RC Hearing, RC List Update

2/2 Hearing on the Regional Center Program
The Senate Judiciary Committee/Senator Grassley have titled next week’s hearing “The Failures and Future of the EB-5 Regional Center Program: Can it be Fixed?” Good heavens! No wonder journalists started calling me yesterday wondering what’s blowing up in EB-5, and disappointed to discover that this insider knows a thousand boring little problems but no big story of pervasive failure to justify such a hearing title. But tis the season for politics, and EB-5 can appear as a golden opportunity to bash immigration plus the wealthy plus real estate developers plus Commies plus New Yorkers all in one rabble-pleasing blow. And Regional Centers may just have to get in line with police officers and Muslim Americans as victims of our politicians’ inclination to profile entire communities based on a few isolated actors. If I were a typical regional center innocently engaged in unremarkable project finance, I’d be worried about a powerful Congressman asking “do you have a future and can you be fixed?” while under the impression that I’m failing and am inherently likely to be facilitating terrorist travel, economic espionage, money laundering, and investment fraud. Hopefully the hearing will call speakers who provide our leaders a more accurate impression of what’s actually going on in the regional center program. The hearing will stream live on the Senate Judiciary Committee website at 10 am EST on Tuesday Feb. 2.

New RCs
Meanwhile, USCIS continues to process EB-5 applications and petitions. The average posted I-526 processing time jumped to 15.5 months as of 11/30/2015 (up from 12.8 months reported as of 10/31). USCIS has also updated the regional center list, and posted a new PDF file that gives the identification number for each regional center. I can’t think how this could possibly help anyone (what we need, USCIS, is for you to please post the designation letters that show who’s behind these RCs and what you’ve approved them for), but the list with ID numbers is there FYI.

Additions to the USCIS Regional Center List, 1/14/2016 to 01/28/2016.

• Ashcroft/Sullivan New England Economic Development Center (Massachusetts, Rhode Island): aseb5.com
• Liongate Regional Center, LLC (Washington)
• MCFI Nevada (Nevada):www.mcfiusa.com

Renamed:

• Central Western Regional Center LLC (former name USA Midwest Regional Center LLC) (Illinois, Indiana, Kansas, Kentucky, Michigan, Missouri, Ohio, Pennsylvania, Wisconsin)
• Green Card Solutions Regional Center (former name Shrimp House US LLC) (Florida)

Legislative Update, New RCs

Legislative Update (see paragraph end for continuing updates)
It looks as if the Regional Center program may get reauthorized next week after all, with significant but not terminal changes. The chairs and ranking members of the House and Senate Judiciary Committees have reached an agreement on a reform package that may be included in the omnibus appropriations legislation that Congress is working on to fund the federal government past December 11. IIUSA’s Board of Directors has voted in favor of the legislation, stating in a letter to members that “we believe that, on balance, the bill achieves real reform with minimal disruption to ongoing job-creating economic activity and establishes a fair market for attracting investors going forward, with everyone under the same rules at the same time.” See IIUSA’s blog post and Senator Leahy’s press release, which includes a one-page summary and link to a discussion draft of the legislation (version MDM15J00 of American Job Creation and Investment Promotion Reform Act of 2015). See also Senator Grassley’s press release. The WSJ blog’s post Fight Over Green Card Investor Program May be Near End discusses the proposal’s supporters and opponents. Michael Homeier’s 12/7 email and 12/9 email and Martin Lawler’s 12/9 post share insiders views of on-going lobbying efforts. As reported by IIUSA on 12/11:

Today, the House passed a short-term funding bill (H.J. 2250) by a voice vote to avoid a government shutdown. The original EB-5 extension is included. Yesterday, the Senate passed the short-term, five-day continuing resolution (CR) by unanimous consent, giving lawmakers until December 16th to pass a long-term spending bill for the rest of fiscal year 2016.

Senate leaders have noted that they will not vote on a funding bill until the House does.  As a result, Congressional leaders will be facing a tight deadline due to the nature of Senate procedure.

Reports indicate that the House may vote on a long-term funding bill as early as Tuesday, December 15th.  As soon as the House passes a bill, Senate Majority Leader Mitch McConnell (R-KY) is expected to file cloture on the funding measure immediately, forcing Senators to wait 30 hours before they can vote on final passage and send a budget bill to President Obama to be signed into law. Negotiations between House Republicans and Democrats are ongoing and IIUSA continues to provide updates on the status of those negotiations.

Now that the fate of EB-5 legislation is firmly linked to the omnibus appropriations legislation, I keep watching The Hill site for new “spending bill” articles, which report on progress of that legislation.

12/15 Update: Here is a link to the finalized Military Construction and Veterans Affairs and Related Agencies Appropriations Act, 2016 [Consolidated Appropriations and Tax Measures]. Page 708 has a simple extension of the Regional Center program to September 30, 2016, and I can’t find any other EB-5 changes.

New and Renamed Regional Centers
Meanwhile, USCIS is still busily adjudicating Regional Center applications, and accepting name changes from RCs affected by the Cautions on Names of Regional Centers.

Additions to the USCIS Regional Center List, 11/12/2015 to 12/03/2015.

• American Lending Center Florida, LLC (Florida)
• American Lending Center Illinois, LLC (Illinois)
• Bart Investment Group, LLC (Florida)
• Chicago First Regional Center Inc (Illinois)
• EB5 Group New York Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania) www.eb5groupllc.com
• EB5 Land Regional Center (Washington)
• First American Regional Center, LLC (California)
• Golden Sun Development Regional Center (Washington)
• Greater New York Business Regional Center (New Jersey, New York, Pennsylvania)
• High Stone Regional Center, LLC (Connecticut, New Jersey, New York)
• Lifezone Development Regional Center (Washington)
• ON Regional Center, LLC (California)
• Piedmont Regional Center, Inc. (Georgia, North Carolina, South Carolina, Tennessee)
• Sino Indus BK Capital LLC (New Jersey, Pennsylvania)

Renamed:

• AFC Regional Center LLC (former name New York Federal Regional Center) (New Jersey, New York, Pennsylvania)
• West Maingate Regional Center, LLC (former name US Maingate Regional Center, LLC) (California)
• American Lending Center LLC (former name United States Employment Development Lending Center) (California)
• Greystone EB5 Southeast Regional Center LLC (former name Greystone Florida Regional Center LLC) (Florida)
• Harris Real Estate Fund LLC (former name U.S. Federal Investment Immigration Fund, LLC) (Arizona)

Direct v RC Structure (AAO decision), New RCs

New AAO Decision (Direct EB-5 Investment Structure, Evidence Standard, Multiple Investors)
I keep seeing evidence of confusion about how direct EB-5 and Regional Center EB-5 differ, and cases that try to use a Regional Center structure for direct investment. Test question: Which structures in Figure 1 are options for a direct EB-5 investment in a hospice business: A and B, or B only? (Assume that the hospice is owned by the entity in whose box it appears.)

The correct answer is: B only, because job creation in A is indirect with respect to the new commercial enterprise. Counting indirect jobs requires Regional Center sponsorship; in direct EB-5, you can only count employees who provide labor for and receive wages directly from the new commercial enterprise. The NCE and the hospice could potentially have different tax ID numbers, but they must be a single enterprise (a single entity, or one entity wholly owns the other) in order for the NCE to count the hospice jobs as direct jobs. If the NCE makes a loan to or investment in another enterprise, the jobs resulting from that investment don’t count because they’re not the NCE’s direct jobs. Figure 1 is similar to the fact pattern from an actual direct EB-5 case that USCIS denied in 2011 and whose appeal the Administrative Appeals Office just dismissed (see decision OCT022015_01B7203 Matter of H-G-). The petitioner in this case first filed I-526 with a Structure A fact pattern, was denied, then reported on appeal that “the entity previously in the middle … has been dissolved to make this a direct investment and job creator” (Structure B). But the fix came too late; a petitioner must demonstrate eligibility at the time of filing and may not make material changes in an effort to make a deficient petition conform to regulatory requirements.

Another timely reminder in the Oct. 2nd AAO decision concerns evidence quality. AAO quotes 8 C.F.R. § 103.2(b)(2) to support the point that a petitioner must submit primary evidence unless it’s demonstrated to be non-existent or unavailable. (In this case, the petitioner provided letters from city officials saying that licenses had likely been issued, but should have provided copies of the licenses themselves or demonstrated the unavailability of such primary evidence.)

I’m also interested in the decision’s statement on the issue of multiple investors. The AAO writes that since the I-526 petition revealed that at least six EB-5 investors would be involved in this enterprise, the business plan should have shown the total investment and job creation for all six investors, and the petition should have included an agreement among the investors for job allocation.

New and Removed Regional Centers
Additions to the USCIS Regional Center List, 09/21/2015 to 10/08/2015

• MW International LLC (California)
• Paramount Regional Center, LLC (California)
• EB5 Affiliate Network New York/Tri-State Regional Center (Connecticut, New Jersey, New York): eb5affiliatenetwork.com
• Liberty EB5 Regional Center (Pennsylvania)

Additions to the USCIS list of Terminated Regional Centers

• Next Bay Properties, LLC (California), terminated 10/1/2015

Short-term RC extension by CR?, New RCs

Regional Center Program Authorization Update
Congress now has just seven working days before the Regional Center program sunsets, and substantive reform/re-authorization bills are not even out of committee. We’re now pinning our hopes on temporary extension as part of a continuing resolution (CR). Today the Senate took a step in this direction, releasing its proposal for a CR that would extend current funding levels for the federal government through December 11, 2015 and reauthorize the EB-5 Regional Center program for the same period. See the IIUSA news release for further detail. We hope that the House follows the Senate’s lead, and that the Regional Center program won’t be allowed to lapse on September 30th.

New Regional Centers
Even as the Regional Center program’s future hangs in the balance, new Regional Centers continue to be approved.
Additions to the USCIS Regional Center List, 09/08/2015 to 09/21/2015

• Baypointe EB5 Regional Center, LLC (Alabama): baypointeeb5.com
• Amaxi Regional Center, LLC (California): www.metroteahouse.com
• Summit Regional Center (California)
• FP Advisors LLC (Colorado)
• EB5 Florida Real Estate Regional Center, LLC (Florida): www.eb5floridarealestateregionalcenter.com
• Liberty Kansas Regional Center (Kansas and Missouri)
• Queensfort Capital Massachusetts Regional Center, LLC (Massachusetts): queensforteb5.com
• Mid America Investment Group, LLC (Arkansas, Mississippi, Tennessee)
• Big Apple Regional Center (New Jersey, New York, Pennsylvania)
• NatureAll Co., Inc. EB-5 Regional Center (New Jersey): natureallusa.com

FYI: The FOIA reading room on the USCIS website, which rarely gets updated, has a new file called FY2014 Regional Center Termination Notices. Don’t get excited, however, unless you’re just interested in the form of termination notices, since the reason for termination is neatly and completely redacted from each letter.

RC Reauthorization Status, New RCs

Reauthorization Status
The current authorization of the Regional Center program is set to expire after September 30, 2015, and timely reauthorization is looking doubtful what with our representatives being on vacation much of the time between now and then, and with none of the proposed/pending legislation looking advisable to pass without discussion and revision. What will happen on October 1 if Congress hasn’t acted in time? We also asked this question in 2012, last time the program was up for reauthorization, and got vague answers from USCIS (“This as a question that will just have to be addressed when and if it occurs, and the Service does not have a response at this time” was the message at the 1/23/2012 EB-5 stakeholder meeting. The 5/1/2012 EB-5 stakeholder meeting executive summary stated that all existing regional center designations would expire automatically and that USCIS would not approve new Regional Center designations, but did not comment on what would happen with Regional Center-associated investor petitions.). We’ll see what USCIS has to say in next week’s engagement (8/13/2015). In the meantime, advocacy groups (IIUSA, EB5 Coalition) are still pressing for timely action, and we may after all get a bill passed at around 11:58 pm on the 30th, as has happened before. Here are the proposals on the horizon, so far as I know.

• • S.1501 – American Job Creation and Investment Promotion Reform Act of 2015. Sponsored by Senator Leahy (D-VT) and Senator Grassley (R-IA). Introduced in the Senate on June 3, 2015, referred to committee, and much analyzed and largely panned since then by the EB-5 community. The bill’s good aspects – that it extends (by five years) and seeks to improve the Regional Center program and is sponsored by important people – seem outweighed by its problems – that its provisions would drastically redirect and severely curtail the scope of the RC program (discouraging large raises, large projects and urban development in favor of small EB-5-dominated projects in rural areas), and that it brands the RC program as a hotbed of corruption and proposes ham-fisted measures that wouldn’t necessarily forestall bad actors, who can be glibber than most in attesting virtue, but would place an unwieldly regulatory burden and risk on people actually trying to do things right. IIUSA reports that they continue to have close discussions with the bill’s drafters – and other relevant Senate offices – as alternative language is considered by the sponsoring offices.
  • H.R.3370 – To amend the Immigration and Nationality Act to promote innovation, investment, and research in the United States, and for other purposes. Sponsored by Representatives Zoe Lofgren (D-CA) and Luis Gutierrez (D-IL). Introduced in the House on July 29, 2015, and referred to committee. I think this is a pretty good bill (aside from being nearly unreadable in bill form – read Rep. Lofgren’s section summary first before you try the legislation itself or you’ll get confused). The bill proposes a couple new EB visa categories in Title I (I don’t see the proposed EB-6 category being used much, as VC risk/unpredictability and immigration aren’t a great mix, but in any case it wouldn’t take visas away from or otherwise affect the EB-5 program) and discusses the EB-5 Regional Center program in Title II (starting on p. 17). The bill would permanently authorize the RC program, double the qualifying EB-5 investment amount (which is a leap, but not unreasonable considering investor visa thresholds in other countries), open the possibility of doubling the annual EB-5 visa allocation, and make other changes that I think would generally improve the footing of the EB-5 program. The proposals regarding TEAs and job creation (p. 38-41) strike me as particularly well-considered and reasonable. The concurrent filing and premium processing provisions would be very popular (though with a fee of only $5000, I believe that 100% of EB-5 petitioners would go for premium processing, making the service impossible to deliver in practice). The proposals for improved program integrity in this bill look serious but largely reasonable and justifiable rather than punitive and alarmist, as in S.1501. I’m just concerned that this bill, like S.1501, charges USCIS to regulate – and holds RCs responsible for keeping in line – a constellation of people who we’d all like to see controlled but who are not necessarily amenable to control by either RCs or USCIS. USCIS is supposed to work with the FBI to conduct background checks of and Regional Centers may be heavily sanctioned based on the behavior of anyone who can be considered “involved” with a regional center or an associated commercial enterprise (i.e. “if he or she is the principal, representative, administrator, owner, officer, board member, manager, executive, general partner, fiduciary, marketer, promoter, director, or other similar position of substantial authority for the operations, management, or promotion of the regional center or associated commercial enterprise, respectively”). In practice, does this mean that FBI agents have to show up at the offices of licensed migration agents in China who happen to be sourcing investors for Regional Centers and say okay hands out everybody, we’re taking fingerprints? How will the Chinese government feel about the US coming in to lay down the law in a domain that it is concerned to regulate itself and to protect from foreign influence? Considering that most EB-5 offers are made entirely abroad, and often by independent third parties who owe first allegiance to their own local regulations, how would Regional Centers handle the requirement “to monitor and supervise all offers and sales of securities which are made by associated commercial enterprises to ensure compliance with the securities laws of the United States, and to maintain records, data, and information relating to all such offers and sales of securities”? Certainly the selling and investor recruitment process is a major challenge, complication and source of confusion and vulnerability for the EB-5 program and for Regional Centers and deserves to be addressed, but easier said than done.
  • H.R. 616 American Entrepreneurship and Investment Act of 2015. Sponsored by Representative Polis (D-CO) and Amodi (R-NV), and now with 22 co-sponsors. Introduced in the House January 28, 2015, referred to committee March 17, 2015. This bill proposes permanently authorizing the Regional Center program without overhauling it, and briefly suggests a few modest and generally-welcome clarifications and improvements. I don’t know why this bill hasn’t gained more traction – possibly because the general mood seems to be that the program needs some significant changes if it’s to be made permanent.
  • Rumor has it that Judiciary Committee Chairman Bob Goodlatte (R-VA) and Representative Darrel Issa (R-CA) plan to introduce legislation in early September that will be similar to their SKILLS Act (HR2131) proposal from last year, with some additions. As originally written, this bill proposed new EB-6 and EB-7 categories (defined differently from Lofgren’s), tweaked a bunch of visa categories, and had one line about the Regional Center program, proposing to make it permanent. The new version will reportedly include some additional EB-5 program changes, but less drastic than those in S.1501.

Carolyn Lee has assembled a handy bill comparison chart. See also Pat Hogan’s letter on the mood in Washington as of Sept. 2015.

New Regional Centers
Additions to the USCIS Regional Center List, 6/23/2015 to 8/3/2015

• American Coast Regional Center (California)
• EB-5 Impact Capital Regional Center, LLC (California and Nevada)
• EB5 International, LLC (California): www.eb5international.com
• EB5 Affiliate Network Washington, D.C. Regional Center, LLC (District of Columbia, Maryland, Virginia, West Virginia): eb5affiliatenetwork.com
• Maryland Global Regional Center, LLC (District of Columbia, Maryland, Virginia, West Virginia): www.cgrc.info
• Civitas Northern Florida Regional Center (Florida): www.civitascapital.com
• EB5 Financing Management Company, LLC (Florida)
• Civitas Illinois Regional Center (Illinois): www.civitascapital.com
• EB5 Affiliate Network State of Hawaii Regional Center, LLC (Hawaii): eb5affiliatenetwork.com
• Massachusetts Wealth and Happiness Regional Center, Inc. (Massachusetts)
• EB5 Affiliate Network State of North Carolina Regional Center, LLC (North Carolina): eb5affiliatenetwork.com
• Ocean Pacific Regional Center, LLC (Oregon)
• Harmonia Regional Center, LLC (Texas): harmoniaeb5.com
• Name Change: Gotham City Regional Center, LLC changed to Silverstein Properties Regional Center LLC (Connecticut, New Jersey, New York, Pennsylvania): silversteinrc.com

USCIS Website
I also note that USCIS has done a little revamp of the EB-5 section of its website, separating what used to be the main page into two pages, one about the EB-5 program and one about the EB-5 visa but still mysteriously (pointedly?) omitting the informational page that used to be there about the Regional Center program. They do slap a nice big forbidden icon on the link to the list of terminated Regional Centers, a list already with plenty of indignity for the subset of centers that landed there not by fault but by choosing not to continue with the program.