calculation.
  • In case I-829 petitioners didn’t have enough to worry about already, the I-829 data doesn’t look right. The FY18 Q2 report reviews Q1 data, as follows: 694 receipts, 6,251 pending. But the Q1 report published in May had quite different numbers for Q1: 1,046 receipts, 6,673 pending. To where did those 352 receipts and 422 pending petitions from Q1 disappear? Or maybe they didn’t disappear, but joined other petitions of unknown origin, since the number of petitions reported pending at the end of Q2 (7,447), is higher by almost a thousand than what one would expect from taking Q1 pending petitions plus Q2 receipts minus Q2 approvals and denials. Hope USCIS can soon modernize beyond paper and counting sticks for keeping EB-5 records. Or am I missing something?

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

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

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

2018 Ombudsman Report

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

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

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

Other relevant resources that I’ve previously linked here:

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

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

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

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

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

New Terminations:

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

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

Senate Hearing

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

Legislation

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

I-829 Notices

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

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

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

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

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

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

To learn more, visit our website.

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

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

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

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

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

For more information, visit our website.

Processing Report, Terminations, Regulations, RC List Changes

Processing Time Report Update

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

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

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

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

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

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

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

Regional Center Terminations

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

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

Examples:

Regulations

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

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

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

Regional Center List Changes

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

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

New Terminations:

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

AAO Decisions (termination, exemplar approval, bridge financing), Other Updates, RC List Changes

AAO Decisions

The Administrative Appeals Office continues to issue non-precedent decisions on appeals of denied EB-5 petitions and applications. The cases give insight into recent USCIS thinking on sensitive topics: material change, deference to prior approvals, regional center oversight responsibilities, regional center activity requirements, bridge financing, and evidentiary requirements.

  • MAY032018_01K1610 (Matter of L-V-E-I, LLC) dismisses the appeal of a regional center that USCIS terminated for inactivity. The applicant successfully demonstrated that its principals have remained actively engaged in seeking EB-5 projects, have been carefully reviewing potential proposals, and have participated in EB-5 conferences and networking. However, the applicant has not received any capital from EB-5 investors since its designation in 2011, and has not offered documentation confirming any currently-active EB-5 projects. AAO concluded that “in light of the above positive and negative indicators, the Applicant has not established that, on balance, it is continuing to promote economic growth.”
  • APR032018_01K1610 (Matter of A-G-R-C, LLC) and APR022018_01K1610 (Matter of W-F-R-C, LLC) sustain the appeals of two regional centers seeking exemplar approval for a project. USCIS cited multiple reasons for denying the exemplar requests, but the core concern seems to have been discomfort with the involvement of two regional centers in the same project (with a portion of EB-5 investors in the project sponsored by one regional center, and remaining investors by the other regional center). However, AAO countered that “The record included a sponsorship agreement that contained sufficient detail to explain how responsibilities and investors would be allocated amongst the two RCs.” AAO went on to determine that USCIS made several mistakes in its denial:
    • USCIS cited Form I-924A information in the denial, but “neither the regulations nor the form instructions predicate the adjudication of an amendment to a regional center’s designation upon a demonstration of consistency or accuracy in its own Form I-924A filings or in relation to those of another regional center.”
    • When USCIS determined that funds were not at risk in the JCE, it erroneously identified the JCE as the project DBA, which is just a name, not an entity.
    • USCIS concluded that EB-5 funds were not spent to develop the project because its site visit inspectors did not see construction underway, but AAO accepted that “applicant has provided permits and records indicating that the project has undertaken meaningful business activity.”
    • USCIS questioned the terms of non-EB-5 capital commitment, but AAO found that “Funds provided from sources other than EB-5 investors are not subject to the at-risk requirements in the regs.”
    • USCIS “opined that it was unlikely that NCE would raise the total amount of required foreign investor capital. He does not cite any evidence in the record to support this contention, nor do the regulations require the Applicant to demonstrate this ability.”
    • AAO agreed that the applicant overcame USCIS concerns about working capital as an input to the economic model, and inflation affecting the revenue estimate.

These cases reflect inconsistencies in EB-5 adjudications. USCIS denied exemplar I-526 amendment requests after having already approved eight investor I-526 petitions with the same project and documents (not to mention having reviewed the project in context of an initial regional center approval). Apparently, deference in EB-5 only goes one way: from exemplar to I-526, not the reverse. We wish that an approved actual I-526 petition could serve as de facto exemplar for future petitions involving the same project, but apparently it does not.

  • APR252018_01K1610 Matter of E-B-F-N-Y concerns a regional center whose amendment request for exemplar project approval was denied, based in part on a bridge financing arrangement. AAO agreed with USCIS and dismissed the appeal. The bridge financing arrangement was found to be unacceptable because the funds were made available to an entity other than the JCE entity, and therefore “The record does not show that the EB-5 capital would go towards the construction that the Applicant claims would provide the job creation required for foreign investors, violating the holding of Mauer of lzummi and the USCIS policy on bridge financing.” Moreover the arrangement did not qualify because it was not sufficiently “temporary,” since the loan in which the investors participate is a construction-to-perm loan that will eventually be considered permanent financing. The applicant attempted to clarify matters by providing new loan agreements, but AAO countered that “the Applicant’s introduction on appeal of new loan documents between the NCE and the JCE may constitute an impermissible material change.” USCIS’s emerging and as yet undeclared new policy on bridge financing has major implications for many EB-5 offerings. For additional discussion, see: A tide change in EB-5 bridge financing policy (April 23, 2018) by Kristal Ozmun and Adam Schaye and EB-5 Bridge Financing: A Study of Market-Driven Applications & Definitions (April 2018) by David Hirson, Nima Korpivaara, Phuong Le
  • APR242018_01B7203 (Matter of H-T-B-) concerns a regional center investor petition that was denied based on problems with the business plan: specifically, failure to link the plan to reality. USCIS doubted the project’s job creation potential because the plan was not grounded in evidence such as supply contracts, lease agreements, construction bids, permits, loan agreements, or analysis of competitors. Lacking such evidence, the plan was not considered comprehensive, credible, or  “any more reliable than hopeful speculation.” This is why the business plans I write bristle with footnotes citing verifiable sources.
  • MAY032018_01B7203 (Matter of Z-Y-) and MAY032018_02B7203 (Matter of W-W-) deny direct EB-5 petitioners who apparently had not read EB-5 policy.  USCIS/AAO remind them of longstanding rules: direct EB-5 investment and job creation must be in a single enterprise (the JCE must be the same entity as the NCE, or its wholly-owned subsidiary), part-time positions cannot be combined to create full-time positions, qualifying investment must be a contribution of capital directly from the investor personally, and job preservation claims require documenting the pre-investment financial condition and employment records of a business that meets the policy definition of “troubled.”  (FYI my Direct EB-5 FAQ page summarizes policy specific to direct EB-5.)

Other Updates

Regional Center List Changes
Meanwhile, I have hard work to update my regional center list as USCIS continues to designate and (mostly) terminate regional centers. 76 regional centers have been terminated so far in 2018, presumably mostly for inactivity. (But we don’t know for sure, since USCIS hasn’t updated the Termination Notices page since 2016.)

Additions to the USCIS Regional Center List, 04/10/2018 to 05/25/2018

  • Auric Ventures International Regional Center (Connecticut, New Jersey, New York, Pennsylvania): www.eb5rc.org
  • Formosa Gardens Regional Center, LLC (Florida)
  • Greystone EB5 Northwest RC (Oregon, Washington): www.greystoneeb5.com
  • Greystone EB5 West RC LLC (California, Nevada): www.greystoneeb5.com
  • K-Stone LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • LD Capital SE Regional Center, LLC (Alabama, Georgia, Tennessee): ldcbtusa.com/regional-centers/
  • Midwest Investment Fund, LLC (Indiana, Kentucky, Ohio)
  • My Life California and Nevada, LLC (California, Nevada)
  • Pan Enterprises Regional Center (California)
  • Seattle Tacoma Area Regional Center, LLC (Washington)
  • Strategic Capital Regional Center, LLC (Connecticut, New Jersey, New York)
  • Te-Enterprise LLC (Texas)
  • Texas Expanse, LLC (Texas)
  • Utah Global Investments, LLC (Utah): utahglobalinvestments.com

Regional Center Terminations, 04/10/2018 to 05/25/2018

  • Silver State Regional Center LLC (Nevada) Terminated 4/11/2018
  • LIGTT Regional Center (Louisiana, Mississippi) 4/18/2018 Terminated
  • Commonweaith of Puerto Rico Regional Center Corporation (Puerto Rico) Terminated 4/25/2018
  • SAA Cedisus EB-5 Projects – SW Indiana Regional Center, LLC (Indiana) Terminated 4/18/2018
  • Art District Los Angeles Regional Center Terminated, LLC Terminated 4/16/2018(California) Terminated
  • SPG Regional Center, LLC (California) Terminated 4/26/2018
  • Global America Regional Center (California) Terminated 4/27/2018
  • California Bond Finance Regional Center, LLC (California) Terminated 4/12/2018
  • Colorado Growth Fund, LLC (Colorado) Terminated 5/15/2018
  • Home Paradise Texas Regional Center, LLC (Oklahoma, Texas) Terminated 4/17/2018
  • Global Century (Houston) (Texas) Terminated 4/12/2018
  • American International Venture Fund – Oregon, LLC (Oregon) Terminated 4/19/2018
  • Central California Regional Center, LLC (California) Terminated 4/13/2018
  • ADC Colorado Regional Center, LLC (Colorado) Terminated 5/1/2018
  • East Coast Renewable Regional Center, LLC (New Jersey) Terminated 4/9/2018
  • Midwest Regional Center, Inc. (Kentucky) Terminated 4/5/2018
  • Ohio Lakeside Regional Investment Center (Ohio) Terminated 5/1/2018
  • TBC Washington DC Area Regional Center, LLC (District of Columbia, Maryland, Virginia, West Virginia) Terminated
  • American General Realty Advisors Regional Center (California) Terminated 4/20/2018
  • Liongate Regional Center, LLC (Washington) Terminated 4/27/2018
  • Altura Regional Center, LLC (California) Terminated 4/9/2018
  • Florida East Coast EB5 Regional Center LLC (former name United States Growth Fund, LLC) (Florida) Terminated 4/10/2018
  • Cornerstone Regional Center, Inc. (Alabama, Florida) Terminated 4/6/2018
  • New England Center for Business Development, LLC (Maine) Terminated 5/9/2018
  • Reside in America Puerto Rico, LLC (Puerto Rico) Terminated 5/1/2018
  • Greystone EB5 Southeast Regional Center LLC (former name Greystone Florida Regional Center LLC) (Florida) Terminated 4/13/2018
  • Washington Foreign Investment Management Group, LLC (Washington) Terminated 4/26/2018
  • QueensFort Capital Texas Regional Center, LLC (Texas) Terminated 4/27/2018
  • Landy Resources Management, LLC (North Dakota) Terminated 5/1/2018
  • Encore S. CA RC, LLC (California) Terminated 4/18/2018
  • One World Development Fund, Inc. (Texas) Terminated 4/12/2018
  • Encore Boston RC, LLC (Massachusetts) Terminated 4/18/2018
  • Pacific Northwest Regional Center (Washington) Terminated 4/5/2018
  • North Atlantic Regional Center, LLC (New Jersey, New York, Pennsylvania) Terminated 5/1/2018
  • Tacoma EB 5 Regional Center (Washington) Terminated 5/2/2018
  • Collegiate Regional Center LLC d/b/a Texas Collegiate Regional Center (Texas) Terminated 5/15/2018
  • QueensFort Capital California Regional Center, LLC (California) Terminated 4/12/2018
  • Ark of the Ozarks LLC (Arkansas) Terminated 4/5/2018
  • Energize-ECI EB-5 Visa Regional Center (Indiana) Terminated 5/9/2018
  • Iowa Department of Economic Development (IDED) (Iowa) Terminated 4/19/2018
  • 5 Starr Regional Center LLC (Oklahoma) Terminated 4/5/2018
  • South Dakota International Business Institute (SDIBI) (South Dakota) Terminated 5/11/2018
  • Regional Economic Development & Investment Group (California) Terminated 4/5/2018
  • New Energy Horizons Regional Center (California) Terminated 4/12/2018
  • Liberty EB5 Regional Center (Pennsylvania) Terminated 5/1/2018
  • American YiYo Regional Center (Georgia) Terminated 4/12/2018
  • Encore Washington/Oregon Regional Center, LLC (Oregon, Washington) Terminated 4/18/2018
  • Amaxi Regional Center, LLC (California) Terminated 5/1/2018

5/15 Policy Manual Update (tenant occupancy)

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

–ORIGINAL POST–

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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