EB-5 Updates

New Policy on RFE and NOID

USCIS has just published a new policy memorandum about Requests for Evidence and Notices of Intent to Deny. And it’s wonderful! It seeks to clarify the role of RFE and NOID in all adjudications, not only for EB-5 petitions and applications, but oh how we need this memo in EB-5. I’m quoting much of the memo below because it’s just so clear and rational and encouraging. Listen up, EB-5 team! This is how you adjudicate cases! We appreciate your expertise, but you weren’t hired just to wield theories and scattershot questions until applicants have validated every detail for you beyond a reasonable doubt. You are immigration service officers now. Your job is understand the legal eligibility requirements and review standard that apply to EB-5 cases, and to review evidence accordingly. (PS, Mr. Renaud, don’t you think it would be wise to include at least some people with legal education among your new EB-5 hires? We suffered in 2012 from multiple RFEs fueled by economists who were conscientious about details but seemed to have little sense of the process and standards for adjudication. We need the new EB-5 team in Washington DC to be staffed by people with the skills to understand and apply the general principles articulated in this memo.)

quoted from 6/3/2013 Policy Memorandum on Requests for Evidence and Notices of Intent to Deny
A. General Principles: RFEs and NOIDs
The guidance articulated under this heading is generally applicable. However, there may be special circumstances where the general principles do not apply. In such instances, there will be accompanying special instructions that will provide alternate guidance. In the absence of special instructions, officers must follow these general principles.

In each case, officers must:
• Understand the specific elements required to demonstrate eligibility for the particular application, petition, or request.
• Understand the standard of proof that applies to the particular application, petition, or request. In most instances, the individual has the standard of proving eligibility by a preponderance of the evidence. Under that standard, the individual must prove it is more likely than not that each of the required elements has been met.
• Review all the evidence to determine whether each of the essential elements has been satisfied by the applicable standard of proof. Fraud and national security concerns should be vetted pursuant to FDNS and CARRP protocols.

If all the essential elements have been satisfied by the applicable standard of proof, including any additional requirement to establish that the individual warrants a favorable exercise of discretion, the officer shall approve the application, petition, or request without issuance of an RFE. 8 CFR 103.2(b)(8)(i).

If the totality of the evidence submitted does not meet the applicable standard of proof, and the adjudicator determines that there is no possibility that additional information or explanation will cure the deficiency, then the adjudicator shall issue a denial.

RFEs. If not all of the required initial evidence has been submitted or the officer determines that the totality of the evidence submitted does not meet the applicable standard of proof, the officer should issue an RFE unless he or she determines there is no possibility that additional evidence available to the individual might cure the deficiency.

NOIDs. The issuance of a NOID is required as described under AFM Chapter 10.5(a)(3). A NOID is required before denying any immigration benefit requests submitted on the following forms:
• Form I-800A (relating to adoptions) based on a mandatory denial ground in 8 CFR 204.309(a);
• Form I-800 based on a mandatory denial ground in 8 CFR 204.309(b); or
• Form I-485 filed by a physician under 8 CFR 245.18(i) because the physician failed to comply with the conditions attached to his or her National Interest Waiver.
A NOID is also required when derogatory information is uncovered during the course of the adjudication that is not known to the individual, according to 8 CFR 103.2(b)(16).
The issuance of a NOID is also appropriate in the following circumstances:
• There is little or no evidence submitted (e.g., a “skeletal filing”); or
• The individual has met the threshold eligibility requirements for the requested benefit or action, but has not established that he or she warrants a favorable exercise of discretion (where there is also a discretionary component to the adjudication).

B. Additional Considerations
In some cases, particularly where the response to an RFE opens up new lines of inquiry, a follow-up RFE might prove necessary. However, officers must include in a single RFE all the additional evidence they anticipate having to request. The officer’s careful consideration of all the apparent gaps in the evidence will minimize the need for multiple RFEs.

Tenant Occupancy Saga Continues (NOID Chapter)

The 12/20/2012 Guidance Memo from USCIS on “Operational Guidance for EB-5 Cases Involving Tenant-Occupancy” offered to give closure about when/how it’s possible to attribute tenant jobs to an EB-5 investment in real estate development. But now the California Service Center is issuing notices that suggest additional concerns and remaining questions.

Possibly mirroring the flood of “tenant occupancy Requests for Evidence” (RFE) from February 2012, we’re now seeing tenant occupancy Notices of Intent to Deny (NOID). This week I’ve read two very similar NOID both dated 4/30/2013, and heard of more. (Anyone else have examples to show? Anyone by chance get an approval for a case involving tenant occupancy? Thank you John Anderson for sharing your experience in your comment to this blog entry.)

The RFEs issued in February last year gave I-924 applicants a choice: 1) give up trying to count tenant jobs, or 2) jump through some hoops, and maybe your tenant occupancy proposal can be accepted as reasonable. Most applicants that I know who received one of those RFEs simply gave up claiming tenant jobs (though the practice had long been a staple of the EB-5 program), but a few tried to jump the hoops. They filed RFE responses in April and May 2012 with evidence demonstrating constraint on the supply of appropriate commercial space and excess demand for such space, arguments for nexus between construction investment and tenant job creation, and strategies for how tenant jobs would be assessed as new or relocated. And then those applicants waited.

Now this week, a year after the RFE responses, and four months after USCIS published the operational guidance memo, I see NOID that give a familiar ultimatum: 1) give up trying to count tenant jobs, or 2) jump through more hoops, and maybe your tenant occupancy proposal can be accepted as reasonable. The hoops in the NOIDs that I’ve read so far (issued on cases that tried to make a facilitation argument) are not quite the same as those in the 2/2012 RFE or in the 12/2012 Guidance Memo from USCIS. It’s not even obvious that the NOID writers are aware of the Guidance Memo — the NOIDs in front of me don’t reference the Memo, and sometimes contradict it. For example:

• The Memo states that, in principle, “tenant-occupancy methodology can satisfy the EB-5 program requirement of presenting a ‘reasonable methodology’ that is ‘supported by economically or statistically valid forecasting tools.’” An NOID before me indicates that an economic model input corresponding to the unrelated tenants of commercial space is per se unacceptable, even if the method for quantifying the tenant jobs is transparent and up-to date.
• The Memo says that applicants relying on a facilitation-based approach (showing removal of a market-based constraint) do not need to also show capital investment in the tenant business. An NOID before me states that the applicant using a facilitation-based approach must also show significant capital investment in tenant businesses.
• The Memo states that the applicant may show facilitation of tenant jobs by the EB-5 enterprise through demonstrating constraint on the supply of appropriate commercial space or of excess demand for such space. The NOIDs before me grant that the applicant has demonstrated constrained supply/excess demand for particular commercial space, but go on to require the applicant to show unmet demand and/or limited supply for the services to be offered by the tenant businesses, and to show that the tenant jobs would not have been created in the absence of construction activity.
• The Memo allows for identifying tenants by industry category at the I-924 stage (rather than identifying specific tenants), and allows for the possibility that leasing plans (and the particular assumptions used as an input to the economic model) may change between I-924 and I-526. The NOIDs before me do not accept analysis based on market trends and potential tenant types identified by four-digit NAICS industry category, but rather ask the I-924 to provide evidence and demonstrations regarding “specific tenant businesses.”

Here’s the message that I get from these NOIDs. I-924 Applicant: “Can I use the previously-accepted EB-5 practice of foreseeing tenant jobs among the impacts of my real estate development?” USCIS: “Sure. You just need to identify and analyze actual businesses likely to become tenants in your future/hypothetical development while also demonstrating that these currently-identifiable prospective tenants won’t (and couldn’t) be in business until some point in the future when you’re finally approved and can go ahead with a real project.”

But maybe I exaggerate. For reference, here is a portion of the common (non-case-specific) language shared by the 4/30/2013 NOIDs that I’ve seen. (The case-specific commentary in the NOIDs is more revealing, and at points contradicts even this language, but is not mine to share.) I wonder if these repeated words reflect the CSC’s own Operational Guidance for EB-5 Cases Involving Tenant Occupancy.

Quoted from 4/30/2013 Notices of Intent to Deny I-924 Applications

USCIS is willing to consider counting the jobs created by tenants occupying the commercial space built by the EB-5 capital as indirect jobs.  However, there are three issues of concern to USCIS in counting tenant jobs as indirect jobs which require additional justification when reviewing Regional Center project proposals. First, there is a concern that the tenants will not be there to lease the space when the construction project is finished. That is, there is concern that once a shopping mall or office building is finished, the space will be largely vacant. Second, the counting of tenant jobs relies on the assumption that these jobs are not simply jobs relocated from commercial space somewhere else. Third, the estimated number of tenant jobs for the commercial space must be supported by a detailed, verifiable, and transparent methodology that estimates industry-specific tenant employment levels.

Thus, to count tenant jobs for job creation purposes, the RC must establish by a preponderance of the evidence that these newly created jobs would not have been created in the geographical region but for construction of the project. The evidence currently presented in your application is insufficient to show that the space supplied by the EB-5 development capital is more likely than not to be occupied by tenants, that the tenant jobs are not merely relocated, and that the estimated number of tenant jobs to be created is probably true.

The applicant has two options:

1. To remove tenant jobs from the job creation counts, or
2. To submit additional evidence that shows that it is more likely than not that the tenants will be there to occupy the commercial space when the construction project is finished, that the tenant jobs are not merely relocated from another commercial space within the same geographical area, and that the estimated number of tenant jobs is a reasonable estimate.

Evidence that tenants are likely to occupy the commercial space:

The applicant may present one or more of the following types of evidence to show that the construction project will be attracting tenants from within the region who were not able to operate prior to the commercial construction project or attracting new tenants from another geographical region. Below are examples of evidence that can be presented to support tenant occupancy and job creation:[This is not meant to be an exhaustive list of the types of evidence that can be presented.]

• 1. A description of the products and services to be provided, a detailed market analysis, and a marketing plan as discussed in Matter of Ho, 22 I&N Dec. 206, 213 (Assoc. Cmm’r 1998), to be part of the comprehensive business plan and which provides support of new tenant occupancy in the region. First, Matter of Ho already requires the business plan to include “a description of the business, its products and/or services”. In this case, this should include a description of the office or commercial space and its characteristics that will result from the construction project. Second,  Matter of Ho states:

The plan should contain a market analysis, including the names of competing businesses and their relative strengths and weaknesses, a comparison of the competition’s products and pricing structures, and a description of the target market/prospective customers of the new commercial enterprise.  Matter of Ho, 22 I&N Dec. 206, 213 (Assoc. Cmm’r 1998)

A satisfactory market analysis that helps to support the fact that new tenants will occupy the space built by the applicant should include: the current size of the market; historic trends and developing trends and projected growth rate; the target market and number and purchase of potential customers; distinguishing characteristics of the target market and why potential tenants are likely to come to this new building/mall; existing competitors in the market and distinguishing features in relation to existing competitors. The market analysis may include data collected on trends and size and purchases in the target market as well as market test results from potential tenants who were contacted and interviewed.

Lastly, information on “the marketing strategy of the business,” as discussed in Matter of Ho, should also be included to support new tenant occupancy in the Regional Center.

• 2. Evidence on lack of appropriate space in the geographical region where the applicant is constructing its commercial space. The following are examples of evidence of lack of appropriate space:
• Evidence of low vacancy rates of commercial space within the geographical region where the project is located.
• Evidence that, even if vacancy rates of general commercial space are high, there is a lack of suitable commercial space, such as space with the amenities and specialized facilities required for the tenants that are expected to lease from the commercial enterprise. Supporting materials showing available and suitable commercial space in the region and the characteristics of the commercial space which makes it unfit to satisfy t he ability to set up the types of businesses and outlets indicated in the business plan.
• The applicant can provide responses from surveys of employers (a minimal sample size of 50 is recommended) in the geographic region indicating that lack of appropriate space is a main constraint towards setting up a business in this geographic region.
• A detailed letter from a state of local governmental official, such as the Mayor of the city where the development will occur or an official of an economic development agency in the area, describing and providing supporting evidence of the availability of suitable space or lack thereof. For example, supporting evidence may include a study conducted on behalf of the city addressing constraints on business development in the area.
• Evidence that the new commercial space will bring substantial cost savings to the tenants who lease space there. The following types of evidence can be useful in this regard:
  1. Evidence of lower operational and/or maintenance costs to the lessee in the commercial space.
  2. Tax benefits, rebates, or other subsidies to the lessee.
  3. Evidence that demand for commercial space is growing in the geographical area where the RC is constructing commercial space. Evidence of growing demand for leasing space includes:
     1. Evidence that lease prices for commercial spaces are increasing.
     2. Evidence of increased demand in the area through population growth, income growth and consumption growth in the area.
     3. Evidence that new tenants and customers will be attracted to the commercial space due to the construction of the project. This may be particularly relevant in the case of Targeted Employment Areas, whether they are high unemployment areas or rural areas. Examples of evidence that can be useful to show that the EB-5 project is more likely than not to attract new tenants and customers includes:
        1. Evidence that an anchor tenant (e.g. a tenant that will occupy one of the largest available spaces within the development) has already been attracted or is likely to sign a lease for this commercial space. In this case, the applicant can provide verifiable evidence in the form of the actual lease or a previous relation and previous leases with the anchor tenant in similar projects from the commercial enterprise.
        2. Evidence of new businesses coming into the geographical area for the first time and locating in the commercial development, offering products or services that were not otherwise available in that market, as well as agreements or letters of intent from actual or potential new businesses.
        3. Support letter from the local government showing preferred status for this economic development area indicating that funds are being invested in the area in the form of roads, bridges or other infrastructure.

        Confirmation that the tenant jobs will be “new” jobs and not “merely relocated”:

        The jobs that become located within the tenant space of the project should be shown to be more likely than not a result of an expansion in specific services driven by the project as opposed to merely tenant shifting and/or re-location of already existing jobs. Please explain how it will be verified that the jobs that will become located within the tenant space of the project can be considered “new” jobs.

        Evidence that the job creation estimates are reasonable:

        If the applicant is able to show that it is more likely than not that the economic conditions of the local area and the specific benefits provided by the proposed commercial space will cause new tenant businesses to start operations in that commercial space, the applicant must also present a detailed, verifiable,  and transparent methodology that estimates industry-specific tenant employment levels. For tenant job estimate purposes, the applicant should prepare employment estimates using detailed, verifiable, and transparent methodologies with supporting data. USCIS encourages you to provide information regarding the specific industry of projected tenants as well as the projected revenue/square footage metrics that are used in the input-output model to support the number of projected tenant jobs.

        Option to remove tenant jobs from the job creation counts:

        Alternatively, the applicant is afforded an opportunity to provide business plans and an economic impact analysis for any industry categories and NAICS codes to demonstrate employment creation which is not based on tenant occupancy.