11/7 EB-5 Engagement Invite

EB-5 Immigrant Investor Program: Stakeholder Engagement from New York City
U.S. Citizenship and Immigration Services (USCIS) invites you to participate in a stakeholder engagement on Tuesday, November 7, from 1 to 2:30 p.m. Eastern to discuss the Immigrant Investor Program, also known as the EB-5 program.

RC reauthorization to 12/8/2017, I-924A tips, SEC request denied (Kameli)

Regional Center Program Reauthorization

The EB-5 Regional Center Program authorization is now extended to December 8, 2017 thanks to H.R.601, which the President signed into law yesterday. Washington worked with admirable dispatch this time, cutting and finalizing the deal all within one week and nearly a month ahead of the September 30th deadline.

The law is hard to read, but for those who like to confirm things personally here’s the relevant language for regional center program extension. H.R. 601 “Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017”  Division D Section 101 (PDF page 11) provides appropriations for “continuing projects or activities…for which appropriations, funds, or other authority were made available in the following appropriations Acts: … (6) The Department of Homeland Security Appropriations Act, 2017 (division F of Public Law 115–31), except section 310.” The previous regional center program authorization is in Public Law 115-31 Division F Section 542 (PDF page 298), so it’s one of the continuing activities that’s extended by H.R. 601 Division D Section 101. (And to go back another step, the language in PL 115-31(F)542 refers back to Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (Public Law 102-395) page 47, which established the regional center program.) H.R. 601 Division D Section 106 (PDF page 13) further specifies that:

Unless otherwise provided for in this Act or in the applicable appropriations Act for fiscal year 2018, appropriations and funds made available and authority granted pursuant to this Act shall be available until whichever of the following first occurs:
(1) the enactment into law of an appropriation for any project or activity provided for in this Act;
(2) the enactment into law of the applicable appropriations Act for fiscal year 2018 without any provision for such project or activity; or
(3) December 8, 2017.

The language in Section 106 is a good reminder that “extended to December 8” doesn’t mean “guaranteed to remain unchanged until December 8.” Congress will reportedly turn its attention to immigration issues in the next couple months, and they could come up with legislation before December that affects multiple visa categories including EB-5.

I-924A Filing Tips
I’m not sure what changed, since I don’t work directly with I-924A, but yesterday USCIS published a new version of the Form I-924A Filing Tips page.

SEC Request Denied (Kameli)
When the SEC files a complaint, it’s easy for the public to just assume that the defendant is guilty as charged and there won’t be any more to the story but determining punishment. Even worse, USCIS tends to assume this and has been known to deny and revoke investor petitions and terminate regional centers before the SEC cases are concluded. We all need to remember that sometimes the defendant might have a compelling other side of the story, and might not be found guilty. The district court judge overseeing a recent EB-5 case filed by the SEC just found that the SEC “in numerous instances has not presented fully developed arguments to show why defendants’ actions violated securities laws.” The judge’s memorandum opinion, which considers the defendants’ side of the story, is linked at the end of the article Senior living developer avoids EB-5 ban, receivership (September 7, 2017). For the SEC’s version of events see SEC v. Seyed Taher Kameli, et al., Civil Action No. 17-cv-04686 (June 22, 2017). The article SEC Suffers One of its First Major Losses in EB-5 Realm (September 12, 2017) summarizes the issues.

Redeployment, Reauthorization, I-485, AAO Decisions, RC List Changes

Redeployment
Julia Harrison’s published statement for the July 19 engagement in San Jose has been updated with cautious answers to two important questions about how redeployment policy applies to pending I-526 petitions. Specifically, whether adding redeployment language to filed documents would constitute material change, and what process and documents are required if redeployment occurs while I-526 is pending. The answers aren’t direct and substantial enough to provide comforting guidance, but on the other hand they’re so open-ended as to potentially offer a lot of flexibility for compliance. I’ll let you consult the link to read for yourself. You needn’t return to my recording to check whether these topics were discussed in more detail in person on July 19, because they were not. Maybe these redeployment questions came up in follow-up emails to the Public Engagement mailbox, and now kindly being shared with everyone. Though it’s lucky I’m so vigilant, or we might never have noticed that the USCIS website replaced one version of the July 19 talking points with another.

Speaking of redeployment, here’s another helpful article. Fiduciary Duties of General Partners and Managers in Connection with Redeployment of EB-5 Capital (August 28, 2017) By Catherine DeBono Holmes

EB-5 Engagements
USCIS posted an official recording of the 8/24 I-924A webinar very promptly, and also sent a “Save the Date” announcement. “U.S. Citizenship and Immigration Services (USCIS) will hold the next EB-5 Immigrant Investor Program national stakeholder engagement on Tuesday, November 7, from 1 to 2:30 p.m. Eastern. This event will take place at the USCIS New York City Field Office with in-person and telephone participation and the option to submit questions in advance. We will send an invitation with more details in the coming weeks.”

Reauthorization
The next sunset date for the Regional Center Program comes in just a few days, on September 30. Since dropping or substantially extending the RC program would require attention and discussion, and no one seems to have time or interest for that, I’m guessing we’re in for another series of uncomfortable and inconclusive short extensions with spending bills, as in 2015 and 2016. (9/8 update: the Regional Center Program is now extended as part of a Continuing Resolution to December 8, 2017.)

EB-5 has an awkward position, politically. When the right likes investment but is queasy about immigrants, and the left is just the opposite, what’s the future of immigrant investment? EB-5 is a visa category that demonstrably creates rather than takes U.S. jobs, supports U.S. business development and American products, and brings in a small number of legal immigrants likely to generate a lot of tax dollars and not strain the welfare system. That should make it a favorite visa category, especially for economic nationalists. But a Congressman who’s actively working against the immigration prospects of US-raised kids and overseas grandmas is already getting some flack, and may hear criticism from all sides if he’s seen to simultaneously support wealth-related immigration. On the other hand, people concerned to protect visa opportunities get more political credit for focusing on kids and grandmothers and tech talent than on a small category of legal immigrants associated in the press with luxury real estate. So far as I know, no one in Congress has been interested enough in EB-5 recently to even criticize it, must less speak in support of it. The Senate Judiciary Committee is reportedly about to hold a hearing on immigrant visas, but EB-5 probably won’t be on the agenda. The hearing is designed to scrutinize visas that conflict with the administration’s “Buy American Hire American” policy, and EB-5 doesn’t conflict with that policy. Since EB-5 isn’t in the cross hairs, it may not even be on the radar. But I’ll keep looking for news, and please tell me if you have insights into what’s likely to happen between now and December. Maybe USCIS’s threat to possibly finalize EB-5 regulations by 4/00/2018 will incentivize lobbyists to push for substantial EB-5 legislation sooner rather than later, but we’ll see. A lot of good EB-5 projects and good faith investors depend on smooth seas ahead.

I-485 Interviews
Immigrants who apply for an EB-5 visa through the adjustment of status (I-485) rather than consular process should note the announcement that USCIS to Expand In-Person Interview Requirements for Certain Permanent Residency Applicants (August 28, 2017). These interviews are designed to provide USCIS officers with the opportunity to verify the information provided in an individual’s application, to discover new information that may be relevant to the adjudication process, and to determine the credibility of the individual seeking permanent residence in the United States. Miller Mayer comments on practical implications.

AAO Decisions (geography, material change, RC termination)
The 2017 folder of AAO decisions on I-526 appeals has already posted 177 decisions – or 26 decisions, if we exclude near duplicates (different petitioners, same decision). I read all the decisions and keep a log of points that are significant to my work with EB-5 business plans. A few comments on decisions that interested me.

  • JAN132017_03B7203 (Matter of WX) and AUG152017_01B7203 (Matter of SL) deal with the same business model: a proposal to open and operate three franchise hair salons, of which the first two have identified TEA locations and the third is a plan for the future, with location to be determined. The AAO decisions confirm what I’ve always said: that only the identified locations can be considered for the total EB-5 investment and employment eligibility requirements. A petition can’t depend on applying TEA investment to a prospective location, since the TEA status of that unidentified location can’t be determined at the time of investment or filing.
  • AUG152017_01B7203 (Matter of SL) has the additional wrinkle that the salons funded by qualifying investment had already gone out of business (after having operated 1.5 years) by the time USCIS got around to adjudicating SL’s I-526 petition. SL expressed her intention to make additional investment and resume operations in the same locations. Interestingly, AAO did not say that such a situation would automatically lead to denial or the need to file a new I-526 petition. AAO challenged the practical feasibility of restarting the business (based on minute analysis of the business plan), but does not challenge the very idea of funding a new business after the previously-funded business failed. The decision implies that business failure and need for new investment would not be, in themselves, a material change. The decision specifically states that opening new salons in the same TEA with different management and different staffing plan is not a material change.
  • JUN302017_01B7203 (Matter of WL) gives another rare example of a change NOT found to be material. WL filed Form I-526 with a business plan that anticipated that the NCE would provide shuttle and tour services, with auto accessories sale as a sideline (about 10% of business). A site visit subsequently found little evidence of shuttle/tour service, and auto accessories sale accounting for far more than 10% of the business. But AAO judged that “Merely shifting the percentages of the types of services the Petitioner said the NCE would offer is not, by itself, a sufficient basis to deny the petition.”
  • APR262017_02B7203 (Matter of YL) and JUL062017_01B7203 (Matter of YY) identify material changes and explain what makes the changes material. In Matter of YL, a change in business focus and location are judged to be “predictably capable of affecting” and “have a tendency to influence” determinations of whether the Petitioner invested at the required capital investment threshold and will prospectively create the requisite qualifying jobs. In Matter of YL, the petitioner filed a series of plans for different types of food service business. AAO judged that in this case “The NCE’s business plans two and three constitute a material change to the original one because they represent far more than a change in food styles. …In addition to the type of food, business plans two and three include changes to the NCE’s nature of business, services offered, location, start-up costs, and staffing needs. These changes are material and are made to correct a deficiency in the original submission.”  (By the way I add these examples as they come to my master post on material change.)
  • JUN222017_01B7203 (Matter of LPT) shows how real-life business development after I-526 can help the petitioner, so long as it’s successful. USCIS questioned the reasonableness and credibility of LPT’s business plan, and LPT responded not by revisiting the projections but by documenting actual successful business performance since I-526 filing. On the other hand, JUN132017_01B7203 (Matter of MYA) explains why disastrous developments after I-526 filing (in this case, the Palm House Hotel woes) justify judging the original business plan not credible in hindsight.
  • APR182017_01B7203 is good reading for anyone intending to set up a direct EB-5 investment with elements of a debt model, such as preferred return.
  • The cases from JUL192017_01B7203 to JUL282017_11B7203 are denials of appeals or motions to reopen/reconsider filed by Path America investors whose petitions were denied or revoked following the termination of Path America Regional Center. All are nearly identical to one or the other of the linked decisions, and dismiss the petitioners’ attempts to claim some due process protection.

Regional Center List Changes

Additions to the USCIS Regional Center List, 8/23/2017 to 8/28/2017

  • Guardian Regional Center, LLC (Texas)
  • NationSure, LLC (New York)
  • State of Maine EB-5 Regional Center, LLC (Maine)

New Terminations

  • Live in America – Georgia Regional Center LLC (Georgia) Terminated 8/18/2017
  • Live in America – Boston Regional Center LLC (Massachusetts, New Hampshire, Rhode Island) Terminated 8/18/2017
  • Live in America – Florida, LLC (Florida) Terminated 8/18/2017
  • Live in America – Nevada Regional Center, LLC (Nevada) Terminated 8/18/2017
  • Live in America – Louisiana Regional Center, LLC (Louisiana) Terminated 8/18/2017
  • Live in America – U.S. Virgin Islands Regional Center LLC (U.S. Virgin Islands (USVI)) Terminated 8/18/2017
  • Live in America – Arizona Regional Center, LLC (Arizona) Terminated 8/18/2017
  • Live in America – Indiana, Michigan, Ohio Regional Center (Indiana, Michigan, Ohio) Terminated 8/18/2017
  • Live in America Chicago Regional Center, LLC (Illinois, Indiana, Wisconsin) Terminated 8/18/2017
  • Live in America – Midwest Regional Center, LLC (Minnesota, Wisconsin) Terminated 8/18/2017
  • SoCal Regional Center, LLC (California) Terminated 8/18/2017

I-924A webinar, EB-5 regs, Articles, RC list changes

I-924A Webinar

Today USCIS held a webinar to discuss the latest version of Form I-924A, Annual Certification of Regional Center. USCIS has linked an official recording to the webinar page. (I previously posted a folder with my recording.)

The webinar was technical and specifically focused on Form I-924A — what’s new in the December 23, 2016 version of the form, and how to complete it. A couple points of general interest came out in the presentation.

  • The presenter highlighted the expanded definition of regional center “principal” in the new I-924A and additional information requested about principals. The presenter confirmed that the IPO Compliance Division plans to use this information to conduct background checks of everyone in a position to control, influence, or direct the management or policies of the regional center, and that the results of such background checks are material to the regional center’s ongoing designation.
  • USCIS instructed that petitions that were withdrawn should be reported as “denied” on I-924A. This categorization could explain the petition approval and denial statistics published last month by USCIS, which reported a surprisingly high number of denied petitions. A caller encouraged USCIS to consider recording withdrawn and denied petitions as separate categories, and the call presenters said they’d consider the suggestion. The presenters also indicated that regional centers can add a note to I-924A explaining how many of the “denied” petitions were in fact denied, and how many withdrawn.

EB-5 Regulations

The Semiannual Regulatory Agenda published today by DHS lists regulation 1615-AC07 (the EB-5 regulation concerning TEAs and investment amount increases) as being in the “Final Rule” stage. The timetable on the rule’s summary page gives an estimated date of 04/00/2018 for Final Action. I’m not sure how seriously to take the agenda or the date estimate.

Articles

Developer FAQ: Jim Butler of JMBM Global Hospitality Group has put together a booklet titled The Developer’s EB-5 Handbook for EB-5 Construction Financing. Although targeted to hotel developers, this free booklet provides experienced answers to a range of practical questions common to businesses as they first consider EB-5 financing.

Large-Scale EB-5 Real Etate Projects: Gary Friedland and Jeanne Calderon of the NYU Stern Center for Real Estate Finance Research have released a new paper featuring a database of large-scale real estate projects that incorporate EB-5 into the capital stack. See EB-5 Projects Database: 2017 Supplement with Trends and Observations (August 16, 2017 Draft).  This 2017 database collects publicly-available information on 26 projects in major metro areas with current/recent EB-5 raises. The authors previously published a 2016 database with 27 projects and a 2015 database with 25 projects.  These large-scale projects are significant for the industry because they target such a large number of investors. The 26 projects in Friedland & Calderon’s 2017 database aim to attract 6,736 EB-5 investors, which means that they alone could use up over two years of available EB-5 visas. Megaprojects take a large piece of a small pie, are too big to fail, can offer attractive and well-managed investment opportunities, and present a public relations challenge. A high-profile luxury development in a Tier 1 city is not typical of the EB-5 program overall, but it is typical of the few projects that seek and find hundreds of EB-5 investors.

Vermont: Speaking of too-big-to-fail, I continue to follow the efforts of Vermont Regional Center to clean up from fraud charges against a couple of its project managers. The regional center has worked hard to recover from the disaster and (at least recently) to protect and compensate investors, but now faces having to respond to a NOIT from USCIS. A Notice of Intent to Terminate is not the same as a termination notice (the RC has a chance to respond to a NOIT, and not all NOITs are followed by termination), but it is a significant development. This news story discusses the whole situation, and this story gives detail of NOIT content. “What level of oversight are regional centers responsible to provide?” is a grey area question in EB-5, and a question that USCIS addresses in its assessment of Vermont Regional Center.

Regional Center List Updates

Additions to the USCIS Regional Center List, 08/01/2017 to 8/23/2017

  • Liberty Regional Investment Center (Georgia)
  • Nevada First National Regional Center, LLC (Arizona, Nevada)
  • Pass2NY Regional Center, LLC (New York)
  • USA New York Liberty EB-5 Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)

New Terminations

  • IZON, LLC (South Carolina) Terminated 8/17/2017
  • America’s Regional Center, LLC (Florida) Terminated 8/15/2017
  • First American Regional Center, LLC (California) Terminated 8/14/2017
  • Civitas Rio Grande Regional Center (Texas) Terminated 8/10/2017
  • Illinois Valley Regional Center (Illinois) Terminated 8/10/2017
  • Southern California Investment Center, LLC (California) Terminated 8/10/2017
  • Powerdyne Regional Center, LLC (California) Terminated 8/2/2017

I-924A webinar, Processing Times, I-526 by country, visa numbers, EB-5 legislation (HR 3471)

I-924A Webinar
U.S. Citizenship and Immigration Services (USCIS) invites you to participate in a webinar on Thursday, August 24, from 1 to 2 p.m. Eastern to discuss Form I-924A, Annual Certification of Regional Center. This webinar will discuss certain changes to the Dec. 23, 2016 edition of Form I-924A and the accompanying instructions. Here is the invitation with instructions for registration. This webinar is also mentioned in Julia Harrison’s Talking Points (July 2017), a new document on the USCIS website that covers a bit of content from the EB-5 engagement in San Jose.

EB-5 Processing Times
Good news! The latest IPO Processing Times report indicates that IPO had a productive June and possibly made a dent in processing times. Most reports since 2014 have shown IPO processing less than a month’s worth of filings each month, which meant it got further and further behind. But in June 2017, the “processing petitions as of” date advanced 1.1 months for I-526, 1.4 months for I-829, and 2.1 months for I-924. If IPO can keep working through more than 30 days of filings every month, we’ll see processing times come down. I understand that periodic filing surges make this difficult, however.

EB-5 Investors by Country: 2016
The latest Regional Center Business Journal has an article with interesting data on I-526 petition filings by country of investor origin, obtained via FOIA request from USCIS. See A New Lens: What the Latest Data Tells Us about Raising EB-5 Capital in an Increasingly Challenging Marketplace (June 2017) by Lee Li.  The State Department publishes figures for visa issuance by country, but they aren’t a good indicator for current demand since most investors receive a visa years after investing. The figures on I-526 filings in 2016, however, likely reflect investment decisions in 2016.

A few takeaways from the 2016 data on I-526 petitions:

  • Vietnam and India register the largest demand spike, with 40+% increase in I-526 petition filings between 2015 and 2016
  • Iran, Venezuela, and Mexico are three countries that made the top 10 countries by number of petition filings in 2016, though they weren’t in the top 10 for visas issued in 2016.
  • Average I-526 approval rates vary by country. The lowest average approval rate in 2016 was for Iranian investors, at only 37%, while 96% of petitions from Hong Kong investors were approved. I will guess that approval rates correlate to the relative difficulty of verifying source of funds for specific countries, and on the relative experience/inexperience of people preparing petition paperwork for investors in each country. Other countries with low I-526 approval rates in 2016 were Mexico (57% approval rate), India (66%), and Russia (67%).
  • China-born investors filed more or less 10,948 I-526 petitions in 2016, while the rest of the world filed about 2,325. China-born investors should pay attention to that “rest of the world” number, since those petitioners and their family get to go ahead of China-born investors in the visa queue.

Visa Numbers

Speaking of the visa backlog, here’s another good article addressing the situation and possible solutions: It’s All About the Numbers (August 8, 2017) by H. Ronald Klasko.

The status quo is unsustainable and requires serious response. So long as we have a few mega-projects flooding the program and the backlog with investors, we must unite in support of visa number solutions or EB-5 will become unusable for everyone. And the U.S. would benefit from providing visas to accommodate the volume of people willing to make major investments in our economy.

New Legislation
Representatives Brian Fitzpatrick (R-PA) and Dwight Evans (D-PA) have introduced an EB-5 bill: H.R.3471 – American Job Creation and Investment Into Public Works Reform Act of 2017. The bill is nearly identical to H.R. 5992 introduced last year by Goodlatte and Conyers, with the most significant difference being the suggestion that infrastructure projects administered by a governmental entity should get a visa set-aside. This bill is significant because it’s one of only two EB-5 bills officially on the table this Congress, but I don’t hear anyone talking about it. The sponsor and co-sponsor haven’t announced it on their websites. Industry as a whole will not like the fact that it doesn’t offer a solution to the visa backlog. The big-league lobbyists won’t like it because it retains the features of H.R. 5992 that they worked so hard to negotiate out of subsequent discussion drafts: retroactive application to petitions filed since June 1, 2015, hefty and clunky account transparency requirement, gift and loan restrictions, significant incentive to invest in a distressed TEA, and significant spread in the annual fee applied to large versus small regional centers. The additional visa set-aside proposed by H.R. 3471 is sweetened by the fact that the bill eliminates the H.R. 5992 suggestion to make the set-asides permanent. I’ve added the bill to my comparison chart, and will keep watching for discussion. The Hill has another article on controversial immigration issues linked to the upcoming September spending fight, but EB-5 doesn’t get a mention. Perhaps H.R.3471 is a subtle solution to the border-wall funding argument that dominates current immigration debate?

 

IPO Report from San Jose (processing times, business plan advice, site visits, visa wait)

A small Employment Visa Engagement hosted at the US Patent and Trademark Office in San Jose on July 19 scored an impressive delegation from the Investor Program Office. I had a chance to meet and hear from IPO Deputy Chief Julia Harrison, IPO Senior Advisor for Economics Jan Lyons, and IPO’s FDNS Division Chief Kurt Vicha. They seemed more relaxed than usual at stakeholder meetings, and shared a lot of useful information. I haven’t seen USCIS post any notes yet (UPDATE: the USCIS website now provides Julia Harrison’s talking points from the engagement). I have summarized major points in this post.  (And FYI here is my folder with a rough unauthorized recording and snapshots of slides.)

Processing Times

Julia Harrison noted that program integrity was a focus for FY2017, with the launch of the site visit and audit and I-829 interview programs, and she made the welcome announcement that FY2018 will specially focus on reducing processing times.

A few initiatives that IPO hopes will improve processing times:

  1. Improve the Quality of Submissions: Mr. Lyons made the point that your processing time depends not only on your place in the queue, but also the quality of submissions before you in that queue. IPO has been hampered by quality problems, particularly in petitions filed in sunset date-surges. For example, in September and October 2015, IPO received 2.5 years-worth of I-924 filings, many of them apparently filed in haste and tough to review. No wonder processing times reports show IPO taking forever to work through I-924 filed in those months, not to mention I-526. Ms. Harrison noted two new resources designed to help make future filings easier to review.
    • In the March 2017 stakeholder meeting, IPO provided “Top 10 Tips for Submitting EB-5 Related Forms” – advice that should improve submissions and eventually reduce processing times, if followed (Also keep in mind the Form Filing Tips and EB-5 Filing Tips on the USCIS website.)
    • Ms. Harrison announced the new “Suggested Order of Documentation” pages linked to the EB-5 Resources page. This standardized order of exhibits is not required, but is designed make EB-5 forms easier and faster for IPO to review.
  2. Increase Capacity: IPO hopes to increase capacity by cross-training its economists and adjudicators so that a single staff person can handle a petition from start to finish. Previously, economists and adjudicators have each handled a distinct part of each petition.
  3. Other: The site inspection program that kicked off this year should facilitate I-829 processing by pre-emptively answering questions that might arise about actual use of investment and job creation.

I appreciated hearing Ms. Harrison say that IPO is “absolutely committed” to reducing processing times, but wish that she had mentioned some drastic measures. Education and operational efficiencies are welcome, but more will be needed to significantly improve processing times in view of a backlog that’s about 30,000 petitions long. Ms. Harrison did not mention new hiring, but I sincerely hope that’s also part of the plan.

Ms. Harrison pointed out that IPO does not have authority to offer premium processing (this would need to come from Congress), and also repeated, as has been said before, that IPO does not favor premium processing, anticipating that it would be unworkable because fees would probably not limit demand in the EB-5 context.

Advice for EB-5 Submissions and Business Plans

Jan Lyons spoke at length, introducing the EB-5 program from a business perspective and discussing adjudication issues. We forget the implications of having a veteran of investment banking and municipal finance at the helm at IPO, directing the team that reviews business plans and economic studies. When I started with EB-5 in 2009, one immigration attorney asked me to remove the financial projections from a business plan because “they’d just confuse the adjudicator.” Now we have an audience at IPO that knows how to read numbers, and struggles with the un-businesslike character of many EB-5 submissions. A cash flow statement is worth a thousand words to a finance person. Mr. Lyons shocked us with an estimate that only about 35% of business plans submitted to his office even contain a pro forma.  If you’re an attorney who reviews petitions, help change this!  Different types of financial information are appropriate to different types of projects, and in EB-5 the appropriate level of financial detail can vary depending on implications for the economic impact report, but a business plan without numbers cannot be called a business plan. Creating profit is the core rationale for any commercial enterprise (not to mention an EB-5 requirement per regulations and Matter of Izummi), and a plan without financials literally has no bottom line. A plan that’s only qualitative, not quantitative, gives a picture of the business that is incomplete, difficult to assess, and not credible. A business plan should have financials, and the financials should match and help explain the story that’s told in words. A pro forma doesn’t help if it lists revenue sources that the project description never mentioned, shows payroll expense insufficient to cover employees promised in the staffing section, indicates growth on a schedule different from what was anticipated in the schedule section, and assumes prices inconsistent with the market analysis.  That will certainly confuse adjudicators, even and especially ones with 20+ years in investment banking.  The industry needs to step up its game. (My service website describes the standards I use when writing and reviewing EB-5 plans.)

Key takeaways from the presentation by Mr. Lyons:

  • Invest in the business plan. Mr. Lyons noted that a majority of problems he sees in EB-5 submissions are not in the economic impact analysis (where simple ability to multiply is a major KSA) but in the business plans, which are often disorganized, incomplete, and full of conjectural information without backup. “We adjudicate on a preponderance of the evidence, not a preponderance of wishful thinking.”
  • A business plan should include financial information. Mr. Lyons made the point that forward-looking financial statements (pro formas) are significant evidence in a business plan, and also facilitate efficient review of the plan.  Pro formas have an expositive value that complements the written narrative of a project.  IPO economists can plod through the hundreds of pages submitted with business plans and reach a conclusion without pro formas, most of the time. But those cases could be analyzed much faster with the inclusion of three simple financial tables: a sources and uses of funds; a cash flow statement; and an income statement.  There are no specific requirements that the financial information be presented as pro forma statements, but pro formas are the most common type of financial information and are generally the most complete and the least expensive method of conveying a complete financial picture. While lack of such statements does not automatically result in an RFE or denial, it does make the plan relatively difficult to understand and assess. In reviewing pro proforms, IPO economists are not judging the quality of the investment. IPO economists are instructed that IPO is not a rating agency nor is it within its purview to make judgements relating to the suitability of investments for individual investors. However, financial information is relevant to EB-5 requirements that IPO must consider, including business plan credibility and the requirement that EB-5 investment be placed at risk with the chance of gain.
  • Do not interpret a Request for Evidence as an assault. Mr. Lyons emphasized that an RFE is not an attack on your intelligence or integrity, and not an indication that the requester is stupid. The requester simply does not have as much information about or familiarity with the petition as you do, and is asking for information.
  • When preparing I-924, keep in mind that “In an initial application, what we’re really looking for in a regional center is evidence that they know what they’re doing.” Demonstrate grasp of EB-5 requirements and show the credible experience of the applicants.
  • Limited geographic area is a legal rather than an economic requirement. In assessing geography requests, IPO is guided by Congressional intent that regional centers are literally “regional centers,” designed to create concentrated pools of investment to stimulate employment growth and economic activity within a defined and limited geographic area.

Site Visits and Audits:

Julia Harrison once again reviewed the difference between site visits and regional center audits, and added commentary on the purpose of each. Site visits are unannounced inspections of job-creating enterprises that look at the JCE site and assess the progress of development and job creation. Audits examine regional centers to see where money is going and whether the regional center has proper oversight and controls in place.

Kurt Vicha explained how the EB-5 site visit process has worked so far, and how sites are selected. In 2016, FDNS selected the one state with the most projects in each of four regions, and conducted site visits to job-creating enterprises (JCEs) in those states (for a total of 50 site visits). In 2017, FDNS selected JCEs for site visits based on a “window of opportunity” defined as about one year after I-526 approvals for that JCE, but before I-829 adjudication. Interestingly, there are about 225 JCEs within that window in 2017, and FDNS is on track to complete site visits at all of them. Inspectors are charged to observe and talk to people on-site about what’s happening at the JCE address, and then write an informational report. This report is then assessed in DC in context of petition filings, with opportunity for regional centers/project companies to respond to any questions. Mr. Vicha noted a common complaint that some questions specific to stand-alone filings have been asked at regional center JCEs (such as about the role of EB-5 investors in the business), and he promises that training will address this issue for next year. FDNS inspectors were hired at a high grade and receive extensive training.

Harrison and Vicha both suggested that site visits particularly emphasize schedule, and assessing whether the business or project has accomplished the activities anticipated in the schedule originally submitted to USCIS. Note to self: remind my clients to be extra conservative in estimating development schedule and hiring schedule dates! Better to estimate late in the business plan and give inspectors a happy surprise than to estimate on the early side and be accused of fraud if subsequent inspection shows unreached milestones.

As for audits, only one has been completed so far.

Visa Numbers and Wait Time

Charlie Oppenheim from Department of State was present, as genial and oracular as ever, and attempted once again to explain the allocation of visa numbers and the many contingencies and moving parts. He didn’t give any new figures related to the EB-5 visa queue, but mentioned that he estimated the wait time to conditional residence for a China-born investor filing now at about 9.9 years (my attempt to calculate had come up with 9.3 years). Those estimates don’t account for future demand, people dropping out, or action from Congress.  Mr. Oppenheim said that Congress has not yet asked for his assessment of the proposal to only count investors toward the EB-5 visa quota (rather than investors plus family members as is the current practice), and opined that such a change would indeed require legislative action.

IPO Suggested Order of Documentation

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

Suggested Order of Documentation

Form I-526

Form I-829

Form I-924

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

Tally of I-526 and I-829 approvals and denials by regional center (updated)

The USCIS Immigrant Investor Regional Centers page at www.uscis.gov/eb-5centers has been updated with links to documents that list regional center names and tally the  I-526 and I-829 approvals for each RC from January 1, 2014 to May 31, 2017.

UPDATE: The logs formerly posted by USCIS have been replaced by a brief message that “USCIS is reviewing inquiries regarding the previously posted Form I-526 and Form I-829 approval and denial statistics by regional center. To provide feedback on that data, please e-mail USCIS.ImmigrantInvestorProgram@uscis.dhs.gov.” Apparently, a lot of regional centers contacted them to complain of errors. IIUSA wrote a formal letter to IPO reporting discrepancies noted by many members.

[ORIGINAL POST]

These documents — if accurate — can be very valuable for potential investors, and for program integrity. Track record of approvals is a material factor in decision-making that, until now, has been unverifiable. Records can offer investors a way to double-check claims about past approvals for a regional center.

Potential investors should interpret the numbers judiciously. As USCIS notes in the documents: “petitions may be denied for various reasons, some of which may be based on investor specific issues and not related to any project issues.” A large number of denials may be related to investor problems or to sudden USCIS policy changes (or to document errors in these posted reports), not to any problems with the regional center. A large number of approvals says something about the size, aggressiveness, and age of a regional center, but does not necessarily promise quality or reliability or anything about the character of future projects or success of future petitions. Also, keep in mind that the numbers are only for petitions adjudicated, not petitions filed. Considering processing times, I-526 adjudications in 2014 to 2017 (the time period reported) largely reflect investments made in 2013 to 2015. Most investments made and petitions filed through RCs since late 2015 would not show up on this log of approvals and denials. And the log does not show any of the EB-5 petition approvals or denials prior to January 1, 2014.

Regional centers should double-check their records in these newly published logs, and follow the instructions in the docs to alert USCIS of errors. Whoever created this database of approvals and denials made a number of entry errors on RC names (resulting in some double or even triple listings from name variants), so the probability of numerical errors is also high. Especially if the published list shows denials that your RC doesn’t in fact have, hasten to report that and request correction!

The petition tally by regional center provides interesting data on regional center activity. We’ve known that a handful of regional centers have dominated the EB-5 field, and now that phenomenon can be quantified. Assuming that the numbers reported by USCIS are reliable, we can draw conclusions about the distribution of investors by regional center.

No wonder the interests of one metro area and a handful of regional center operators dominate EB-5 politics, when those interests claim such a large piece of the EB-5 pie. The USCIS database indicates that three regional center operators (US Immigration Fund, CMB, and Related) account for nearly a quarter of all I-526 petitions approved since 2014. New York City RC alone accounts for a fifth of all I-829 approvals during that time.  Over half of the approved I-526s petitions since 2014 went through just 21 regional centers, while nearly half of investors with I-829 approvals in that time went through just four regional centers. Meanwhile, over half the regional centers currently on the USCIS list of approved RCs did not have any approved investor petitions from 2014 to the present. (Though these RCs haven’t necessarily been inactive. Long processing times mean that approvals and denials through 2017 only reflect petitions filed/investments made through 2014/2015 — or earlier for I-829. An RC that doesn’t appear with many approvals or denials yet may have many petitions currently pending.)

New EB-5 Policy (Sustaining Investment, Redeployment, and Investors in a Terminated RC)–Updated

We’ve been waiting for years for USCIS to clarify its policy on sustaining investment, and when and how EB-5 capital may need to be redeployed if a project winds up before the investor reaches the I-829 stage. Today, we have this notification:

The USCIS Policy Manual has been updated to provide further guidance regarding the job creation and capital at risk requirements for Form I-526, Immigrant Petition by Alien Entrepreneur, and Form I-829, Petition by Entrepreneur to Remove Conditions on Permanent Resident Status. Volume 6 (Immigrants), Part G: Investors is effective on June 14, 2017. The Policy Alert is available here: Volume 6 (Immigrants), Part G: Investors (Final date for comments: June 28, 2017)

The Policy Alert from USCIS does not actually say what changed. I compared the the June 14, 2017 version of the Policy Manual with my hard copy of the previous November 2016 version, and highlighted the changes to the new file in red font. (Here is my folder with dated versions of 6 USCIS-PM G). The June 2017 changes — which are significant and touch on material change and termination issues as well as redeployment — are in Chapter 2(A)2, Chapter 4(C), Chapter 5(A)2, and Chapter 5(C).

UPDATES: I’ve copied the new Policy Manual language on redeployment into a separate document and added my attempt to analyze the language and understand the terms. Here is my work so far.

Here are reactions from others to the new policy:

The new policy is effective as of today, before anyone has had a chance to review or comment on it. Indeed, the policy is essentially retroactive since it defines new requirements for investment agreements that current investors may have signed years ago. But USCIS is offering an opportunity to comment, for what it’s worth at this point.

Please send all comments to publicengagementfeedback@uscis.dhs.gov and be sure to include the following to make your comments clear:

    • State the title of the relevant volume and section in the subject line of your message;
    • Refer to a specific portion of the document;
    • Explain the reason for any recommended change; and
    • Include data, information, or authority that supports the recommendation.

Opening & Closing Dates for Comments: June 14, 2017 – June 28, 2017

As background, here are some reactions to the draft policy memo from August 2015 on sustaining investment, and wish lists of features we wish had been included in the new policy.

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

Regional Center Termination Reasons

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

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

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

Legal Win for EB-5 Investors

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

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

Trends, Pitfalls, and Ethics in Working with Overseas Agents

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

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

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

DHS Director and EB-5

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

Regional Center List Changes

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

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

New Terminations

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

I-924 Webinar, Amendment Requirements

In case anyone would like to review it, here is a link to my audio recording and copies of the slides from today’s webinar on the revised Form I-924 Application for Regional Center Designation. (6/2017 UPDATE:You can now get the sound and slides together, as USCIS has posted a recording of the webinar.) The big news was a comment that the page for the March 3, 2017 EB-5 stakeholder meeting now contains remarks from Lori MacKenzie modifying what she had said at the meeting about geographic area amendments. My original blog post complained about this buried new policy posting, but shortly thereafter USCIS sent out a stakeholder email and posted a statement prominently on the EB-5 section of the USCIS website.

Update to EB-5 National Stakeholder Engagement Remarks: Regional Center Geographic Area Amendments and Form I- 526 Petition Eligibility
On March 3, 2017, USCIS held an EB-5 national stakeholder engagement.  This national engagement was part of our ongoing effort to enhance dialogue with our stakeholders in the EB-5 program.  Remarks from the EB-5 national stakeholder engagement are available here.

At the engagement, USCIS noted that a May 2013 policy memo had previously provided guidance that a formal amendment was not required to expand a regional center’s geographic area, and permitted concurrent filing Form I-526, Immigrant Petition by Alien Entrepreneur prior to approval of the geographic scope amendment.  The May 2013 guidance was superseded by the recent publication of the final  Form I-924 ,the Application for Regional Center Designation Under the Immigrant Investor Program and instructions.  The I-924 revisions included changes to the Form I-924 instructions and require that regional centers file a Form I-924 when seeking an expansion of their geographic area.  The revised Form I-924 became effective on December 23, 2016, following publication of the revisions in draft form in the Federal Register in May of 2016, and a period during which the public had the opportunity to comment.

During the engagement, USCIS addressed questions regarding how requests to change a regional center’s geographic area should be filed and the timing of such a filing.  Specifically, where a regional center has a filed and pending Form I-924 amendment requesting an expansion in geographic area, stakeholders  asked whether or not Form I-526 petitions may be filed prior to approval of the I-924 amendment, relying on such proposed expanded geography.  USCIS has reviewed stakeholder concerns raised during the engagement and has updated the engagement remarks to clarify how the agency is implementing the above policy. Specifically:

  • Where the regional center’s geographic area expansion request was submitted either through a Form I-924 amendment or Form I-526 petition filed prior to February 22, 2017 (the date on which use of the new Form I-924 became mandatory), and the request is ultimately approved, USCIS will continue to adjudicate additional Form I-526 petitions associated with investments in that area under the guidance reflected in the May 30, 2013 policy memo.
  • Any requests for geographic area expansion made on or after February 22, 2017 will be adjudicated under the current guidance; namely, a Form I-924 amendment must be filed, and approved, to expand the regional center’s geographic area.
  • For geographic area expansion requests made on or after February 22, 2017, the Form I-924 amendment must be approved before an I-526 petitioner may demonstrate eligibility at the time of filing his or her petition based on an investment in the expanded area. Form I-526 petitioners who believe they may be unable to demonstrate eligibility at the time of filing on this basis may wish to contact USCIS at ipostakeholderengagement@uscis.dhs.gov.

Sincerely,
USCIS Public Engagement

And here, since the I-924 Form and Instructions are apparently our new venue for policy guidance, is the official word on amendment requirements.

Quoted from the I-924 Instructions (version expiring 12/31/2018), page 1
Request an amendment to a previously approved regional center.
A. You must file an amendment to:
(1) Seek approval for any changes to the regional center’s name, ownership, or organizational structure, or any changes to the regional center’s administration that affect its oversight and reporting responsibilities, or to add or remove any of the regional center’s principals, immediately following the changed circumstances; or
(2) Change the geographic area of a regional center.
B. You may also file an amendment to:
(1) Change the industries of focus of the regional center;
(2) Add a new commercial enterprise associated with the regional center and/or seek a preliminary determination of EB-5 compliance for an exemplar Form I-526, Immigrant Petition by Entrepreneur, for that new commercial enterprise, before individual entrepreneurs file their petitions; or
(3) Notify USCIS of changes in the name, organizational structure or administration, capital investment instruments, or offering memoranda (including changes in the economic analysis and underlying business plan used to estimate job creation) for a previously added new commercial enterprise associated with the regional center.
NOTE: An I-924 amendment is not required to report changes of address, contact information, a change of duties among the regional center principals, changes to non-principal managing companies, contracting agents or similar changes, or information described in Item 2.B. above. The regional center must notify USCIS within 30 days of such changes. Notification of these changes can be made by sending an email to the EB-5 Program mailbox at: USCIS.ImmigrantInvestorProgram@dhs.gov. USCIS will review any changes submitted by email and may require or recommend, as appropriate, the regional center to file an I-924 Amendment.

“You must file an amendment to seek approval for….” sounds like it could be discretionary (i.e. you needn’t file an amendment if you’re not seeking approval for…), but apparently it isn’t. (Previously, IPO said that I-924 amendment was recommended to seek approval for management changes, with an option to just notify the IPO email box. No longer.) Today’s webinar slides restated the I-924 instructions as “You must file an amendment in case of…,” and the presenter said that the required amendment must not only be filed but also approved. (But approved “before what”? This point doesn’t go without saying. Before I-526s are filed? Before I-526s can be approved? Before the regional center can take any action at all? IPO needs to clarify the “before what” for each required type of amendment, and whether the requirement is to file or file plus wait for approval.)
Otherwise, today’s webinar mainly just read through the new Form I-924 content, pointing out changes for the benefit of people who hadn’t previously noted just how much the form changed, or implications of those changes. The audience asked few questions. USCIS emphasized two concerns behind Form I-924 revisions: vetting regional center principals and managers, and limiting geographic area. The revisions take effective steps toward the first objective, but make little difference to the second. Geographic area requests are limited only by imagination and chutzpah so long as USCIS continues to allow and even encourage applicants to base their requests on hypothetical/fictitious projects.

4/26 USCIS Webinar on I-924

Note: The subtext to this webinar may be the storm over IPO’s claim that the revised Form I-924 justifies the new policy to require amendment approval for expanded geographic area prior to I-526 filing. However, the invite doesn’t solicit any advance comments or indicate whether the event will allow questions.

From: U.S. Citizenship and Immigration Services [mailto:uscis@public.govdelivery.com]
Sent: Wednesday, April 05, 2017 10:34 AM
Subject: USCIS Invitation: Form I-924, Application for Regional Center Designation Under the Immigrant Investor Program, 04/26/2017

Dear Stakeholder,

U.S. Citizenship and Immigration Services (USCIS) invites you to participate in a webinar on Wednesday, April 26, from 1 to 2 p.m. to discuss the Form I-924, Application for Regional Center Designation Under the Immigrant Investor Program. This webinar will discuss certain changes to the Dec. 23, 2016 edition of Form I-924.

Form I-924 is used by any economic unit, public or private, in the United States that is involved with promoting economic growth (including increased export sales, improved regional productivity, job creation, or increased domestic capital investment) to:

  1. Ask USCIS to be designated as a regional center under the Immigrant Investor Program; or
  2. Request an amendment to a previously approved regional center.

Form I-924 and its instructions are available at https://www.uscis.gov/i-924.

To Register:

Please email ipostakeholderengagement@uscis.dhs.gov with your full name and the name of your organization. Also, please place “I-924 Webinar” in the subject line. Once we process your registration, you will receive a confirmation email with additional details.

If you have any questions regarding the registration process, or if you have not received a confirmation email within two business days, please email us at the same address.

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 compliance audits

From: U.S. Citizenship and Immigration Services [mailto:uscis@public.govdelivery.com]
Sent: Tuesday, March 21, 2017 11:18 AM
Subject: USCIS Message: EB-5 Regional Center Compliance Audits

Dear Stakeholder,

U.S. Citizenship and Immigration Services (USCIS) announces the launch of an EB-5 Regional Center Compliance Audit Program.  Regional center compliance audits are an additional way to enhance program integrity and verify information in regional center applications and annual certifications. These audits will verify compliance with applicable laws and authorities to ensure continued eligibility for the regional center designation.

For example, the audit team:

  • Reviews applications, certifications, associated records, and information on the regional center;
  • Verifies supporting documents, submitted with the application(s) and in the annual certification(s);
  • Conducts site inspections; and
  • Interviews personnel to confirm the information provided with the application(s) and annual certification(s).

You can read additional details on the program on our Regional Center Compliance Audit page.  Read more about the EB-5 program online at uscis.gov/EB-5.

Sincerely,

USCIS Public Engagement

U.S. Citizenship and Immigration Services
20 Massachusetts Ave NW, Washington DC 20529 · 1-800-375-5283

 

3/3 USCIS EB-5 Stakeholder Engagement (I-829 division, RC geographic area, site visits, filing tips)

Today’s EB-5 Stakeholder Engagement with USCIS provided a number of important updates. (3/20 UPDATE: USCIS has now uploaded copies of prepared statements by Colucci and Harrison.) I have uploaded my recording, and summarized a few highlights.

  • EB-5 Petition Statistics: In October to December 2016, IPO saw a continued surge in petition filings, with 4,395 I-526 petitions received, 752 I-829 receipts, and 184 I-924 receipts. During that quarter, IPO processed 3,583 I-526 petitions (a record high), 112 I-829 petitions (a near-record low), and 88 I-924 petitions. IPO is now reorienting resources toward I-829, after having previously prioritized I-526 and I-924. Mr. Colucci commented that IPO processed more I-829s last month than in all of last quarter.
  • IPO Staffing: IPO is subject to the executive freeze on Federal agency hiring; however, USCIS has requested exemptions for certain “mission-critical” positions, and IPO has received an exemption for its adjudicator position. IPO now has 157 employees (below their target of 171 employees for the end of last year). IPO is authorized to hire up to 247 employees this fiscal year, subject to the hiring freeze and any exemptions. Increased staffing is IPO’s primary strategy for improving processing times.
  • I-829 Processing: In October 2016, IPO created a new division to focus on Form I-829 adjudications and customer service inquiries. The division will have three teams, with eight adjudicators and economists on each team. The most senior member of each team will interview I-829 petitioners, with most interviews conducted remotely with assistance from local field offices. (As previously stated, the I-829 petitioner can bring her counsel, qualified interpreter, and a representative from the regional center if applicable.) IPO expects I-829 adjudication output to improve significantly once this division is fully staffed and trained. There are currently 18 of 24 people on board, including three senior economists and three senior adjudicators who are working to cross-train for improved efficiency.
  • RC Reporting: IPO says that they will “soon” publish regional center termination notices in the USCIS Electronic Reading Room to promote transparency about reasons for termination. They are also planning to publish petition approval and denial statistics for each regional center.
  • Compliance, Audits, Site Visits: IPO has grown its compliance unit to become a division that oversees pooled investments (both regional center and pooled direct investments) with three branches to review I-924A, issue termination notices, and oversee audits (the first of which is scheduled for next month). IPO has trained 13 site inspectors from around the country, and expects to conduct about 250 EB-5 project site visits this year. IPO reassured stakeholders that IPO would interpret any site visit results in context, and would not make decisions based on the info before notifying petitioners through RFE or NOID. There are two types of site visits: for-cause visits triggered by questions about the project, and random visits that are scheduled at some point between I-526 approval and I-829 filing.
  • Policy: IPO plans to publish content related to sustained investment “in the near future” in the USCIS Policy Manual (rather than finalizing the draft August 2015 policy memo). IPO reviewed comments on the Policy Manual but does not plan any changes in response to the comments.
  • Regional Center geographic area expansion must now be approved BEFORE I-526 petitions can be filed: Here is a transcription of what Lori Mackenzie said (starting at minute 25 of the recording):

    UPDATE: These remarks from the meeting have now been superseded by Lori MacKenzie’s published remarks.
    We also received some questions related to the new Policy Manual publication as well as to the new I-924 Form release, which was effective on December 23, 2016, and the question really does relate to an expansion of geographic scope of a regional center. So just to give everyone a little bit of background around that. There is some guidance in the May 2013 Policy Memo that talks about how to expand geographic scope. After that guidance, we published the Policy Manual in November of 2016 which superseded that guidance, and then on December 23 we issued some guidance with respect to the Form I-924 and the instructions for filing the Form I-924. And so the question really relates to ‘if a Regional Center has filed an I-924 amendment requesting an expansion of geographic scope, may concurrent I-526 petitions be filed in the meantime relying on such proposed expanded geography?’ And the response to that is a little tricky, so you might want to take a few notes. We will continue to adjudicate all petitions filed prior to December 23, 2016, which is the effective date of the new Form I-924, under the prior guidance. So the May 2013 policy guidance holds for that. Petitions filed on or after December 23, 2016 must follow the current guidance, which means that Form I-526 petitions based on an area not previously approved will be deniable due to ineligibility at the time of filing. Note that in May 2016, prior to publication of the final revised Form I-924, we did provide the public with an opportunity to comment on this process by publishing the draft form in the Federal Register.

    I had been wondering about this issue, ever since I noticed that the November 2016 USCIS Policy Manual dropped two little words — “geographic area” – out of the May 2013 Policy Manual’s sentence about changes not requiring an amendment. However, both the Policy Manual and the new I-924 Instructions only said that amendments need to be filed, and we didn’t hear until today that IPO also demands that they be approved before investors can file I-526. Stakeholders strongly encouraged IPO to reconsider this surreptitious policy change, which has major implications for in-process projects that relied on previous policy, and which is unworkable considering that USCIS may take over a year to process amendment requests. Robert Divine has published a helpful article that explains the issues and suggests how industry and investors can respond to USCIS’s move:
    USCIS Reneges on Sponsoring Projects Outside Approved RC Area, Claiming it Gave Notice Through “Stealth” Disclosures

  • Filing Tips: IPO noted practices that would facilitate adjudications. They requested that petitions come with a cover letter and table of contents and tab-separated sections; that documents be single-sided, with page-numbers, and not permanently bound; and that copies be clear and legible and come with full translation if applicable. The petition should indicate whether it’s direct or regional center, and whether it’s part of a dual I-924/I-526 filing. I-924 applications need not include organizational and transactional documents unless associated with an Exemplar I-526. If submitting an interfiling with revised documents, highlight changes with yellow highlighter or some other method that is readily noticeable. Petitioners who have decided to abandon the process are requested to notify IPO of the decision to withdraw their petitions.

USCIS EB-5 Training Materials (April 2015)

I just noticed that the FOIA Reading Room on the USCIS website contains a 458-page document with presentations used by IPO in April 2015 to train EB-5 adjudicators. I may be the last person to notice? In case not, I’ve sketched out a Table of Contents and highlights below. The presentations are dated (especially now that the 11/2016 Policy Manual has replaced the 5/2013 Policy Memo and other guidance referenced in this training), but still quite interesting, especially for the examples. Also, because some currently-active adjudicators were trained on this. I’m especially intrigued by the section starting on page 383, which describes a process and checklist used by IPO economists when reviewing regional center I-526 petitions.

Presentation Title Pages Select points of interest (with PDF page numbers)
Capital at Risk 1 – 37 Indebtedness Analysis (6-9), list of red flags for investment (17), comment on shielding risk (20), evidence of business activity (23), comment on construction reserves not at risk (24), examples of redemption agreements and guaranteed returns (25-26), examples of permissible and impermissible escrow conditions and holdback conditions (29-32)
Comprehensive Business Plan 38 – 56 Definition of credibility (47), list of expected supporting documents (48), explanation of labor division between economists and adjudicators in business plan review (50), reminder that IPO reviews the business plan for evidence of capital at risk, not only for job creation (52), list of problems common to business plans not prepared by Suzanne Lazicki (53)
Child Status Protection Act 57 – 76 Explains CSPA age calculation and its effect under visa retrogression
DHS Overview 77 – 99 Discusses coordination with other agencies  (95-96)
Direct Job Creation 100 – 130 Reminder to adjudicators to require evidence of any existing employment at the I-526 stage (121)
EB-5 Overview 131 – 184 Indication that I-924 and I-924A are adjudicated by IPO economists not adjudicators (165-166), stats on petitions received, approved, and denied  and visas issued from 2005 to 2014 (175-178)
Indirect Job Creation for Adjudicators 185 – 210 Clarifies that “economically direct jobs” are one of the three types of indirect job creation estimated by economic models (194); discusses of reasonable inputs (198, 203); comments on model-derived construction jobs (205) and tenant occupancy (206)
Introduction to Standalone I-526 Adjudication 211 – 247 Mainly just summarizes policy
IPO Overview 248 – 281 IPO organizational chart (263) and explanation of IPO roles and duties (264-276)
In-Depth Lawful Source of Capital Issues 282 – 338 Examples of unlawful means (291), examples of income evidence (301-305), how to analyze funds derived from real property (307-312), how to analyze shareholder loans as source of funds (313-315), how to analyze gifts as source of funds (322-325), OFAC and FinCEN
Formation of an NCE and Active Management 339 – 382 Examples of expansion to establish an NCE (350-351), active management example (356-358), ULPA limited partner powers in LP (359) and LLC (370)
Reviewing the Economist Due Diligence Summary 383 – 400 This entire section is extremely interesting, describing how IPO economists review regional center applications and regional center investor petitions. Immigration attorneys may want to pre-emptively structure their case summaries according to the economist checklist described in this presentation
Targeted Employment Area 401 – 423 Comments that state TEA designation letters are usually valid for one year from the date of the letter (414)
USCIS Overview 424 – 458 Just an organizational overview

Understanding USCIS Processing Time Reports–Updated

Every month, the USCIS Processing Time Information page updates a chart titled “Average Processing Times for Immigrant Investor Program Office” that looks like this.
chart
What does this chart mean?

1. The report provides a metric for inquiries
The single unambiguous function of this report is to indicate when petitioners may begin to complain. A stakeholder email from USCIS in January 2017 explained,

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

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

2. The report is not a reliable guide for the processing time for any given petition
You might think “As of November 30, 2016 we are processing I-526 cases as of August 7, 2015” means that “the I-526 processing time is 16 months, and an I-526 filed now can expect a decision 16 months later.”  This is not a safe assumption because 2017 filings will face different adjudication factors than 2015 filings.  Huge surges in petition filings will put a negative strain on processing times, even as IPO works on staffing improvements that should have a positive influence. It’s hard to project into the future and guess how the moving pieces will even out.

Or you might think that the processing time report means “as of November 30, 2016 IPO has finished processing I-526 cases from before 8/7/2015, its current workload is mostly composed of August 2015 cases, and my turn is coming soon if my petition was filed on or after 8/7/2015.” This interpretation is risky because it assumes (1) that the posted processing time is not only average but also typical, and (2) that IPO follows a first-in-first out policy in adjudications. We have reason for some doubt on both these points. I don’t know how IPO calculates the processing dates that it posts (and IPO Deputy Chief Julia Harrison has said a couple times that she doesn’t either and can’t explain it), but we can assume some deviation. (For example, compare my charts of reported processing times and actual processing times for I-924 applications in 2015.) And IPO has indicated that it does not necessarily process EB-5 petitions in date order. With respect to I-526 “Generally speaking we do our adjudications not in a strict first-in-first-out order but in a range of first-in-first-out based on when we received the first application related to a specific project,” and likewise “USCIS adjudicates Form I–829 petitions in ‘first in, first out’ order by new commercial enterprises”. (See my on-going log of USCIS communications regarding processing times.) If IPO processes petitions in batches by project, then many petitions may be out of date order. And exemplar filings can influence processing times, for good or ill. IPO has said that exemplar petitions facilitate processing for subsequent I-526 petitions.  However EB-5 Insights reported on 3/15/2017 that IPO seems to have an unofficial policy to hold in abeyance pending I-526 Petitions when an Exemplar I-924 Petition associated with the same new commercial enterprise has been filed.

3. The report reflects processing trends
We can scrutinize the processing times report to try to follow processing trends, get a sense of whether IPO is speeding up or slowing down, and try (though this is perilous, as noted above) to project the future. FYI here are charts based on my log of dates/months reported in monthly updates to the IPO processing times table since 2014. (And you may access my spreadsheet here.)

 

Further Discussion

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

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

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

Recap of Major Winter Developments (policy, regulations, legislation, statistics, fees, Commerce study, new AAO, SEC actions, litigation)

The past few months have been packed with important EB-5 news, and it’s hard to keep up with all that’s happening.  As a reminder, here is a summary list of the major developments to keep in focus. (The first five I’ve discussed in previous posts; the last five I haven’t had time to write about yet.)

  1. New Policy: Effective November 30, 2016, USCIS replaced all existing EB-5 policy with a new Policy Manual: USCIS Policy Manual, 6 USCIS-PM G (November 30, 2016). This major event puts the whole program on a new footing (though 6 USCIS-PM G is essentially similar to the policy it replaced, with a few adjustments, additions, omissions, and clarifications as I started to discuss here).
  2. Proposed New Regulations: As I announced this week, USCIS has published notices of proposed EB-5 rule-making in the Federal Register.  Advance Notice #0008 invites stakeholders to give input on possible changes to regional center designations and terminations and the I-924 and project approval process. Notice #0006 gives proposed new rules covering priority dates, investment amounts, and TEA designation, among other things. If the new rules are finalized as proposed, the EB-5 minimum investment amount will increase to $1.8 million (or $1.35 million within a TEA) as calculated from inflation, fewer projects will qualify for TEA status, investors with approved I-526 will have the option to invest in a different project without losing their original priority date, and regional centers may need to get project approval before offering investments. We can expect action toward finalizing regulations at some point after the public comment period closes on April 11, 2017 – maybe shortly or maybe long after, if the comments inspire redrafting and/or if the new administration chooses not to greenlight the regulations.
  3. Proposed New Legislation: Congress was (reportedly) actively working on EB-5 reform legislation before the continuing resolution that passed on December 10 provided the regional center program with a clean extension through April 28, 2017. We have a staff draft of an EB-5 bill dated December 2, 2016, and understand that staffers and lobbyists are still working with this document behind the scenes. If the staff draft were passed as-is, the EB-5 minimum investment amount would decrease to $700,000 (or $650,000 for a TEA investment), with incremental increases up to $1M/$800K, additional TEA categories and incentives (including rolling visa set-asides) would be introduced, and regional centers would  be given hefty new annual fees ($10,000 or $20,000) and relatively gentle new fund administration and reporting requirements. (My bill comparison chart gives a link to the bill text and summarizes the provisions.) We may see action toward passing reform legislation in the coming months before the next regional center sunset date on April 28 – or may not, with so many other matters demanding attention during Trump’s first 100 days in office, and the anti-change lobby.
  4. New Data and Statistics: We got updated numbers from USCIS and the Department of State on EB-5 petition and visa processing and backlogs as of the end of 2016. The numbers show a queue of current and prospective visa applicants about 75,000 people long, which implies an 8-year visa wait for new China-born investors. And unless USCIS improves processing volumes, it will take 2+ years just to process the currently-pending I-526 petitions and 3+ years to just process the currently-pending I-829 petitions. Proposed EB-5 reform legislation and regulations both plan to improve processing times/volumes, but do not offer to increase available visa numbers.
  5. Fee Increases: EB-5 petitions and applications have higher filing fees since December 23, 2016. The new I-924 fee (dramatically increased to $17,785) is likely to curb the burgeoning number of regional centers (perhaps especially new applications from serial operators, which have accounted for an increasing percentage of new RCs) and discourage voluntary filing of amendments.
  6. Department of Commerce EB-5 Impact Analysis: We finally have the long-promised Department of Commerce study commissioned by USCIS: Estimating the Investment and Job Creation Impact of the EB-5 Program (January 2017). The product is a slender report and based on old data from 2012-2013, so the numerical conclusions are of limited interest at this point, but the analysis is still significant and could have political impact. I can see EB-5-critic Senator Grassley seizing on this report and the barriers to good analysis that the authors describe. EB-5 economists should review the formerly common EIR problems identified on p. 9, and ensure that they’re not still repeating them.
  7. New AAO Decisions: In November and December, USCIS published 27 new decisions on I-526 cases and one new decision on a regional center termination appeal.  The termination decision (NOV022016_01K2610) and 15 nearly-identical I-526 decisions (for example DEC142016_07B7203) are related to Path America KingCo, LLC, which lost designation after an SEC action mainly targeting its principal. The regional center appealed its termination based on pursuing active, viable projects under reputable new management. Investors appealed with the argument that their petition denials were premature, coming while the regional center appeal and the SEC case were still unresolved. AAO found that the investor appeals were hopeless due to the issue of material change, and that the regional center appeal was not sufficiently compelling. (But the RC decision interestingly grants the possibility that mitigating, corrective, and restorative actions could potentially compensate for past problems with the regional center or related entities.) Among decisions not related to Path America, I hope to write more about three decisions with good discussion of material change issues (NOV012016_02B7203, NOV072016_01B7203, NOV292016_02B7203) and two that address the level of business activity necessary before filing I-526 (NOV092016_01B7203, NOV292016_01B7203). I’ll particularly highlight NOV292016_01B7203, which explicitly states what I’ve always said – that an investor must not file a TEA-based I-526 before securing a location for the business.
  8. New SEC Actions: On December 27, 2016, the SEC published a complaint brought against California-based attorney Emilio Francisco and associated companies who are charged with diverting and stealing EB-5 investor funds. On December 28, 2016, the SEC announced settlement on a case against AJN Investments LLC/Jason Adam Ogden, who was charged with diverting EB-5 investor funds and wrongly making midstream business model changes.  I’m interested to note that these SEC complaints do not implicate or even identify the regional centers that sponsored the EB-5 investments involved. The SEC holds the project companies and principals exclusively responsible for problems in the offerings, projects, and use of funds. I wonder whether USCIS will pursue the regional center sponsors, holding them responsible for oversight, or whether it will follow the SEC’s lead in considering the sponsors out of the picture. It appears that the regional centers in these cases did not control any NCE bank accounts and were not involved in offering documents or investor promotion. In other news, the SEC has just settled with Path America (a case that did implicate the regional center).
  9. Other litigation: On November 14, 2016, a long list of EB-5 investor plaintiffs brought a civil suit against a long list of defendants associated with the Palm House Hotel EB-5 project. The suit enumerates the lies that the investors believe they were told, calls out every party and service provider allegedly involved in making false representations, and traces alleged misuse of investor funds. The case appears complicated and ambiguous (not the kind of low-hanging fruit that the SEC seems to favor) but full of drama and makes for gripping reading. Another case that’s older now (filed August 2016), but also a colorful Florida story: USA v. Karamchand Doobay, who was charged with perpetrating fraud through his regional center and projects. I’m sure the investors in these cases would unite in one message for the future: do not neglect due diligence before investing! And the defendants would likely encourage care in partnerships and representations.
  10. Good news: Meanwhile, just to keep  perspective, 99% of the 865 regional centers are apparently doing well and good, or avoiding lawsuits and bad press at any rate. At least $10.4 billion dollars of EB-5 investment entered the U.S. economy in 2016, judging by the number of I-526 petitions filed during the year. I was privileged to write business plans last year for 32 new EB-5 deals that look promising for both local communities and foreign investors, and I continue to be encouraged by what I see on the ground on the bright side of EB-5.

(Also note, adding to the festival of updates and feedback opportunities, an in-person EB-5 stakeholder meeting just announced for March 3 in DC.)

Proposed New EB-5 Regs (priority dates, investment amounts, TEAs)

On January 13, the Federal Register is publishing a Notice of Proposed Rule-making titled EB-5 Investor Program Modernization (DHS Docket No. USCIS 2016-0006). The notice proposes and explains the rationale behind new EB-5 regulations on priority dates, investment amounts, and targeted employment areas, among other changes. The Notice gives a comment period ending on April 11, 2017, and the regulation amendments could go live at any time after that point – though I assume not very soon thereafter, since the notice solicits and will presumably receive extensive public comment, may require another draft before the final, and will need to be greenlighted by the new administration.

Summary of Proposed Regulation Amendments in DHS Docket No. USCIS-2016-0006

  1. Priority Dates: Allow an EB-5 petitioner to use the priority date of an approved EB-5 petition for any subsequently-filed petition. (In other words, an investor with an approved I-526 in one project could choose to file a new I-526 in a different project while keeping the original priority date. This would benefit investors whose project or regional center has trouble after petition approval, but before the investor receives a visa number. The regulations do not restrict investor reasons for choosing to file a new petition.)
  2. Investment Amounts: Increase the standard minimum investment amount to account for inflation, reduce the differential between standard and TEA investment amounts, and implement automatic increases every five years based on inflation (rounded to the nearest 100,000).  Based on CPI increases since investment amounts were set in 1990, this means that the standard minimum investment would become $1,800,000 in 2017. The TEA amount, set at 75% of the standard, would be $1,350,000 in 2017. The investor would be required to contribute the minimum investment amount that is designated at the time the petition is filed.
  3. Targeted Employment Areas: Eliminate state designation of TEAs, and have DHS determine TEA qualification by applying its own uniform standards to evidence presented by investors and regional centers. For high-unemployment TEAs, DHS would only designate an MSA, county, city, or project tracts. (A project tract TEA is the census tract where the project is located, or a group comprising any or all census tracts that touch the tract where the project is located — but not a group including any indirectly connected census tracts). The regulations do not specify which unemployment data DHS would use or accept. (This document compares TEA regulations in the proposed regulations to current policy and legislative proposals.)
  4. Other technical changes: define a process by which derivatives may file Form I-829 if not included on the principal’s position; provide greater flexibility in selecting the I-829 interview location; remove the requirement that investors report to a district office in order to receive a permanent resident card; miscellaneous other changes (including clarifying that an investor can be sufficiently engaged in an NCE merely by virtue of being an equity holder, without requiring a management or other active role).

The notice goes into extensive detail about USCIS’s thinking and research behind the proposed changes (which is interesting in itself, even apart from context), and invites stakeholders to respond with equally substantial data and analysis. I look forward to IIUSA or others stepping up to help organize a serious stakeholder response. We need to do better than hundreds of individual stakeholders mailing to basically just say “this would hurt” and “we don’t like change.” (Update: Comments can be reviewed at this link.)

The regulators at USCIS and legislators in Congress share similar goals — to modernize the EB-5 program and change certain aspects of the program in need of reform — but so far the draft legislation and proposed regulations suggest quite different changes. I wonder whether Congressional staffers will be influenced by these Notices of Proposed Rule-Making as they continue to refine legislation. (Update: The House Judiciary Committee held a hearing on March 8 to discuss the proposed regulations.) I note that the draft regulations frequently reference Congressional intent as expressed around 1990, but not current discussions in Congress.

EB-5 Regs (Regional Centers), I-924 Process and 2015 Stats, Processing Times

I-924 Approval Data

I try to improve the accuracy of my Regional Center List by requesting regional center designation letters from USCIS through the FOIA process. So far I have logged all initial designations and amendments through 2015. I’m sharing summaries of data points gleaned from the most recent letters in my collection (2015 approvals) to help shed light on processing issues.  As we prepare to respond to the ANPRM, let’s think about what’s wrong with the following pictures, and how to improve the situation.

Status of Amended Regulations

USCIS has published an Advance Notice of Proposed Rulemaking (ANPRM) in the Federal Register. This notice “EB-5 Immigrant Investor Regional Center Program” (Docket No. USCIS-2016-0008) does not unveil any revised regulations, but instead generously solicits stakeholder input to help formulate new rules for regional center designation, the exemplar filing process, continued RC participation, and RC termination. (Docket #0008 references a separate notice “EB-5 Immigrant Investor Program Modernization” Docket No. USCIS-2016-0006 that may cover the other EB-5 topics that we expected to see addressed. 1/12 UPDATE: here is Docket No. USCIS-2016-0006, which proposes new regulations for EB-5 investment amount increases, TEA requirements, priority dates, and other EB-5 matters.)

The bad news about notice #0008 is that it suggests USCIS is in a preliminary stage of thinking about new regional center designation rules, hasn’t actually drafted any regulations on this topic, and doesn’t expect to start for at least another 90 days. (Though hustle might be useless anyway, if Trump makes good on his election commitment to issue a temporary moratorium on most new regulations.) The good news is that notice #0008 demonstrates genuine concern to understand and work with regional center reality, presents thoughtful analysis of the issues, and poses excellent questions. Answers prepared for USCIS in response to the ANPRM should be organized and shared with Congressional staffers as well, since draft EB-5 reform legislation covers the same issues that USCIS aims to resolve, and would benefit from the same input.

Processing Times

Speaking of processing times, here is an email that I should have shared last week.

From: U.S. Citizenship and Immigration Services [mailto:uscis@public.govdelivery.com]
Sent: Thursday, January 05, 2017 11:32 AM
Subject: USCIS Now Uses Specific Dates to Show Case Processing Times

Dear Stakeholder,

Starting on Jan. 4, 2017, we will post processing times using a specific date format rather than weeks or months. This is the first step in providing processing times that are timelier and easier to understand.

We post case processing times on our website as a guide for when to inquire (service request) about a pending case. For the last several years, we have posted case processing times using two different formats:

  • For cases that were within our production goals, we listed processing times in weeks or months.
  • For cases that were outside of our production goals, we listed processing times with a specific date.

Always refer to your I-797C, Notice of Action, and look for “receipt date” to determine when we accepted your case. If the receipt date on the USCIS Processing Times web page is after the date we have listed on your notice, you should expect to hear from us within 30 days. If after those 30 days, you have not heard from us, you may make an inquiry on your case.

We recommend using our e-request tool for all case inquiries. In addition, we have many other services and tools at my.uscis.gov

If you move, remember to update your address for each pending case and receipt number at uscis.gov/addresschange.

Kind Regards,
USCIS Public Engagement Division

Note that this change is cosmetic: processing “as of month” and “as of date” are the same information, just in a different form. But the change is helpful to clarify that the report does not give average processing times, but rather a metric for judging when it’s okay to inquire about case status. FYI here is my spreadsheet of historical IPO processing times with columns translating month to date and vice versa. (But whether considering month or date, keep in mind individual deviations as illustrated above in my scatter plot charts of actual I-924 processing in 2015.)

Policy Manual EB-5 Section: What’s New

The EB-5 program just shifted onto a new and slightly different foundation. USCIS Policy Manual Volume 6, Part G, published today, is now the controlling source for EB-5 policy guidance. Usually we get a review and comment period before new policy goes live, but the effective date for this policy (which I’ll call PM 6G for short) is November 30, 2016.

PM 6G consolidates and replaces (and expands on) the May 2013 EB-5 Policy Memo, EB-5 sections in the Adjudicator’s Field Manual, and other related prior USCIS guidance. It’s intended as a compendium of existing policy, but it’s not identical to the previous guidance. Here are significant points that I notice (based on reading PM 6G side-by-side with the May 2013 Policy Memo, and consulting my memory).

PM 6G introduces a few new petition filing instructions:

  • Chapter 3(B)(3) states that a regional center I-526 petition for a project not previously reviewed by USCIS must identify the project “as an actual project being presented for the first time,” and  “should contain an affirmative statement signed by a regional center principal confirming that the regional center is aware of the specific project being presented for the first time as part of the immigrant investor petition.”
  • Chapter 4(A) states that a regional center I-526 petition for a project previously reviewed by USCIS must submit the previously-approved documentation together with the investor’s documents. This is required even though the regional center previously submitted the documentation with the Form I-924. The petition must also include a copy of the regional center’s most recently-issued approval letter.
  • Chapter 5(B) states that a I-829 petition must include relevant documents previously submitted with the Form I-526, including the comprehensive business plan and economic impact analysis, if the petitioner is relying on such documents to meet his or her burden of proof. “This information is necessary to indicate whether there are material changes that would impact deference.”

PM 6G includes a few items that might be arguable as new policy:

  • Chapter 2(A)1 has a section on “using loan proceeds as capital”
  • Chapter 2(D)4 says that “USCIS may request additional evidence that the indirect jobs created, or to be created, are full time.” (The May 2013 Policy Memo had stated the opposite:Due to the nature of accepted job creation modeling practices, which do not distinguish whether jobs are full- or part-time, USCIS relies upon the reasonable economic models to determine that it is more likely than not that the indirect jobs are created and will not request additional evidence to validate the job creation estimates in the economic models to prove by a greater level of certainty that the indirect jobs created, or to be created, are full-time or permanent.” We need to get PM 6G revised to reflect that reasonable approach.) Chapter 2(D)(4) also confusingly defines direct jobs in the context of regional center job creation and economic analysis as “those jobs that establish an employer-employee relationship between the new commercial enterprise and the persons it employs.” This should be revised or expanded to reflect the alternate meaning of a “direct” job that is in fact used by economic models.
  • Chapter 2(D)6 incorporates the content of the 12/20/2012 Operational Guidance on tenant occupancy
  • Chapter 3(D) says that amendments are optional for changing a regional center’s “industries of focus, business plans, or economic methodologies,” but does not say that amendments are optional for a change in geographic boundaries.  The May 2013 Policy Memo had included geographic boundaries on the list of changes for which an amendment was not required.
  • Chapter 5(B) defines a first-in policy for allocating jobs to EB-5 investors, absent other agreement  (departing from the recent practice of saying no investors get jobs if there aren’t enough for all and there isn’t a job allocation agreement)

PM 6G provides some new examples, clarifications, and re-emphasis:

  • Chapter 2(A)2 lists types of documents that can be used to help demonstrate source of funds
  • Chapter 2(A)2 lists “administrative fees, management fees, attorneys’ fees, finders’ fees, syndication fees” as examples of expenses that will be considered to erode capital made available to the job-creating entity, if paid out of the EB-5 qualifying investment amount
  • Chapter 2(A)5 repeats the old point that TEA qualification is determined for each petitioner based on the  project location’s TEA status at the time of that petitioner’s investment or I-526 filing, while re-emphasizing the implication that the project location is not necessarily a TEA for all time, and just because some early investors qualified for the reduced investment amount isn’t determinative for later investors in the same project
  • Chapter 2(D)3 lists examples of evidence to be provided for a job-sharing arrangement in order to show that it truly involves job share of a full-time position, and not combination of part-time positions
  • Chapter 2(D)5 re-emphasizes that a reasonable economic methodology must be based on reasonable inputs, and gives examples of economic model inputs and relevant documentation to help establish their reasonableness. This discussion is repeated in Chapter 5(B), with odd lack of distinction between evidence required at the I-526 and I-829 stage.
  • Chapter 3(A) describes new detail required of the operational plan filed with the I-924 Application for Regional Center
  • Chapter 3(B)1 suggests specific content for the “general proposals and predictions” in a regional center application relying on hypothetical projects
  • Chapter 3(E) describes the process and issues in regional center termination
  • Chapter 4(C) and 5(C) discuss material change in terms of the same principles but with different language and different examples from the May 2013 Policy Memo. Unlike the memo, the manual discusses and gives examples of changes that would NOT count as material.
  • Chapter 5(B) tries to discuss evidence for regional center job creation at the I-829 stage, but needs more work to clearly address issues specific to regional center as distinct from direct investments, and to differentiate what’s required at I-829 from what’s required at I-526
  • Chapter 5(B)1 gives examples of kinds of construction jobs that do and don’t count as intermittent

What is the significance of PM 6G?  For investors, I guess it doesn’t make much difference because it doesn’t include major policy changes (yet) and basically says what their consultants knew already. It will just be a handy place to find all EB-5 policy, being more comprehensive and better written than the May 2013 memo. Attorneys will want to get busy finding problems and commenting on details that need to be changed.  I’ll have to spend Christmas going through years of blog posts and other documents updating the content and citations to reference PM 6G instead of the various superseded guidance and policy sources (and maybe spend Easter the same way when PM 6G gets revised based on new regulations). I dislike the fluidity of the online Policy Manual, and for myself am copying the content into stable old-fashioned page-numbered documents with navigation.(Here is a link to my folder, which I expect will eventually include many dated versions. You’re welcome to share, keeping in mind that the online manual is the most reliable source for the most current content.)

I look forward to linking to other reactions on the manual here, and may modify my own comments in this post.