April 15, 2023 | By Michael A. Harris
Soon, the USCIS will hopefully have its scheduled EB-5 Stakeholder Engagement. The event was originally scheduled on March 20, 2023, but was unexpectedly moved to April 25, 2023. One of the topics for the engagement will be the requirements for an immigrant investor to sustain their investment if they filed Form I-526 before March 15, 2022, and the new requirement under the EB-5 Reform and Integrity Act of 2022 (“RIA”) that capital must be expected to remain invested for at least two years for those who filed an I-526 or Form I-526E on or after March 15, 2022. This topic is of particular importance to EB-5 investors and industry stakeholders as it relates to the “at risk” requirement and compliance with USCIS policy guidance, and could potentially have significant impacts on an investor’s eligibility for a green card.
The EB-5 program, established by the United States Congress in 1990, has long been an attractive option for foreign investors seeking a pathway to U.S. permanent residency. The program allows investors to obtain a green card by investing in a new commercial enterprise (“NCE”) that creates jobs in the U.S. However, in recent years, concerns have arisen over the management and integrity of the program, leading to calls for reform, such as by grassroots organizations. The RIA, passed on March 15, 2022, made significant changes to the EB-5 program, including new provisions related to redeployment.
In the context of the EB-5 program, redeployment refers to the reinvestment of an investor’s capital into a new project or investment after the original investment has been repaid, completed, or sold. This process allows the investor to maintain their investment and satisfy the program’s requirements for sustaining their investment in the U.S. economy.
A Major Discovery
Last year, possibly before anyone else, I discovered significant changes to the Immigration and Nationality Act (INA) resulting from the RIA that could have a significant impact on the sustainment period, which had previously been required through a resident’s conditional period. Consequentially, this impact may also drastically change the redeployment process. By closely analyzing the roadmap of changes provided by the RIA to the INA, I was shocked when I realized the gravity of the RIA’s amendments to the INA. These changes include:
1. New Investment Period under INA Section 203(b)(5)(A)(i): The amendment clarifies that an investor’s capital is expected to remain invested for not less than two years. This change emphasizes the need for sustained investment and may influence the way investors and NCEs approach redeployment, as it highlights the importance of maintaining the investment for the required duration.
2. New Buyback Provisions under INA Section 203(b)(5)(D)(ii)(IV): This amendment states that capital invested may be subject to a buyback option at the NCE’s discretion and that the investor may withdraw their petition only after fulfilling their sustainment period and other requirements. This change offers more flexibility to NCEs and investors, ensuring that the investment remains in the U.S. economy while providing an option for withdrawal under certain conditions.
3. Removal of Sustainment of Investment as a Basis to Terminate Residence under INA Section 216A(b)(1)(B): The key change in this section is that an investor’s termination of status can no longer be based on not sustaining their investment during their entire period of their two-year conditional residency. Previously, the investor could lose their status if they failed to maintain their investment throughout their residency in the United States. The change by the RIA now says that only if an investor has not “invested the requisite capital” can their residency be terminated. Previously, the law had two provisions that affected an investor who was still “in the process of investing” or “not sustaining” the investment:
(i) the alien did not invest, or was not actively in the process of investing, the requisite capital; or
(ii) the alien was not sustaining the actions described in clause (i) throughout the period of the alien’s residence in the United States; or
|(B) the alien did not invest the requisite capital; or
(i) invested, or is actively in the process of investing, the requisite capital; and
(ii) sustained the actions described in clause (i) throughout the period of the alien’s residence in the United States; and
|(A) invested the requisite capital;
Again, note the parts in bold or red above that have been removed from the INA.
4. New Requirement if Investors Are Still “In the Process of Creating” Jobs
|(B) is otherwise conforming to the requirements of section 203(b)(5).
(i) created the employment required under section 203(b)(5)(A)(ii); or (ii) is actively in the process of creating the employment required under section 203(b)(5)(A)(ii) and will create such employment before the third anniversary of the alien’s lawful admission for permanent residence, provided that such alien’s capital will remain invested during such time; and
(C) is otherwise conforming to the requirements of section 203(b)(5).
The recent amendments to INA §216A(d)(1)(B) and (C) resulting from the RIA have significant implications for EB-5 investors in both regional center and direct standalone projects. Previously, INA §216A(d)(1)(B) required an investor to sustain their investment throughout the entire period of conditional permanent residence, which is typically two years. However, the new version of INA §216A(d)(1)(B) now provides that an investor is no longer required to sustain their investment during the conditional residence period, unless they have not yet fulfilled the job creation requirement under INA §203(b)(5)(A)(ii).
Under the new provision of INA §216A(d)(1)(B), an investor may be required to sustain their investment during their two-year residential period if the job creation requirement has not yet been met. This means that if the jobs have not been created before the investor’s conditional residence period ends, they may be required to maintain their investment for an additional two years, until the end of the two-year residential period. This new provision aims to ensure that investors continue to have a financial stake in the success of the project until the job creation requirement has been met.
For investors in regional center projects, this new provision may not have a significant impact, as the vast majority of regional center projects are structured to create the required jobs within the two-year conditional residence period. However, for investors in direct standalone projects, which may have longer project timelines or face unexpected delays, this new provision may require them to sustain their investment for a longer period of time than originally anticipated.
Overall, these changes to INA §216A(d)(1)(B) and (C) highlight the importance of careful planning and due diligence for EB-5 investors. Investors should ensure that they fully understand the job creation requirements of the program and carefully consider the project timeline and potential risks before making an investment.
The Real Question: What Will be the Potential Impact on USCIS Policy
The RIA’s amendments could lead to several impacts on the U.S. Citizenship and Immigration Services (“USCIS”) policies regarding the EB-5 program and redeployment. These potential impacts include:
1. Policy Clarification: The USCIS may need to issue updated guidance and clarify its policy on redeployment to account for the new provisions in the RIA. This could involve providing more detailed information on the redeployment process, the role of NCEs, and the requirements for maintaining and completing an investor’s capital investment.
2. Increased Oversight and Compliance: The RIA’s amendments could lead to increased oversight and compliance efforts by the USCIS to ensure that investors and NCEs adhere to the new requirements. This may involve more stringent checks on the redeployment process, ensuring that the capital remains invested for the requisite period, and monitoring the exercise of buyback options.
3. Enhanced Investor Protections: The changes introduced by the RIA should result in stronger investor protections within the EB-5 program. By emphasizing the need for sustained investment and reducing the risk of termination, the USCIS policies may be updated to further safeguard the interests of investors, ensuring that they can navigate the redeployment process with more certainty and stability.
4. Impact on Processing Times: The RIA’s amendments may have an effect on the processing times for EB-5 petitions. As the USCIS updates its policies and procedures to incorporate the new requirements, it is possible that there could be delays in the adjudication of petitions. However, it is important to note that the USCIS’s focus on investor protections and policy clarification could ultimately benefit investors by increasing the certainty and transparency of the program.
Furthermore, the amended INA §216A(d)(1)(B) also has potential implications for investors in regional center and direct standalone projects. While an investor no longer needs to sustain the investment during the conditional residence period, they MAY have to sustain their investment during their two-year residential period IF the jobs have not been created. This means that investors may need to carefully consider the potential risks and benefits of investing in projects that may not create the required jobs within the initial two-year period.
New Regulations Coming: Will USCIS Be Reasonable?
As a result of the RIA, how USCIS will update its policies and procedures to align with these new provisions will be critical to the redeployment process, oversight and compliance efforts, and petition processing times. Here’s what I think some potential changes could be to the current regulations under 8 C.F.R. based on a reasonable interpretation of the EB-5 Reform and Integrity Act. These changes could include:
1. Sustained Investment Period: Update 8 C.F.R. § 204.6(j) to reflect the new requirement under INA Section 203(b)(5)(A)(i) that capital should remain invested for at least two years. The regulations could provide more guidance on the criteria for satisfying this requirement, including expanding the types of projects eligible for redeployment and the documentation needed to demonstrate compliance.
2. Buyback Options: Amend 8 C.F.R. § 204.6(j) to incorporate the provisions under INA Section 203(b)(5)(D)(ii)(IV) regarding buyback options. The regulations could clarify the conditions under which a buyback option can be exercised, and any reporting requirements for NCEs that choose to exercise these options.
3. Termination of Status: Revise 8 C.F.R. § 216.6 to reflect the changes in INA Section 216A(b)(1)(B), which no longer requires termination of an investor’s status based on not sustaining their investment. The regulations could provide further guidance on the grounds for termination and any procedural safeguards for investors facing termination.
4. Redeployment Procedures: Update 8 C.F.R. § 204.6(j) to offer more specific guidance on redeployment procedures, in light of the changes introduced by the EB-5 Reform and Integrity Act. This could include addressing the acceptable timeframes for redeployment, the level of involvement required from the investor, and any additional documentation or reporting requirements.
5. Monitoring and Compliance: Amend 8 C.F.R. § 204.6 and § 216.6 to establish more robust monitoring and compliance measures, ensuring that investors and NCEs adhere to the new provisions. This could involve outlining the roles and responsibilities of NCEs in maintaining the sustained investment period, as well as the potential consequences for non-compliance.
6.Investor Protections: Revise the relevant sections of 8 C.F.R. to enhance investor protections, taking into account the increased emphasis on sustained investment and reduced risk of termination introduced by the EB-5 Reform and Integrity Act. This may involve strengthening the due diligence requirements for NCEs, outlining investor rights during the redeployment process, and providing clearer guidelines on dispute resolution.
7. Processing Times and Adjudication: Update 8 C.F.R. to address potential impacts on processing times and adjudication procedures, in light of the changes introduced by the EB-5 Reform and Integrity Act. This could involve streamlining the petition review process, establishing clear timelines for different stages of the EB-5 application, and providing guidance on how the new provisions may affect processing times.
Conclusion: IIUSA and AIIA Differ in Stance on Redeployment Policy for EB-5 Investors
IIUSA and AIIA, two of the biggest trade associations in the EB-5 industry, hold opposing views on the issue of redeployment. IIUSA supports the practice, stating that it allows for flexibility and has benefits for investors and projects alike. In contrast, AIIA has long lobbied against redeployment, citing concerns about how it may be exploited by bad actors, and arguing that it should only occur with investor consent. While both groups may agree on the need for greater transparency and accountability, their differing views on redeployment reflect the broader debate over how to best protect the interests of EB-5 investors.
The current regulations under 8 C.F.R. should aim to reflect the changes introduced by the EB-5 Reform and Integrity Act and provide clearer guidance for investors, NCEs, and USCIS adjudicators. These updates could address various aspects of the EB-5 program, including sustained investment, partial investment, partial job creation, buyback options, termination of status, redeployment procedures, monitoring and compliance, investor protections, and processing times. By amending the regulations to incorporate the new provisions, the USCIS can help ensure that the EB-5 Program remains an attractive and secure option for foreign investors while maintaining the integrity of the program and promoting investment in the U.S. economy. How the industry reacts, such as based on the unity between AILA’s EB-5 Committee, IIUSA (the trade organization which represents the EB-5 Regional Center industry), as well as AIIA (the nonprofit investor-led group that seeks to protect investor’s interests), may determine the outcome.