EB-5 Updates

AILA/IIUSA Forum Updates (Kendall, Oppenheim, visa availability)

November 5, 2018 39 Comments

Last week I attended the 2018 AILA & IIUSA EB-5 Industry Forum, which featured appearances by new IPO Chief Sarah Kendall and Department of State Visa Control Office Chief Charles Oppenheim.

Ms. Kendall is a career civil servant and spoke accordingly. She gave the impression of being competent, in control, and unlikely to say anything unexpected. I didn’t note anything major in her speech that I hadn’t already heard from the USCIS Policy Manual, OMB Unified Agenda, or previous stakeholder meetings. (UPDATE: Here is a copy of Ms. Kendall’s prepared remarks.) The headlines: no update on regulations beyond what OMB said, and no significant new input on the hot issues of redeployment, bridge financing, material change, or minors as investors. Stakeholder meetings are not the proper venue for policy announcements, so I suppose there’s really not much to do but repeat existing guidance and say “thank you, we’ll consider it,” for everything else. One would expect Ms. Kendall to have a law enforcement orientation, considering her background. And indeed she stated that “focus must be on program integrity,” and listed these objectives for IPO: improve transparency, protect national security, lawful administration of our nation’s laws. I appreciate that she started with transparency, which is foundational to the other two objectives. And it was gracious of Ms. Kendall (and former Interim Chief Julia Harrison) to attend the AILA/IIUSA event and take time to chat with attendees.

In the past I’ve sometimes felt like a lone crusader with my spreadsheets and numbers reports. I attended the AILA/IIUSA forum in person partly because I suspected that Charles Oppenheim would give information about visa numbers and wait times that my clients need to know, and no one else would process it or publicly report on it. But I was wrong. A wonderful panel on visa numbers not only provided a very extensive data set but analyzed and drew actionable conclusions from it, and then IIUSA made the right choice to promptly publish the full presentation where anyone can access it. And now other people are already reporting on it, without pausing to worry about messaging. Integrity depends on transparency – an important lesson for everyone.

Here is the gold mine: Presentation Materials from Department of State Visa Control Office Chief Charles Oppenheim (UPDTATE: IIUSA has also published commentary on the presentation.)

The slides provide the most comprehensive and current set of visa-availability-related data yet, with helpful interpretation and conclusions. Bottom line: how long should an investor filing I-526 on October 30, 2018 expect to wait for an EB-5 visa number? Mr. Oppenheim made the following prediction: China, 14 years; Vietnam, 7.2 years; India, 5.7 years; South Korea, 2.2 years; China-Taiwan, 1.7 years; Brazil, 1.5 years. Here’s the famous slide:

These time predictions refer to the time between I-526 filing and visa availability for people filing I-526 on October 30, 2018. People who filed I-526 before October 30, 2018 have fewer people ahead of them in line, and thus can expect correspondingly shorter wait times. People who file later can probably expect longer waits (unless trends or rules change, as they could). The predicted visa wait times for South Korea, Taiwan, and Brazil are now short enough as to be likely imperceptible (i.e. even shorter than I-526 processing time). Mr. Oppenheim foresees that South Korea, Taiwan, and Brazil will remain current (no cut-off date) through 2019 and probably 2020. The predicted wait time for an India-born investor filing today has lengthened since the last prediction from April, but not as much as I’d feared. Mr. Oppenheim now predicts that the Visa Bulletin will have a Final Action Date for India “no later than July 2019.” In other words, the annual EB-5 visa allocation available to India in FY2019 is expected to run out in July. In October 2019, when new FY2020 visas become available, India will have a Final Action Date in 2017, meaning that India-born applicants with priority dates before the 2017 Final Action Date will then be able to apply for visas. As for China, Mr. Oppenheim predicts that by October 2018, the Final Action Data for China-born applicants will progress to 10/22/2014 (best case) or 10/8/2014 (worst case), and that China will advance (at best) two months in 2019. Mr. Oppenheim expects to be able to move Vietnam’s Final Action Date as far as September 2016 this year, before the FY2019 visas available to Vietnam run out.

For the full background to these predictions, and very helpful commentary on how the visa process and allocation work, potential variability, and what we do and do not know, see the full slide presentation and my voice recording of the panel. (And if you want all the backlog-related data I know, though all you really need is Charlie’s predictions, see my backlog spreadsheet.)

A shout-out to other colleagues reporting on the conference:

EB-5 Update – New State Department Data Released, by Bernard Wolfsdorf, Robert Blanco, Joseph Barnett, and Vivian Zhu
Department of Sate Gives EB-5 Backlog Projections and Anticipates Cutoff Dates, by Matthew Galati
7 Things We Learned from New EB-5 Program Chief Sarah M. Kendall, by Joseph Barnett

Wolfsdorf Rosenthal is holding a free webinar on 11/8 to discuss the DOS data and implications.

See also the conference program/RCBJ Business Journal available online. I particularly recommend these articles:

Analyzing the Recent Trend of EB-5 Expedited Processing, by Joseph Barnett, Partner, Wolfsdorf Rosenthal LLP
Summary and Analysis of Litigation to Expand EB-5 Visa Capacity, by Carolyn Lee, Partner, Miller Mayer

Regarding legislation and potential developments in Washington, I did not hear anything particularly newsworthy. Industry lobbyists say that they see hope for the future because they are finally united for the first time. This talking point would be more encouraging if we hadn’t heard the same statement last year, before the last attempt at EB-5 legislation that excluded most of the industry until the 11th hour and then met with industry discord. The panel last week did not specify compromises or concessions that have been made since then, and did not reflect specifically on what went wrong. The panel foresaw possibility for renewed legislative efforts in 2019, initiated in the House. EB-5 has best chance of getting attention after border wall funding and DACA are no longer taking all available oxygen, and after more representatives have been educated on EB-5. The panel hinted that we might be looking at more continuing resolutions in December, particularly for DHS funding if Democrats do well in the midterms. The proposal to eliminate per-country caps (in the Yoder amendment to the House version of the DHS funding bill, and H.R.392) got little mention, and no one said they thought it likely to be enacted.

Filed under EB-5 Statistics

FY2018 Q3 EB-5 Form Processing Statistics

October 31, 2018 9 Comments

After months of famine we suddenly have a feast of EB-5 numbers: data for FY2018 EB-5 form completions through September 2018 from the USCIS/IIUSA meeting on October 5, data for pending I-526 as of October 2018 from an IPO mailbox response to my blog reader, per-country I-526 data through FY2017 on sale by IIUSA, data relevant to the EB-5 visa waiting line from a wonderful panel with Charles Oppenheim at the AILA/IIUSA conference, and now official figures from USCIS for EB-5 forms received, approved, denied, and pending in the third quarter of FY2018 (April to June 2018). I’ve already reported on the first two data sets, and will cover the Oppenheim presentation in a forthcoming post when I’ve had time to process the information. As time permits, I may also do a post that tries to make sense of how these various data sets intersect, and some apparent contradictions and mysterious gaps. But for now, here are my charts highlighting trends in the official FY2018 Q3 data. The numbers come from the USCIS Immigration and Citizenship Data page, with Form I-526 and I-829 data in the Employment Based subsection, and Form I-924 data in the Forms subsection in the “All Forms Report.”

A few notes:

Overall, IPO is receiving fewer forms and processing more forms than before. That should be a good sign for processing times at least, and will result in smaller backlogs. However, performance improvement is currently all focused on I-526. Q3 showed a record-breaking number of I-526 processed (22% improvement over the previous quarter) but drop in number of I-924 and I-829 processed.
Q3 I-526 receipts were lower than any quarter I’ve recorded since 2013, likely reflecting concerns about visa wait time.
In Q3, I-829 receipts exceeded I-526 receipts for possibly the first time ever.
I-829 completion rates look terrible, with an almost-linear 65% drop in completions over the last four quarters. What’s happening, I-829 team? Why are you getting fewer and fewer I-829 adjudicated? IPO should put more resources on I-829 adjudication, considering the receipt trend across all forms.
A surprising 51% of Form I-924 adjudicated in Q3 were denied. The denial rate for I-829 was higher than usual, at 13%. The I-526 denial rate remained at 9%.
USCIS is not infallible when it comes to inconsistencies, and the Q3 reports contain significant revisions to the Q2 and Q1 numbers previously reported. In the I-829 reports, for example, the May report indicated 1,046 receipts in Q1, the July report indicated 694 receipts in Q1, and now the October report indicates 862 receipts in Q1. You make us doubt that you know what happened in with I-829 in Q1, USCIS! This should make USCIS recognize and sympathize with the difficulty of reporting consistent numbers, even with the best of intentions. FYI, here is my file on the ongoing mystery of the pending petition count.

Filed under EB-5 Statistics

PM Update (redemption agreements, debt arrangements)

October 31, 2018 7 Comments

USCIS has updated the USCIS Policy Manual immigrant investor section with a new subsection titled “Redemption Language” that clarifies policy on debt arrangements. This new language follows up on a flurry of denials in 2017/2018 based on suspected debt arrangements, and subsequent successful litigation. I await analysis from experts, but the new Policy Manual language comes close to granting “okay, we were wrong and you were right.” Regarding redemption provisions only exercisable by the new commercial enterprise, the PM now states that “USCIS generally does not consider these arrangements to be impermissible debt arrangements,” and footnotes the Kurzban’s recent Chang v. USCIS case over call options. However, the PM language also adds several qualifications. We’ll see whether the lawyers now agree that the clarified policy is fully justified under the regulations and Matter of Izummi. (UPDATE: In her analysis of the New USICS EB-5 Redemption Policy Update, Carolyn Lee points out problematic language that could be interpreted to prohibit even denial-based repayments. She also notes that the PM update reinforces the flawed marriage analogy from Matter of Izummi.)

I’ve copied below the policy alert and the new policy language. As usual, I also made a new file for the current 6 USCIS PM G (saved in this folder), and performed document comparison with the previous version (dated August 24, 2018) to confirm that nothing changed besides the one new subsection under 6 USCIS PM G(2)A(2).

From: U.S. Citizenship and Immigration Services <uscis@public.govdelivery.com>
Sent: October 30, 2018 11:02 AM
Subject: USCIS Policy Manual Update

USCIS is revising guidance in the USCIS Policy Manual to clarify its policy on debt arrangements in Volume 6: Immigrants, Part G, Investors. Please see the Policy Alert for more detailed information:

Policy Alert: Immigrant Investors and Debt Arrangements (Final date for comments: Nov. 12, 2018)

Visit the Policy Manual for Comment page for more information on stakeholder review and comment.

***

New language added to USCIS Policy Manual Volume 6 Part G Chapter 2 Section A(2)

Redemption Language

The regulatory definition of “invest” excludes capital contributions that are “in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement.” [Footnote: The full definition of invest is provided at 8 CFR 204.6(e).]

An agreement evidencing a preconceived intent to exit the investment as soon as possible after removing conditions on permanent residence may constitute an impermissible debt arrangement. [Footnote: See Matter of Izummi, 22 I&N Dec. 169, 183-188 (Assoc. Comm. 1998).] Funds contributed in exchange for a debt arrangement do not constitute a qualifying contribution of capital. [Footnote: EB-5 regulations contain two basic requirements in order to have a legitimate qualifying investment: (1) 8 CFR 204.6(e) defines “invest” to require a qualifying (that is, non-prohibited) contribution of capital; and (2) 8 CFR 204.6(j)(2) requires a qualifying use of such capital (placing such capital at risk for the purpose of generating a return). In order to satisfy the evidentiary requirement set forth at 8 CFR 204.6(j)(2), an investor must first properly contribute capital in accordance with the definition of invest at 8 CFR 204.6(e). If the contribution of capital fails to meet the definition of invest, it is not a qualifying investment, even if it is at risk for the purpose of generating a return.] In general, the petitioner may not enter into the agreement knowing that he or she has a willing buyer at a certain time and for a certain price. [Footnote: See Matter of Izummi, 22 I&N Dec. 169, 186-187 (Assoc. Comm. 1998).]

Any agreement between the immigrant investor and the new commercial enterprise that provides the investor with a contractual right to repayment is an impermissible debt arrangement. In such a case, the investment funds do not constitute a qualifying contribution of capital.[Footnote: See Matter of Izummi, 22 I&N Dec. 169, 188 (Assoc. Comm. 1998). Matter of Izummi addressed redemption agreements in general, and not only those where the investor holds the right to repayment. USCIS generally disfavors redemption provisions that indicate a preconceived intent to exit the investment as soon as possible, and notes that one district court has drawn the line at whether the investor holds the right to repayment. See Chang v. USCIS, 289 F.Supp.3d 177 (D.D.C. Feb. 7, 2018).] Mandatory redemptions and options exercisable by the investor are two examples of agreements where the investor has a right to repayment. The impermissibility of such an arrangement cannot be remedied with the addition of other requirements or contingencies, such as conditioning the repurchase of the securities on the availability of funds; the delay of the repurchase until a date in the future (including after the adjudication of the Petition by Entrepreneur to Remove Conditions on Permanent Resident Status (Form I-829)); or the possibility that the investor might not exercise the right. In other words, repayment does not need to be guaranteed in order to be impermissible. It is the establishment of the investor’s right to demand a repurchase, regardless of the new commercial enterprise’s ability to fulfill the repurchase, that constitutes an impermissible debt arrangement. [Footnote See Matter of Izummi, 22 I&N Dec. 169 (185-86) (Assoc. Comm. 1998).]

The following table describes certain characteristics that might be present in agreements and explains whether their inclusion creates an impermissible debt arrangement.

Characteristics of Redemption Provisions

Type of Provision Description Impermissible Agreement?

Mandatory redemptions Arrangements that require the new commercial enterprise to redeem all or a portion of the petitioner’s equity at a specified time or upon the occurrence of a specified event (for example, once the conditions are removed on the petitioner’s permanent resident status) and for a specified price (whether fixed or subject to a specified formula). USCIS considers this an impermissible debt arrangement. Such impermissible obligations are not subject to the discretion of the new commercial enterprise (although it may have some discretion regarding the timing and manner in which the redemption is performed).

Options exercisable by the investor Arrangements that grant the petitioner the option to require the new commercial enterprise to redeem all or a portion of his or her equity at a specified time or upon the occurrence of a specified event (for example, once the conditions are removed on the petitioner’s permanent resident status) and for a specified price (whether fixed or subject to a specified formula). USCIS considers this an impermissible debt arrangement.

Option exercisable by the new commercial enterprise A redemption agreement between the immigrant investor and the new commercial enterprise that does not provide the investor with a right to repayment.

One example of such an agreement is a discretionary option held by the new commercial enterprise to repurchase investor shares. These options are typically structured similarly to options exercisable by the investor, except that the option is held and may be exercised by the new commercial enterprise. When executed, these options require an investor to sell all or a portion of his or her ownership interest back to that entity.
USCIS generally does not consider these arrangements to be impermissible debt arrangements. [Footnote: See Matter of Izummi, 22 I&N Dec. 169, 188 (Assoc. Comm. 1998). See Chang v. USCIS, 289 F.Supp.3d 177 (D.D.C. Feb. 7, 2018).]

However, such an option may be impermissible if there is evidence the parties construct it in a manner that effectively converts it to a mandatory redemption or an option exercisable by the investor (considered a debt arrangement). For example, an arrangement would be impermissible if ancillary provisions or agreements obligate the new commercial enterprise to either (a) exercise the option (at a specified time, upon the occurrence of a specified event, or at the request of the investor) or (b) if it chooses not to exercise the option, liquidate the assets and refund the investor a specific amount.

Filed under EB-5 Law & Policy

Pending I-526 by country as of 10/2018

October 25, 2018 41 Comments

There’s an EB-5 Support page on the USCIS website that provides an email address for IPO, and instructions for how and when to communicate through the IPO mailbox. I’ve dismissed this contact option, having only heard and experienced reports that emailing the IPO mailbox yields nothing but a canned response and no action. But what do you know, sometimes it works. On October 25, 2018, IPO responded to an email from one of my readers with this extremely valuable information: “Shortly after replying to your email, Immigrant Investor Program Office management asked the webmaster to post online a table containing I-526 data. Here’s the link: https://www.uscis.gov/sites/default/files/USCIS/Working%20in%20the%20US/i526list.pdf” The link leads to a table that breaks down all I-526 pending at IPO as of October 2018 by investor country of origin and priority date. (UPDATE: USCIS removed the file in July 2019. Here is the copy I saved.) Thank you IPO management for this transparency! Program integrity depends on informed decisions, which in turn depend on information. We understand that these figures are probably subject to change since they’re so recent, and haven’t gone through the months-long review process that normally precedes public data posting. That’s just fine — our decisions need data timeliness far more than minute precision. And thank you reader for making the request and for bringing the answer to public attention. Otherwise this data treasure might have rested unnoticed on the USCIS website, or been hoarded by a few.

The charts and tables below highlight features of the data that I consider particularly interesting. The pending I-526 numbers by country help explain why Department of State predicts backlogs and visa wait times for certain countries. The pending I-526 numbers by receipt date illustrate how long currently-pending petitions have been waiting for adjudication. And the figure for total pending petitions, combined with data from other sources, suggests that I-526 receipts may have plummeted in FY2018. That’s bad news for the US economy, job creation, and destitute business plan writers like me whose revenue depends on new EB-5 demand. But it’s good news for EB-5 program sustainability. So long as the EB-5 visa cap remains at about ten thousand for investors plus family, the program can unfortunately only sustainably accommodate three to four thousand investor I-526 per year on average.

calc

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

Filed under EB-5 Statistics

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

October 24, 2018 14 Comments

Report on USCIS Meeting with IIUSA

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

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

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

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

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

Litigation in EB-5

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

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

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

Topics covered by this paper include:

The pending litigation in the CMB Century Park Hotel case, with a detailed analysis of the Investment Company Act of 1940 aspects of the case, as well as discussing the relevance to this case of the recent SEC Order against CMB even though the Order relates to unrelated projects

The 2018 SEC enforcement action, the DOJ prosecution and the pending bankruptcy auction of the Palm House Hotel where an affiliate of the Related Companies is apparently the stalking horse bidder

The immediate impact of the 2017 U.S. Supreme Court decision in SEC v. Kokesh based on recent SEC testimony before Congress

The SEC settlement with Ariel Quiros, the mastermind of the Jay Peak fraud; a comparison of the distribution of proceeds with the distribution under the Raymond James Financial settlement; and possible SEC Whistleblower awards

The pending litigation against USIF alleging a secret restructure of the EB-5 investors’ capital, in its atypical role as an in-house regional center

DOJ criminal prosecutions in 2018, as well as expected future prosecutions

Unregistered broker-dealer actions, including the recent enforcement action against an immigration attorney wearing multiple hats, and a 2018 US Supreme Court decision prompting a rehearing of aspects of the Hui Feng decision

The pending litigation against People’s United Bank for its role in Jay Peak and its potential impact upon other banks’ willingness to establish and maintain EB-5 subscription escrows

Updates to our SEC EB-5 Securities Enforcement Action Database

Our dim outlook on the likelihood of enactment of EB-5 integrity reform measures, although a recent announcement by OMB, DHS and USCIS provides a glimmer of hope

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

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

Filed under EB-5 in the News, EB-5 Statistics, Updates from USCIS

EB-5 Engagement 11/19

October 19, 2018 4 Comments

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

Dear Stakeholder,

U.S. Citizenship and Immigration Services (USCIS) invites you to participate in a public teleconference on Monday, Nov. 19, from 1 to 2 p.m. (Eastern) to discuss the Immigrant Investor Program, also known as the EB-5 program. This engagement is part of our ongoing efforts to enhance dialogue with the public on the EB-5 program.

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

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

Visit our registration page to confirm your participation

Enter your email address and select “Submit”

Select “Subscriber Preferences”

Select the “Event Registration” tab

Be sure to provide your full name and organization

Complete the questions and select “Submit”

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

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

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

Submit questions in advance; or

Request a disability accommodation to participate.

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

We look forward to engaging with you!

EB-5 National Stakeholder Engagement on 11.19.18 IPO PED PL OCC OPS FOD…_.docx

Filed under Updates from USCIS

Regulations update (Fall 2018)

October 17, 2018 42 Comments

The Fall 2018 OMB Unified Agenda has been published with updated timetables for two EB-5 regulations in progress, and notice of a third EB-5 regulation to come.

RIN1615-AC07 EB-5 Immigrant Investor Program Modernization, with proposed changes to TEAs and the minimum investment amount:
- Timetable for Final Rule updated to November 2018 (The Spring 2018 agenda had anticipated August 2018)
RIN 1615-AC11 Regional Center Program Regulation, with proposed changes to regional center designation requirements and process:
- Timetable for Notice of Proposed Rulemaking is still March 2019 (same as in the Spring 2018 agenda)
RIN 1615-AC26 EB-5 Immigrant Investor Program Realignment, which “will solicit public input on proposals that would increase monitoring and oversight, encourage investment in rural areas, redefine components of the job creation requirement, and define conditions for regional center designations and operations”
- Timetable for Advance Notice of Proposed Rulemaking announced for September 2019

We’re most concerned about RIN 1615-AC07, since that’s the one at the Final Rule stage. If it does actually become a Final Rule next month, then it could potentially take effect before the end of the year. (I understand that the effective date for a Final Rule is usually at least 30 days after its finalized.) We won’t know the content of the Final Rule until it’s published, but here, as a reminder, is a summary of what the draft rule NPRM proposed:

Increase the standard minimum EB-5 investment amount to $1,800,000, or $1,350,000 in a TEA.
A TEA is based on high unemployment and incentivized with 25% reduction to the investment amount (not other factors or incentives as proposed by Congress).
A TEA can only be designated for a high-unemployment MSA, county, city, single census tract, or limited group of census tracts. DHS, not the states, is responsible for TEA designation.
Give priority date protection (an investor with an approved I-526 could choose to file a new I-526 while keeping the original priority date, subject to certain restrictions)
Spouse and children may be able to file I-829 even if not included on the principal investor’s petition.
Other technical changes.

When DHS opened the draft for comment in 2017, the industry told DHS how disastrous some of the proposals could be as written. We’ll see whether DHS listened and revised the draft. (My May 2017 post New EB-5 Regulations: Comments Discussion reviews the industry response.)

It remains to be seen whether the Fall 2018 Unified Agenda action dates will be more reliable than previous deadlines. I believe that RIN 1615-AC07 is still at at Step 7 in the Rulemaking Process, since I haven’t yet seen it listed by the OMB as a Regulatory Action Currently Under Review for Department of Homeland Security. But we may really see action this time, after DHS missed the previously-predicted deadlines of February 2018 and August 2018. USCIS Director L. Francis Cissna testified at the June 2018 Senate Judiciary Committee hearing on EB-5 regarding the regulations that “USCIS is currently reviewing the comments and moving forward in the regulatory process with both of these items as expeditiously as possible.” (UPDATE: Mr. Cissna told IIUSA on October 5, 2018 that “the proposed rule that has yet to go final, it is going to go final. We’re just not ready yet. We’re still working on it” and “The reg., it might take a while yet before it gets finally published.”)

As for the third new regulation, with an Advance Notice foreseen for a year from now, I don’t know whether to laugh or cry. The vague and sweeping precis and long lead time makes me suspect that DHS itself does not know yet what will go into this regulation. To the extent that its promised content overlaps with the content of the two regulations already on the table, it seems to question and undermine those regs. (AC07 already proposes to modify TEAs and AC11 is already about conditions for regional center designation. Why would AC26 propose to cover the same areas, unless judging those other regs faulty? We agree that those regs are faulty, at least in draft form, but then why are they still going forward, with vague promise of future correction? Is this about conflict among current/former policy staff at IPO and Office of Policy and Strategy?) AC26 apparently takes for granted that Congress will never act on EB-5, as it covers policy changes previously expected Congress. It also takes for granted that EB-5 will be a robust market to oversee into 2019 and beyond.

Filed under EB-5 Law & Policy

FY17 per-country I-526 data, SEC action (registration)

October 9, 2018 37 Comments

Per-Country I-526 Data
IIUSA has received another year of per-country data for I-526 filings through the Freedom of Information Act process, and prepared a report for IIUSA members. Being ambivalent about freedom of information, IIUSA has decided to share this much with the public.
The full FOIA data set for I-526 filings, approvals, and denials FY2016-FY2017 is being sold for $1,500 (discounted to $300 for IIUSA members).

People who seek EB-5 investors will be interested to note shifts in the top six countries for EB-5 demand. Data on I-526 filings gives a better demand indicator than visas issued, since visas are usually issued 2+ years after the investment.

Past Chinese investors will note with concern the rising number of I-526 filings from other countries that aren’t oversubscribed. But Chinese can also take heart that increased demand in FY16/17 was concentrated in two countries that have (Vietnam) or will (India) exceed their cap and receive a demand-dampening cut-off date since FY2017. Only applicants from undersubscribed countries with no cut-off date can advance ahead of Chinese in the visa waiting line.

Indians will appreciate the clue to future EB-5 visa demand and wait time. Table 1 shows that Indians filed 354+587=941 I-526 from FY16 to FY17. Let’s say 941 I-526 filed * 85% I-526 approval rate * 2.9 visas per I-526 approval = 2,320 visas demanded. (I’m using historical worldwide averages as variables for this estimate, though I guess Indian approval rates may be lower and family size higher than the China-dominated average.**) About 2,320 EB-5 visas demanded by Indians * 1 year/696 EB-5 visas available to India = about 3.3 years to issue the EB-5 visas demanded by India in FY16 and FY17. 3.3 years/2 years = 1.6 more demand than supply = backlog coming. Processing time information indicates that USCIS is only just now approving I-526 from 2016, so many of those I-526 filers haven’t reached the visas application stage yet. When they do, they’ll exceed the per-country cap and lead to a visa bulletin cut-off date for India. When that will happen depends on USCIS’s speed in adjudicating I-526. The length of the visa wait time will vary for people with different priority dates. If only we had FY2018 data as well! Charlie Oppenheim at Department of State probably has these numbers, and I look forward to hearing what he has to say at the AILA/IIUSA EB-5 Industry Forum in a few weeks. I also look forward to USCIS finally publishing FY2018 Q3 data for worldwide EB-5 petitions filings (which they’re very late in doing). Because good business decisions depend on information, I continue to update and share my spreadsheet of available data related to EB-5 visa availability.

**UPDATE: I’ve since realized that DOS publishes a report of Monthly Immigrant Visa Issuances that contradicts my assumption about family size. I logged the monthly reports of EB-5 visas issued to Indians and Vietnamese so far in FY2018 (See Tab 2 Column AS of my backlog spreadsheet), with this result:

India: 347 EB-5 visas issued Oct 2017-August 2018, of which 130 were to principal applicants (average 2.67 visas per principal)
Vietnam: 658 EB-5 visas issued Oct 2017-August 2018, of which 171 were to principal applicants (average 3.85 visas per principal)

SEC Action on Unregistered Sales of Securities
The SEC has set a gentle example to the EB-5 community in a recent enforcement action. The SEC targeted EB-5 giant CMB Export for violations of registration requirements and improper transaction-based compensation until 2015, and settled for $11.6 million in penalties (not much, considering the amount of investor funds involved) and compliments to CMB’s compliance efforts since 2015. In its press release, the SEC emphasizes the intended moral of the story: “All securities, including EB-5 securities, must comply with registration provisions, which are essential to protecting investors. In the EB-5 industry, strong compliance policies can help ensure that companies meet their registration obligations under the federal securities laws.” Other regional centers will be interested to read the SEC Order and consider their own past and future policies. Note that previous actions have made an issue of transaction-based compensation to unregistered broker-dealers, but this is the first SEC action to target offering partnership interests without first registering the offering, or having a valid exemption from registration.

Filed under EB-5 Statistics

RC program authorization (12/7/2018)

September 28, 2018 6 Comments

FY2018 is ending with a Continuing Resolution that defers the deadline for unmade decisions about government funding and programs, including the regional center program, to December 7, 2018. (The relevant language from H.R. 6157 is on my Washington Updates page.) The history of regional center program authorization since 1992 now looks like this.

The Continuing Resolution means that the regional center program remains authorized as-is until December 7, 2018, or until the enactment of a new law that reauthorizes or excludes the regional center program going forward. We can’t expect more legislation until mid November at earliest, however, since the House has gone on recess as of September 28 and will not reconvene until November 13.

Meanwhile, EB-5 regulations have still not proceeded to the OMB review stage.

I speculate that Washington will persevere in ignoring and avoiding EB-5 because immigrant investment presents an inconvenient reminder that immigrants can bring a wealth of resources – even hard-to-deny resources such as dollars, economic growth, and job creation. There’s a will to brand immigrants as dangerous takers, and EB-5 investors contradict that image. Unfortunately, the EB-5 program still suffers – ignored by the right, and castigated by the left for being ignored even as new policies particularly harass materially-poor immigrants. Recent op-eds are unfortunately wrong in claiming that the Trump administration has made more EB-5 visas available. (In fact there’s been increased demand but no visa supply increase, resulting in backlogs that make EB-5 a slow track.) It’s hard to imagine any EB-5 relief in current political conditions. Perhaps the strategy pioneered at our southern border can be applied to EB-5, only instead of keeping children while deporting the parents, we keep the billions of dollars in EB-5 investment while fostering indefinite delays to issuing visas to the investors. Or maybe, we’ll wake up one day and remember who we are and why it’s a good idea to open the door to the many forms of wealth represented by immigrants. In the meantime, IIUSA at least has not given up and has filed an Amicus Brief in Support of Visa Backlog Litigation.

(For those interested in the new policies related to inadmissibility, see the June 2018 Policy Memo on inadmissible and deportable aliens, an ANPRM on proposed changes to the public charge ground of inadmissibility, and notes from a 9/27 stakeholder meeting on the June policy memo. The EB5 Insights blog discusses implications for EB-5 investors, and Wolfsdorf critiques the policy.)

Filed under EB-5 Law & Policy

Preparing to file I-924A Annual Certification

September 19, 2018 13 Comments

It appears that a Continuing Resolution will extend regional center program authorization at least into December 2018. (I add detail and updates as available to my Washington Updates page.) Assuming business as usual, regional centers should think about preparing to file the Form I-924A annual report. Regional centers use Form I-924A to demonstrate continued eligibility for regional center designation. Regional centers that remain designated for participation in the program as of September 30 of a given year must submit Form I-924A with the required supporting documentation on or before December 29 of that same year.

FILING INSTRUCTIONS

Here are links to official information, instructions, and tips from USCIS:

I-924A form and instructions
A detailed set of I-924A filing tips dated 9/8/2017
A Q&A on the I-924A dated 9/8/2017
A webinar dated 8/28/2017 that goes step-by-step through the I-924A form and instructions, with comments and tips

CHOOSING TO TERMINATE

If a regional center does not file I-924A, or files I-924A that does not demonstrate eligibility for continued designation, then USCIS will respond with a Notice of Intent to Terminate, and eventually terminate the designation. The regulations at 8 CFR 204.6(m)(6)(vi) also offer a relatively tidy alternative for regional centers who do not wish to stay designated: “A regional center may elect to withdraw from the program and request a termination of the regional center designation. The regional center must notify USCIS of such election in the form of a letter or as otherwise requested by USCIS. USCIS will notify the regional center of its decision regarding the withdrawal request in writing.”

The active method (formal withdrawal request) and passive method (just don’t file I-924A) have the same outcome: termination of regional center designation. The active method has the advantage, for what it’s worth, of getting a relatively nice letter back from USCIS. (Representative letters for comparison: termination based on withdrawal, and termination for failure to file I-924A.) The word “fail” appears eight times in the no-I-924A termination letter, and not at all in the withdrawal termination letter. Only the withdrawal termination letter template points out that “the withdrawal and termination do not preclude the filing of a new regional center application” and “the facts and circumstances of the prior designation, withdrawal, and termination may still be considered in the adjudication of future regional center applications.”

PRACTICAL ADVICE

The instructions and tips from USCIS (linked in the first section above) are quite practical and detailed, so do read those carefully. The following section has a few additional lessons derived from my reading of the 207 regional center termination letters posted so far by USCIS. (I also maintain and share an ongoing log of all terminations and associated letters – another bit of generous work for which I am not much thanked.)

Avoidable reasons that regional centers have been terminated despite filing I-924A

The I-924A was filed using the wrong edition of the form, to the wrong address, or missing the proper fee
The I-924A got lost, and the RC could not show proof of mailing to prove that this loss wasn’t its fault
The I-924A was not properly filed until after December 29

I-924A issues for active Regional Centers

If the regional center has experienced any changes for which an amendment is required (such as changes in name, ownership, or structure), file the I-924 amendment before filing I-924A.
Strive for clear consistency between the info provided in I-924A and the info reflected in the record of past filings, including past I-924A, I-924, and investor petitions. (I’ve seen multiple decisions that indicate that USCIS is cross-referencing I-924A with other filings, suspiciously watchful for any apparent inconsistencies. Of course projects and numbers change over time, but USCIS tends to see changes as aberrations and discrepancies that need explanation.)
Double-check that the regional center entity is still active in good standing, and with an active business license. Remind USCIS with which Secretary of State and municipality the regional center is registered, so USCIS doesn’t check in the wrong place.
Double-check the Regional Center website for any problematic material (such as images of the USCIS logo, any language that smells like a visa guarantee, or any apparent inconsistencies with the regional center information – e.g. name, ownership, managers – officially reported to USCIS)
Google the regional center name and project names, see if any negative media stories appear, and consider preemptively explaining those stories as part of the I-924A

I-924A issues for Regional Centers with no EB-5 investment yet

A regional center on its third year since initial designation with no EB-5 investment is in line for termination for failure to promote economic growth, unless it makes a compelling counterargument. (That three-year metric is not published anywhere, but evident in termination letters. USCIS takes 2-3 years just to adjudicate the application for initial designation – enough time in limbo for the RC to lose its originally-contemplated projects and partners – and then gives the RC only 2-3 years to start again from scratch before termination. Quite unreasonable, but the current practice.)
A compelling counter-argument requires project evidence. In termination letters, USCIS does not admit to being impressed by evidence of marketing and promotional activities for the regional center, by due diligence on potential projects, or by general industry involvement. USCIS most wants to see evidence of projects imminently likely to use EB-5 investment. They seem to want to see project evidence related to timing (such as registrations, licenses, permits) and evidence related to firm commitment to do the project and include the regional center and EB-5 investment (such as signed term sheets, signed purchase agreements, loan commitments). The goal is to avoid USCIS deciding that “the evidence submitted relate only to potential projects and future aspiration goals” and “thus these projects are not relevant examples of the regional center’s ability to continue to promote economic growth” (to quote language repeated in multiple termination letters). USCIS seems particularly fixated on the idea of “binding contractual obligation” and to particularly like finalized contracts and signed term sheets as evidence. (Again this advanced-project evidence demand is hardly reasonable – calling for status and commitments not consistent with the fact that USCIS will likely delay projects with years-long I-526 processing times. But the injustice has yet to be recognized.) There’s some evidence that having filed an amendment (especially one with I-526 exemplar request) can help support the activity argument, in lieu of being able to report filed investor petitions.
These regional center termination letters discuss specific examples of project evidence provided to USCIS with Form I-924A, and why USCIS did not think the evidence of activity made for a compelling economic growth argument.

FORM I-924A REVISIONS

If you’d like to advise USCIS about how to make the next edition of Form I-924A less faulty, you have until 11/13/2018 to do so through the Federal Register rulemaking comment process.

PLUG

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Filed under EB-5 Resources

I-924 exemplar appeal sustained (reserves, material change)

September 12, 2018 3 Comments

I read and log all Administrative Appeals Office decisions on EB-5 appeals, in an effort to keep up with EB-5 adjudication trends and be more than just another business plan writer with an English major and MBA. The AAO decisions illuminate and very occasionally question current thinking at USCIS about how to interpret and apply EB-5 requirements in practice.

AUG152018_01K1610 (Matter of A-C-R-C-) is a sustained appeal that challenges USCIS interpretation of the EB-5 at-risk requirement and material change policy. The appeal concerns an I-924 application to request approval of a proposed project as an exemplar. The applicant filed the I-924 in 2015. When USCIS got around to adjudicating the application two years later, an adjudicator googled local media reports about the project, discovered changes (unsurprisingly) from the original plan, and sent the applicant a Notice of Intent to Deny. The applicant responded to the NOID by explaining the changes and submitting revised and amended documents. USCIS still denied the application for two reasons:

changes to the business plan and associated organizational and transactional documents represented impermissible material changes
the existence of a working capital reserve and interest reserve in the budget for the job-creating enterprise meant that the full amount of EB-5 investment capital was not available for job creation purposes, and therefore not at risk, and not reasonable as part of inputs to the economic model

AAO found fault with the USCIS analysis.

USCIS cited Matter of lzummi ‘s finding that “A petitioner may not make material changes to his petition in an effort to make his deficient petition conform to the Service requirements.” AAO found that Izummi is not apposite because the case in this appeal involved changes made in response to business reality, before USCIS even sent the NOID, and thus obviously not just in attempt to remedy a deficient petition. The changes in this case were significant but not material. (This is good news if it means AAO is tending toward the reasonably limited definition of material change suggested by Ron Klasko: “a change that makes an approvable project un-approvable, or makes an un-approvable project approvable.” This in contrast to the apparent general inclination by USCIS to treat any significant new set of facts as a material change.) At least in this case, AAO agreed with the applicant’s contention that its changes were not material because “while the location, the Borrower, and the JCE differ from the initial filing, these changes are permissible because the ____ hospital project is substantively similar to the management structure, construction and development entities, and economic analysis in the original 2015 business plan’s proposed project in _____, and moreover, these changes were not an attempt to remedy a deficient petition.” (But this is a non-precedent decision, and thus sets no precedent for how USCIS or AAO will treat other cases.)
AAO points out that standards for an I-924 application with exemplar I-526 are not the same as those that apply to an investor I-526 petition. The USCIS Policy Manual, referencing Matter of Katigbak, says that an application cannot be approved with a different set of facts than those presented in the original filing. But this applies to visa petition proceedings, not applications filed by regional centers. The relevant Policy Manual guidance for regional center amendment applications and the Form 1-924 instructions recognize the evolving business realities that are reflected in regional center amendments, and require an amendment submission only for specific, limited changes. Furthermore, the fact that a change could be material for investor petitions already pending for the same project does not have implications for the exemplar I-526. The Form I-924 eligibility requirements are independent of future eligibility determinations for associated investor petitions.
USCIS saw a working capital reserve and an interest reserve in the budget for the job-creating enterprise, and determined that the Applicant had not established that the full amount of investor funds would be placed at risk for the purpose of job creation because a portion of the EB-5 capital could be placed in these reserve funds. USCIS cited Matter of lzummi’s findings that “Reserve funds that are not made available for purposes of job creation cannot be considered capital placed at risk for the purpose of generating a return on the capital being placed at risk” and “the full requisite amount of capital must be made available to the business(es) most closely responsible for creating the employment on which the petition is based.” AAO found that USCIS incorrectly interpreted Izummi and misapplied its findings. In Izummi, reserve funds were at the NCE level and created to satisfy the NCE’s potential future obligations and to return a portion of EB-5 capital. In the instant case, the reserve fund was owned by the JCE and for use by the job-creating project, not to facilitate any capital repayment to investors. “The record shows the JCE anticipates using these funds for its operations by the second year, and accordingly, has demonstrated that the full amount of the EB-5 capital would be made available for job creation purposes.” In Izummi, the requirement about capital available for job creation addressed a problem that EB-5 funds were being siphoned off by the NCE and subsidiaries even before reaching the job-creating entity. In the instant case, reserves were at the JCE level, and all EB-5 funds reached the JCE. Furthermore, Izummi placed no limitations on how the entity most closely responsible for job creation used the funds. USCIS has historically agreed (in an engagement cited by AAO, and also in the Policy Manual 6(G)2(D))) that a JCE can use a portion of EB-5 funds for uses such as land purchase that aren’t in themselves job-creating activities. AAO concluded that “Thus, in the instant case, JCE’s use of EB-5 capital on business activities supported by the credible business plan, even where a portion of those expenditures do not directly result in job creation, does not violate Izummi.”
The USCIS denial contended, without explanation, that the record lacks sufficient verifiable details to support the job creation inputs. AAO reviewed the record and found a supporting letter from a major international construction company and a detailed feasibility study. AAO considered this significant documentation supporting the construction costs and operational revenues used as inputs into the RIMS II model. Therefore, “the Applicant has demonstrated that the revised business plan and economic analysis use acceptable inputs to support its job creation estimates.”

Filed under EB-5 Law & Policy

Ombudsman on new RFE and NOID policy, visa timing, RC list updates

September 11, 2018 5 Comments

New RFE and NOID Policy
Today is the effective date for the new USCIS policy memorandum on issuance of RFEs and NOIDs. Basically, the memo expands an adjudicator’s discretion to simply deny a petition, without first issuing an RFE or NOID to ask questions or request additional evidence. The policy since 2013 has been that straight denials were only allowed for statutory denials – i.e. when there was no possibility that the deficiency could be cured by submission of additional evidence. The new policy opens new ground for straight denial based on failure to establish eligibility based on lack of required initial evidence. The memo says that this is designed to “encourage applicants, petitioners, and requestors to be diligent in collecting and submitting required evidence,” and is “not intended to penalize filers for innocent mistakes or misunderstandings of evidentiary requirements.”

I listened into a Ombudsman’s teleconference on September 6, and heard representatives from USCIS answer questions about the memo. (UPDATE: Here are official notes from the engagement.) The answers indicated that the Office of Policy and Strategy, at least, seems fuzzy on what constitutes “required initial evidence” and “innocent mistakes or misunderstandings.” “Pages left on the copier” was the one example given of an innocent mistake. No examples of innocent misunderstandings – though USCIS clarified that having an attorney or not wouldn’t be a factor. In general, “required initial evidence” means evidence as required by statute, the regulations, and form instructions. But what does it mean specifically? Certainly in EB-5, we see a lot of variation among lawyers and adjudicators in their interpretation of the specific documents required in various situations to satisfy forms and regulations. Now adjudicators will be free to indulge their discretion to interpret requirements, with no chance for response before denial. Meanwhile, lawyers will likely start clogging the system with kitchen sink petitions that throw in every possible document and page in case it’s something that someone might want to see.

On the Ombudsman call, USCIS confusingly promised that they would be publishing “optional checklists of required initial evidence”(?) on September 11. If that’s happened for EB-5 yet, I can’t find it. Last year, USCIS published a suggested order of documentation for each EB-5 form, and two distinct sets of filing tips for each form. (These are on a phantom Resources page not linked to menus on the USCIS website.) The specific suggestions are helpful but not applicable to every case, so I hope they won’t end up getting treated as optionalrequired evidence. But who knows what adjudicators make of all this guidance. USCIS told the Ombudsman that adjudicators had received one day of training on the new policy, and may or may not have supervisory review for denials under the new policy. As before, adjudicators are supposed to fully explain the reasons for any denial in the denial notice, and petitioners have the same appeals recourse as before.

Response to Policy Manual Updates
Anyone not pleased about the August 24 Policy Manual update on Regional Center geographic area will appreciate the points made forcefully by AILA in its Comments on USCIS Policy Manual Guidance on the Geographic Area of Regional Centers (September 9, 2018). AILA dissects the policy itself and the suboptimal process behind it.

Gap between I-526 approval and visa allocation
I realize that my series of timing posts is missing an important piece: analysis of the steps and time factors (for countries with no cut-off date yet) between receiving the Form I-797, Approval Notice for the I-526 and claiming an EB-5 visa number. Especially Indians are trying to calculate: if I can count on receiving I-526 adjudication in the next few weeks, can I count on getting allocated a visa number in the advance of the Visa Bulletin giving a cut-off date for India? The point at which the visa number actually gets allocated, and the factors/timing between I-526 approval and that point, vary between I-485 and consular processing, and I don’t understand it all yet. But potential investors should include this in discussions with counsel, because delays can be considerable for consular processing anyway. I’m hearing reports of USCIS taking at least 3+ months and even 8+ months just to forward I-526 approvals to the National Visa Center. Ironically, it seems that the faster USCIS adjudicates I-526, the more it drags its feet on advancing that approval to the next stage. But this is a developing situation, and I have limited examples. Here is my background reading list so far FYI. Please email me any additional helpful articles and current timing information.

NVC Timeline for Consular Processing (October 11, 2017) Miller Mayer
Adjustment of Status Process (June 20, 2017) Miller Mayer
The Operation of the Immigrant Numerical Control System Department of State
The “Red Combo Card” Option for EB-5 Indian Nationals – Will It Work? (September 8, 2018) Wolfsdorf Rosenthal

SEC Action
In recent years, the SEC has set examples by bringing complaints against people who misappropriated and misused EB-5 investor money. In its latest EB-5 action, the SEC reinforces a message that it’s also wrong to aid and abet fraud by others. SEC Charges Former Raymond James Branch Manager for Facilitating a Massive EB-5 Fraud (September 6, 2018)

Regional Center List Changes
Additions to the USCIS Regional Center List, 08/21/2018 to 09/11/18

Regional Center of Washington State, LLC (Washington)

New Terminations

Encore Pennsylvania RC, LLC (EPRC) (Pennsylvania) Terminated 8/20/2018
Gulf Coast Funds Management, LLC (Mississippi) Terminated 8/30/2018
The Mid-American Regional Center, LLC (Indiana) Terminated 8/30/2018
Citizens Regional Center of Florida (Florida) Terminated 8/24/2018
Central Texas Regional Center (Texas) Terminated 8/21/2018
California Global Alliance Regional Center c/o Lewis C. Nelson & Sons, Inc. (California) Terminated 8/31/2018
Invest Midwest Regional Center (former name Civitas Indiana Regional Center) (Indiana) Terminated 8/21/2018
L Global Regional Center, LLC (California) Terminated 8/20/2018

Filed under EB-5 Law & Policy, New RC

WA Updates, Visa Numbers, Ombudsman, RC List Updates

September 4, 2018 11 Comments

Washington Updates

August passed with no final rule for EB-5 regulations. OMB has not even received the regulations for review. USCIS Director Cissna told Congress in June that he thought it would be tough to finalize the regs before Sept 30, 2018, and I don’t expect any action soon.

The Regional Center program is currently authorized through 9/30/2018, pursuant to Consolidated Appropriations Act, 2018, Division M—Extensions, Title II—Immigration Extensions (PDF p. 702). The RC program could be extended beyond 9/30 explicitly (if Congress passes a 2019 appropriations act that mentions RC program authorization) or implicitly (if Congresses passes a Continuing Resolution that would postpone the deadline for 2018 appropriations, including the program authorizations in Division M Title II). 9/13 Update: The House has introduced a Continuing Resolution that would extend a number of 2018 authorities and authorizations, including Division M Title II, to December 7, 2018. I’m adding status updates to my Washington Update page.

The 2019 appropriations could be a vehicle for other immigration changes as part of the Department of Homeland Security Appropriations segment. The version of the DHS Appropriations Act 2019 voted out of committee in the House includes the Yoder amendment, which would eliminate the per-country limit for EB-5 visas. The Senate version of 2019 DHS appropriations includes no such provision. It remains to be seen what final version will be negotiated by the House and Senate.

Here’s my understanding of the current status, based on this article: Congress faces September scramble on spending (September 3, 2018) The Hill.

Spending legislation comprises 12 individual appropriations bills for different agencies. In 2018 these were all packaged together in one “omnibus” with miscellaneous other content; this year, lawmakers want to avoid an omnibus, instead sending individual bills to the President.
Senators have passed 9 out of the 12 individual appropriations bills for 2019, but the House and Senate have yet to sort out in conference any of the differences in their bills.
One of the three appropriations bills that has not passed the Senate, and that lawmakers do not want to touch until after the midterm election, is the Department of Homeland Security Appropriations Act (which concerns border wall funding, among other contentious issues). A Continuing Resolution may be passed as a stopgap to defer votes on 2019 DHS appropriations (and likely at least two other spending bills) until after November. The stopgap is likely to go into December, but leadership hasn’t yet worked out the details of a short-term bill. If a CR is passed for DHS appropriations, what would defer a decision on the per-country cap to December. (A CR for DHS appropriations would not affect regional center authorization, since RC program authorization is not in the 2018 DHS appropriations act, but rather in a different part of the 2018 omnibus.)
In 2018 appropriations, regional center program authorization is not attached to any of the 12 individual appropriations bills, but is in a 13^th section – Division M – devoted to program extensions/authorization. The Hill reports that “In the Senate, Appropriations Committee Chairman Shelby and Vice-Chair Patrick Leahy agreed to keep authorizing language out of the appropriations process.” I’m not sure what that means exactly. Could Division M be folded into a continuing resolution to December, which would also extend the RC program sunset date to December? I look forward to advocacy alerts from IIUSA.

Visa Numbers

USCIS has responded to the lawsuit by Chinese investors over the issue of family members in the EB-5 visa quota. This article discusses and analyses the USCIS response: The Government’s Poor Defense of Counting Derivatives against Immigration Quotas (August 27, 2018) Cato Institute

Meanwhile, people from India have an on-going challenge to try estimating the visa queue and cut-off date timing by tracking news on EB-5 visa demand among Indians. China models a hard lesson: do not wait to be surprised by the Visa Bulletin! The visa wait time for an Indian investor filing I-526 today does not depend on today’s Visa Bulletin but on future Visa Bulletins, which in turn depend on the number of other Indians currently filing and currently waiting for I-526 processing at USCIS. 700 visas/year * 1 investor petition/about 3 visas = about 233 investors that can be accommodated per year per country considering the 7% per-country limit. Two groups active in India — Can Am and LCR Partners – each report having over 200 Indian investors in 2018, which means about two-years-worth of EB-5 visas available to India claimed just this year through just two firms. Something to watch. The timing for a Visa Bulletin cut-off date for India depends on USCIS’s speed in adjudicating Indian petitions and advancing them to the visa stage. (My post from June explains the process in more detail.)

New RFE and NOID Policy

I plan to listen in on an Ombudsman Teleconference on USCIS Policy Updates on the Issuance of RFEs and NOIDs September 6, 2018, from 2:00pm to 3:00pm EDT. The policy updates are not specific to EB-5, but significant for those of us who help prepare I-526 paperwork. As background, see USCIS Issues Two New Policy Memoranda on Notices to Appear and Denials in Lieu of RFEs and NOIDs – What This Means for You (July 16, 2018) GT Alert

Due Diligence

I frequently get emails from investors asking for investment advice, which I can’t give. But I will say that I appreciated the points in this article How Transparent are EB-5 Project Managers (July 11, 2018). If I were a prospective EB-5 investor, account transparency, communication, and independent oversight would be major factors in my investment decision. See also Friedland & Calderon’s article EB-5 2.0: Can Account Transparency Save the Program? (Draft December 6, 2016).

Updates from USCIS

After having hosted EB-5 engagements almost quarterly since 2010, USCIS is now on track to go an entire year with no EB-5 stakeholder meeting. Does this relate to leadership turnover at IPO, I wonder? A wish not to discuss the unfinalized regs, unwritten redeployment policy, and fluctuating processing times? One suspects that no news isn’t good news. Please talk to us, IPO. Maybe we can help.

Regional Center List Changes

Additions to the USCIS Regional Center List, 08/02/2018 to 08/21/2018

APRC Mesa Verde, LLC (Colorado)

New Terminations

APIC Regional Center, LLC (Oregon) Terminated 8/8/2018
Build America Capital Partners Regional Center LLC (California) Terminated 7/31/2018
Washington State Regional Center (Washington) Terminated 7/31/2018
American Bridge Seattle Regional Center, LLC (Washington) Terminated 8/1/2018
Saipan Regional Investment Center, LLC (Commonwealth of Northern Marianas Islands) Terminated 8/8/2018
American Altin Regional Center (California) Terminated 8/8/2018
Great Ocean Regional Center (Washington) Terminated 7/30/2018
Future Resources, Inc. (California) Terminated 8/15/2018
North American Regional Center (New Jersey, New York, Pennsylvania) Terminated 8/2/2018
Build America Fund 1, LLC (California) Terminated 8/9/2018
California International Regional Center LLC (California) Terminated 7/10/2018

Filed under EB-5 in the News, EB-5 Law & Policy, New RC

Policy Manual update: Geographic Area

August 24, 2018 2 Comments

USCIS has now made its policy on geographic area amendments an official part of the USCIS Policy Manual. Before, to know the unofficial policy that’s been effective since February 2017, you needed to have been present at a March 2017 stakeholder meeting, noticed followup clarifications on the USCIS website, and been on the email list for a stakeholder alert. Now, at least the policy is set down in the Policy Manual where everyone can find it.

As usual, I copied the whole of today’s version of the Policy Manual EB-5 section, and saved it as a Word document in my folder of Policy Manual versions. I then did a document comparison with the previous version (current as of May 15, 2018) to see exactly what changed, and kindly share my redline.

In addition to adding language related to geographic amendments, the latest version of the PM clarifies the effective date for tenant occupancy guidance rescision, and specifies that changing regional centers after I-526 filing constitutes a material change.

For more in-depth analysis:

Robert Divine’s article for IIUSA summarizes the Policy Manual changes and analyzes implications
AILA’s comments to USCIS make a case for what’s wrong with the content and process of this Policy Manual update

Here is the email from USCIS with links to the Policy Alert and feedback page.

From: U.S. Citizenship and Immigration Services <uscis@public.govdelivery.com>
Sent: Friday, August 24, 2018 9:13 AM
Subject: USCIS Policy Manual Update

USCIS is updating guidance in the USCIS Policy Manual regarding a regional center’s geographic area, requests to expand the geographic area, and how such requests impact the filing of Form I-526 petitions. The Policy Alert is available here:

Volume 6: Immigrants, Part G, Investors (Final date for comments: Sept. 9, 2018)

Visit the Policy Manual for Comment page for more information on stakeholder review and comment.

Filed under EB-5 Law & Policy

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

August 5, 2018 9 Comments

Regional Center Terminations

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

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

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

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

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

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

SEC Action

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

Processing Times

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

Washington Updates

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

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

Regional Center List Changes

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

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

New Terminations

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

Filed under EB-5 Law & Policy, New RC, Updates from USCIS

Per-country limits in question?

July 28, 2018 126 Comments

1/2019 UPDATE: IIUSA has done a more granular analysis of the EB-5 impact of the Yoder amendment

7/2019 UPDATE: My post Country Cap discussion analyzes H.R. 1044 ‘Fairness for High-Skilled Immigrants Act of 2019, which renews the proposal to remove the country cap for EB visas, but with a transition period and protection for past investors with approved petitions.]

— ORIGINAL POST —

I do not normally quote the Center for Immigration Studies, but for once I agree with David North. This is a concerning development:

An alarming bit of news – generally ignored by the press – is that the country of origin ceilings that try to diversify our immigration streams may be scrapped by congressional action.

The House Appropriations Committee, while marking up the Department of Homeland Security spending bill this week, inserted language that would eliminate the long-standing requirement that no more than 7 percent of any group of employment-based immigrants could come from a single nation. The same provision would ease the 7 percent rule on family migration as well, but not eliminate it. (See the amendment here, on pp. 23-28; it was introduced last year as a stand-alone bill, H.R. 392.)

This came about because the chair of the DHS Appropriations Subcommittee, Rep. Kevin Yoder, R-Kan.), managed to persuade his colleagues on the full committee that the current system is unfair to the Indian nationals whose visa applications, notably in the EB-2 category, are backlogged for several years. The provision would also speed up the delivery of EB-5 (immigrant investors) to Chinese applicants, while slowing down their arrival for people elsewhere in the world.

This House amendment language may not get into a final bill (it’s not in the Senate version), but it’s still important for the community to be educated about what the per-country limit means for EB-5. Based on data for EB-5 usage to date, here is what I calculate would happen to EB-5 visa availability if the per-country cap were removed as part of the FY2019 funding bill in September:

The October 2018 Visa Bulletin would have a 2014 cut-off date for the EB-5 category for all countries.
From 2019 to 2027, Department of State would be issuing EB-5 visas to people already in the backlog as of 2018, with no visas left for contemporary demand. Here are my estimates for when visas would be available to investors from various dates, based on data about I-526 filings from 2014 to 2018 and assumptions about denials/dropouts, family size, and visas already issued. Investors from all countries would be in the same line in order by priority date, without regard to nationality.
- 2014 priority date: visa issued in 2019 (5-year wait)
- 2015 priority date: visa issued in 2020/2021 (6-year wait)
- 2016 priority date: visa issued in 2022/2023 (7-year wait)
- 2017 priority date: visa issued in 2024/2025 (8-year wait)
- 2018 priority date: visa issued in 2026/2027 (9-year wait)
- 2019 priority date: visa issued in 2027/2028
China-born applicants would dominate the front of the line for EB-5 visas, having the oldest priority dates. They would get 99% of EB-5 visas in 2019, and gradually reduce to about 80% of visas by 2027.

Pros and Cons

Removing the per-country limit for EB-5 would give past China-born investors a predictable visa wait of 5 to 10 years, mostly just competing with each other for visas. That would be better than the current hard-to-predict wait of 5 years to life that depends on the wild card of future incoming non-China demand. Removing the per-country limit would give the China-born investor filing today an estimated 9+ year wait rather than the currently-estimated 15+ year wait. This is a benefit for China, but not a solution even for China. 9 years is preferable to 15 years, but this difference becomes irrelevant if both times are unacceptably long.
Removing the per-country limit for EB-5 would be a pure disaster for non-China investors. All non-Chinese with pending I-526 or pending visa applications would find themselves in line behind the tens of thousands of Chinese with older priority dates, with many-year visa waits for everyone. Today’s China-born investor suffers, but at least it’s from policy that was in place when he invested, and an excess China demand situation knowable at that time. The non-China investor already in the system would suffer retroactively from new policy that didn’t exist when he invested.
Lacking the per-country limit to protect new investment from a variety of countries, the EB-5 program would be essentially dead as regards new investment for the next ten years. Interest might revive by 2030, when the backlog that piled up in 2011-2018 is out of the system, leaving visas available for new applicants. (Or earlier, if many people in the system are shocked at finding their visa timeline unexpectedly expanded by 5-10 years, and try to exit.)

There’s still room for lobbying on this issue, so judge where your interest lies and speak with your contacts.

Additional Reading:

The amendment text is linked from this page on the House Appropriations Committee website.
The Yoder Amendment mirrors H.R.392 – Fairness for High-Skilled Immigrants Act of 2017, which has received a lot of sponsors and lobbying support.
An August 10 Advocacy Alert from IIUSA says: “According to sources on both the House Appropriations Committee and the House Homeland Security Committee, the chances of the Homeland Security funding bill, which includes the Yoder amendment, of passing before the new fiscal year is very low. IIUSA will continue to explain the implications of these provisions to legislators in the House and Senate until both chambers are likely to vote on the bill after the midterm elections and before the 116th Congress commences in January.”
Media articles on the background of and reaction to the amendment: Republicans Vote to Gut Enforcement, Increase Foreign Workers (July 27, 2018) National Review, After right slams Yoder on immigration, he pledges to work with Trump to ‘fix this’ (July 30, 2018) Idaho Statesman
The Appropriations Committee press release mistakenly reports that “The amendment provides additional flexibility related to the country cap on high-skilled workers under the H1-B visa program.” In fact, the text makes adjustments to EB and FB immigrant visas, and says nothing about H1-B.
This Congressional Research Service report explains and analyzes “Numerical Limits on Permanent Employment-Based Immigration: Analysis of the Per-country Ceilings”

Filed under EB-5 Law & Policy, EB-5 Statistics

Visa Numbers (FY2018 Q3 and conference update)

July 27, 2018 58 Comments

The 2018 eb5 investors Magazine EB-5 Convention in Los Angeles provided a platform to discuss a challenged industry. The dominant theme was EB-5 visa numbers, and the consequences of excess demand for a limited quota. Panels and conversations discussed alternatives to China in view of untenable visa wait times, alternatives to EB-5 for investors and project companies and service providers, alternatives to the visa quota as currently interpreted, and options for deploying past investor funds during the visa wait. I learned that everyone is confused about redeployment and material change, with smart lawyers giving conflicting advice, and that many people are confused about visa availability. I copy below the most important piece of solid information I learned at the conference – the latest DOS statistics on EB-5 visas issued – followed by my comments and predictions.

Information reported by Bernard Wolfsdorf at the EB-5 Waiting Line panel at the eb5 investors Magazine EB-5 Convention on July 24, 2018, based on information provided by Charlie Oppenheim at the Department of State Visa Controls Office [recording here]

As of the third quarter of FY2018 (June 2018), Department of State had issued the following number of visas:

Worldwide: 7,900

China: 4,049

Vietnam: 692

South Korea: 423

India: 375

Taiwan: 337

DOS China Predictions:

On October 2018, the cut-off date for China will move to August 8, 2014 (or maybe August 15).

China has received a large number of visas annually because it has been able to take visas unused by other countries. Increased marketing in the rest of the world means that the number of visas available for China is dropping. Charlie will allocate 4,675 visas to China in FY2018—much fewer than in previous years. (China received 7,567 visas in FY2017.) Charlie predicts that China will have 3,500 visas available in FY2019, and 3,000 in FY2020.

DOS Vietnam Predictions:

On October 1, 2018, the Vietnam cut-off date will move up to January 2016.

In March 2019, the Vietnam cut-off date is expected to retrogress.

[Suzanne’s note: In other words, the October Visa Bulletin date moves up so that Vietnamese can get the about 700 new visas available to them in the new fiscal year. These having been issued, the March Visa Bulletin will put Vietnam back to the same cut-off date as China — i.e. in the same line as China for any leftover visas.]

Notes on visa availability:

The China backlog has the oldest priority dates in the system and thus first claim on all visas left over after the up-to-700 per country allocation. The total allocation to China depends on number of leftover visas. Countries behind China are effectively limited to about 700 visas annually. Data on visas issued for FY2018 to date indicate that Vietnam has already reached its limit for the year, while South Korea, India, and Taiwan are closer than ever before to the 700 limit. (As a reminder, total visas issued to these countries in FY2017: Vietnam 471; South Korea 195; India 174; Taiwan 188.) DOS predicts future visa wait times for investors from these countries. (No FY2018 Q3 numbers were provided for Brazil — don’t know if that means fewer FY2018 visa applications than expected from Brazil.)

Remember that investors from one country don’t all have the same wait time. Individual wait times vary by priority date (date of I-526 receipt). Vietnamese investors who filed I-526 in January 2016 will likely have an almost 3-year wait for a conditional green card (per Charlie’s Visa Bulletin cut-off date prediction above), while Vietnamese who filed I-526 in April 2018 will likely have a 6-year wait (per Charlie’s prediction at the IIUSA conference in April). Each of those estimates is specific to a point in time – that is, to Vietnamese investors who filed on a certain date — not for all Vietnamese. If the number of I-526 filings from Vietnam increased in a linear manner from 2015 to the present, then the visa wait time for Vietnamese investors over that time period is also linear. As a Vietnamese investor, I’d estimate my visa wait by plotting a line through the two wait-time estimates provided by Charlie, and see where my priority date would fall on that line. (i.e. I’d estimate about a 2-year wait if I filed in 2015 and a 4-5 year wait if I filed in 2017, since he estimated 3 years for early 2016 filers and 6 years for early 2018 filers.) The demand line often isn’t linear (e.g. I expect Vietnam I-526 filings to drop in 2019, thus changing the calculation for 2019 Vietnamese investors), but still plot-able given data.

In EB-5 some people have a false sense of panic (i.e. past Chinese investors thinking Charlie estimated a 15-year visa wait for all Chinese as of April 2018, when he just estimated a 15-year wait for new Chinese investors filing I-526 in April 2018), while others have a false sense of security (i.e. current Vietnamese investors thinking an October 2018 Visa Bulletin indicating 3-year wait applies to today’s new investors, when in fact it’s just specific to people who filed by January 2016 and at the visa application stage in October 2018.) The misunderstandings both result from forgetting to think of the visa wait as a waiting line problem, with the wait for any one investor as a function of that investor’s place in a priority-date-ordered queue (subject to country limits, but not in undifferentiated pools by country). Generally, the longer ago you filed I-526, the shorter your total wait for an EB-5 visa. Chinese investors who filed I-525 four years ago are receiving visas today (four year wait), while Chinese investors filing I-526 today will have longer to wait. The EB-5 waiting line problem extremely complex but not impossible, considering the process we know and the fact that we have at least some data. (FYI my spreadsheet of backlog-related data is currently under revision as I try to think out a simpler presentation with clearer country-specific analysis. And I really wish we could get updated per-country I-526 data!)

Misconceptions about visa availability were evident in several promoters who spoke at the conference about demand potential. The EB-5 quota and per-country limit mean that each non-China country can get only about 700 visas i.e. accommodate only about 230 investors annually. (10,000 visa quota * 7% per country + 0 visas leftover after the China backlog) * 1 investor/3 visas = about 230 investors per country, sustainably. Meanwhile, thousands of investor I-526 * 3 visas/1 investor * 1 year/700 visas = many years visa wait for any country that falls for the siren song of big projects. India especially, take note. CanAm alone boasts of securing 200 Indian investors this year – almost a year’s worth of visas to one regional center operator – and I hear about multiple other projects each seeking hundreds of Indians. Investors should be vigilant, and EB-5 promoters consider their long-term interests and watch the activity of other promoters. No market can replace China; raising too much in any one market will simply spoil it. That is, unless the EB-5 visa quota changes.

Will the EB-5 visa quota change, and who will advocate for change? I was reminded at the conference that the industry has conflicting interests. On the one hand, we cannot keep raising money or creating jobs at historical levels without visa relief. Long wait times would ruin the market going forward. Either EB-5 visa numbers increase or EB-5 economic contributions fall. On the other hand, long visa waits result in the golden gift of billions of dollars in past investment free to be redeployed for 10+ years longer than expected with little investor input and no new job creation requirement. Some companies with large amounts of EB-5 money already in pocket may not be motivated to press for change. But a majority of industry players do want change, as do investors of course. A new lawsuit pressing the 10,000 EB-5 visas-for-investors argument has maximized its slim chance of success by being entrusted to rockstar Ira Kurzban. (The 10,000 EB-5 quota has been historically interpreted to include family members, thus making it effectively a 3,300-investor quota.) If Kurzban can’t argue this, no one can. People at the conference seemed to think the lawsuit is, at least, a significant and productive gesture. (Update: here is the complaint.) A new organization has been formed just to advocate for backlog problems: EB-5 Visa Relief Group. We shall see where all this leads. This year the draft EB-5 reform legislation did not touch EB-5 backlog problems, while larger immigration bills offered to increase visa numbers for every EB category except EB-5. I welcome more pressure and lobbying on behalf of EB-5 visa relief.

Based what I heard from panels and in conversation at the conference, I would be willing to bet money on the following predictions:

The regional center program will get another short-term reauthorization with no changes by the next sunset date of September 30, 2018, as part of the funding bill for FY2019.
Another EB-5 bill with longer-term regional center authorization and some EB-5 reforms will be introduced following the midterm elections. The bill will not go anywhere, unless finalized regulations motivate the EB-5 factions to consult with each other, accept painful compromises, and figure out a minimum broadly-beneficial platform that Washington can count on being thanked for enacting. In other words, the bill will not go anywhere.
The EB-5 modernization regulations will be finalized in 2018, probably right when I wanted to focus on pumpkin pie and Christmas shopping. The investment amount increases and priority date protections may be modified from the original draft regulations. Litigation around the rollout may come out of New York City.
The total number of I-526 filings will fall gradually through 2018, and drop significantly in 2019 as a result in of the regulations and new Visa Bulletin cut-off dates. Because I predict a fall in demand overall, my projections for China visa numbers are more optimistic than Charlie’s. I think that rest-of-the-world demand will fall after 2019, leaving more visas left for China.
When new Visa Bulletin cut-off dates are imposed in 2019, many people will express surprise that the cut-off dates and associated visa wait effect people who invested back in 2017 and 2018. If the visa cut-off dates come earlier than expected as a result of more/faster-than-expected I-526 approvals, people will be surprised by that too.
With increasing pressures and alternatives, many regional centers, real estate companies, and service providers (and some past investors) will look to exit EB-5 in 2019.
Litigators will keep busy, cashing in on questionable interpretations by USCIS and investor frustration with wait times, issuer redeployment decisions, and project progress.
I-526 processing times will improve significantly with the fall in I-526 receipts. EB-5 will become a fast track again for investors from low demand countries, escrows contingent on I-526 approval will become feasible again, and new types of projects will find opportunity in EB-5.

Filed under EB-5 Law & Policy, EB-5 Statistics

FY2018 Q2 EB-5 Form Processing Statistics

July 17, 2018 37 Comments

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

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

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

Filed under EB-5 Statistics, Updates from USCIS

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

July 16, 2018 21 Comments

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

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

2018 Ombudsman Report

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

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

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

At Risk, Debt Arrangement, Guaranteed Redemption: Important Distinctions (July 9, 2018) H. Ronald Klasko

Other relevant resources that I’ve previously linked here:

IIUSA has included helpful analysis of challenges to investment structures and terms in its letter from IIUSA to USCIS regarding Major Issues Facing the EB-5 Industry.

Ira Kurzban has published an article based on his success with Chiayu Chang, et. al., v USCIS “Federal Litigation: The Knockout Punch to USCIS’s Overbroad Policy on Redemption Agreements and Call Options?”

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 decisions and cases, and summarize the fact pattern and arguments for each case.

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

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

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

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

Allstates QSR Regional Center, LLC (Connecticut, District of Columbia, Massachusetts, New York, Pennsylvania)

American Dream Group, LLC Regional Center (Washington)

Art District Los Angeles Regional Center, LLC (California)

Beresford Regional Center (California)

Best Tire Center Regional Center, LLC (Texas)

BridgeForth Southeastern Regional Center, LLC (Florida, Georgia, South Carolina, Tennessee)

Gateway South Florida Regional Center, LLC (Florida)

Keystone Great Lakes Regional Center, LLC: www.keystoneeb5.com (Illinois, Indiana, Wisconsin)

Retail Equity Partners Regional Center Texas, LLC (Texas)

U.S. Immigration Fund – CA, LLC (California)

Xocolatl Xperience Regional Center, Inc. (Florida)

Zhielo, LLC (Florida)

New Terminations:

Charter Square Regional Center, LLC (California) Terminated 7/10/2018

RGV EB-5 Regional Center (Texas) Terminated 7/10/2018

Vermont Agency of Commerce and Community Development (Vermont) Terminated 7/3/2018 USCIS Termination Notice

Idaho State Regional Center LLC (Idaho) Terminated 7/3/2018

White Lotus Group Regional Center (Iowa, Nebraska) Terminated 6/26/2018

Rota EB5 Regional Center (Commonwealth of Northern Marianas Islands) Terminated 6/21/2018

AmerAsia EB5 Regional Center SF, LLC (California) Terminated 6/11/2018

Utah Invest Regional Center, LLC (Utah) Terminated 7/3/2018

California Pacific Regional Center, Inc (California) Terminated 6/7/2018

Filed under EB-5 Resources, New RC, Updates from USCIS

Constructive IIUSA response to bridge finance and other challenges

June 26, 2018 2 Comments

During the Q&A period at the EB-5 stakeholder meeting on November, 7, 2017, caller Carolyn Lee questioned IPO Deputy Chief Julia Harrison about recent adjudication of the bridge financing policy.

[transcription of time 01:01:27 – 01:10:11]
Ms. Lee: …We are concerned because we have been seeing what we think is a pattern of adjudications where qualifying bridge finance structures structured under the current written policy manual appear to be found to not qualify. …This comment is directed to urge you to please ensure that your examiners are trained on this policy, and are applying it correctly, because we have seen some very troubling NOIDs in this respect.

Ms. Harrison: Yes, thanks for that. I appreciate that you’re getting NOIDs that … there’s always going to be times when maybe we don’t agree. That happens. But if you are seeing something where you feel we may have messed up, follow the standard protocols to do the formal response. You can send an email to our customer service box and say we would appreciate it if the leadership team would take a look at this. It’s really hard for us… I mean I could take that back and have conversations with my team and say “Are you guys having some challenges with bridge financing? Have we done something different?” And they would all say “no.” Right, because they’re doing what they think is the right thing to do. And maybe they are. But it’s really hard for me to really kind of take a look into that unless you send me some examples. So I don’t want you guys to all flood me. Don’t go crazy. But, if you have a couple that you think are good examples of where you think we’ve gone astray – I’m not saying I’m going to agree with you, but I’m going to have some conversations with my team. Please, though, do not take that as instruction to not follow the formal process.

Ms. Lee: Absolutely. Can we take that as an invitation to some sort of dialogue on these very complex issues?

Ms. Harrison: We can’t do that. We can’t go crazy. We can’t have a dialogue. [Laughs] We don’t want to violate any of the FACA rules. But, I will take a look at it and discuss with my team.

Finally after seven months, the industry has followed up on this exchange with a letter from IIUSA to USCIS regarding Major Issues Facing the EB-5 Industry. The letter starts by reopening the possibility of dialogue by addressing what FACA does and does not prohibit, and goes on to analyze six specific bridge financing challenges, as well problems associated with processing delays, third party guarantees, project financing structures, site visits, and redeployment.

This letter exemplifies what we should do regularly: respond constructively to misunderstandings at IPO with solid and documented clarifications based on our collective knowledge and resources. If examiners at IPO know little about bridge financing beyond what’s in Black’s Law Dictionary, and make incorrect determinations accordingly, that’s partly our fault. They have tough jobs and can’t be expert in every area of law and finance. The industry does have a comprehensive array of expertise, if only we organized to share it. IIUSA was late drafting this letter, and even later involving industry, but the product is solid. Anyone struggling with challenges to financing agreements and structures can use and build on this letter’s in-depth analysis. And I hope USCIS listens to the important points about processing delays, site visit missteps, and ambiguity around redeployment.

Filed under EB-5 Resources

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EB-5 Updates

AILA/IIUSA Forum Updates (Kendall, Oppenheim, visa availability)

FY2018 Q3 EB-5 Form Processing Statistics

PM Update (redemption agreements, debt arrangements)

Redemption Language

Pending I-526 by country as of 10/2018

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

EB-5 Engagement 11/19

Regulations update (Fall 2018)

FY17 per-country I-526 data, SEC action (registration)

RC program authorization (12/7/2018)

Preparing to file I-924A Annual Certification

I-924 exemplar appeal sustained (reserves, material change)

Ombudsman on new RFE and NOID policy, visa timing, RC list updates

WA Updates, Visa Numbers, Ombudsman, RC List Updates

Policy Manual update: Geographic Area

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

Per-country limits in question?

Visa Numbers (FY2018 Q3 and conference update)

FY2018 Q2 EB-5 Form Processing Statistics

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

Constructive IIUSA response to bridge finance and other challenges

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Characteristics of Redemption Provisions
Type of Provision	Description	Impermissible Agreement?
Mandatory redemptions	Arrangements that require the new commercial enterprise to redeem all or a portion of the petitioner’s equity at a specified time or upon the occurrence of a specified event (for example, once the conditions are removed on the petitioner’s permanent resident status) and for a specified price (whether fixed or subject to a specified formula).	USCIS considers this an impermissible debt arrangement. Such impermissible obligations are not subject to the discretion of the new commercial enterprise (although it may have some discretion regarding the timing and manner in which the redemption is performed).
Options exercisable by the investor	Arrangements that grant the petitioner the option to require the new commercial enterprise to redeem all or a portion of his or her equity at a specified time or upon the occurrence of a specified event (for example, once the conditions are removed on the petitioner’s permanent resident status) and for a specified price (whether fixed or subject to a specified formula).	USCIS considers this an impermissible debt arrangement.
Option exercisable by the new commercial enterprise	A redemption agreement between the immigrant investor and the new commercial enterprise that does not provide the investor with a right to repayment. One example of such an agreement is a discretionary option held by the new commercial enterprise to repurchase investor shares. These options are typically structured similarly to options exercisable by the investor, except that the option is held and may be exercised by the new commercial enterprise. When executed, these options require an investor to sell all or a portion of his or her ownership interest back to that entity.	USCIS generally does not consider these arrangements to be impermissible debt arrangements. [Footnote: See Matter of Izummi, 22 I&N Dec. 169, 188 (Assoc. Comm. 1998). See Chang v. USCIS, 289 F.Supp.3d 177 (D.D.C. Feb. 7, 2018).] However, such an option may be impermissible if there is evidence the parties construct it in a manner that effectively converts it to a mandatory redemption or an option exercisable by the investor (considered a debt arrangement). For example, an arrangement would be impermissible if ancillary provisions or agreements obligate the new commercial enterprise to either (a) exercise the option (at a specified time, upon the occurrence of a specified event, or at the request of the investor) or (b) if it chooses not to exercise the option, liquidate the assets and refund the investor a specific amount.