EB-5 Primer

The media is still full of EB-5 stories, but many reports struggle to explain EB-5. Are we selling citizenship? Is this a cash-for-visas program? Why would a luxury project by celebrity New York developers get to benefit from immigrant investment?

Strictly speaking, EB-5 is not a visa-for-cash program but a visa-for-employment program. The “EB” in EB-5 stands for Employment Based. While some countries do sell citizenship, Congress took care to set up the US program differently. An EB-5 investor can get conditional permanent residence for making a qualifying investment that will result in creation of at least 10 jobs, and may eventually get a permanent green card if the investor sustains the investment and can go on to demonstrate that jobs were in fact created. Cash alone does not win EB-5 status.

Another distinctive feature of the US investor visa program is that it involves private sector investment, not government-sponsored or government-controlled investment opportunities. The prospective immigrant is free to choose to invest in anything from an Iowa farm to a New Jersey skyscraper, and may apply for a visa if job creation and other requirements can be met. Senator Grassley would like the EB-5 investor to chose the Iowa farm, and the investor might prefer it as well if the government bore the risk and responsibility for the choice and replaced market forces in underwriting the investment’s success. The government makes no such offer, however, and the investor is left to decide which private investment opportunity is most suitable. The government influences application of immigrant investor capital in two ways: by defining requirements for EB-5 eligibility, and by offering incentives. An eligible EB-5 investment must be at-risk investment of a certain amount in a for-profit enterprise that creates a certain number and kind of jobs, among other requirements, and the “Targeted Employment Area” incentive with reduced investment was designed to reward investment in high-unemployment and rural areas.

Some observers are concerned that the TEA incentive hasn’t functioned as intended, and that EB-5 investor capital is benefiting the wrong places and the wrong people. Others worry that the investment and job creation requirements need to be more robust to realize Congressional intent. EB-5 reform legislation targets these issues, as do proposed regulations from DHS. And to quote a White House spokesman, the administration “is evaluating wholesale reform of the EB-5 program to ensure that the program is used as intended and that investment is being spread to all areas of the country.”

For additional reading, see my post with comparison of investor immigration programs worldwide based on a Migration Policy Institute report, and my summary of TEA incentive proposals in proposed regulations and legislation (now significantly revised and expanded, and I welcome additional corrections).

EB-5 in the news (Kushner Cos in China, SEC in Idaho, visa dates, Ombudsman, RC terminations)

Now that we’ve celebrated the good news of regional center program extension to September 30, 2017, here’s some concerning news to keep in focus as well.

  • The regional center program was barely extended – just another few months added. The program desperately needs stability – preferably the stability of a permanent program, and at least the stability we used to have of three-to-five year extensions. These tiny months-long jumps reflect deferred decision-making, not necessarily votes in the program’s favor. We need Congress to take positive action on EB-5 — something it hasn’t done since 2012.
  • Big-city mega-projects are a minority of EB-5 offerings but claim a large number EB-5 investors, and their prominence in the news is not helpful when Congress and the public need to see how EB-5 is also working to help undercapitalized areas. This weekend, media from the Washington Post, the Wall Street Journal, the New York Times, and The Guardian to NPR and Vox.com are reporting hot stories from journalists who persevered in observing an EB-5 roadshow being put on in China by the Kushner Companies. It hardly matters if the backers are completely innocent of influence peddling – indeed, they ought be innocent, because everyone is likely to just assume and act on the assumption that they’re guilty, regardless of what they do or say. Prospective investors are likely to assume without being told that the Kushner EB-5 project promoters can leverage access to power at the highest level, making the offering very attractive, and EB-5 critics will be just as eager to jump to the same conclusion, making the offering very dangerous politically. Senator Grassley, Senator Leahy, and Senator Feinstein at least are going to have a field day. (Updates: Feinstein and Leahy have a letter out to the White House Counsel, Grassley has written a letter to John Kelly, Leahy, Conyers, and Lofgren have written a letter to the Kushner Companies, and the White House has started issuing statements.) Some of my relatives even called me today, questioning my involvement in EB-5 after reading the news. I’m proud of my personal experience with many small businesses that launched thanks to EB-5 investment, with investors who sacrificed to invest and have persevered on a difficult and lengthy path to US residence, and with entrepreneurs who’ve brought so much more to the US than their money. Such stories rarely make the news, however. In reviewing statistics on EB-5 filings for the Notice of Proposed Rulemaking, DHS indicated that regional center projects in FY2013-2015 included 15 investors on average, while non-regional center investments had two investors on average (NPRM footnote 58). That’s just an average, but reflects the EB-5 world I have known best. But mega-projects, though few in number, are increasingly making a big splash in a small pond. The Kushner project reportedly seeks to raise $150M from 300 investors, which means it could claim nearly 10% of available EB-5 visas for a year assuming an average of three visas per investor. The 27 mega-projects summarized by NYU researchers in a March 2016 article would use up over three years of EB-5 visa numbers by themselves, if fully funded. New York City Regional Center recently announced its 1000th I-829 approval, with permanent residence for over 2,750 individuals and conditional permanent residence for an additional 5,200 investors and family members  – nearly 8,000 visas facilitated by a single regional center. This big-fish phenomenon is something to grapple with as we contemplate the future of the EB-5 program.
  • Investors understandably gravitate to major-league capitalists when the SEC keeps showing up amateur capitalists. The SEC has announced another EB-5 case, this one involving Serofim Muroff, associated entities through which he allegedly misappropriated funds, and an administrative assistant/bookkeeper charged with facilitating the misappropriation. Here is a link to the SEC press release and complaint.  The woes of Idaho State Regional Center are not new (various lawsuits have been ongoing), but this SEC case looks distinctive to me in the way it applies securities laws to the EB-5 context, and I look forward to expert analysis.  The handful of EB-5 cases brought so far by the SEC have common themes that should be targeted by industry best practices and integrity measures in new EB-5 legislation.
  • The news from Charlie Oppenheim during the IIUSA EB-5 Washington, D.C. Conference was predictably sobering. Mr. Oppenheim anticipates that the cutoff date for China-born investors will have advanced only to June or July 2014 by the end of this fiscal year, and to September or October 2014 by the end of next fiscal year. Considering the I-526 filing surges that have happened since 2014, this trend  is not going to get prettier, absent legislation to change visa numbers. Mr. Oppenheim also noted that Vietnam could trigger the per-country limit and become subject to a cutoff date in 2019 or 2020. The small-pond phenomenon (only about 10,000 visas available annually for investors plus family members, and 7% per-country limit when the cap is reached) is another important issue for Congress to address as it contemplates the future of the EB-5 program.
  • President Trump, who has yet to exhibit any warm fuzzies to EB-5, despite what the Washington Post may suspect, has appointed a new CIS Ombudsman known for being anti-immigration generally and anti-EB-5 in particular.  My only question is whether Julie Kirchner’s probable bad intentions are any more likely to be effective than good intentions expressed by previous Ombudsman.
  • Meanwhile, USCIS continues to approve new regional centers while terminating others for failure to promote economic growth.

Regional Center List Changes
Additions to the USCIS Regional Center List, 04/17/2017 to 05/08/2017.

  • First American Redevelopment Regional Center (California)

New Terminations:

  • North American Center for Foreign Investments, LLC (California) Terminated May 1, 2017
  • Westgate Orlando Regional Center, LLC (Florida) Terminated May 1, 2017
  • New York Green Hotel Regional Center LLC (Connecticut, New Jersey, New York) Terminated May 1, 2017
  • DRC Capital Partners, LLC (Arizona) Terminated May 1, 2017
  • E&W Lake Tahoe Regional Center LLC (California) Terminated May 1, 2017
  • ACIC Management, Inc. Regional Center (Washington) Terminated May 1, 2017
  • PetroSam, LLC (Texas) Terminated May 1, 2017
  • Alaska Gold & Mining Regional Center, LLC (Alaska) Terminated April 21, 2017 Liberty West Regional Center (Arizona, California) Terminated April 19, 2017

RC reauthorization to 9/30/2017, Trump statements on reform

The regional center program is now authorized, as part of fiscal year 2017 Appropriations legislation, through September 30, 2017. Updates as they happened:

  • 5/8/2017: In the wake of RC program reauthorization and the flap over an EB-5 project being promoted by the Kushner Companies, the White House has started issuing more EB-5 statements, which I’m collecting in this document.
  • 5/5/2017: President Trump has signed the omnibus appropriations bill H.R. 244 – Senate Amendments to HIRE Vets Act [Consolidated Appropriations Act, 2017]. The text still includes clean extension of the regional center program to September 30, 2017 (Title III, Section 542).
  • 5/1/2017: House Appropriations Committee press release: Comprehensive Government Funding Bill Released. The bill text includes this magic sentence on page 734: “SEC. 542. Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note) shall be applied by substituting ‘‘September 30, 2017’’ for ‘‘September 30, 2015’’. If passed, this will give simple extension of the Regional Center program authorization for the reminder of the fiscal year, with no other EB-5 program changes. (Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (Public Law 102-395) established the regional center program, page 47.)  Even assuming the bill will pass as-is, this is not time to relax. Congress could still come out with new independent EB-5 legislation at any time — nothing says they have to wait til the last reauthorization minute to act. Senator Cornyn’s office circulated a new discussion draft of EB-5 legislation just this morning. I’ve entered summary details in my bill comparison chart,   and will add link to the full text as soon as someone posts the draft publicly.
  • 4/28/2017: H.J.Res. 99 – Joint Resolution making further continuing appropriations for fiscal year 2017, and for other purposes has been passed and signed into law, extending government funding and other provisions of Public Law 114–223 (including the regional center program) to May 5, 2017.
  • 4/27/2017: For the first time, I’ve noticed a statement from the Trump administration on EB-5. Washington Post says,
      • The White House issued a statement to The Washington Post this week saying that the Trump administration is weighing changes to the foreign investor visa program. “There are serious concerns held by the administration regarding the EB-5 visa program, in part because it is not being used as it was primarily intended,” said Michael Short, a White House spokesman. “The administration is continuing to evaluate reforms to the program, which we believe is in need of substantial repair.”

    (Update: additional statements linked above at the 5/8/2017 bullet point.)

  • 4/26/2017: House Appropriations Committee Press Release: “House Appropriations Chairman Rodney Frelinghuysen today introduced a short-term Continuing Resolution (CR) (H.J.Res. 99) to continue funding for federal programs and services until May 5, 2017. …The legislation continues policy and funding provisions included in currently enacted fiscal year 2016 Appropriations legislation.” Here is the text of the CR. It’s set for vote on 4/28.

As a reminder, the history of recent regional center program reauthorizations:

  • 12/10/2016 – RC program is extended unchanged to 04/28/2017 as part of a continuing appropriations act (PL 114-254)
  • 9/29/2016 – RC program is extended unchanged to 12/09/2016 as part of a continuing appropriations act (PL 114-223)
  • 12/8/2015 – RC program is extended unchanged to 9/30/2016 as part of an appropriations act (PL 114-113)
  • 9/30/2015 – RC program is extended unchanged to 12/11/2015 as part of a continuing appropriations act (PL 114-53)
  • 9/28/2012 – RC program is extended (with one small change) to 9/30/2015 as part of immigration-related legislation (PL 112-176)

I-924 Webinar, Amendment Requirements

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

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

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

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

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

Sincerely,
USCIS Public Engagement

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

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

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

Goodlatte statement; IIUSA TEA Analysis

Two important new press releases:

  1. House Judiciary Committee Chairman Bob Goodlatte announces on behalf of House and Senate Judiciary Committee members that “Lawmakers Remain Committed to Good-Faith Talks to Reform Investor Visa Program Ahead of Expiration” (April 19, 2017)
  2. IIUSA announces First-Ever Comparative Analysis Report on EB-5 TEA Policy Reform (April 20, 2017). This very valuable report and mapping tool  takes a comprehensive look at the impact the different TEA policy proposals would have on the EB-5 Regional Center program at both a national and state-by-state level. For those of you who downloaded my TEA summary earlier, note that I erred in providing a link to an NMTC mapping tool based on old data. You should look instead at the IIUSA interactive mapping tool, which uses the dataset that would actually be required to determine TEA qualification under new proposals.

Meanwhile, a 4/19 post by Miller Mayer reports on a version of EB-5 reform legislation that I haven’t even seen, though Miller Mayer says “all major EB-5 industry representatives have agreed to this tentative compromise.”

Washington Updates (new draft bill), New Form I-526, RC list updates

Washington Updates
It’s still not clear what will happen in the next couple weeks before the next regional center program sunset date on April 28, and whether we’re likely to see EB-5 program changes first from legislation or from new regulations. In an advocacy update sent to members last week, IIUSA noted that the appropriations package to fund the government past April 28 is likely to be larger than a continuing resolution. Thus it could be a vehicle for EB-5 legislative reform, were any reform proposals ready. Right now there are three active bills – two that would terminate EB-5 entirely, and Rand Paul’s rosy wish list of improvements. Yesterday EB-5 Insights reported that the Senate Legislative Council is circulating another staff discussion draft of EB-5 reform legislation, and speculates that the RC program may get a short-term extension of a few weeks (with government funding) while Congress works out other appropriations details. I’ve added the staff draft dated 4/15/2017 to my Bill Comparison Table and updated my TEA Incentive Summary for reference. (5/11/2017 update: I’ve now revised the TEA Incentive Summary.) The new draft is basically the same document (with a few changes) as the 12/2/2016 staff discussion draft, which in turn was based on the Goodlatte/Conyers legislation from 09/2016. We shall see whether it goes anywhere this time around.

New Form I-526
There’s a new edition of the Form I-526, which everyone must use starting June 9, 2017. Wolfsdorf Rosenthal and EB-5 Insights discuss what’s new in this version of the form.

Petition Processing
The new IPO processing times report does not look good, with the “processing petitions as of date” date having regressed for every category (back almost a week for I-829, back nearly 3 weeks for I-526, and back nearly 5 weeks for I-924). If you’re new to this blog, here’s a link to a post with everything I know about interpreting processing time reports.
Also, a sharp-eyed reader pointed out to me that the number of pending I-526 petitions that USCIS reports every year does not, as one would expect, equal the number of pending petitions at previous year-end plus current-year receipts minus current-year approvals and denials. (The quarterly numbers don’t add up either.) Anyone know why this is so? If not, I’m submitting a question for the next stakeholder meeting.

Regional Center List Changes
Additions to the USCIS Regional Center List, 04/03/2017 to 04/17/2017

  • Atlas Regional Center, LLC (California)
  • Hawaiian Palms Regional Center (Hawaii)
  • Hope Investment Regional Center (California)
  • Washington Free Life (Washington)

New Terminations

  • Leaf Fischer Investment Group, LLC (Florida) Terminated 3/6/2017
  • Idaho Global Investment Center, LLC (Idaho) Terminated 3/6/2017
  • FreeMind Films Regional Center (California) Terminated 3/15/2017
  • Green Card Gateway Regional Center (Illinois) Terminated 3/30/2017
  • Florida Gateway Regional Center, LLC (Florida) Terminated 4/12/2017

Preventing fraud in EB-5 (CIIF investigation)

In his testimony before the House Judiciary Committee in February 2016, Investor Program Office Chief Nicholas Colucci discussed how much USCIS has done to improve its administration of the EB-5 program, with particular focus on adding resources to prevent the kind of fraud and abuse that can come with investment and immigration.

Over the past few years, USCIS has taken a number of steps to improve the administration of the EB-5 program. In 2013, USCIS realigned the EB-5 program into the Immigrant Investor Program Office, and relocated it from USCIS’ California Service Center, which adjudicates various immigration benefits, to Washington, D.C., with a Chief dedicated exclusively to EB-5 adjudications. As the United States Government Accountability Office (GAO) noted in its August 2015 report to Congressional requesters on the EB-5 program, this move was part of a restructuring to help USCIS better detect fraud. USCIS also created a Fraud Detection and National Security EB-5 Division (FDNS EB-5) and embedded its personnel within IPO to work alongside adjudications officers. Additionally, a dedicated team of attorneys from the USCIS Office of Chief Counsel advise on program-related legal matters. In staffing the IPO, USCIS has, and continues to invest in the specialties needed to manage the complex EB-5 caseload by hiring staff with expertise in economics, law, business, finance, securities and banking to review cases and to enhance consistency, timeliness, and integrity within the program….
USCIS has taken its responsibility to administer the EB-5 program very earnestly, through its specialized staffing devoted solely to this program and its extensive efforts to regulate the quickly growing regional center program. However, no agency can do this alone. The EB-5 program necessitates collaboration with several other agencies, and the establishment of IPO in Washington, D.C. allows USCIS to work closely with partners such as the U.S. Securities and Exchange Commission (SEC), with whom IPO shares a robust collaborative relationship. USCIS also works closely with its sister agency, U.S. Immigration and Customs Enforcement (ICE), as well as with the Federal Bureau of Investigation (FBI) and the U.S. Department of State, in support of our oversight of the EB-5 program.

Improvements have covered staffing, inter-agency collaborations, and improved processes for important functions such as vetting lawful source of investor funds (as further explained in follow-up testimony — see especially Question 15 in response to Senator Grassley and Question 5 in response to Dianne Feinstein.)

This week’s breaking news story Feds raid San Gabriel, Arcadia locations over visa-fraud scheme involving criminals on China’s most-wanted list reminds us why those improvements were so important. The case, as described in an Application for Search Warrant filed by an FBI investigator, indicates that USCIS approved I-526 petitions from 2009 to 2012 that (if FBI evidence is correct) should never have been approved — including cases that involved people who did not invest their own funds, people who were promptly refunded their investments, and three individuals listed on China’s most wanted list for financial crimes. The good news is that the net since 2013 seems to be holding. The warrant does not indicate that any investors named in the investigation have been able to to get permanent green cards (though several have had I-829 petitions on file since 2012, possibly pending this FBI investigation which seems to have started in 2013), and the post-2013 I-526 petitions discussed in the warrant are likewise pending. The investigation stands as evidence that people may try to get away with fraud and abuse — but not that they get away with it. Investors who may have been complicit have not successfully completed the immigration process, and the regional center principals have had the FBI at their heels (sometimes literally: “at approximately 11:13 a.m., observed TAT exit SUBJECT PREMISES #2’s front door and walk across the street, after which he talked to a gardener, and then returned and entered SP#2. At 11:45 a.m. observed TAT exit SP#2 and go to the mailbox in front of the residence and retrieve mail. At 12:13 p.m. observed TAT walking from SP#2 carrying a black-colored briefcase-sized soft bag in his hands. TAT then walked across the street.”) and are now facing formal fraud investigation. Dozens of good faith investors in CIIF offerings and anyone with CIIF who’s innocent of fraud are unfortunate collateral damage, and I wish for their sake that the FBI had worked more quickly. (Update: Some investors have filed suit in civil court to try to get their money back, and Federal Prosecutors have filed civil complaints seeking asset forfeiture.)

FY2017 Q1 EB-5 Petition Processing Statistics

The USCIS Immigration and Citizenship Data page has been updated with numbers for I-526 and I-829 petitions received and processed in October to December 2016. The numbers show another dramatic improvement in I-526 processing, continuing free-fall in I-829 processing, and another unnatural surge in I-526 receipts. Denial rates remain low. When IPO previewed these numbers in the last stakeholder meeting, they said that I-829 adjudications will improve going forward with a new I-829 team.

I’ve updated my summary charts with the FY2017 Q1 numbers, and also added a new chart pointing out how I-526 filing trends coincide with regional center program sunset dates. Legislators and USCIS have tended to speak as if recent EB-5 investor numbers reflect sustainable trends based on surging interest in the EB-5 program (and/or underpricing or aggressive marketing). My experience and what I read indicates that the surges are rather fueled by uncertainty about program changes, such that people who would otherwise have considered EB-5 years in the future are hustling all at once to make investments now while the program is still viable. That kind of demand is not sustainable. In fact it means that all else being equal we’ll see fewer investments in the future, because tomorrow’s demand is being pulled into today (and tomorrow’s visas are being claimed today). The increasing supply of EB-5 investment opportunities (particularly from a few mega-projects, the subject of a forthcoming post) play a role in the surges and backlog, but most of all I blame Congress for keeping the regional center program on edge by repeatedly promising and failing to act on EB-5.

4/26 USCIS Webinar on I-924

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

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

Dear Stakeholder,

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

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

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

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

To Register:

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

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

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

We look forward to engaging with you!

Washington updates, articles, RC list updates

Washington Updates

  • Legislation: Another piece of EB-5 legislation has been thrown into the ring – this one from Rand Paul: S.727 Invest in Our Communities Act. Dianne Feinstein made an extreme bargaining statement with S.232, which threatens to eliminate the EB-5 program entirely, and Rand Paul’s bill takes the opposite pole – offering to make the regional center program permanent with more visas for everyone, better processing times, more investor protections, reasonably limited integrity measures, and no changes to the investment amount or Targeted Employment Area incentive. I’ve entered S.727 in my bill comparison chart, but I guess it lacks sufficient compromise to gain traction (and the similar S.2122 from Mr. Paul in 2015 didn’t go anywhere) . I can’t guess what will happen between now and April 28, but am following what The Hill has to say about prospects for a continuing resolution or omnibus spending bill. UPDATE: An April 6, 2017 letter from Senators/Representatives Grassley, Leahy, Conyers, Goodlatte, and Feinstein encourages Congressional leadership not to extend the RC program on April 28 unless accompanied by reforms. (Then why don’t any of these people introduce reform legislation??)
  • Regulations: Recall the April 11 deadline if you want to comment on USCIS proposed EB-5 regulations USCIS 2016-0006 and USCIS-2016-0008. So far, 0006 (with proposed TEA and investment amount changes) has 54 comments and 0008 (the advance notice requesting feedback on regional center designation issues) just 11 comments.

Other Resources

  • Wolfsdorf Rosenthal and EB-5 Insights have posts about a new kind of source of funds RFE that requests SOF evidence for people transfering funds on behalf of an EB-5 investor.
  • Carolyn Lee of Miller Mayer discusses the newly-unveiled regional center compliance audit program.
  • A journalist called to ask me for the story behind the surge of regional center terminations in 2015 and 2016. In case anyone else is interested in this topic, here are the sources I sent him.

RC List
Additions to the USCIS Regional Center List, 03/01/2017 to 04/03/2017:

  • Coastline Regional Center (Washington)
  • Extell Utah Regional Center (Utah): eb5extell.com
  • Mainsail Florida Regional Center (Florida)

Removed from the list of terminated RCs, and restored to the list of approved RCs:

  • South Dakota International Business Institute (SDIBI) (South Dakota)

New Terminations:

  • San Gabriel Valley Regional Center (California) Terminated 3/15/2017
  • Washington Center for Foreign Investment, LLC (Maryland) Terminated 3/28/2017

By the way I work hard to keep my blog Regional Center List complete and consistent with information from USCIS, but the task is not easy and I welcome regional centers to correct my information.

Washington updates, RC termination appeal, SEC (WA), Petition processing

Washington Updates

The comment period for proposed EB-5 regulations closes on April 11, and the regional center program’s current authorization expires on April 28. Either of those immanent deadlines could be associated with significant EB-5 program changes, but I’m not hearing any confident predictions for what will happen exactly. Last week Senators Grassley and Leahy wrote a letter reacting against news that a couple lobbyists for large real estate developers may have recently agreed to “secret backroom deals to thwart reforms.” The senators promised to oppose any such deal, which would presumably protect investment amounts and TEA definitions from significant change, but have yet to  reintroduce substantial EB-5 reform legislation of their own.  And Congress has so much to do in the next month that one wonders whether our representatives can even agree on a plan to fund the government beyond April 28, much less figure out EB-5 changes. For other commentary on state of play in Washington, see for example posts from IIUSA and Wolfsdorf Law. (This is probably too unserious to even mention, but Representative Steve King of “other people’s babies” fame has introduced another bill, H.R.1502, proposing to repeal the EB-5 program entirely. I don’t see this particular bill going anywhere, not least because terrorist threats may be the one problem EB-5 does not have.)

Appealing Regional Center Termination

Matter of S-D-R-C-, ID# 13768 (AAO Mar. 15, 2017) considers the question of whether or how USCIS would be justified in terminating South Dakota International Business Institute  — a regional center that on the one hand has had many successful projects and contributed significantly to economic growth over the years, and on the other hand was – for a number of years, though not currently – in the hands of management charged with various improper activities. The AAO concludes, after interesting discussion deserving industry attention and response: “Evidence of a regional center’s improper or unlawful activities is relevant to the question of whether that center is continuing to promote economic growth, but derogatory evidence must be weighed against countervailing equities on a case-by-case basis. This case contains evidence of the diversion of funds away from job-creating activities, as well as evidence of substantial economic activity that created thousands of jobs. USCIS must consider all relevant factors in determining whether the Applicant’s regional center designation should be terminated or maintained.” AAO withdrew USCIS’s termination decision and remands the matter for further proceedings.

Challenging Capricious Decision-making

Mr. Whalen also posted a decision on the Quartzburg Gold case that I discussed last summer. The court denies part of the plaintiffs’ motion, but grants the plaintiffs’ charge that USCIS was arbitrary and capricious in its decision-making. “First, the reasoning underlying USCIS’s denial of an initial set of Plaintiffs’ petitions was arbitrary and capricious and counter to the evidence before USCIS. Second, USCIS’s decision to treat the petitions of certain Plaintiffs differently than others, despite the fact that all of the Plaintiffs presented effectively equivalent petitions, without providing any explanation for doing so, was also arbitrary and capricious.”

Litigation

The SEC has announced fraud charges against Washington-based businessman Andy Shin Fong Chen and his company Aero Space Port International Group, Inc. The complaint has the usual allegations regarding misappropriation of EB-5 investor funds, and is distinctive in targeting just one of the regional center’s several offerings. The RC response argues that the EB-5 investments are not securities (SEC begs to differ), and points out that the investors involved still support the project and its management (unsurprisingly, considering that they have I-526 petitions pending). I haven’t had time to fill out details in my log of SEC EB-5 cases, but hope someone else will publish an exercise like this to highlight common themes.  In an article published today in The Hill, Catherine DeBono Holmes discusses reforms that could help reduce or eliminate the factors that keep repeating in the scattered cases of alleged fraud in EB-5.

I-526 Petition Processing

The EB-5 Insights blog reports that that IPO seems to be implementing an undeclared policy of holding I-526 petitions in abeyance when an Exemplar I-924 Petition associated with the same new commercial enterprise has been filed. For reference, here is my running log of communications from USCIS regarding EB-5 petition processing practices and times. My EB-5 discussion forum is still open for investors to discuss their experience and progress of the cases they are tracking.

RC compliance audits

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

Dear Stakeholder,

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

For example, the audit team:

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

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

Sincerely,

USCIS Public Engagement

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

 

FY2016 EB-5 Visas Stats by Country

The US State Department Report of the Visa Office 2016 has been updated with Table V (Part 3), which gives a breakdown of all EB visas issued by country in fiscal year 2016. I’ve updated my chart with the EB-5 visa numbers. I’m interested to note the growing number of visas based on direct EB-5 investment (8.5% of the total visas versus 1.6% the previous year), the distribution of TEA investments (99.9% of regional center investments but 68% of direct investments), the growing number of visas going to investors from outside mainland China (24% versus 17% the previous year), and the growing national diversity of EB-5 investors. South Korea and Brazil each claimed over a hundred more EB-5 visas in FY16 than FY15, and five new countries entered the list of those with more than 20 visas each: Germany, Argentina, Colombia, Singapore, and Italy. Considering processing times and the visa backlog, these trends likely reflect EB-5 investments made/I-526 petitions filed in 2014 and earlier. (UPDATE: IIUSA has data on I-526 filings by country in 2016, and you can see additional detail in my post on Q3 2017 petition filings.)

For reference, here are links to my posts with summary charts of 2014 visa numbers by country and 2015 visa numbers by country.

3/8 House EB-5 Hearing (TEA & Investment Amounts)

Today’s House Judiciary Committee hearing on The Department of Homeland Security’s Proposed Regulations Reforming the Investor Visa Program focused on changes to the EB-5 investment amount and TEA incentive proposed by USCIS in its Notice of Proposed Rule-making EB-5 Investor Program Modernization (DHS Docket No. USCIS 2016-0006).

The hearing opened with statements from the Congressmen responsible for two of last year’s reform bills – Senators Grassley and Leahy, and Representatives Goodlatte and Conyers. All four expressed support for USCIS’s proposed EB-5 regulations, though Leahy and Conyers also argued that there’s no substitute for a legislative solution. Leahy said that he and Grassley will soon reintroduce their reform legislation (an interesting development); Goodlatte and Conyers did not say anything about sponsoring legislation. All four made almost the same points as in last year’s House and Senate hearings, but sounded a darker note this year – turning “mend it or end it” from a question into a threat. Representatives Sensenbrenner and Lofgren followed with relatively positive statements, listing EB-5 successes and contributions, but both agreed on the need for modernization (higher investment amounts) and reform (TEA adjustments). The Committee then heard testimony from and questioned a panel including the GAO (recapping its Sept. 2016 study on TEA use in EB-5), regional center operators (ably represented by Angelique Brunner and Sam Walls III), an organization that specializes in property revitalization and blight prevention, and an anti-immigration activist. Oddly, USCIS was not represented. (Speaking of which, Colucci’s reponses for the record from last year’s Senate hearing are worth reviewing.)

I don’t have time report on all the details (you can watch the video and read the testimony), but conclude with a few general impressions. Not one of the Representatives who spoke opined that EB-5 is just fine the way it is – all expressed at least one concern, and sounded ready to support mending (if not ending) the RC program.Likewise, no one on the Committee side advocated for canceling the proposed Obama-era regulations – the only question was whether Congress should take back the policy-making ball and act first.  I heard little sympathy for the industry position that USCIS’s proposed investment amounts are too high and its proposed TEA incentive too restrictive. (Lofgren (D-CA) and Nadler (D-NY) spoke out for qualifications considering the urban context and investor demand, Goodlatte noted that he’d been willing to accept less drastic proposals, and Brunner advocated for market-based alternatives.) Goodlatte and Lofgren both raised the specter of retroactivity, which they didn’t call “changing the rules of the game midstream and thus derailing thousands of good-faith investors and projects and job creation” but rather “implementing reform now, instead of postponing it 7-8 years until the backlog is through the system (while not blaming ourselves for the legislative lollygagging that spurred the surges/backlogs)” Even David North was taken aback by the suggestion that Congress could impose a retroactive new investment amount, but apparently Mr. Goodlatte still hasn’t been shown how disastrous and counterproductive such a move would be.  What are you doing, industry advocates, besides earning a bad reputation for obstruction?  This hearing also suggested that Congress isn’t being informed about direct EB-5, and hasn’t considered the impact of investment amount, TEA, and job allocation changes outside the regional center context. Generally, I came away from the hearing with a sense that the House Judiciary Committee agrees about the need for some EB-5 program changes, recognizes program benefits but is more angry than before about flaws, and has progressed little since last year toward refining or agreeing about specific proposals for change.  (However a lobbyist speaking to The Real Deal pointed out that the hearing was not well attended by Judiciary Committee members, so the views expressed may not be representative.) There’s reportedly EB-5 reform legislation cooking behind the scenes, but we didn’t get any preview at this hearing, and the clock to the next regional center program sunset date on April 28 is ticking loudly.

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

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

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

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

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

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

Washington updates

The article Will EB-5 Survive? (February 23, 2017) in National Real Estate Investor reviews the current status of EB-5 politics.

[See also my more recent post on the 3/8 House Judiciary Committee hearing.]

USCIS EB-5 Training Materials (April 2015)

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

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

Articles (Project Oversight, Redeployment, TEA Changes), RC list changes

EB-5 Articles

What to do if you suspect your EB-5 project is in trouble (February 17, 2017) by Catherine DeBono Holmes, Esq., Daniel B Lundy, Esq. and Jeffrey E. Brandlin, CPA, CIRA, CFF
This article gives practical advice for managers and investors in EB-5 investment funds. It offers a checklist of warning signs that an EB-5 project may be in trouble, defines a role for a construction monitor/accountant and lists tasks that person should accomplish, describes monitoring systems that should be in place, suggests steps for investors to take if they are not satisfied with monitoring and reporting, and begins to address the question of what EB-5 investors should do in case of a fraud enforcement action. I particularly recommend this article to EB-5 investors, as a reminder of what they can demand and what they should do after investment. EB-5 managers are not necessarily motivated to meet a high and expensive standard for oversight (a manager affiliated with the project owner may not see the need, an unaffiliated manager may prefer to keep at arms length from the project, and the odd bad actor lives on opacity). EB-5 investors, however, certainly benefit from exercising their rights to active and on-going due diligence. People drafting EB-5 legislation and regulations may also be interested in this article, as they consider appropriate requirements for EB-5 managers.

Standards and Guidelines for Redeployment of EB-5 Investment Funds – A White Paper (February 21, 2017) by Klasko Immigration Law Partners, LLP, Arnstein & Lehr LLP, Jeffer Mangels Butler & Mitchell LLP
This article steps into the grey area that USCIS has left by failing to finalize or replace its DRAFT guidance on the Job Creation Requirement and Sustainment of the Investment for EB-5 Adjudication of Form I-526 and Form I-829 (8/10/1015). At issue is the question of what EB-5 enterprises can do with EB-5 money considering that (1) an EB-5 investor’s funds are required to remain at risk in the enterprise throughout the investor’s conditional residence period, (2) visa backlogs mean that the investor might not be reaching the I-829 stage until up to 10 or more years following the initial investment, and (3) most EB-5 deals involve loans due to be repaid to the enterprise in less than 10 years. The draft guidance memo suggested that “to the extent that all or some portion of the new commercial enterprise’s claim against the job-creating entity is repaid to the new commercial enterprise during the sustainment period, the new commercial enterprise must continue to deploy such repaid capital in an ‘at risk’ activity for the remainder of the sustainment period” and “the capital will not be considered ‘at risk’ if it is merely being held in the new commercial enterprise’s bank account or an escrow account during the sustainment period.” Although this suggestion is questionable, and not final policy, it’s the only indication we have of USCIS’s thinking, and the authors of the above-linked article suggest practical ways to satisfy that standard for sustained investment. The authors explain why investment in publicly-traded or privately-held securities or real estate investment should comply with the “at risk” requirement, and they suggest guidelines for making such investments in a manner that complies with Federal securities laws and state law fiduciary obligations.

EB-5 Proposed Regulations: A Missed Opportunity, Next Steps for Reform (Rev. 2/14/17) by NYU Scholar-in-Residence Gary Friedland, Esq. and Professor Jeanne Calderon, Esq.
In this article, the authors once again address the sticky issue of EB-5 Targeted Employment Areas from an academic rather than industry perspective. They discuss TEA changes in proposed regulations and proposed legislation with reference to their database of EB-5 projects, which is dominated by the kind of large big-city projects that make poster children for TEA reformers. The EB-5 industry will not join the authors in lamenting that the draconian proposed regulations appear doomed by timing, but it should account for and consider effective response to the evidence that the authors present in support of TEA reform.

Regional Center List Changes
Additions to the USCIS Regional Center List, 02/04/2017 to 02/22/2017

  • Invest Guam Regional Center (Guam)
  • Universal Regional Center (California)
  • Discovery Northeast, LLC (New Jersey, New York, Pennsylvania)
  • Star EB5 Group (Connecticut, Delaware, New Jersey, New York, Pennsylvania)

Understanding USCIS Processing Time Reports–Updated

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

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

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

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

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

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

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

 

Further Discussion

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

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

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

S.232 Update, SEC & Attorneys, RC list changes

S.232 Update
Senator Feinstein and Senator Grassley have finally published text for and issued a joint press release on the long-shot S.232 – A bill to terminate the EB-5 Visa Program. The statement from Senator Grassley clarifies what this piece of legislation is really about: “For years, I’ve worked with bipartisan colleagues in good faith to reform it. Unfortunately, despite its many flaws, EB-5 proponents are apparently content with the status quo, and that’s unacceptable. I was hoping that it would not come to this point, but absent serious efforts to bring about reforms, we need to take the necessary steps to wind down the program and completely mitigate fraud, abuse and threats to our security.” S.232 expresses frustration at the progress of EB-5 legislation and makes a hardball negotiating statement: “if you don’t respond to my concerns, here’s what could happen.” The proposal to eliminate EB-5 entirely must be too drastic to gain much support or pass into law, but we should still take the frustration seriously. I can understand why EB-5 industry advocates in Washington DC would settle on a “protect the status quo” platform, that being the path of least resistance to industry consensus, but we cannot afford a reputation for being unserious about reform. We should address each of the concerns that Feinstein and Grassley raise in their press release. We can clarify points that are factually wrong (EB-5 is not green card sale and does not avoid waiting lines, as Feinstein assumes), respond constructively to valid concerns (for example support effective protections in response to past instances of fraud, address questions raised by GAO and Commerce studies on job counts), and have the leadership to offer some considered concessions on the fundamentally divisive issues (such how the targeted employment area incentive should be used, what investment amounts should be). We must not leave oxygen for S.232, or give it excuse to become anything more than a negotiating threat.

SEC Issues for Attorneys
IIUSA has reposted 10 Observations from Reviewing Evidence in an SEC Civil Enforcement Action, an article with good advice for attorneys based on the author’s review of documentary evidence in a civil enforcement action brought by the SEC against an attorney for taking commissions as an unregistered broker-dealer.

RC List Changes
Additions to the USCIS Regional Center List, 12/06/2016 to 02/04/2017

  • Health and Welfare EB-5 Regional Center, LLC (New Jersey, Pennsylvania)

Additions to the list of Terminated Regional Centers:

  • Medical Investment in Texas Regional Center (Texas) Terminated 1/23/2017
  • Pacific Proton Therapy Regional Center, LLC (California) Terminated 1/26/2017