Source: https://wolfsdorf.com/blog/news_posts/eb-5-immigrant-investor-program-a-changing-landscape/
Timestamp: 2019-04-20 12:43:27+00:00

Document:
The EB-5 Immigrant Investor Program is one of the most controversial and challenging provisions in the Immigration Act of 1990, Pub. L. No. 101-649, 104 Stat. 4978 (IMMACT90)1. The Program’s instability, the changing economic environment, and friendlier immigrant investor programs offered by other nations have all led to its underutilization. Of the 130,000 visas allocated between 1992 and 2004, only 6,024 visas were issued to immigrant investors and their dependent family members. Of this group, only 643 investors were successful in removing the conditional requirement and receiving full permanent resident status.2 However, due to some positive developments in recent years, we now have seen a surge in EB-5 investor petitions and USCIS approval rates. Recently released data shows that the number of petitions has increased from 332 in 2005 to 4,156 in 2012 and, during that same period, approval rates have risen from 53% to 79%.3 This article aims to review the program’s history and recent developments and will show that it now provides an excellent path to permanent residence for foreign investors and entrepreneurs and is sure to boost the U.S. economy.
The extensions of the program are an important sign of strong bipartisan support and Congressional commitment to the Immigrant Investor Program. However, unless Congress makes the Regional Center Program permanent, the program will continue to be marred with uncertainty and deter potential investors that want to commit to the program long term.
Immigrant investor eligibility requires proof that: (1) petitioner has invested or is actively in the process of investing the required amount of capital in a new commercial enterprise; (2) the investment is at risk; and (3) petitioner is or will be engaged in the management of the new commercial enterprise, either through day-to-day managerial control or policy formulation.18 An investor qualifies by initially filing Form I-526, Immigrant Petition by Alien Entrepreneur.19 After the petition is approved, the investor must apply for adjustment of status in the United States or at a U.S. consulate/embassy overseas.20 Upon approval, the investor is then granted a two-year conditional green card.
During the 90-day period prior to expiration of the conditional period, Form I-829, Petition by Entrepreneur to Remove Conditions, must be filed.21 In this petition, the investor must demonstrate the stated investment was made or still sustained over the two-year conditional period, and the requisite full-time jobs were created or will be created within a reasonable period of time. Only upon approval of the I-829 petition is the conditional nature of the green card lifted and full permanent residence granted.
During the first 15 years, the restrictive interpretation of the regulations drastically limited the types of investment permitted under the program. For example, a purely passive investment of more than $1 million that created at least 10 jobs would be denied for failure to meet the managerial requirement.22 Likewise, if an investor sought to expand an already existing business that did not result in a substantial change, i.e., an increase of at least 40 percent in either the net worth or number of employees, the petition would be denied for failure to meet the establishment requirement.23 A strict reading of the regulation would mean that if an investor wished to risk $1 million in an existing enterprise that already has 100 employees, he or she had to create at least 40 new jobs with his or her investment, despite the statutory requirement of creating only 10 new jobs, as clearly designated by Congress. These restrictions enormously altered the statutory goals of the EB-5 program and made investment in existing businesses difficult. While a passive investment or an expansion of a business may have met the goals of employment creation and infusion of capital, it would not meet the government’s restrictive interpretations and would thereby lose its eligibility under the EB-5 regulations.
As a result, hundreds of I-829 petitions filed by immigrant investors were denied based on the retroactive criteria. Most of the I-526 investor petitions filed after 1998 never had a chance, as investors relied on plausible interpretations of published regulations and invested in what appeared to be lawful investment plans, but ultimately became entangled in the government’s restrictive interpretation of the law.
INS could not “change the rules of the game” by automatically applying its new more restrictive interpretations retroactively to investors who had already received conditional green cards and who are now trying to have those conditions removed. Instead, the agency must allow some investors an opportunity to show how such a retroactive application would hurt them.
Despite this apparent victory for immigrant investors, this decision actually had the effect of curtailing the program. The court ordered that the merits of the retroactivity claim be remanded to the administrative courts for review. Unfortunately, INS refused to hear the retroactivity claims. Even though the parties argued the issue of retroactivity before the district court, the subject was left unresolved.
Consequently, for those investors caught in the midst of the rule changes, this landmark decision provided the first indication that the 10-year pattern of negative, restrictive adjudication might be drawing to a close based on the appellate court’s conclusion that retroactive application of the 1998 precedent decisions was impermissible.
The DOJ Amendments eliminated the “establishment” requirement—that EB-5 investors have “established” a commercial enterprise.37 Instead, investors only needed to show they have “invested” in a commercial enterprise. Thus, immigrant investors who invest in an existing enterprise no longer had to prove they expanded the net worth or the number of employees by 40 percent.38 This significantly altered the original regulations and eliminated one of the biggest obstacles created by the 1998 precedent decisions. For instance, in Matter of Izumii, the AAO determined that the limited partners who had joined the general partnership over varying periods had used these “pooling agreements” to circumvent the establishment of a new business enterprise requirement. Because the DOJ Amendments eliminated the “establishment” requirement, the finding stated in Matter of Izumii is no longer applicable.
For advocates of the investor visa program, Congress’s decision to eliminate the establishment requirement was seen as a significant positive development. However, soon after those judicial and statutory victories were celebrated, USCIS once again dealt the program another setback. On June 10, 2003, USCIS issued an interim guidance memo confirming that although an “alien entrepreneur is no longer required to establish a commercial enterprise,”39 the new law does not remove the requirement that the enterprise be “new,” as defined in 8 CFR §204.6(e). From this restrictive interpretation, it appeared that the “establishment of a new commercial enterprise” requirement still pertained to those enterprises established prior to November 29, 1990.
Investors should continue to exercise caution in applying for immigrant investor visas as restrictive adjudications continue. For this reason, most EB-5 investors choose to participate in recently approved program designated regional centers, as they allow for creation of indirect employment, and the alien investor is not required to engage in the day-to-day management of the new commercial enterprise.40 Also, USCIS appears to be approving cases for designated regional centers at a higher rate than traditional cases. However, the investor is cautioned that the strict reading of the source of the funds issue continues to be rigorously enforced for all cases. Also with so many new regional centers being established, there are now concerns as to whether some will be economically viable, and if they will be able to meet the requirements to remove the conditional nature of the residency that is granted for an initial two-year period.
primary recipient, having drawn 41 percent of the investors.
relief to the hundreds of investors whose status and cases have been in limbo for years.
investor to the commercial enterprise.
USCIS will routinely reject these investors based on such minor technical grounds.
regulatory development, field design, case auditing, and training on regional center adjudication.
recently issued two important memos clarifying key program questions and stakeholder concerns.
Ombudsman Richard Flowers concerning the improvements to the immigrant-investor program.
methodology, merely verification of an assertion previously made during the I-526 stage.
job creating enterprise to support the job count.
cases and petition approval rates.
months after the adjudication of the petition.
discretion for substantial good faith compliance.
reduction in unemployment rates thanks to EB-5 investments.
EB-5 Program – Still the best choice for investors and entrepreneurs?
not wait years for a visa number.
officer or director position would satisfy the requirement to be engaged in the enterprise.
organization charts and are more favorable towards businesses that employ numerous U.S.
can be an attractive vehicle to achieve U.S. permanent residence.
under the program. Moreover, Congress has historically expressed support for the EB-5 program.
unemployment and revive the economy.
greater certainty for some investors seeking to obtain permanent residence status.
location is irrelevant for seeking EB-1C classification.
marginality, as in E-2 visa practice.
immigration law topics and continues to present to local and national audiences, including physician groups and universities. Ms.
Bhora can be contacted at nbhora@wolfsdorf.com.
the CBP Liaison for the Southern California Chapter of AILA. Mr. Yemm can be contacted at richard@wolfsdorf.com.
2 “Immigrant Investors: Small Number of Participants Attributed to Pending Regulations and Other Factors,” GAO-05-256 (Apr. 2005), published on AILA InfoNet at Doc. No. 05040475 (posted Apr. 4, 2005) (GAO Report).
4 H.R. Rep. No. 723, 101st Cong., 2d Sess., pt. 1, at 41 (1990).
Category Sufficient?” 12 J.L. & Com. 147, 149 (1992).
6 See S. Rep. No. 55 (1989).
7 INA 203(b)(5)(A); 8 CFR §204.6.
11 INA §203(b)(5)(B); 8 CFR §204.6(e).
12 Pub. L. No. 106-396, §402(a), 114 Stat. 1637, 1647 (2000).
into law on December 3, 2003.
2009 (Sept. 30, 2008; 122 Stat. 3574; 143 pages).
15 H.R. 1105 / Public Law No: 111-8 Omnibus Appropriations Act, 2009.
16 H.R. 2892/Public Law No: P.L.111-83.
20 As of the date of this article, the USCIS does not permit concurrent filing of the application to adjust of status with the I-526 petition.
Investor Visas,” 98-09 Immigration Briefings (Sept. 1998).
25 12 Interpreter Releases 332 (Mar. 9, 1998).
27 Matter of Soffici, 22 I&N Dec. 158, 19 Immigr. Rep. B2-25 (Int. Dec. 3359, AAO June 25, 1998); Matter of Izumii, 22 I&N Dec. 169, 19 Immigr. Rep. B2-32 (Int. Dec. 3360, AAO June 13, 1998); Matter of Hsiung, 22 I&N Dec. 201, 19 Immigr. Rep. B2-106 (Int. Dec. 3361, AAO July 31, 1998); and Matter of Ho, 22 I&N Dec. 206, 19 Immigr. Rep. B2-99 (Int. Dec. 3362, AAO July 31, 1998).
28 S. W. Yale-Loehr, “EB-5 Immigrant Investors: An Overview,” Immigration Options for Investors 51(AILA 2006) at 62.
29 Chang v. United States, No. CV-99-10518-GHK (AJWx) (C.D. Cal. May 3, 2001).
31 Chang v. United States, 327 F.3d 911 (9th Cir. 2003) at 925.
37 Supra n. 12 at 53.
Entrepreneur” (June 10, 2003), 8 Bender’s Immigr. Bull. 1306 (Aug. 1, 2003), published on AILA InfoNet at Doc.
No. 03061744 (posted June 17, 2003).
InfoNet at Doc. No. 09063065 (posted June 30, 2009).
41 The Basic Pilot Program Extension and Expansion Act of 2003, Pub. L. No. 108-156, §5, 117 Stat. 1944.
42 GAO Report, supra note 2.
43 8 CFR §204.6(j)(2); 8 CFR §§216.6(a)(4)(ii), 1216.6(a)(4)(ii).
44 See Matter of M–, I&N Dec. 24, 50 (BIA 1958, A.G. 1958).
47 See “Message from the Director: New EB-5 Program Office,” published by AILA InfoNet at AILA InfoNet at Doc.
52 Supra note 40 (Q and A no. 12).
published by AILA InfoNet at Doc. No. 12051148 (posted 05/11/12).
InfoNet at Doc. No. 09061964 (posted 06/19/09) (hereinafter Neufeld memo).
58 Supra note 49, at 1.
62 Supra note 49, at 3.
count” as “full-time” jobs. Id. at 5.
(last accessed Sep. 11, 2009).
66 Supra note 49, at 6.
68 See 8 C.F.R §§ 216.6(4)(iv) and 216.6(c)(1)(iv).
69 Supra note 49, at 6, 7.
70 Supra note 46, at 16.
71 Supra note 40 (Follow up Q and A).
at Doc. No. 12041241 (posted July 18, 2012).
75 Visa retrogression is of particular concern for Indian and Chinese-born nationals who are currently subject to five and nine-year waits in the EB-2 and EB-3 categories, respectively. Visa Bulletin for May 2012.
Doc. No. 02073171 (posted Jul. 31, 2002).
knowledge employee for an affiliated business.
80 INA §203(b)(5)(A); 8 CFR §204.6(j)(5).
Infonet at Doc. No. 10010462 (posted January 4, 2010).
88 INS Memorandum, Robert L. Bach, Executive Associate Commissioner (Aug. 28, 1998), HQ 40/6.1.3, published on AILA InfoNet at Doc. No. 98083198 (posted Aug. 31, 1998); see also 22 CFR §41.51(b)(7); 8 CFR §214.2(e)(12).

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