Source: http://eb5info.com/articles/101-eb-5-job-creation-what-to-do-when-plans-change-
Timestamp: 2019-08-17 11:20:04
Document Index: 687830

Matched Legal Cases: ['§ 203', '§ 204', '§ 204', '§ 204', '§ 204', '§ 204', '§ 204', '§ 216', '§ 216', '§ 204', '§ 214', '§ 245', '§245', '§245', '§ 216', '§ 245', '§ 245', '§ 203', '§ 203', '§ 201', '§ 203', '§ 203', '§ 245', '§ 245', '§ 245', '§ 203', '§ 203', '§ 245', '§245', '§ 216', '§204', '§204', '§ 216', '§ 216', '§ 216', '§216', '§203', '§204', '§274', '§216', '§216']

EB-5 Job Creation: What to Do When Plans Change Article | EB-5 VISA
EB-5 Job Creation: What to Do When Plans Change
This article is intended to fill a void in the existing EB-5 literature. There are plenty of articles discussing the requirements of job creation in EB-5 cases.[1] There are also articles challenging, with good reason, the USCIS interpretation of the job creation requirements both at the I-526 EB-5 petition stage and, most significantly, at the I-829 condition removal stage.[2]
This article is intended to do neither. Rather, the purpose of this article is to deal with the issue of what happens when anticipated job creation doesn’t happen, or falls behind schedule, or is revised in some way. Specifically, the article will address the USCIS “material change” standard as it relates specifically to job creation, suggest flaws in the CIS proposed solution and suggest a revised procedure for CIS to consider that would be more consistent with both the law and the policy behind the EB-5 program. I will evaluate the impact upon the investor and the various options and strategies that might be available to the investor. I will do so in the context of both individual EB-5 petitions and regional center EB-5 petitions.
Throughout this article, I will incorporate, in addition to the law (statute, regulations and precedent decisions), the lore (USCIS memoranda, advisory opinions, liaison or stakeholders meetings answers and the Adjudicator’s Field Manual (“AFM”)). Although all elements of the lore are subject to question and challenge in federal court, and the author believes many should be challenged, for purposes of this article I will assume that this is all part of the body of “law” with which the investor must cope and comply.
SUMMARY OF LAW ON JOB CREATION
EB-5 Petition Stage
The law on job creation must be analyzed with an understanding of the differences between requirements at the I-526 stage and requirements at the I-829 stage, and also requirements for individual EB-5 investors vs. requirements for regional center EB-5 investors.
The basic job creation requirement is contained in INA § 203(b)(5)(a)(ii), which requires the investor to “create full-time employment for not fewer than 10 United States citizens or aliens lawfully admitted for permanent residence or other immigrants lawfully authorized to be employed in the United States (other than the immigrant and the immigrant’s spouse, sons, or daughters).”
The relevant regulatory section is 8 C.F.R. § 204.6. In addition to defining “employee,” “full-time employment” and “qualifying employee” in 8 C.F.R. § 204.6(e), the regulation focuses on job creation at 8 C.F.R. § 204.6(j)(4). It is significant to note that these regulations require the employment that is created by the new commercial enterprise to be W-2 “employees.” Arguably, under the statutory language, if the new commercial enterprise enters into full-time independent contractor arrangements, “employment” would have been “created” for ten qualified individuals. However, such employment creation would not qualify under the regulations since the individuals are not “employees.”[3]
8 C.F.R. § 204.6(j)(4) provides four options for proving employment creation:
For an individual, non-regional center EB-5 petition, if the ten qualifying employees have been hired at the time of the filing of the I-526 petition, documentation of the ten employees should be provided.
If the ten employees have not been hired at the time of the I-526 petition, a comprehensive business plan must be provided showing “the need” for at least ten qualifying employees “will result” within the next two years, including when such employees will be hired.
In the case of a “troubled business,”[4] the comprehensive business plan must show the number of existing employees is being or will be maintained at no less than the pre-investment level for at least two years.
In the case of a regional center investment (for which there is no mention of a business plan), the I-526 must include evidence that the investment will create full-time positions for not fewer than ten persons either directly or indirectly through “reasonable methodologies.”
Significantly, 8 C.F.R. § 204.6(j)(iii) relating to regional centers does not reference a business plan and references “ten persons” rather than ten “qualifying employees.” This regulatory section is amplified by 8 C.F.R. § 204.6(m)(7)(ii), which references “reasonable methodologies” that may be used to “indicate the likelihood that the business will result in increased employment.” It is important to contrast the regulatory requirement at the I-526 stage that the new commercial enterprise for an individual, non-regional center investment “will create” requisite employment with the requirement for the regional center investor to show “the likelihood” that the increased employment will result –arguably, a significantly lesser burden of proof.
USCIS added potentially significant gloss to the regulations regarding employment creation in a December 11, 2009 Memorandum from Donald Neufeld, Acting Associate Director, Domestic Operations.[5] The following points are worth noting:
There is no requirement to show that indirect or induced jobs created through a regional center investment are full-time;
Direct construction jobs count as “permanent jobs” if they are expected to last at least two years;
It is the position—and not the employee – that is critical, meaning that the occupants of the position can vary as long as the position remains the same;
Independent contractor positions can qualify to establish indirect employment for regional center petitions but not for individual, non-regional center petitions;
Full-time employment cannot be seasonal –it must be year-round.
Condition Removal Stage
The major area of controversy relating to job creation is exactly what needs to be proven at the time of filing the I-829 condition removal petition. The statute is completely silent regarding any test of employment creation at the I-829 stage. Rather, in INA § 216A(b)(1), conditional permanent residence status can only be terminated if (A) the investment was intended “solely as a means of evading the immigration laws;” (B) the alien did not invest, or was not “actively in the process of investing,” or was not “sustaining” the investment of the requisite capital throughout the period of conditional residence; or (C) “the alien was otherwise not conforming to the requirements of section 203(b)(5).”
Although both the legislative history and an earlier legacy INS memorandum[6] indicates that counting of jobs is not part, and should not be part, of the adjudication of a condition removal petition, USCIS has created that requirement by regulation. Specifically, 8 C.F.R. § 216.6(c)(1)(iv) requires proof that the conditional resident investor either created “or can be expected to create within a reasonable period of time” the requisite number of employees. The Service takes the position that this is a reasonable interpretation of the statutory requirement that the alien has to have been “conforming” to the requirement of section 203(b)(5). Arguably, especially in the context of a regional center investment, it is a stretch to argue that Congress felt that an alien was not conforming to the requirements if, for reasons totally beyond his control, the regional center failed to create the necessary jobs; and therefore the investor, who did nothing wrong and relocated himself and his family to the United States, should be removed from the United States.
WHEN MUST THE JOBS BE CREATED?
Given the present adjudication standards of USCIS, when must the jobs be created in order to obtain approval of an I-526 petition and an I-829 petition? For the first time, in a Memorandum dated June 17, 2009,[7] USCIS created a requirement applicable to both individual investors and regional center investors that the requisite employment must be created within two years. Since the regulation at 8 C.F.R. § 204.6(j)(4)(i)(B) had only created the two year employment creation requirement for individual EB-5 investors and not regional center investors, and since there is no two year employment creation requirement in the statute, this new requirement by memorandum is certainly subject to challenge. Nevertheless, given that this Memorandum has now been incorporated into the Adjudicator’s Field Manual at 22.4(c)(4)(D)(ii), it is critical to understand the USCIS’ present requirements.
Assuming for purposes of an individual EB-5 petition or a regional center EB-5 petition that a showing must be made of job creation within two years, the next question is two years starting when? This question is answered for the first time in the June 17, 2009 Memorandum, incorporated in the Adjudicator’s Field Manual, as being 2 ½ years from the approval of the I-526 petition.[8] How did USCIS come up with this date? The reasoning needs some explanation. For the purpose of determining the outcome of an I-829 petition, USCIS believes that the two year conditional residence period dates from the acquisition of conditional residence (following the approval of the I-485 or the consular immigrant visa application). However, for purposes of adjudicating the I-526, the adjudicator does not know when that will occur. USCIS estimates that will occur within six months. Therefore, in adjudicating the I-526 petition, the adjudicator will require proof that the jobs will be created within two years plus the estimated six months.
The “Reasonable Time” Standard
Assuming the I-526 petition is approved, what happens if all of the jobs are not created by the time of the filing of the I-829? Even though the investor had the burden of proving that the jobs would be created by the time of filing the I-829, the regulations only require that the jobs “can be expected to [be created] within a reasonable period of time.”[9] There is no definition of what constitutes a “reasonable time.” The Adjudicator’s Field Manual, as amended by the June 17, 2009 Neufeld Memorandum, states the following at 25.2(e)(4)(D):
“In making the ‘reasonable time’ determination, officers should consider the evidence submitted along with the petition that demonstrates when the jobs are expected to be created, the reasons that the jobs were not created as predicted in form I-526, the nature of the industry or industries in which the jobs are to be created, and any other evidence submitted by the petitioner.”
The AFM section states that the officer should approve the I-829 if it appears “more likely than not” that the jobs will be created within a reasonable time and, otherwise, should deny the I-829.
What evidence should be submitted if all of the jobs have not been created in order to show that it is “more likely than not” that they will be created within a “reasonable time?” There is no guidance on this whatsoever. Presumably, the evidence to be submitted will be very case specific. A starting point would likely be a logical explanation, with documentation, of what events specific to the business or external to the business resulted in a delay in job creation compared to what was anticipated at the time of approval of the I-526 petition. In addition to documenting all of the jobs that have already been created, and in addition to providing an anticipated time schedule for the creation of the remaining jobs, documentation might include the following evidence of:
weather conditions that created delays;
acts of god, such as hurricanes, earthquake, fires, etc.;
unanticipated economic or industry downturns;
recent business activity that leads to an optimistic near term future for the business;
recent marketing efforts and results of those marketing efforts;
employees having left the business and attempts to replace them;
recent contracts or anticipated contracts; • additional capital influx;
industry or geographic positive predictions for future near term growth;
a new product line;
anything else that may be persuasive to explain both the delay in job creation and the anticipated increase in job creation in the near future.
How does all of this apply in the case of a regional center where many or most or all of the jobs are indirect or induced employment? The December 11, 2009 Neufeld Memorandum states that the adjudicator should not readjudicate the job creation methodology that resulted in the economic projection of the requisite amount of direct or indirect employment.[10] In responding to a question at an EB-5 Stakeholders meeting on June 24, 2009, USCIS stated that the I-829 inquiry in a regional center case is “limited to assessing milestones that were predicted at the I-526 stage of the process.” The answer gives the following example:
“At the I-526 stage the plan was to build a shopping center and lease out the space. At the I 829 stage we would want to know if the space had substantially leased as predicted. In the alternative, if jobs were predicted based on total expenditure, we would want to know if the funds had been spent as planned.”[11]
Therefore, documentation should be provided at the I-829 stage to show that the foundational elements of the econometric model that was filed with the I-526 petition have occurred or will occur within a “reasonable time.” These foundational elements often include expenditure of capital, creation of direct jobs, construction of the building, leasing of units, net sales revenue and other developments specific to the business model.
Problems with Job Creation
What if most or all of the jobs were only recently created? Although this could create a credibility issue, it does not create a problem under the statute or the regulations. The statute requires that the investment was “sustained” during the period of conditional residence.[12] Likewise, the regulations require that the commercial enterprise and the investment capital must have been “sustained” during the conditional residence period.[13] Neither the statute nor the regulations require that the employment be sustained for any particular period of time. Therefore, fluctuating levels of employment during the two year period, or an increase in employment near the end of the two year period, should not be disqualifying.
What if a Request for Evidence is issued subsequent to the filing of the I-829 and the response indicates that, although the requisite employment was created at the time of filing the I-829, there has been a reduction in employment subsequent to such filing? Since the regulatory language is in the past tense – “the alien created”[14] – there would seem to be no requirement for continuing such employment beyond the statutory two year period. Arguably, any request for evidence relating to activity subsequent to the filing would be ultra vires the statute and regulation. However, it is not at all clear that CIS would agree with this analysis.
However, if the requisite employment was not created at the time of the filing of the I-829, the issue of post-filing activity is a more complicated one. Presumably, if jobs were actually created subsequent to the filing of the I-829 petition, the investor would be eager to provide such information to the adjudicator to prove that the projection of creation of jobs within a reasonable time has actually occurred. On the other hand, if post-filing activity is less robust, there is a good argument that the “reasonable time” determination must be made based upon facts existent at the time of the filing of the I-829 and that subsequent events are irrelevant. If a denial is based on a determination that the jobs were unlikely to be created within a reasonable time, presumably the fact that the jobs ultimately are created within a reasonable time would be a basis for the filing of a Motion to Reopen.
Another issue seen in recent adjudications involves the immigration status of the employees. The issue is a difficult one. On the one hand, the statute requires the employees to be U.S. citizens, permanent residents or other immigrant lawfully authorized to be employed in the U.S.[15], and the regulation requires the employees to be “qualifying employees.”[16] On the other hand, the employing entity is prohibited from inquiring beyond the employee’s choice of documents to present in the I-9 process (as long as they reasonably appear to be genuine) upon penalty of a discrimination charge.[17] Although legacy INS previously resolved that balance in favor of the investor[18], the present CIS position requires the employer to violate the antidiscrimination provisions in order to ensure compliance with the job creation requirements.[19] Employing entities may wish to enroll in E-Verify in order to know in advance whether the government database reflects the authorized work status of the employees. However, E-Verify will not confirm whether the employees are citizens or residents, as opposed to nonimmigrants with work authorization.
NEW PROCEDURE CREATED BY DECEMBER 11, 2009 MEMORANDUM
Until recently, neither the regulations nor the AFM created an option other than approval or denial of the I-829 petition in the event USCIS was not satisfied that the job creation requirement was met or would likely be met within a reasonable time. The Service takes the position that the I-526 business plan may not be “materially changed” after the petition has been filed, and there is no provision for extending the time period for the filing of the I-829 petition to provide the investor more time to meet requirements. Historically, in the event of a material change, such that the investor could not demonstrate compliance during the period of conditional residence with the business plan approved in the I-526 case, the I-829 would very likely be denied. However, a third option was introduced by the December 11, 2009 Neufeld Memorandum. If there is a material change that would otherwise lead to this unwanted result, , the investor has the option of filing a new I-526 petition and starting a new conditional residence period. If the Service is satisfied that the new I-526 can be approved the investor may file a new application for conditional permanent residence.[20]
This new procedure begs many questions:
What is a material change necessitating a new I-526?”
Can this procedure be utilized after the denial of the I-829?
What is the status of the investor while the new I-526 is being adjudicated?
Is the investor eligible for adjustment of status?
What about the conditional resident children who have subsequently turned 21?
This article will attempt to deal with all of those issues.
What is a “Material Change”?
“Material change” is not expressly defined either for EB-5 purposes or, for that matter, with respect to other petitions filed with USCIS. However, we are not drawing on a blank slate. In a Memorandum dated August 22, 1996, entitled “Amended H-1B Petitions,”[21] the Service stated that a “material change” exists when a change substantially alters the terms or conditions of an H-1B employee’s employment. The Adjudicator’s Field Manual provides examples of changes that are not “material:”
Transfer of a beneficiary from one branch of a firm to another branch of the firm
Change of petitioner’s name
Changes in the ownership structure of the petitioning entity.
Examples of material change in the AFM are rather obvious:
Transfer of employee from one employer to another employer
Change from one specialty occupation to another specialty occupation
Merger that creates a new employing entity.[22]
With respect to L-1 petitions, the Service has stated that even a change from one managerial position to a completely different managerial position is not a material change. Only if there is a change from a specialized knowledge to a managerial/executive position, or if there is a transfer from one company to another company, is the change material. See “Guidelines for the filing of Amended H and L petitions,” INS Office of Operations, C0214h-C; C0214L-C (October 22, 1992).[23]
Applying these standards in the EB-5 context, the analogy would be that, if there is a completely new entity in which the investment is made, the change is “material.” As long as the statutory requirements regarding making the investment and sustaining the investment are met, the only change that is material should be one that results in the investor not creating the requisite jobs within a reasonable time after the filing of the I-829 petition. If there is a change in the business plan, timing of the investment, timing of job creation, nature of the jobs, nature of the business, or other change that would not result in a denial of the original I-526 petition, the change should not be considered material.
What if some or all of these changes affect the indirect employment creation calculations in the econometric report using one of the established input/output models? If the changes would result in the requisite indirect employment not being created within a reasonable time using the designated input/output model, the change may well be “material”. However, if the model would still result in a conclusion that the requisite indirect employment will be created within a reasonable time, arguably the change should not be considered “material”. In that case, perhaps the new econometric report, based on the new and updated facts and circumstances, should be filed with the I-829 condition removal petition.
What is the Service’s position? The Service’s position appears to be that any change in the business plan, even if all of the necessary jobs have been created, is a “material change.”[24] For example, if the original plan on which the I-526 was approved envisioned the creation of a restaurant with employment being in the form of cooks and waiters, but in the end the company evolved into a catering business with employees being drivers, menu planners and order takers, even though the investment was sustained and even though the employment was created, the I 829 petition might be denied under this policy. This is subject to challenge since the investor has met all statutory and regulatory requirements, none of which requires that the jobs created be the same jobs as envisioned in the I 526 filing, and since it is inconsistent with CIS standards for other visa categories.
What if the I-526 business plan envisions a business that will be multi-faceted over time, including creating a restaurant, a catering business and possibly other businesses? Presumably, then, the I-829 would be approved because there is no material change? The Service position is, at best, unclear. If the business plan clearly articulated multiple business opportunities, but if the specific job creation at the I 526 stage was premised upon only the first of the specific businesses, there is some indication, including the above language from the AFM, that the Service would not approve the I-829 if it did not pre-approve this specific job creation in this specific business at the I-526 stage. If that is, in fact, the Service’s adjudicatory position in a case where the investor sustained his investment and the jobs were actually created, the Service position would appear to be especially vulnerable in litigation.
A Q&A in the December 14, 2009 EB-5 Stakeholders meeting is instructive. The question was as follows:
“If a business plan provides for investments in multiple job-creating businesses over time, and if the commercial enterprise moves the money from one job-creating business to another consistent with the business plan, does every such movement of funds require an amended I 526?”
The Service response was that the business plan must specifically provide for investment in multiple job-creating businesses over time in order for USCIS to determine that it is feasible. The business plan must also demonstrate that the requisite jobs will be created through the succession of capital investments through the commercial enterprise. “In such an instance, an amended petition would not be required as long as the capital investment activities…are in keeping with the approved business plan.”[25]
New Petition or Amended Petition
In the December 11, 2009 Neufeld Memorandum, the Service states that the result of a material change should be the requirement to file a new petition. This is not consistent with the agency’s past practice with respect to other types of applications. The AFM states that a material change in the terms and conditions of employment or in the beneficiary’s eligibility for the benefit does not require a new petition. Rather, it requires an amended petition.[26] See also 8 C.F.R. § 214.2(h)(11)(i)(A), which requires an amended petition – and not a new petition – when there are changes in the terms and conditions of employment of a beneficiary which may affect eligibility for H-1B status. The procedure for O-1 visa beneficiaries is consistent with the H-1B petition procedures. The AFM requires a new petition if there is a change of petitioning employers. However, if the conditions of employment change, even if the changes are “material changes in the terms and conditions of employment or the beneficiary’s eligibility”, no new petition is required – only an amended petition.[27]
With respect to immigrant petitions, perhaps the I-140 petition is the most analogous to the I-526 petition. If there is a material change in the job opportunity necessitating a new labor certification application, the labor certification can be submitted in support of the pending I-140 petition without requiring a new I-140 petition.[28] Previous legacy INS memoranda either stated specifically that a “material change in the terms and conditions of employment or the beneficiary’s eligibility” requires an amended petition or refer to new and amended petitions interchangeably.[29]
Therefore, if the change is not material, no additional petition should be required; and the Service can be advised of the change at the I-829 stage. If there is a material change, consistent with Service policy as stated above, the remedy should be an amended I-526 petition and not a new I-526 petition.[30]
Ramifications of New I-526 Petition
The distinction is critically important. An amended I-526 petition would not affect the timing of the filing of the condition removal petition and would not require the investor to obtain a new period of conditional residence status. On the other hand, a new petition would create the necessity for a new application for conditional permanent residence and a new two year period. The significance of this cannot be overstated. Not only does it require the time and expense of filing a new application for conditional permanent residence, and not only does it require the investor to delay obtaining full permanent residence for another two years, it also has the following impacts:
Any children of the investor who obtained conditional permanent status but are now over age 21, or any spouse who has been divorced, would now be ineligible to obtain a new period of conditional residence;
The investor likely would be ineligible for adjustment of status to conditional permanent residence;
If the conditional permanent residence application was filed under INA § 245(i), eligibility for adjustment of status may be lost because the petition that grandfathered the alien under that section cannot be used a second time for §245(i) grandfathering purposes;[31]
A new five year period for purposes of naturalization would start from the grant of the new conditional permanent residence status.
I will explore these issues separately.
What happens to the investor’s children, who have subsequently become age 21 or older, and the investor’s previous spouse, who has now become an ex-spouse? The December 11, 2009 Neufeld Memorandum and the amended AFM[32] state that the adult son and daughter and the ex-spouse, who are now ineligible to be classified as EB-5 dependents at the time of the filing of the new I-485 application, are left without remedy. Presumably, these individuals would be subject to removal. This result would not inure in the event of the filing of an amended petition, since the original grant of conditional permanent residence that protected the dependents would remain in effect and would still be the basis for the pendency of the condition removal petition.
One of many ways in which the Neufeld Memorandum appears to be legally incorrect is its statement that the conditional resident who abandons his conditional residence is eligible to adjust status to a new period of conditional residence. A closer analysis fails to reveal a legal basis for this conclusion. The analysis starts with INA§245(f), which prohibits the adjustment of status of an alien lawfully admitted for conditional residence under § 216A. In Matter of Stockwell, 20 I & N Dec. 309 (BIA 1991), the Board interpreted the implementing regulations, now contained at 8 CFR § 245.1 (c)(5), as barring from adjustment only those aliens currently holding conditional permanent resident status and not those whose conditional status has been terminated. On this basis, the Service suggests in the AFM that the investor should abandon his permanent residence status on form I-407.[33]
However, once the alien terminates conditional permanent residence status, under what subsection of 245 is the alien adjusting? This remains a mystery. The problem is INA § 245 (c) (7), which prohibits an alien from adjusting status to an immigrant under § 203 (b) (EB-5 is under § 203 (b) (5)) if the alien is “not in a lawful nonimmigrant status.” With abandonment concurrently filed with the adjustment, the alien may be in a lawful immigrant status, but clearly not in a lawful nonimmigrant status. Therefore, the alien who ends his conditional permanent residence could apply for adjustment of status to conditional permanent residence upon marriage to a U.S. citizen spouse (under INA § 201 (b) (2)) or based on any family-sponsored category under § 203 (a), but not under § 203 (b), which applies to employment-based immigrants.
Doesn’t INA § 245 (k) save the day, because that allows an employment-based immigrant to adjust irrespective of the prohibition in INA § 245 (c) (7)? Unfortunately, § 245 (k) only applies to employment-based immigrants under § 203 (b) (1), (2) and (3) (and sometimes (4)), but does not apply to § 203 (b) (5) immigrants. It appears to this author that attempting to utilize the procedure suggested by the December 11, 2009 Neufeld Memorandum is an invitation to a denial of adjustment of status, especially since CIS states that it is not bound by its own memoranda[34] and certainly not bound where its memorandum violates the statutory language.
Of course, if an alien is grandfathered under INA § 245 (i), she would be eligible to utilize this procedure, right? Not necessarily. The Service has taken the position that a petition filed before the relevant date (January 14, 1998 or April 30, 2001) can only be used to grandfather an alien for adjustment of status one time.[35] Presumably, the investor used the petition to enable her to adjust status under §245 (i) for the first filing, which could make it unavailable a second time.
Therefore, the Neufeld Memorandum clearly needs to be revised both as a matter of policy and as a matter of law. In addition to defining material change as indicated above, the revised memorandum should clearly indicate that a material change – assuming it does not involve a different commercial entity – requires an amended petition and not a new petition and therefore does not require abandonment of previous conditional permanent residence status or a new application for conditional permanent residence status. The suggested revision would put I-526 practice in conformity with I-140 practice, which allows for the transfer of a filed adjustment of status application based on an approved I-140 petition to a new approved I-140 petition, without the need to withdraw the adjustment of status application and file a new one, as long as there is no break in the continuity of the adjustment of status application.[36]
Investor’s Choice – I-829 or New I-526
At least for now, an investor who has any change whatsoever in the business plan – even if only that the vicissitudes of the business, the economy, acts of nature, etc. resulted in the jobs being created on a slower schedule than anticipated - is clearly faced with a dilemma. Should she file the I 829 petition with an explanation of all of the extenuating circumstances that resulted in a delay in job creation, together with documentation establishing the likelihood that the jobs will be created within a reasonable time; or should she choose not to take the risk of filing the I-829 petition and instead file a new I-526 petition with a new business plan taking into account the changed circumstances?
The Service provided two examples in a superseded portion of the Adjudicator’s Field Manual that may be helpful in gleaning how an I-829 may be treated:
A conditional resident has created positions for only seven full-time employees. If the conditional resident states that he intends to create three additional positions at an indefinite time in the future, the I-829 petition should be denied. If the conditional resident provides credible evidence to demonstrate recruitment for the remaining full-time positions, that the positions are in the process of being actively recruited, and that they will clearly be filled, the I-829 petition may be approved.
Although a conditional resident claims to have created positions for ten full-time employees, only nine are actually working. If a conditional resident presents evidence that she actively recruited the tenth employee, and the tenth employee is expected to be hired and begin employment, the I-829 petition may be approved.[37]
Examples abound of other scenarios that would create a difficult choice for the investor:
A construction project is behind schedule. Most jobs have not been created. It is likely to be another year or two until the construction is completed and jobs are created. Is this a material change? Will the jobs be created within a “reasonable time?”
More than ten jobs were created, but recent events have resulted in a significant slowdown of business and some of the employees have been laid off. The plan is to rehire when business conditions improve. Is this a “material change? Will business conditions improve within a “reasonable time?”
The expected start date of the business was delayed. However, since the launch date, everything has gone as originally planned. The plan will now be a three year plan instead of a two year plan. Is this a “material change?” Will the jobs be created within a “reasonable time?”
The original plan was to hire ten employees up front. The plan changed, and the employees were not hired until later; but all ten were hired by the end of the two years. Is this a “material change?”
All ten employees were hired during the two years, but the job positions and titles are very different than originally anticipated. Is this a “material change?”
A regional center’s construction project was delayed because of weather conditions, unavailability of capital, economic conditions, etc. As a result, all of the foundational elements of the econometric model have not yet occurred. However, the project is now moving forward. Is this a “material change?” Will the jobs be created within a “reasonable time?”
The answers to all of these factual scenarios are unclear and ultimately would depend upon the unknown definitions of “material change” and “reasonable time.” Although there is a good argument that none of these is a “material change” and that the jobs would be created within a “reasonable time,” in all of the scenarios the investor may choose not to take the risk of getting an I-829 denial and may prefer to file a new I-526 petition.
Procedure for New I-526 Petition
Let’s assume the investor chooses the conservative option and files a new I-526 petition. What is the procedure? The Adjudicator’s Field Manual, as amended by the December 11, 2009 Neufeld Memorandum, sets forth the new procedure for filing new I-526 petitions in the event of either a material change that results in an inability to satisfy the I-829 requirements or in the event of a complete failure of the project and the initiation of a new capital investment project.[38] The revisions to the AFM set forth three scenarios regarding timing and leave open a fourth.
The first scenario occurs before the alien becomes a conditional permanent resident. In that event, the approval of the new I-526 would be the basis for the approval of the existing application for adjustment of status or immigrant visa.
The second scenario is if the new I 526 petition is filed after the alien becomes a conditional permanent resident but before the due date of the filing of the I-829 petition. Upon approval of the new I-526, the investor files an abandonment of permanent residence application (form I-407) with a new I-485 adjustment of status application. The result is that the investor has a new two year period of conditional residence.
Finally, if the I-829 petition is pending, the investor may request the withdrawal of the I-829 petition upon approval of the new I-526 petition and then file a new application for adjustment of status.
If the I-829 is already filed, will the adjudication be deferred pending action on the new I-526?
If the I-829 is filed, there has been a material change but the necessary jobs have been created, can the new I-526 petition be co-filed with the existing I-829 petition; or must it be accompanied by a new I-829 petition?
Can the same procedure allowing for adjustment of status be applied in the case of a new I-526 petition filed after an I-829 petition has been denied?
A previous legacy INS Memorandum, “EB-5 Field Memorandum 9: Form I-829 Processing,”[39] is instructive. That memorandum, and the accompanying amendment to the AFM, stated that, where an I 526 was approved prior to the issuance of the four EB-5 precedent decisions, and the I-829 cannot be approved because of the changes created by those decisions, the investor could file a new I-526 based upon the same business plan with changes to conform to the precedent decisions. The Service would suspend adjudication of the I-829 until the new I-526 petition was adjudicated. Upon approval, the investor would abandon his previous conditional permanent residence status, leave the U.S. and obtain a new period of conditional residence status.
Another question involves whether the filing of the new I-526 petition eliminates the need to file an I-829 petition before the end of the original two year conditional residence period. Nothing in the aforementioned Memorandum or the AFM so indicates. Presumably, in order to have conditional permanent residence status continue, the investor would have to timely file the I-829 petition before the expiration of the initial conditional residence while concurrently pursuing the new I-526 petition. Otherwise, presumably, the conditional resident status of the investor would be terminated, leaving the investor with no lawful status in the U.S.
EFFECT OF I-829 DENIAL
Let’s now visit the option of the investor who chooses not to file a new I-526 petition, chooses to proceed with the I-829 petition and attempts to prove that there has been no material change and that the jobs will be created within a reasonable time. If the I-829 application is denied, what are the options?
Although the December 11, 2009 Neufeld Memorandum does not reference the possibility of a new I-526 petition after the denial of the I-829, it is not expressly precluded. Presumably, this would still be an option.
What is the status of the alien and his family once the I-829 petition is denied? Although there is some confusing and apparently contradictory language, the end result is somewhat clear. 8 C.F.R. § 216.6 (d) (2) states the lawful permanent residence status is terminated as of the date of the I-829 denial; and the investor must surrender his permanent residence card. However, this is inconsistent with Matter of Lok,[40] which makes clear that the lawful permanent resident status of an alien is not terminated until the entry of a final administrative order of deportation. The Service resolves this discrepancy in the Adjudicator’s Field Manual.[41] It states that if the I-829 is denied, until a final order of removal is entered, the alien must be issued a temporary extension of his conditional resident status. This procedure was recently reaffirmed at a USCIS EB-5 Stakeholders Meeting[42] (“an alien investor retains conditional residence status and is entitled to proof of that status while he or she obtains review of the USCIS termination in removal proceedings”). Presumably, proof of conditional resident status would be issued in the form of a temporary I-551 stamp in the passport.
What if the investor wants to challenge the I-829 denial? There is no appeal of an I-829 denial.[43] However, the investor may seek review of the I-829 in removal proceedings. In such event, the burden of proof rests with the Service to establish by a preponderance of the evidence that the facts and information in the investor’s removal petition are not true and that the petition was properly denied.[44] This would leave it to an immigration judge to sort out legal issues, such as whether job counting is a proper basis for an I-829 adjudication; whether there was a material change to the I-526; whether the investor has created the requisite employment; and whether the requisite employment will be created within a reasonable time. If the investor wants to obtain judicial review of the denial of an I-829 by an immigration judge, as with any other removal proceeding, the investor can appeal to the Board of Immigration Appeals. During such appeal, the investor continues to be entitled to proof of his conditional residence status.[45] Ultimately, if the Board of Immigration Appeals denies the appeal, judicial review is available in a court of appeals. However, once the order is administratively final, the investor is no longer entitled to proof of conditional residence status.[46] If, despite the investor’s efforts, no Notice to Appear is issued and therefore the investor is unable to renew his condition removal petition before an immigration judge, there may be possibilities to go to federal district court.[47]
Recent positions taken by USCIS put EB-5 investors in a precarious position if there is any deviation in the planned course of job creation. At least until the Service revises its current policies, or until there is a successful administrative or judicial challenge, investors have difficult choices to make with very serious ramifications to their ability to remain in the United States with their families and to become unconditional permanent residents and ultimately naturalized citizens.
H. Ronald Klasko is one of the country's leading lawyers representing investors in EB-5 and treaty investor (E-2) cases. He is the Chair of the EB-5 Committee of AILA. Ron was the lead attorney on the famous Walsh and Pollard case, which established the key precedent for treaty investor visas. Ron Klasko is the Philadelphia-based Managing Partner of Klasko, Rulon, Stock & Seltzer, LLP, chosen as one of six top tier immigration firms by Chambers Global. Ron is a former national president and three term General Counsel of AILA and has been a member of its Board of Governors since 1980. He is one of only three practicing attorneys ever honored with the AILA Founders Award for his contributions to immigration jurisprudence. His website is www.eb5immigration.com.
[1] See HRK.
[2] See HRK.
[3] 8 C.F.R.§204.6(e)
[4] “Troubled business” is defined as a business that has been in existence for at least 2 years, has incurred a net loss for accounting purposes during the previous 12 or 24 month period and the loss for such period is at least equal to 20% of the troubled business’ net worth prior to the loss. 8 C.F.R.§204.6(e).
[5] Memorandum from Donald Neufeld, Acting Associate Director, Domestic Operations entitled “Adjudication of EB-5 Regional Center Proposals and Affiliated Form I-526 and form I-829 Petitions; Adjudicator’s Field Manual (AFM) Update to Chapters 22.4 and 25.2 (AD09-38)”(December 11, 2009).
[6] HQ204.27-P entitled “Removing Conditional Residence Status for Aliens Admitted as Conditional Resident Investors” from James A. Puleo, Executive Assistant Commissioner.
[7] Memorandum from Donald Neufeld, Acting Associate Director, Domestic Operations entitled “EB-5 Alien Entrepreneurs – Job Creation and Full-time Positions (AFM Update AD09-04)”(June 17, 2009).
[8] Adjudicator’s Field Manual (“AFM”) 22.4(c)(4)(D)(ii)(a).
[9] 8 C.F.R. § 216.6(c)(1)(iv).
[10] AFM 22.4(a)(2)(E).
[11] Minutes of meeting between American Immigration Lawyers Association and Invest in the USA and USCIS on June 24, 2009 (answer to question 12).
[12] INA § 216A(b)(1)(B)(ii).
[13] 8 C.F.R. § 216.6(c)(1)(iii).
[14] 8 C.F.R.§216.6(a)(4)(iv).
[15] INA§203(b)(5)(A)(ii)
[16] 8 C.F.R.§204.6(e)
[17] INA§274B(a)(6)
[18] See INS I-829 Standard Operating Procedure (“The Service Center may not hold the employers to a higher standard of care in determining the employees [sic] authorization to work than the Immigration Reform Act of 1986”).
[19] See Minutes of meeting between American Immigration Lawyers Association EB-5 Committee and Invest in the USA and USCIS on December 14, 2009 (answers to questions 15, 16 and 17).
[20] AFM 22.4(c)(4)(G).
[21] Memorandum from T. Alexander Aleinikoff, INS Executive Associate Commissioner entitled “Amended H-1B Petitions” dated August 22, 1996.
[22] AFM 31.2(e)
[23] Memorandum from James J. Hogan, INS Executive Associate Commissioner, Operations, entitled “Guidelines for the Filing of Amended H and L Petitions”, dated October 22, 1992.
[24] See AFM 22.4(c)(4)(G), as amended by the December 11, 2009 Neufeld Memorandum (the actual project identified in the business plan and approved in the I-526 petition must serve as the basis for determining whether the I-829 petition should be approved; if there is a material change, a new I-526 petition must be filed).
[25] Minutes of meeting between American Immigration Lawyers Association and Invest in the USA and USCIS on June 24, 2009 (answer to question number 12). Note the Service’s reference to an “amended petition” rather than a “new petition”, which can be highly significant. See, infra.
[26] AFM 31.2(e)
[27] AFM 33/4(a)
[28] AFM 22.2(E)
[29] See notes 21 and 23, supra.
[30] One of the precedent decisions, Matter of Izummi, 22I.&N. Dec. 169 (BIA 1998), is often cited for the proposition that an investor may not make material changes to a petition that has been filed in order to make a deficient petition approvable. However, Matter of Izummi arguably has no relevance to an I-526 petition that was approvable when filed and actually approved.
[31] Interoffice Memorandum from William R. Yates, Associate Director for Operations, U.S. Citizenship and Immigration Services, Clarification of Certain Eligibility Requirements Pertaining to an Application to Adjust Status under Section 245(i) of the Immigration and Nationality Act, HQOPRD 70/23.1 at 6 (March 9, 2005).
[32] AFM 22.4(c)(4)(G)
[33] This leaves open the question whether abandonment is the same as a termination for purposes of the holding in Stockwell. Arguably the answer should be in the affirmative. See also Matter of Mendez, 20 I.&N. Dec. 833 (BIA 1994) (withdrawal of support by petitioning spouse to jointly-filed I-751 condition removal petition effectuated a termination of the conditional permanent residence status).
[34] Matter of Izummi, 22I.&N. Dec.(BIA1998).
[35] See Memorandum of Robert L. Bach, Executive Associate Commissioner of INS, “Accepting Applications for Adjustment of Status under Section 245(i) of the Immigration and Nationality Act,” at 4 (April 14, 1999). See also Interoffice Memorandum of William R. Yates, “Clarification of Certain Eligibility Requirements Pertaining to an Application to Adjust Status under Section 245(i) of the Immigration and Nationality Act,” at ¶3(E)(2)(March 9, 2005).
[36] AFM 23.2(l).
[37] These examples appeared in a superseded version of the AFM at 15.2(h).
[38] AFM 22.4(c)(4)(G).
[39] Memorandum from Michael A. Pearson, Executive Associate Commissioner, Office of Field Operations, dated March 3, 2000, adding AFM 25.2(f)(9)(B), since superseded.
[40] Matter of Lok, 18I.&N. Dec.101 (BIA1981), aff’d. 681F.2d107(2nd Cir. 1982).
[41] AFM 25.2(k).
[42] Minutes of meeting between American Immigration Lawyers Association EB-5 Committee and Invest in the USA and USCIS on December 14, 2009 (answer to question 37).
[43] 8 C.F.R. §216.6(d)(2).
[44] 8 C.F.R. §216.6(d)(2).
[45] AFM 25.2(k).
[47] See Iddir vs. Immigration and Naturalization Service, 301 F.3d492(7th Dir. 2002); Chang vs. US, 327F.3d911(9th Cir. 2003).