Statistics shared by USCIS confirm phenomenal growth of the EB-5 program. The CSC adjudications unit has quadrupled in size during the past year, and the agency reports ongoing improvements in workflow.
USCIS acknowledged that a large number of Regional Center applications are being held in abeyance pending resolution of “an issue with the economic analysis.” The agency has been consulting with a contract economist and hopes to have that issue resolved within the next few weeks, after which applicants will begin to see decisions, RFE’s or denials.
The agency’s comments revealed no clear resolution on such questions as under what circumstances an employer will be provided the opportunity to replace a nonqualifying worker with a qualifying worker in response to an RFE, under what circumstances identical project documentation will be given deference in I-526 cases where bridge financing is used, and under what circumstances real estate-based investments may be used as part of a portfolio of investments.
There will be several new developments to watch for in the coming quarter. EB-5 processing times will be reported separately from the general CSC report and will be made available on the USCIS website. The new processing time reports will reportedly include more transparency. Also, summarized data from the I-924A process will also be published on the USCIS website. USCIS is compiling information on the most common reasons for denial of an I-924 and an I-829 and may make those available at the next stakeholder meeting. Finally, the revised I-924 form is in development and will be published for notice and comment. The new form will lay out standards for “shovel ready projects.”
USCIS Director Mayorkas hosted a small group discussion, attended in person by 25 stakeholders including Carroll & Scribner’s Ed Carroll (Susan Pilcher attended by phone), in order to solicit reaction and input into the latest iteration of a Draft Policy Memorandum to guide EB-5 adjudications. A copy of the Draft Policy Memorandum can be found here. While there is no formal comment period for this version of the memo, Director Mayorkas invited stakeholders to provide input through the email@example.com e-mail address. The agency contemplates further revisions to this “foundation document” in the weeks and months ahead, to be followed by amendments to the Adjudicator’s Field Manual.
The very interactive discussion yielded some insights into areas of EB-5 adjudication policy where the agency seems to have achieved some clarity, and it also revealed several areas in which mixed signals and inconsistent interpretations remain. Importantly, the Director continues to agree that predictability in adjudications is of paramount importance to project developers and investors. The following are key highlights of the discussion that will be of interest to the EB-5 community:
* There was consensus that it’s the New Commercial Enterprise – not the investors’ funds – that creates the jobs, and that interpretations and adjudications need to be guided by this principle.
* In the standalone EB-5 context (i.e. direct jobs), there can be multiple job-creating entities or projects so long as they are wholly-owned by the New Commercial Enterprise. This effectively eliminates the venture-capital-fund model from consideration in the standalone or direct-job context.
* In the Regional Center context, the agency has yet to clarify its thinking as to whether it is permissible for the New Commercial Enterprise to invest pooled funds in multiple job-creating and job-inducing projects. There was considerable discussion about how created jobs would be allocated among investors in this kind of scenario, and whether this issue would need to be fleshed out in the business documents of the project or whether it would be a function of the order of adjudications. No clear consensus emerged, and the Director committed to studying this issue further.
* What is “a reasonable time” for projected job creation if unforeseen circumstances have made it impossible to create all of the jobs by the time of I-829 filing? While all agreed that what was reasonable would turn on the facts and the credibility/viability of the business plan, Director Mayorkas noted that wide latitude on this issue would not be received favorably, and it is his expectation that the “reasonable time” contemplated by the statute would be “fairly short” in duration. The Director invited stakeholders to submit for consideration a variety of fact patterns to illustrate what would be a reasonable time under the circumstances.
* Regarding RFE’s on lawful source of funds issues, stakeholders reported seeing an upswing of RFEs regarding the tracing of funds involving Chinese intermediaries, the source of administrative fees, the lawful source of funds of Regional Center developers’ funds, and compliance with Chinese currency control and tax laws. The Director noted that the agency is currently taking a close look at the currency control and tax compliance issues, particularly with respect to Chinese investors, and we should expect continued close review of these issues. There was considerable discussion of whether it was reasonable and within the scope of the statute to examine the lawful source of funds that were commingled with investment funds in a single bank account. No clear consensus emerged, although it was clear the agency is unwilling to draw a bright line on these issues.
* Considerable confusion emerged over the agency’s approach to bridge loans. Although the Director expressed the view that the agency had signaled its clear acceptance of the use of bridge loans (again, based on the concept that it is the New Commercial Enterprise-not the investors’ funds—that creates the jobs), agency representatives seemed to balk at the notion that investors whose funds are used to repay bridge loans after the jobs have already been created could be credited with having created those jobs. There was some discussion as to whether clarifying the role of EB-5 funds in the loan documents would eliminate uncertainty, but a clear consensus did not emerge.
* The agency will be looking further at corporate law to further develop policy with respect to “restructuring/reorganizing” sufficient to result in a New Commercial Enterprise. USCIS continues to work on the Draft Policy Memorandum and invites stakeholder comments as it proceeds. The next USCIS Stakeholder Engagement on EB-5 issues is scheduled for January 23, 2012 at 1:00 pm EST. For more information about the scheduled Engagement, click here.