5/15 Policy Manual Update (tenant occupancy)

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

–ORIGINAL POST–

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

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

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consistent since 2012, then shame on USCIS for sending out a Policy Alert today literally saying that the policy is rescinded as of yesterday.

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

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

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

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

 

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

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

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

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

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

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

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

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

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

New Litigation and AAO Decisions (“invest” requirements)

Appeals and litigation give a rare public glimpse into how the Investor Program Office is adjudicating I-526 petitions. It appears that IPO may be in the midst of a campaign to re-interpret/enforce the EB-5 “invest” requirements as described in 6 USCIS Policy Manual G.2  There have been a spate of denials that turn on language in the securities and transaction documents. Recent examples:

  • Guaranteed returns and debt arrangements, call option issue: CHANG et al v. DEPARTMENT OF HOMELAND SECURITY et al (Case Number: 1:18-cv-00659) is a civil action filed on March 22, 2018 by ten investors who put money into senior living project in Florida. (Here’s a summary and the full complaint.) These investors filed I-526 in 2014 and 2015 and heard nothing back from USCIS, finally making a mandamus complaint in October 2017 to compel agency adjudication. USCIS responded in February 2018, denying all investor petitions based on finding that “a call option reflected in the Partnership Agreement and the offering documents demonstrated the existence of an impermissible debt arrangement.” The investors have responded with a complaint pointing out that this issue was previously addressed by federal judges who found that a call option does not of itself constitute a debt arrangement. In previous cases, the US District Court in DC ruled that the USCIS denials could not survive review because they conflict with the plain language of the regulations, are not compelled by statutory or regulatory purpose, unreasonably stretch the rationale of precedent decisions, and run counter to evidence. Call options (buyout options) have been quite common in EB-5, and I wonder if many I-526 are being held up now behind the scenes while USCIS figures out how to deal with them (balancing newfound intent to deny such cases with the fact that the court has shredded the reasoning behind several denials so far). I’ve seen recent NOIDs based on call options, so USCIS hasn’t given in yet. I can’t see what legs the court (not to mention policy and reality) have left to the case against call options per se, and I hope USCIS accepts that soon to avoid further needless delays, disruption, and lawsuits. (UPDATE: FYI here are my notes for an ILW call on 4/17 to discuss the “invest” requirement, and new USCIS challenges to equity with debt-like features. The notes link to the relevant AAO and district court decisions, and summarize the fact patterns and arguments for each case.)
  •  “Made available” and bridge financing issues: JAN262018_05B7203, JAN302018_01B7203, FEB072018_02B7203, and MAR152018_01B7203 are decisions on the same regional center offering to invest in construction of a distribution center in Washington. After having approved 10 investors in the project, USCIS denied petitions for the last 10 investors. USCIS’s main excuses for this treatment: (1) the project having completed construction constitutes a material change of fact that prevents the last investors from relying on favorable decisions for previous investors, (2) USCIS belatedly identified a legal deficiency: that the PPM and loan agreement language don’t unambiguously obligate the NCE to make the entire amount of the petitioners’ funds available to the JCE, and (3) the reality that the investors chose a project that successfully developed and created jobs does not overcome paperwork problems. The petitioners were judged ineligible not based on reality, necessarily, but based on wording: they submitted documents that had leaky language in the loan agreement, didn’t paper up a bridge financing arrangement the way it’s supposed to be papered, and left sloppy inconsistencies in the business plan and economic impact report. Several morals from this case: People who draft transaction documents need to be mindful of the “made available” and bridge financing features of the EB-5 “invest” requirement, and write that into documents — taking particular care when it’s likely that (as often happens now considering long processing times) the project will have been completed by the time USCIS finally gets around to adjudicating I-526 petitions for investors. Prepare for the fact that an adjudicator may ask two years later: “why the JCE would still need this capital and to what use it would be put by the JCE in light of the completion of the project.” Document preparers must be very attentive to detail and careful about language, because compliant documents are apparently more determinative than compliant reality in whether or not investor petitions get approved. I keep this burden in mind as I write EB-5 business plans.
  • “Chance for gain” issue: FEB282018_02B7203,  MAR092018_02B7203, MAR162018_01B7203 are decisions on the same offering to invest in a regional center NCE to make a loan to a JCE to construct, finance, and operate an hotel. The denials rest on a finding that the LP agreement and loan agreement “do not provide the Petitioner with any rights to the NCE’s profits, whether derived from the loan interest or otherwise, and the sole opportunity for the Petitioner to generate a return on the investment is if the general partner elects to pay a 0.05% interest payment upon the NCE’s loan repayment.” USCIS will deny cases that guarantee a return, but – as we see here – can also deny cases that appear to make a return too discretionary. USCIS found in these cases that “discretionary chance for return which is unrelated to the investment does not satisfy the regulatory requirement for capital at risk under 8 C.F.R. § 204.60)(2).” Again, people drafting documents must walk a very fine line. USCIS wants to see (1) that investors have a chance for gain, (2) that the income sources to pay a return are directly related to the purpose of the underlying investment, (3) that the return is not guaranteed, (4) that the NCE general partner does not have absolute discretion to make or withhold the return. And furthermore, the documents have to be right the first time, at I-526 filing. The petitioners in FEB282018_02B7203 and MAR092018_02B7203 provided amended documents in response to NOID, but USCIS judged this an impermissible material change and refused to consider such post-filing clarifications.
  • “Business activity” at-risk issue and identified location: To meet the at-risk requirement for EB-5 investment, a petitioner must present evidence of actual undertaking of business activity, not just an idea for future activity. The precedent decision Matter of Ho cited entering a lease as an example of de minimus activity that doesn’t  itself qualify as sufficient business activity to put funds at risk. So if a petitioner hasn’t even secured a business location before filing I-526, he can expect to be challenged as having even less than de minimus activity. That happened to the petitioner in MAR162018_02B7203, a regional center case. “The Chief concluded that without a specific property, the Petitioner could not demonstrate that his funds were at risk, that the business plan was comprehensive rather than hypothetical, or that certain inputs to the economic model were valid.” (This decision also shows the importance of a quality business plan with real market analysis and financials, as it rips apart the placeholder content in the petitioner’s plan. And it shows confusion about the job creation timing requirement in the USCIS Policy Manual Vol. 6 Chapter 2(D)5. The decision seems to assume that job creation must occur within two years of filing I-526, while the PM states that the two-year job creation window is deemed to begin 6 months after adjudication of Form I-526.)

Other recent AAO decisions of note:

  • FEB072018_01B7203 is one of the rare cases where AAO decides to withdraw USCIS’s decision – in this case involving source of funds derived from loan proceeds received as a gift from the petitioner’s husband.
  • FEB152018_01K1610 upholds USCIS’s decision to terminate a regional center for this fatal error: filing Form I-924A to the wrong address.
  • FEB282018_01B7203 is yet another reminder that the new owner of a pre-existing business cannot expect that the enterprise and its new employees automatically qualify as “new” for EB-5 purposes.

Minor Investors:

Long processing times and the visa backlog have motivated families to make a teenage child to be the principal EB-5 applicant. USCIS has questioned but started approving such petitions, as reported by Wolfsdorf Rosenthal in this post and Miller Mayer in this webinar (35 minutes into the recording).

Washington Updates:

I continue to update my Washington Updates page, most recently with post-March analysis and a link to a letter from several senators to USCIS urging that regulations be finalized. Senator Grassley has made this plea multiple times since 2016; we’ll see what happens now.

Personal Update:

As EB-5 reporting and analysis become increasingly time-consuming, and less linked to my selfish purpose of encouraging demand for my business plan-writing service, I’ve decided to put up a donate option. If you can support the effort behind the blog and help keep it in business, please visit my About page and scroll down to the Paypal button, which can facilitate making a contribution through Paypal. I want to avoid a subscription model because publicly-available EB-5 information is important to my clients and the health of the EB-5 program.

Regional Center List Changes:

Additions to the USCIS Regional Center List, 03/19/2018 to 04/10/2018

  • American Capital Regional Center, LLC (Texas)
  • Borrego Development, LLC (California, Nevada)
  • Colorado Rocky Mountain High Regional Center, LLC (Colorado): www.coloradorockymountainhighrc.com
  • M5 Venture Silicon Valley RC LLC (California): www.m5venture.com
  • Mile High Regional Center (Colorado)
  • National Regional Center, LLC (California)
  • Protogroup, Inc. (Florida)
  • Texas Tilegend Regional Center (Texas)
  • Y & L Enterprises LLC (Iowa, Nebraska)

New Terminations

  • Encore Raleigh/Durham Regional Center (North Carolina)
  • Encore Alabama/Florida Regional Center (Alabama, Florida)
  • G.R.E.E.N. Regional Center (New Jersey)
  • BLMP Florida Healthcare Regional Center, LLC (Florida)
  • Michigan-Indiana EB-5 Regional Center (Indiana, Michigan)
  • Queensfort Capital Massachusetts Regional Center, LLC (Massachusetts)
  • South Pacific Regional Center, LLC (Hawaii)
  • Queens Fort New York Regional Center, LLC (New Jersey, New York, Pennsylvania)
  • Central Texas Properties Regional Center (Texas)
  • South Texas EB-5 Regional Center, LLC (Texas)
  • Pacific Viniculture (Washington)
  • California Investment Immigration Fund, LLC (CIIF) (California)
  • USA ODI Regional Center, LLC (Maryland, Virginia, West Virginia)
  • Manchester Pacific Regional Center (California)
  • Regency Regional Center, LLC (California)

RC Authorization to 9/30/2018, Processing Times, New RCs

Regional Center Program Authorization

The last time Congress voted a significant regional center program extension was 2012. Since then, the program has been extended a few months at a time, in connection with government funding. This is now happening again with H.R.1625, the vehicle for the Consolidated Appropriations Act 2018, which was signed by the President today.  The text includes regional center program authorization to 9/30/2018 on PDF page 1759, as follows:

SEC. 204. Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note) shall be applied by substituting “September 30, 2018” for “September 30, 2015”

This language refers back to Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (Public Law 102-395) Section 610 (PDF page 47), which established the regional center program. The 2018 Appropriations Act does not include the EB-5 Reform Act, or other EB-5 changes. It just extends the borrowed time until we get a good piece of EB-5 legislation.

Processing Times

USCIS has attempted to clarify reporting for processing times, and succeeded in confusing me, at least, even more than before. Unfortunately I missed a webinar on this topic yesterday because even the emails were confusing, but here’s what I think I understand, having read the new pages at egov.uscis.gov/processing-times/ and egov.uscis.gov/processing-times/more-info, and used my spreadsheet to fiddle with the EB-5 form numbers in comparison with numbers in the old-style report.

USCIS has changed its method for calculating processing times for four forms: N-400, I-90, I-485, and I-751. The underlying method for calculating (and underlying reality behind) times for I-526, I-829, and I-924 has not changed. What’s different for the EB-5 forms is that USCIS now reports three pieces of information: a high and low month in an “estimated time range” and a “case inquiry date.” The low month in the time range corresponds to the date USCIS previously reported for “processing cases as of…” in the old-style report, while the high month multiplies that duration by 1.3, and the case inquiry date more-or-less corresponds to the high month. Apparently IPO doesn’t want people complaining that they’re outside of normal processing times until their cases are taking 130% longer than average. If you took part in the webinar and have additional insights or corrections, please share.

See also the OIG Report: USCIS Has Unclear Website Information and Unrealistic Time Goals for Adjudicating Green Card Applications

Visa Availability

The Visa Bulletin for April 2018 confirms that Vietnam is definitely up next month for a cut-off date based on oversubscription. With visa availability being the major political and practical factor for EB-5 today, I’ll be writing more about this soon.

Regional Center List Updates

Additions to the USCIS Regional Center List, 03/09/2018 to 03/19/2018:

  • 888 American Dream Projects Regional Center (California, Nevada)
  • American National Regional Center d.b.a. EB5 Financial Regional Center (California): www.anrcs.com
  • Dayton Regional Center, LLC (Ohio)
  • Delvelyn Regional Center, LLC (California)
  • Hudson Funds New York Regional Center, LLC (New Jersey, New York, Pennsylvania): hudson-funds.com
  • MGV NYC Regional Center LLC (New Jersey, New York, Pennsylvania)
  • Monterey Massachusetts Regional Center, LLC (Massachusetts)
  • Monterey Northern California Regional Center, LLC (California)
  • Monterey Southern California Regional Center, LLC (California)
  • New York/New Jersey Real Estate and Infrastructure Regional Center LLC (Connecticut, New Jersey, New York)
  • PacNW Regional Center, LLC (Oregon, Washington)
  • Propet American Dream, LLC (Washington): www.propetamericandream.com
  • RSR EB-5 Regional Center, LLC (North Carolina, South Carolina)
  • Smith Mountain Regional Center, LLC (Colorado, Oklahoma, Texas)
  • U.S. Green Capital Regional Center, LLC D/B/A Playa Vista Regional Center (California): pvcapitalmanagement.com
  • Washington American Investments, LLC (District of Columbia, Maryland, Pennsylvania, Virginia)

New Terminations:

  • Chen Roberts Regional Center (Oklahoma)
  • Regency Regional Center LLC (California)

EB-5 No-Reform Act, RC List Changes

On Friday, IIUSA reported that “Yesterday IIUSA met with Republican negotiators and received draft legislative text that is being proposed for inclusion on the March 23rd Congressional omnibus package… We expect the House to vote the omnibus out of the chamber as early as March 16, allowing the Senate the entire week of March 19 to pass the measure before government funding expires on Friday, March 23…. the current debate over what policy provisions to include in the FY18 omnibus spending package provides one of the few, if not the only, opportunity to secure a long-term EB-5 reauthorization.”

With three years to work on drafting EB-5 legislation, why did Congressional negotiators keep this most recent EB-5 bill hidden until the very last minute, and provide even IIUSA only a few hours to read it and respond? Possibly because this “Immigrant Investor Visa and Regional Center Program Comprehensive Reform Act” is a tissue of minority hand-outs, declawed reforms, poison pills, and half-baked good ideas. We’re to conclude “This is our last chance to get significant regional center program authorization, and it’s too late to make changes now, so we have to support this, no matter the details.”  I understand, but oh those details. I am ashamed of this bill, and on behalf of the people behind it. How did years of negotiation produce this document? The media, pro-reform lawmakers, and the good proportion of EB-5 stakeholders left out of compromises will not be kind to those who drafted this bill, if it passes as-is.

The EB-5 Reform Act has a few generally-favorable provisions:

  • It would reauthorize the regional center program to 2023
  • It would add some flexibility for material change, and some protection for investors in projects that don’t work out
  • It would make some process improvements

The EB-5 Reform Act is lobbying money well-spent for a few:

    • The TEA reform in this bill is calculated to avoid unduly incentivizing investment in distressed areas. In three years of EB-5 legislative proposals, each version has had a softer TEA proposal than the last. This one reduces the monetary incentive to a hair, compensates with incentives that will either be impotent/unrealizable in practice (visa set-asides, premium processing) or positively counterproductive (lower jobs requirement for needy areas?), broadens the definitions of what qualifies as an urban distressed or rural area (e.g. switching from the NMTC “severe distress” criteria in previous proposals to just the NMTC low-income criteria, and no specified limit on gerrymandering), and adds new incentivized areas for a special few (closed military bases, U.S. territories, infrastructure, franchise investment funds). Congress was originally energized for EB-5 reform because they didn’t like seeing most EB-5 dollars flowing to already well-capitalized projects in already well-capitalized areas. That status quo has little to fear from this legislation. Luxury real estate will keep its top spot if this passes, and we’ll still have Chuck Grassley and the media shaking their fists.
    • The bill offers real estate projects an extra gift for good measure: construction jobs can be aggregated and counted as qualifying direct permanent jobs regardless of duration.
    • The integrity provisions in this bill are calculated to avoid making life difficult. Gone are the suggestions in past bills about involving third parties in oversight or reporting or requiring account transparency or fund administration. Here, integrity measures focus on internal certifications of compliance to the best of the certifier’s knowledge. That’s good for honest players who can do without burdensome and intrusive regulation, but also little limit on bad players happy to self-report compliance. Such teeth as the bill has — site visits, audits, background checks, termination threat — are largely things IPO is doing already, though I’m sure they’d appreciate the official authorization and extra funding. But generally, I’m not sure this bill will satisfy lawmakers who wanted EB-5 reform to combat fraud.
    • The bill retains integrity measures that conveniently double as anti-competitive measures. The bill keeps a previously proposed annual regional center fee – lowering the amount for the largest regional centers and keeping it high for the smallest. It is more severe than previous proposals on involvement by anyone with foreign government connection at any level, even in providing non-EB-5 capital to a job-creating entity.
    • UPDATE: Re-reading more carefully, I see that I’m wrong about this one. The bill says that for four months after enactment, no one can file I-526 except for new investors in in-progress raises with an approved examplar. The bill even attempts to set aside 7,000 visas for these privileged investors, forgetting that the numerical limit for 2018 visas was already exceeded back in 2014.

Here’s who will be most upset, if the EB-5 Reform Act passes:

  • The approximately 92,000 people in line for an EB-5 visa. These people are already in for a long wait with an annual quota of about 10,000 visas, and the EB-5 reform act has set-asides that would reduce generally-available visa numbers to about 6,900 per year. The situation will be especially bad for people from China, Vietnam, and possibly India. Those people already in line didn’t plan to wait 17 years or so for conditional green cards — and neither did the projects accepting their investment. The bill does not include on-purpose retroactivity (it doesn’t make TEA, investment amount, or job creation changes apply to people who already filed I-526), but past investors will be severely affected by the visa set-asides, and potentially by new restrictions that affect regional centers and investment projects.
  • Those hoping to raise EB-5 funds to benefit projects in rural or distressed urban areas. The new incentives are not better designed to benefit them than the current incentive structure. The new regional center fees and requirements are well-designed to put anyone out of business who isn’t raising funds from hundreds of investors for prosperous urban projects.
  • Entrepreneurs planning to file EB-5 petitions in the near future for their own enterprises, and any regional centers planning to raise funds for a project without a pre-approved exemplar. The bill has a 120-day moratorium on filing new I-526 and I-924, followed by a transition period from day 121 to day 365 that limits the petitions that can be processed.
  • The Investor Program Office. This legislation will be tough to interpret and implement. USCIS will have to figure out provisions that the bill hardly explains: the franchise investment fund idea, the provision that I-829 petitions based on investment in unrealized/failed projects are to remain valid, the new amendment and re-petition processes, the provisions that imply retroactive new requirements for past projects, and the effects on direct EB-5. The bill stipulates a 120-day transition period, during which USCIS can come up with new regulations and policy, new forms and supporting processes, a new TEA designation process, and a new premium processing option. Hahahahaha. 120 months would be more plausible, considering past experience.
  • Regional centers with fewer than 20 investors annually. They’ll face a $10,000 annual fee and a list of new compliance certifications that will be hard work if taken seriously.
  • EB-5 projects with any foreign-government-entity-related funds in the capital stack, or personnel at any level.

End of rant. If I wake up tomorrow to find that this has been attached to the House version of the new omnibus spending bill, then I shall transition to learning to live with it. And polish my resume, perhaps.

In the meantime, USCIS approved a bunch of new regional centers. Probably most of these applicants filed I-924 back in 2015, little thinking what they’d be up against today!

Additions to the USCIS Regional Center List, 02/02/2018 to 03/05/2018.

47 regional centers have been added.

  • AHRC GA, LLC (Georgia)
  • All American Investment Holdings, LLC (California)
  • Ameri-Link Northeast Regional Center, LLC (California, New Jersey, New York)
  • American Citizen Regional Center – Southern California LLC (California)
  • American Equity Fund California, LLC (California)
  • American Equity Fund, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • Avista Regional Center, LLC (Florida, Georgia)
  • BC Southeast Regional Center, LLC (Florida)
  • BC West Coast Regional Center, LLC (California)
  • Bay Area Community Regional Center, LLC (California)
  • CMB Hawaii Regional Center, LLC (Hawaii): www.cmbeb5visa.com
  • Carolina EB-5 Regional Center, LLC (North Carolina)
  • Chicago Golden Pacific, LLC (Illinois): www.usgoldenpacific.com
  • EB-5 Inc Regional Center, LLC (Florida)
  • EB5 Texas Investment Group LLC (Texas)
  • East Coast Prime Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • Education Fund SC Regional Center, LLC (Louisiana, New Mexico, Texas): edufundamerica.com
  • Gateway America Regional Center (New York, Ohio, Pennsylvania)
  • Green Mountains Regional Center, LLC (New Hampshire, Vermont)
  • Happy Family USA Regional Center (California, Nevada): www.hfeb5.net
  • Hawaii Investor Regional Center Corp. (Hawaii)
  • LJHB Perpetual, LLC (District of Columbia, Maryland, Virginia, West Virginia)
  • Landmark Regional Center, LLC (Connecticut, New Jersey, New York)
  • Manhattan CBD Development Regional Center, LLC (New York)
  • Mid-America Renaissance Regional Center, LLC (Kansas, Missouri)
  • NYC Liberty Green Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • New York City EB-5, LLC (New Jersey, New York, Pennsylvania): www.americaneconomicgrowthfund.com/nyceb5
  • New York City Transportation Regional Center LLC (Connecticut, New Jersey, New York)
  • OMS Group, LLC (North Carolina, South Carolina)
  • Omaha Old Market Regional Center LLC (Iowa, Nebraska)
  • Pacific West Economic and Development Center LLLP (California, Nevada)
  • Phoenix & Dragon LLC (Connecticut, Massachusetts, New Hampshire, Rhode Island)
  • Phoenix Pacific LLC (Washington)
  • Prime Capital, LLC (California)
  • RW EB-5 Regional Center, LLC (Nevada)
  • Real Estate Development Center of America LLC (Florida, Georgia, South Carolina, Tennessee): redcoaregionalcenter.com
  • Redwood Regional Center, LLC (Oregon, Washington)
  • Roundhay Partners Regional Center, LLC (California)
  • Serendipity Regional Center, LLC (California)
  • Smith Delta Regional Center, LLC (Alabama, Arkansas, Louisiana, Mississippi, Tennessee)
  • SoCal Global Regional Center, LLC (California)
  • South Florida Real Estate and Infrastructure Regional Center LLC (Florida)
  • SunCapital Texas Regional Center (Texas)
  • The Harbor Bank Community Development Capital RC (District of Columbia, Maryland, Pennsylvania, Virginia, West Virginia)
  • WRCI California Regional Center, Inc. (California, Nevada)
  • Zephyrus Regional Center LLC (Arizona, California, Nevada, Oregon, Washington)

Renamed:

  • EB5 Affiliate Network State of Texas Regional Center, LLC (Texas) into EB5 Affiliate Network States of Texas and Louisiana Regional Center, LLC (Louisiana, Texas

Finally restored to the approved list, after AAO sustained its termination appeal:

  • Path America Sonoco, LLC (Washington)

New Terminations:

  • Omega Puerto Rico Regional Center, LLC (Puerto Rico)
  • Southwest Kansas Regional Center (Kansas)
  • EB5 Memphis Regional Center, LLC (Tennessee)
  • New Orleans’ Mayor’s Office RC (Louisiana)
  • Diversified Global Investment, LLC (Georgia)

 

Updates (CR to 3/23, AAO sustained appeals, RC List)

EB-5 Legislation and Regulations
I’ve started a Washington Updates page off the Resources tab to keep track of what’s going on with legislation and regulations, and will revise it regularly as I hear about changes, in lieu of endless update posts. The page has details of regional center authorization (currently extended through March 23, 2018) and the immigration debate and new bills as they relate (or mostly do not relate) to EB-5.

AAO decisions: troubled RCs/projects

Do investor petitions fail when the project and/or regional center runs into trouble? Not necessarily, according to recent AAO decisions on EB-5 appeals.

  • In August 2015, the SEC filed a complaint against Path America companies including Path America Kingco LLC and Path America Snoco LLC. The case was settled in August 2017, with the former Path America principal receiving four years in prison. In the meantime, USCIS terminated Path America Kingco in March 2016, denied and revoked a bunch of Path America Kingco I-526 petitions starting in April 2016, and terminated Path America Snoco LLC in November 2016. Path America Kingco appealed its termination and was dismissed (JUN092017_01K2610), the PAK investors appealed their denials and were dismissed (e.g. DEC052016_01B7203, MAY112017_01B7203, JUL192017_01B7203), but Path America Snoco appealed its termination and was sustained (DEC212017_01K1610). PAK and PAS were terminated for malfeasance by the same former principal, but in the PAK case “he diverted proportionally more of the investors’ funds and the comparatively new management has only recently begun the process of renewing the project after its time in receivership.” AAO decided that PAS deserved to keep its designation because “the near completion of the project as proposed and the existence of a new owner committed to promoting future economic growth in the aggregate warrant maintenance of the regional center.” PAK has the same new owner, and the PAK and PAS situations appear to differ in degree more than substance, but at least AAO shows that it can give positive factors some weight. The PAS decision states that “There may be cases where, to maintain program integrity, the nature or degree of bad acts cannot be ameliorated or counter-balanced by positive factors of job creation and economic growth. For the foregoing reasons, this is not such a case.” Path America Snoco has been restored to the USCIS list of approved regional centers.
  • The PhoenixMart project by Central Arizona Regional Center has seen considerable drama and lengthy project delays. In 2017, USCIS denied a bunch of I-526 in the project, finding that “the business plan was not credible because construction did not substantively commence until years after the initially-forecasted completion date.” However, AAO just posted several decisions in the 2018 folder (JAN172018_02B7203, JAN172018_05B7203, JAN172018_06B7203, JAN172018_07B7203) that withdraw those denials, remanding the matter for further proceedings. AAO was impressed by evidence that the project has recently made substantial progress, and “Therefore, we withdraw the Chiefs finding that the business plan was not credible with regard to the construction portion of the plan.” (Reflecting its new sensitivity to return provisions, however, AAO takes the opportunity to bring up an issue not included in the USCIS denial: “whether the granting of first right of refusal to EB-5 investors for the purchase of up to 1,500 shops in ___ constitutes an impermissible redemption agreement.”)
  • The Palm House Hotel project has been the subject of numerous lawsuits and went into receivership in 2015. In 2016, EB-5 investors sued sponsor South Atlantic Regional Center and associated entities, alleging that the project was, in reality, nothing more than a façade pursuant to which their funds were stolen and distributed among the conspirators. However, the project has made some progress under the receiver, and at least two investors appealed their I-526 denials to the AAO (JUN132017_01B7203, JAN172018_03B7203). AAO denied the motions, but in a way that leaves open the possibility that the outcome might have been different had the petitioners presented better documentation regarding availability of funds to complete the project.

LucidText in the news
Suzanne Lazicki is featured in the latest EB5 Investors Magazine as one of the Top 5 Business Plan Writers of 2017, and in a podcast with Mona Shah discussing business plans and the current EB-5 landscape.

Regional Center List Changes
Additions to the USCIS Regional Center List, 12/05/2017 to 02/02/2018

  • Awesome American Regional Center LLC (California, Nevada)
  • Commuter Center Regional Center, LLC (Washington)
  • Florida Capital Group Regional Center (Florida)
  • Grand Commonwealth Regional Center, LLC (California)
  • Hawaii Investment Funds, LLC (Hawaii): www.hawaiieb5.com
  • Live in America – Louisiana Regional Center, LLC (Louisiana): www.liveinamerica.us
  • Midtown NYC Regional Center, LLC (Connecticut, New Jersey, New York)
  • Mugo Regional Center LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • North American Asset Management Regional Center, LLC (Washington)
  • Polaris Regional Center (Guam)
  • Stonehenge Regional Center, LLC (Texas)
  • TS Pacific Regional Center (California)
  • Texo Capital, LLC (Ohio, Pennsylvania): www.texoeb5.com

Additions to the Regional Center Terminations page, 12/05/2017 to 02/02/2018

  • Greater Houston Investment Center, LLC (Texas)
  • Lansing Economic Development Corporation (LEDC) Regional Center (Michigan)
  • Maryland Area Regional Center, LLC (Maryland)
  • Liberty South Regional Center (Arkansas, Mississippi)
  • Southeastern Higher Education Regional Center (South Carolina)
  • EB-5 Fund CA, Inc. (California)
  • EB-5 Regional Center Florida, LLC (Florida)
  • America Development Investment Center Regional Center (Alabama, Georgia)
  • Florida East Coast Regional Center, LLC (Florida)
  • Lakewood Regional Center a/k/a American Life, Inc. – Lakewood Regional Center (Washington)
  • American Logistics [International] Regional Center (California)
  • South East Los Angeles RC (SELARC) California (California)
  • Southwest Florida Regional Center, LLC (Florida) (terminated 5/25/2017 but not listed until 1/30/2018)

Previously listed as terminated, but now restored to the list of approved regional centers:

  • ON Regional Center, LLC (California)

RC Reauthorization to 1/19/2018, visa numbers, legal actions, RC list changes

Countdown to Regional Center Program Reauthorization

  • 12/22: President Trump has signed the continuing resolution H.R. 1370, which means that the regional center program is now extended together with other authorities to January 19, 2018. (See Congress.gov for the text of the enrolled bill H.R.1370, now Public Law No 115-96.) I also notice that the White House website has been reorganized to highlight immigration as a key issue. The new White House immigration page emphasizes these priorities for the administration: constructing a border wall, ensuring the swift removal of unlawful entrants, ending chain migration, eliminating the Visa Lottery, and moving the country to a merit-based entry system.
  • 12/21: The House and Senate have passed a Continuing Resolution that replaces the expiration date in previous legislation with “January 19, 2018,” and doesn’t include any language that would exclude regional center program authorization. See the House Appropriations Committee news release for the text of House Amendment to the Senate Amendment to H.R. 1370.
  • 12/20: The content of a Continuing Resolution through 1/19 is still under negotiation.
  • 12/18: Nothing settled yet on the next stopgap funding measure, which will have to fight with tax reform for attention this week. The Senate Appropriations Committee may come up with its own proposal to compete with the House proposal. Senator Cornyn indicates that the Senate bill would also be through January 19, but may include some different provisions.
  • 12/13: Yesterday the House Appropriations Committee introduced H.J.Res 124 – a Continuing Resolution that would temporarily extend federal funding and maintain current federal operations (currently authorized to December 22) until January 19, 2018. Basically, it’s a clean extension that just switches out expiration dates: “SEC. 101. The Continuing Appropriations Act, 2018 6 (division D of Public Law 115–56) is further amended—7 (1) by striking the date specified in section 8 106(3) and inserting ‘‘January 19, 2018.’’ The 250 pages of miscellaneous additional provisions (defense appropriations, CHIP extension, etc.) do not mention EB-5 or move to separate RC program authorization from continued government funding. This bill is just barely out of committee, not enacted yet, but I’ll add updates as I hear news ahead of the 12/22 deadline.
  • 12/8: IIUSA members will be happy to note that the association has decided to tell us its 2017 Policy Platform and comments on the draft legislative framework. Now to see if we’ll be asked for our opinion on the policy positions someone has formulated. Probably not, since the hard-won industry unity depends on a narrow base. UPDATE: IIUSA has sent an email to members with the invitation “Please contact advocacy@iiusa.org with any comments or questions” on the IIUSA policy framework.
  • 12/8: IIUSA did the right thing with a stern statement on Marketing Hypothetical EB-5 Reform Outcomes as Certainties. Prospective investors take note: do not rest your current EB-5 decision on the possibility of visa set-asides in hypothetical future legislation. We have no assurance that a set-aside proposal will ever be enacted, or to whom/what a set-aside proposal would apply, if enacted. Even if set-asides became available, the size of the visa backlog and volume of I-526 filings mean that they may disappear too quickly to have an appreciable incentive effect. Their main function appears to be now, in hypothetical form, as a phantom concession to help get what industry negotiators really want (low investment difference between TEA and non-TEA areas) and a phantom carrot to encourage new investors.

Visa Backlog Update

The backlog of EB-5 visa applications at the National Visa Center continues to grow, as one would expect with I-526 filing surges reaching the visa application stage. The Annual Report of Immigrant Visa Applicants in the Family-sponsored and Employment-based preferences Registered at the National Visa Center as of November 1, 2017 reveals that the EB-5 visa application backlog is 23% longer this year than last year, with 17% increase in pending applications from mainland China and a 106% increase in pending applications from other countries. I’ve added these numbers to my master backlog calculation spreadsheet, which has a projection tab to estimate how statistics translate into wait times.

Legal Actions

Additional reading for those interested in following litigation in the EB-5 space, and learning from the actions and statements that got other people in trouble.

Other Helpful Articles

McKee, Curylo, Parrington: Considerations for Independent Third Parties to Assist With EB-5 Investments (December 12, 2017)

Regional Center List Changes

Additions to the USCIS Regional Center List, 11/08/2017 to 12/05/2017:

  • American Dream Fund Seattle Regional Center, LLC (Washington): www.adreamfund.com
  • American EB5 Regional Center (Florida)
  • Cactus21 LLC (California)
  • Chicago Real Estate Development Regional Center, LLC (Illinois, Indiana, Wisconsin)
  • Great North Regional Center, LLC (Massachusetts, New Hampshire, New York, Vermont): www.peakresorts.com
  • Hawaii Regional Fortune Center LLC (Hawaii)
  • M5 Venture Southern California RC, LLC (California): www.m5venture.com
  • Manhattan Empire State Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • NCP Regional Center (California)
  • North Carolina EB5 Regional Center, LLC (North Carolina, South Carolina): eb5affiliatenetwork.com/regional-centers-access/eb5-regional-center-north-carolina
  • SRC NY, LLC (Connecticut, New Jersey, New York, Pennsylvania)

One regional center was removed from the approved list, but not added to the terminated list:

  • Bart Investment Group, LLC (Florida)

 

Q4 2017 EB-5 Petition Stats

The USCIS Immigration Forms Data Page has posted EB-5 petition processing data for the 4th quarter of FY2017 (July to September 2017).

The good news is that in FY2017, IPO finally – for the first time since FY2009 – adjudicated more EB-5 petitions than it received during the year. That’s what needs to happen for the backlog to shrink and processing times to fall.

In FY2017, I-526 receipts were down 14% and I-526 adjudications up 31% from the previous year. I-829 receipts were down 24% and adjudications up 42% from the previous year.

Although I-526 receipts fell slightly in FY2017, they were still unsustainably high – enough to claim nearly four years of visa numbers if the annual EB-5 visa cap stays at 10,000. As before, the quarterly receipt trend shows filing surges around regional center program sunset dates.

I-829 receipts fell every quarter in FY2017, which is troubling. The State Department has issued the maximum number of EB-5 visas annually since FY2014, so I would expect a steady stream of petitions to remove conditions. Instead, it seems that an increasing number of people who received conditional permanent residence are failing to complete the EB-5 process. I-829 denial rates remain very low, however.

The most dramatic processing improvement in FY2017 came for I-829 petitions, particularly in the fourth quarter. I-526 processing has improved year-over-year, but not consistently by quarter.

IPO has steadily increased their processing capacity since 2013, and I hope that the trend will continue into 2018. IPO has committed to reducing processing times in 2018, and continues to hire new staff. (Last month USAjobs.gov posted a job announcement recruiting for “many vacancies” as Adjudications Officer at IPO. Fortunately for the poor pending petitions, I decided not to apply.)

USCIS apparently continues to refine its record-keeping system. The Q4 data report not only provides Q4 numbers but some revised figures for previous quarters and years (with variation by several hundred from previously-reported figures). The pending petition count remains a mystery. (One would expect quarter-end pending petitions to equal previous quarter-end pending plus current quarter receipts minus current-quarter adjudications, but that’s not the case.)

11/7 and 11/10 IPO Updates (processing, bridge financing, more), Baruch College Conference, RC List Updates

IPO staff met with EB-5 stakeholders twice this week, at an official Stakeholder Engagement on November 7 and at an EB-5 Conference hosted by Baruch College on November 10.

I’ve uploaded voice recordings of both presentations (11/7 here and 11/10 here), and you can watch the Baruch College presentation on YouTube here (IPO speaks in Part 6). Official remarks from the 11/7 engagement are posted on the invitation page. Hot topics included petition processing, Form I-924A, redeployment, bridge financing, and material change. I summarize a few highlights below.

EB-5 Program Introduction
At the 11/10 conference, IPO Senior Advisor for Economics Jan Lyons provided a basic yet substantive introduction to the EB-5 program and how it works. Agents and potential investors, this is an excellent source of reliable information straight from USCIS. He speaks near the beginning of the Conference presentation Part 6.

Processing Information
On 11/7, IPO Deputy Chief Julia Harrison generously spoke at length about processing issues, including staff allocation and petition workflow. Here’s my best effort to summarize the content (with time references to the 11/7 recording FYI).

  • Petition adjudication at IPO is divided across several teams, including a team handling I-829 and customer service, a team handling direct EB-5 I-526, and a group of teams handling regional center I-526. I-924 is also a separate workflow. Each team is staffed by adjudicators and economists.
  • IPO is working to increase capacity by cross-training personnel. Previously, adjudicators and economists had specialist roles, with economists reviewing project-related documents for I-526 and economic issues at I-829, while adjudicators looked at source of funds at I-526 and sustainment at I-829. Now economists and adjudicators are each being trained to handle a single petition from start to finish. The I-829 team is now fully-cross trained, and performing well. One of the I-526 teams is already cross-trained, and the effort will continue until all officers can individually handle any part of I-526 petition review. Ms. Harrison anticipates that this new approach will increase capacity, promote flexibility, and help IPO more nearly reach the goal of processing petitions in first-come-first-serve order.
  • Ms. Harrison described the workflow for I-526 petitions. Previously, IPO would assign all I-526 for one project to a dedicated team for that project. IPO did not intend to prioritize adjudication for big projects, but Ms. Harrison acknowledged the difficulty of keeping petitions in first-in-first-out order when they were grouped in multiple workflows by project. Today, IPO is working with a two-stage process that separates adjudication of project-specific issues from investor specific issues. For regional center projects with multiple investors, IPO waits to receive two I-526 for the project (unless exemplar approval is in place). Those two I-526 are then assigned to a an economist or cross-trained team that reviews the project portion of the petitions. This process may involve issuing an RFC (request for clarification) email or RFE asking project-specific questions. When project issues have been adjudicated, the first two I-526s are released to the general queue for all regional center petitions. Petitions in that queue get assigned to adjudicators in more-or-less first-come-first-served order for investor-specific review. New petitions for a previously-reviewed project would go directly to the adjudication queue, and the project-related aspects of those petitions shouldn’t have to be reviewed anew. A petitioner who already responded to an RFC or RFE at the project-review stage may get another RFE at the investor-review stage, however. The petitions in the adjudication queue are in order by date but may not be finished in first-in-first-out order, due to case-specific issues. (How does the strategy to combine project-specific and investor-specific issues in officer training harmonize with the strategy to separate project-specific and investor-specific issues the adjudication workflow? That question did not come up.) Time references in the recording: 10:59 – 15:15, 17:46 – 22:32, 01:19:37 – 01:22:00
  • Ms. Harrison points to posted processing times as the best estimate for when petitions filed in 2015 will be adjudicated.  (26:22) She also noted that completion rate improvement in the past few months is not yet reflected in the Processing Times report.
  • Direct EB-5 petitions have a separate queue from regional center petitions. The leader on the regional center side communicates about progress with his counterpart on the direct EB-5 side to help ensure that petitions filed at the same time are moved forward concurrently. (01:21:00)
  • IPO lacks an automated system to match an I-924 exemplar request with previously-filed I-526 petitions for the same project. (When the matching happens, it’s by means such as office-wide emails asking “has anybody done a review of this project?”) Therefore, IPO requests that exemplar requests be filed with a cover letter that identifies receipt numbers for I-526 in the same project. In case an I-526 is approved before then I-924 is adjudicated, then the I-924 should also be approved, but ideally IPO wants to have the I-924 exemplar request and any concurrent I-526 adjudicated together by one person. This raises the question of whether the first approved I-526 couldn’t itself serve as exemplar approval, with no need for the I-924, but Ms. Harrison did not answer that question. It also makes us wonder how any Exemplar ever gets matched to associated I-526, even if they are filed subsequently. Ms. Harrison did indicate that IPO welcomes help in the matching process – a cover letter on the petition indexing it to related Exemplar, or even follow-up emails to the IPO customer service mailbox providing lists of associated applications/petitions for IPO’s reference. (9:23 – 10:58, 01:27:10 – 01:28:45)
  • Currently, I-526 petitions are adjudicated more or less in first-come-first-served order by filing date, regardless of nationality. However, IPO is considering the suggestion to prioritize adjudicating petitions of countries that are not backlogged. IPO invites stakeholder feedback on this idea. (32:05 – 33:30, 01:19:37 – 01:22:04, 01:29:12)
  • I-829 adjudications are making significant progress. Julia Harrison noted that the posted processing times don’t fully reflect the improvement yet, but she’s seeing much improved completion rates.

In the 11/10 presentation, IPO Senior Advisor for Economics Jan Lyons pointed out that IPO has finally cleared a huge hurdle – the surge of applications and petitions filed in advance of the December 2015 sunset date. That surge slowed down processing not only due to volume but to the poor quality of many petitions, apparently filed in a rush. I-526 and I-924 adjudications are proceeding more quickly and smoothly going forward. Mr. Lyons pointed out three factors that affect an individual’s processing time: place in the queue, the qualify of petitions before yours, and the quality of your petition.

Bridge Financing
This issue needs its own post, so I’ll just briefly mention the points at issue: whether bridge financing to be replaced by EB-5 must be “temporary” as in “a year or less” to qualify as a bridge and establish nexus, and whether EB-5 funds must pass through the job-creating enterprise account to repay the JCE’s bridge debt. IPO’s working answers are a tentative “yes” to the duration question and firm “yes” to the path question. Jan Lyons gave thoughtful discussion in the 11/7 call at time 01:01:28 – 01:10:11 and 01:40:01 – 01:42:11, and starting at time 12:55:24 of the 11/10 conference (I’ll let you listen for the details). And he welcomes feedback from the industry. That IPO hasn’t already received solid feedback demonstrates acute industry failure. In a healthy world, IIUSA would’ve shared bridge financing RFEs with membership months ago, and appropriate people would’ve gotten together to write and submit a constructive, well-footnoted article presenting reasonable guidelines for bridge financing in EB-5. As it is, I didn’t even hear about the RFEs ‘til very recently, and there hasn’t apparently been any industry collaboration except to whine about why the RFE creates problems (while putting the burden on IPO to solve a problem that our collective experience and industry sources are competent to address). For shame. (In case you weren’t informed either, see the RFE trends presentation at this link.)

Redeployment & Material Change
I lump these topics together because IPO’s answers to questions on both issues were the same: consult written policy. IPO did not clarify ambiguities in the redeployment policy, and did not fall into the trap of contradicting the clear material change policy. People who know better keep asking at meetings whether a petitioner can change projects or change regional centers before CPR — probably because they hope someday IPO might accidentally say the “yes” we’d like to hear. But investors beware: this is not a grey area. Policy and decisions are clear that material change before conditional permanent residence will derail a petition, and that project and regional center identity are material. Changing NCEs is not an option at any time. (I have a post detailing the material change policy and applications.)  The grey area comes at the I-829 stage. IPO said they’re working on policy specific to the question of how to treat regional center changes for an I-829 petitioner. (For sure the petitioner is protected from any changes that occur after I-829 filing, but the situation before that is less clear.)

I-924A
Most answers to I-924A questions likewise boiled down to “read the instructions,” but you can re-listen to the 11/7 recording for any nuances. In the 11/10 meeting, Julia Harrison made the welcome comment that “two to three years” is not a hard and fast requirement for the time during which a regional center must sponsor a project or face termination. “We do look at the totality of the evidence you submit,” and will consider evidence that the regional center is “making progress toward a project” or at least “has something on the horizon” (2:44:00)

Policy & Regulations
Julia Harrison reports having no information to indicate that the April 2018 target date for finalizing the EB-5 regulations will not be met, though this does not depend on IPO. Her team is “always working” on the Policy Manual, but doesn’t have specifics on future updates. Lori McKenzie is no longer the Policy Division Chief, and Ms. Harrison did not mention a replacement.

Baruch College Conference
The EB-5 Conference with USCIS IPO, Hosted by the Steven L. Newman Real Estate Institute – Baruch College (November 10, 2017) had a number of solid presentations besides the IPO panel. Here is the list of speakers, and video of the panels.

Regional Center List Changes
Additions to the USCIS Regional Center List, 10/2/2017 to 11/08/2017:

  • 1 America Regional Center (California)
  • AHRC PA, LLC (Pennsylvania)
  • ARE Regional Center (MA), LLC (Massachusetts)
  • American Ace Development Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • American East Coast Regional Center, LLC (Connecticut, New Jersey, New York)
  • American Fortune Regional Center, LLC (Texas)
  • American Real Estate Growth Regional Center, LLC (California): www.aregrc.com
  • City by City EB-5 Regional Center PR USA, LLC (Puerto Rico)
  • Fairhaven Capital Advisors American Samoa Regional Center Corp. (American Samoa)
  • Florida Opportunities Regional Center LLC (Florida)
  • Genesis Regional Center, LLC (California)
  • Golden Shores Regional Center (California)
  • Gulf Coast SW Regional Center, LLC (Florida)
  • Hawaiian Opportunities Regional Center, LLC (Hawaii)
  • LA Yucaipa Regional Center, LLC (California)
  • Liberty Investment Center LLC (Illinois, Wisconsin)
  • MZH Capital Partners, Inc. (New Jersey, New York, Pennsylvania)
  • Montana Real Estate EB-5 Regional Center, LLC (Montana)
  • New Sun EB-5 Regional Center, LLC (California)
  • Paradise City Funding Regional Center, LLC (Connecticut, New Jersey, New York)
  • Pocono EB-5 Regional Center LLC (New Jersey, Pennsylvania)
  • Related California Regional Center (California): www.relatedusa.com
  • Related Chicago Metro Regional Center (Illinois, Indiana, Wisconsin): www.relatedusa.com
  • Related Florida Regional Center (Florida): www.relatedusa.com
  • SRC LA, LLC (California)
  • South Carolina Global Regional Center (South Carolina)
  • United Land RC LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • Vegas Regional Center, LLC (California, Nevada)
  • Wealth Global Regional Center, LLC (Connecticut, New Jersey, New York)
  • A List Partners Regional Center, LLC (Texas): www.alistpartners.com
  • Inkstone States Regional Center LLC (Washington): www.inkstone-capital.com
  • Noblemen Regional Center (Washington)
  • Wasatch Front Regional Center, LLC (Utah)

This regional center was listed as terminated on 8/10/017, but restored to the approved list on 11/6/2017:

  • Civitas Rio Grande Regional Center (Texas)

New Terminations:

  • Charlotte Harbor Regional Center (Florida) Terminated 10/2/2017
  • California Development Regional Center (California) Terminated 10/23/2017

Visa Numbers Update (Vietnam, India), TEA Reform Proposal, RC Audit Change

Visa Numbers Update (Vietnam, India)

We heard some updated EB-5 numbers this week from Charles Oppenheim, the Chief of the Immigrant Visa Control and Reporting within the U.S. Department of State. Bernard Wolfsdorf gives highlights from the presentation in 5 Things I Learned from Charlie Oppenheim at the IIUSA 7th Annual EB-5 Industry Forum. The major news is Mr. Oppenheim’s prediction that Vietnam will have enough demand to be subject to a cut-off date in 2018, and India may need a cut-off date by 2020. Cut-off dates happen when a visa category is oversubscribed and a country demands more than its rightful 7% of available visas in that category. A cut-off date holds back applicants from oversubscribed countries long enough to let any other applicants from undersubscribed countries get first chance at available visa numbers.  China is so far over the limit that it’s in an indefinite cut-off date situation with slow forward movement. Vietnam and India are just barely approaching the limit, and don’t have that much competition from other countries, so their cut-off dates would likely be temporary and hardly perceptible unless demand explodes.

I most appreciated the slide from the Mr. Oppenheim’s IIUSA presentation that gives a breakdown of pending applicants at the National Visa Center by country of origin (for the top five countries) and priority date. I added data from the slide to my Excel file of EB-5 backlog-related info, and correlate it with per-country I-526 receipt data from USCIS. I’m copying below a couple tables that illustrate (1) how we might forecast future cut-off-date-countries from information on I-526 receipts and approvals, and (2) that life is not fair. (Note: see below for updated tables.)

Since the IPO Processing Times report indicates that USCIS has only gotten to processing I-526 filed in November 2015, one wouldn’t expect to see applicants with 2016 and 2017 priority dates already in the visa queue. But Department of State reports nearly 2,000 applicants from the top five countries with priority dates after 2015, which means that USCIS must have processed over 600 petitions out of date order. Of course the number of pending visa applicants with priority dates 2015-2017 is still very small compared with the number of I-526 receipts in those years, so a majority of petitioners are getting held up in slow I-526 processing. I am surprised at the number of applicants with early priority dates still pending at NVC, considering that the China cut-off date progressed to mid-2014 this year (per the Visa Bulletin) and the other countries don’t have a cut-off date.

12/11/2017 UPDATE: The Department of State has provided updated numbers for pending visas in its Annual Report of Immigrant Visa Applicants in the Family-sponsored and Employment-based preferences Registered at the National Visa Center as of November 1, 2017. Here are updated charts based on the new data.

TEA Reform Proposal

Industry discussion about potential legislation has focused on the House-Judiciary Chair EB-5 Reform Proposal, a one-page term sheet with notes for potential future legislation. The term sheet proposes replacing the current Targeted Employment Area (TEA) system with a R/UD system. R/UD stands for Rural or Urban Distressed – two areas that would be incentivized for EB-5 investment with a slightly lower investment amount and fees, reduced job creation requirement, and – most potent of all – set-aside visas.

A couple major questions to consider: which projects would qualify for incentives under the R/UD proposal, and who’d be the winners and losers, were the term sheet to become legislation and then law?

  • The term sheet briefly defines Urban Distressed criteria: “must meet 2 out of 3 of the New Market Tax Credit Criteria.” The NMTC program has several sets of criteria, but we’ll assume the staffers mean the NMTC criteria for “severe distress” (since that’s the criteria referenced in previous EB-5 draft legislation): Poverty rate greater than 30 percent; median family income not exceeding 60 percent of statewide median; unemployment rates at least 1.5 times the national average. The term sheet gives this cryptic description of Rural criteria: “Base law + census tracts that would qualify under base law except for the fact that they are located in the outlying counties of MSA’s with population densities of less than 400 psm + Hatch fix.” I believe that means: Rural is an area with a population under 20,000 that is outside a Metropolitan Statistical Area (or a low population/low density area within the outskirts of an MSA). With those definitions in mind, you can get a sense of whether a project location might qualify for R/UD incentives using the CDFI Fund Mapping page provided by the US Department of the Treasury. For urban projects, select the NMTC mapping tool. When you enter the project address, the NMTC tool will bring up a map of census tracts around that address, with relevant NMTC data for poverty rate, income, and unemployment for each census tract. Check these numbers against the NMTC Severe Distress threshold, recalling that the EB-5 proposal would require 2 of 3 criteria to qualify. For rural projects, choose the BEA tool on the CDFI Fund Mapping page. This will bring up a map that lets you search by address and discover whether the address is in a non-metropolitan area, and the local area population. (To be sure of R/UD qualification, you’d need some additional guidance: whether and to what extent it’s allowable to group and average data across more and less distressed urban census tracts, what it means to be “outlying” in the rural context, and what source and date of data would be accepted. The term sheet doesn’t specify this.)
  • To judge winners and losers, we look at proposed incentives for R/UD investment. The term sheet suggests that investments in R/UD areas would be incentivized in these ways: 1,500 annual set-aside visas each for R and UD (with any unused visas rolling over from year to year in the same category), $925,000 minimum investment, reduced job creation requirement (5 indirect), option for exemplar somewhat-premium processing (one year), and exemption from an extra visa fee. Investments outside R/UD areas would have a $1,025,000 minimum investment, compete for the 6,940 annual visas remaining after set-asides, and would be subject to a visa fee of $50,000. The R/UD definitions and visa set-asides would become available on the date of enactment, affecting everyone with a visa pending at that time. The term sheet specifies that people with pending petitions and applications wouldn’t need to increase their investment amount, but they would find themselves in a line suddenly made about 40% longer by set-asides that reduce the generally available visa pool. The term sheet offers this limited relief: “For 1 year after DOE, any unused set-aside visas may be used by investors who had filed petitions pending as of DOE that meet the new definitions of R/UD.” However, I guess that few pending petitions fall in that category. This means that the #1 loser in this proposal is the past investor still waiting on conditional permanent residence. Congressional staffers don’t cry over the past investor, because they’re annoyed by the filing surges that happened in recent years (while they failed to act) and have wanted retroactivity. Self-interested RC lobbyists may also have few tears for past investors, whose money is in the bank and whose presence in the backlog represents the major drag on recruitment of new investors. A small negotiating table could see a win-win in a proposal that could discourage past applicants into clearing out the backlog and smooth the way for new rural/urban distressed investment (effectively incentivized with set-asides) and new prosperous urban investment (still competitive thanks to minor investment amount difference). Industry players who care about past investors and clients exist, and I hope their concern will signify.

Audit and Inspection Change
The page on the USCIS website that formerly explained Regional Center Compliance “Audits” and Site “Inspections” now describes Regional Center Compliance “Review” and Site “Assessments.” It’s interesting that USCIS revised the titles to sound less threatening, though the promised content of the audit/review or inspection/assessment remains almost unchanged.  The one content change I notice on the page is an additional bullet point for Regional Center Compliance Review: “Assess the effectiveness of internal controls related to the regional center’s administration, oversight, and management functions.”

Washington Updates, Articles, SEC Actions, RC List Changes

Washington Updates
We’re entering FY2018 with another RC program sunset date coming up on December 8, 2017, and new EB-5 regulations waiting for final clearance by the Office of Management and Budget. In a September 28 podcast with Mona Shah, Peter Joseph of IIUSA reports that “Congressional leadership including Senator Cornyn, Majority Leader McConnell, and Speaker Ryan has spent time working with judiciary committee leadership in coming to an agreement. The fact that these parties continue to dedicate time to a legislative solution is a very good sign.” However, “We don’t know the details of what might come out of a Congressional agreement. Investment amounts and other key issues are part of a fluid conversation, and negotiation will continue until there is enough agreement to move to the next stage.” I’m glad to hear that conversations are on-going, with IIUSA taking an active part. I’m also inclined to agree with Mintz Levin’s conclusions in the thoughtful article Lawmakers May Not Spend Political Capital on Standalone EB-5 Bill (September 28, 2017). It’s hard to imagine that Congress will prioritize EB-5 legislation when issues like health care and tax reform are pending, and easy to imagine them deferring responsibility with another content-free short-term RC program extension, or waiting for regulations. If DHS finalizes new EB-5 regulations before Congress gets around to legislation, then Congress doesn’t have to touch donation-losing issues like investment amount increases and TEA reform. Congress must act eventually, because only Congress can authorize the RC program and deal with visa numbers, but we’ll see. Prior to the last couple sunsets I heard whispers that certain lobbyists had secured a gentleman’s agreement with staffers for new legislation that would protect the status quo. (Senator Grassley heard the whispers too, and was not pleased). I’m hearing similar reports this time around, together with protests from other people in communication with the same offices who say no, Congressional leadership is not on board with the status quo proposals (to minimize the investment differential, protect the natural advantage of big-city projects, and generally avoid painful disruption). I’m not sure what to expect. I look forward to listening in to EB-5 Legislation: Where Are We? a free webinar to be hosted on October 4 by Kurt Reuss of EB5 Diligence, with an all-star cast including Stephen Yale-Loehr, Robert Divine, Robert Cornish, Laura Reiff, H. Ronald Klasko, Carolyn Lee, and Douglas Hauer. (10/12 Update: Mona Shah reports on a possible new legislative compromise.)

Interesting Articles

  • NES Financial has published another white paper with EB-5 Trends & Insights based on data from the many regional center transactions they facilitate. NES comments on 2017 trends in EB-5 capital structure, investor markets, escrow terms, and size and location of EB-5 projects.
  • Bloomberg Businessweek recently featured EB-5 in How Rich Chinese Use Visa Fixers to Move to the U.S. (September 14, 2017). I appreciate the article for its clever graphic, and for its old-fashioned vision of Chinese flocking to the smooth path of EB-5, not sweating at home over backlog calculations and the question of whether an EB-5 green card is worth a decade wait on top of investment risk and political uncertainty and capital control complications. CNN Money seems closer to the current situation with its article America’s ‘golden visa’ is losing its luster in China (September 29, 2017). The changing role of Chinese investors in EB-5 will likely define our experience in 2018. Unless, of course, we get good news on legislation and visa numbers.
  • Those involved with EB-5 investors from Iran, and people of conscience generally, will want to keep an eye on the emerging situation with President Trump’s new Presidential Proclamation on Visas. The State Department summarizes the revised travel ban, and how it affects nationals of Chad (?), Iran, Libya, North Korea, Syria, Venezuela, Yemen, and Somalia. (10/24 update: the Supreme Court has dismissed a final attempt to block the ban.)

SEC Actions
The Securities and Exchange Commission continues to highlight the need for investor vigilance. This month brought two new complaints, against Ronald Van Den Heuvel and Green Box NA Detroit (filed September 19, 2017) and Edward and Jean Chen and Home Paradise Investment Center LLC (filed September 20, 2017). I’ve added select details to my log of all SEC actions in EB-5. If we believe the SEC’s version of events, these cases did not involve complex or sophisticated schemes, just daylight theft and open lies enabled by related-party transactions and weak diligence. USCIS wasn’t necessarily taken in (the briefly-posted list of I-526 and I-829 adjudications by RC showed 0 petition approvals for Home Paradise), but quite a few investors were. The market needs to be more careful. The good actors who account for a majority of EB-5 players need to go the extra mile with transparency and account controls to demonstrate their good faith. Meanwhile, we appreciate the SEC putting bad actors on notice that EB-5 is not a free lunch.

Regional Center List Changes
Additions to the USCIS Regional Center List, 8/28/2017 to 10/02/2017

  • American Real Estate Regional Center, LLC (Connecticut, New Jersey, New York)
  • American Stone Energy EB5, LLC (Texas)
  • Broadway Regional Center, LLC (California)

(Additionally Live in America – Carolinas Regional Center LLC, previously removed in error, has been restored to the list of approved regional centers)

New Terminations

  • California Blue Sky Regional Center, LLC (California) Terminated August 29, 2017
  • Arundel Capital Partners (Massachusetts) Terminated August 29, 2017
  • California Economic Development Fund, LLC (California) Terminated September 25, 2017
  • Global Medical Center of Southern California (California) Terminated September 25, 2017

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.

2018 Update: The SEC v. Kameli case continues, however. The SEC came back with an amended complaint filed on January 29, 2018.

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?

 

Articles & Resources (Ombudsman, Visa Numbers, Investor Protection, Redeployment, RC Audits), Washington Updates, RC List Changes

Helpful Articles and Resources

Washington Updates
What is happening with EB-5 in Washington? I wish I knew. Immigration policy generally looks like an orphan child.  The top three leadership posts at USCIS are all still filled by “acting” people (Lee Cissna was nominated but still not confirmed as Director), and now we’re missing a DHS Secretary as well, until Congress can find time to confirm a replacement for John Kelly. That can’t facilitate significant USCIS action like finalizing regulations or hiring. The White House website listed immigration as a top issue a few months ago, and gave an immigration policy statement, but not anymore. (8/2 Update: The White House is now talking about immigration with the RAISE Act.) I hear rumors that lobbyists are still actively talking to Congressional staffers about EB-5 legislation and regional center program reauthorization, but don’t know where that will lead. Congress has so many fish to fry. We wonder whether Congress can even figure out funding the government past September 30, and there’s talk of another short-term Continuing Resolution, which could mean another series of hop-and-skip extensions of the RC program, whose current authorization is tied to the 2017 funding bill. But it’s hard to predict. Insights or insider information, anyone? (8/3 Updates: Senator Cornyn, author of the draft EB-5 legislation released most recently, has announced Building America’s Trust Act, a new immigration bill that doesn’t appear to address EB-5. Representative Brian Fitzpatrick has introduced H.R.3471 with the promising title “To amend section 203(b)(5) of the Immigration and Nationality Act to implement new reforms, and to reauthorize the EB-5 Regional Center Program, in order to promote and reform foreign capital investment and job creation in communities in the United States, and for other purposes.” I’ll report more fully when the bill text becomes available.)

Regional Center List Changes

Additions to the USCIS Regional Center List, 07/17/2017 to 8/1/2017

New Terminations:

  • Anacostia Regional Center (District of Columbia) Terminated 7/18/2017
  • AAA Florida Senior Living Regional Center, LLC (Florida) Terminated 7/12/2017
  • Allied Artist High Desert EB5 Regional Center (New Mexico) Terminated 7/12/2017
  • Rosti Capital Regional Center (California) Terminated 7/17/2017

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.

Listening Session (EB-5 regs), EB-5 as securities (Hui Feng), RC Audits, RC List Changes

EB-5 Immigrant Investor Program Engagement July 13

At the EB-5 listening session on July 13, the USCIS participants stuck to their resolve to listen only, and did not provide input or feedback. The call solicited stakeholder comments on the questions raised by the Advance Notice of Proposed Rule-Making, which addressed regional center designation and participation and exemplar project approval. The ANPRM inspired few written comments to its preliminary questions, and this call also got tepid response. What did USCIS want to know from us, beyond what those of us who care said already in our written comments? USCIS would not specify, and we weren’t sure what to say. The Wolfsdorf Rosenthal blog has diligently summarized stakeholder comments, and my recording is available for anyone who’s really interested. I hope USCIS learned something from the call, but I did not. People with more to say on the designated topics of RC life-cycle (designation, participation, termination), RC exemplar process, RC compliance audits, or indirect job creation methodologies may email ipostakaeholderengagement@uscis.dhs.gov.

USCIS let slip one bit of info. Lori MacKenzie said that “the agency is working to finalize that rule” — referring to the regulation that people care about, the NPRM dealing with investment amounts and TEAs. No indication of timeline, however, or whether the listening session call reflects intention to combine NPRM and ANPRM topics in one new rule. (On July 3, Senators Dean Heller, John Cornyn, Rand Paul, and Thom Tillis had sent DHS a letter asking that the agency not move forward with the proposed EB-5 regulations. The listening session indicates that DHS is indeed moving forward, however slowly.)

Here is my favorite listening session caller comment, from a Mr. Fuentes in minute 45: “We have a bottleneck of processing in an environment where resources are not the limit.” Yes – that’s exactly what’s wrong and fixable in EB-5. So many problems for EB-5 projects and investors result from the fact of long processing times, and long processing times are traceable to constraints that need not exist in a program of multi-million-dollar projects and high-net-worth immigrants. I’ll write more on this soon.

The call also reminded me that we need to talk more about direct EB-5, and the kinds of business and investment that are and are not workable in that environment. Purchasing an operational existing business rarely works for direct EB-5. The history of AAO denial decisions is thick with business acquisition cases that foundered on the “new commercial enterprise” requirement and/or the requirement to create new jobs. EB-5 rules specify that mere ownership change does not make an enterprise or jobs in that enterprise new. I have a couple related posts (one on the difference between direct and regional center EB-5, and one on options for investing in an existing business), but see the need for a simpler article addressed to entrepreneurs contemplating direct EB-5.

EB-5 and Securities Law

Immigration lawyers happen to be well-placed to match EB-5 investors to EB-5 projects, and are pressured by the market and tempted with commissions to play a match-making role. This role is perilous, however, considering securities laws. In 2015 and 2016, the SEC made examples of several immigration lawyers who had received transaction-based compensation for facilitating investments, and of one of the regional centers that paid such compensation. The message: it’s illegal to be on the giving or receiving end of payments to someone acting as a broker without appropriate license.

One of the law firms targeted by the SEC fought back. Hui Feng (subject of a complaint published in December 2015 by the SEC against himself and his firm Law Offices of Feng & Associates, P.C.) argued that the SEC’s claims fail because EB-5 investments are not securities and the immigration lawyer does not act as a “broker” when receiving finder fees. He pointed out that EB-5 investments are primarily motivated by the visa, without expectation of profit, that his commissions were contingent on visa approval rather than in connection with securities sale, and that the attorney role has its own fiduciary duties and that broker requirements are inapplicable – i.e. the EB-5 process and investment and lawyer’s role are fundamentally immigration matters, not securities matters and not the SEC’s business. (My layman’s paraphrase; see the court filings for the actual legal arguments.) The US District Court, Central District of California, however, has come down on the SEC’s side in its Motions for Summary Judgment (June 29, 2017). The decision has the longest discussion I’ve seen yet in support of the point that yes, EB-5 investments are securities. It also enumerates the activities supporting the conclusion that yes, this immigration lawyer acted as a broker, and explains why the fee arrangement details were material and should have been disclosed to investors and regional centers. If you pay or receive EB-5 finders fees, pay attention to this decision. You may also want to review IIUSA’s Best Practices for Engaging with Sales Intermediaries.

Regional Center Compliance Audits
The Regional Center Business Journal has a helpful article by Mariza McKee, Kimberly Hare, and Clete Samson “USCIS Compliance Audits – Preparing Regional Centers for the First Wave”

RC List Changes
USCIS continues to cull the list of approved regional centers, with 50 terminations so far this year. 2017 termination letters haven’t been published yet, but I’ll guess that most of these terminations are for lack of recent activity.

Additions to the USCIS Regional Center List, 6/26/2017 to 7/17/2017:

  • No new regional centers.

New Terminations:

  • North Country EB-5 Regional Center, LLC (New York) Terminated 7/7/2017
  • Guam Strategic Development LLC RC (Guam) Terminated 7/7/2017
  • Good Life EB5 Georgia Regional Center, LLC (Georgia) Terminated 6/30/2017
  • Tri-Cities Investment District, LLC (California) Terminated 6/30/2017
  • Prosperity Regional Center (former name U.S. Prosperity Regional Center) (Florida) Terminated 6/23/2017