2012/07/26 -- EB-5 Stakeholders Teleconference


This teleconference had a USCIS attorney present, so USCIS was able to answer more substantive questions than the usual.

Summary:

Job announcement has been announced for a new EB-5 Program Office Head.

USCIS kept on referring to another updated policy draft memo by Director Mayorkas coming out soon, but they were saying it would come out soon several months ago, so it's hard to say when it will be coming out.

USCIS also stated that any applicant who was denied on I-924 applications will be given a chance to show up personally in front of a Review Board composed of two supervisory USCIS officers and one economist. This implies that many I-924 applications will be denied. 209 approved regional centers currently.

Sustainment of Investment in NCE: How to determine if new investment has been made? 8 CFR 216.6(a)(4)(iii). May include bank statement, invoices, receipts, contracts, tax statements, etc. All of these docs are helpful to USCIS showing path of the capital from investors to NCE. Also, must show EB-5 money has been made available and sustained in a business in compliance with INA 216A(b)(1)(A) thru (C). [Note this statute does not mention or require EB-5 capital having to be sustained in the JCE but only in NCE. We feel USCIS is adding another requirement beyond the EB-5 statutes and regs. Why do they keep on doing this? Or did the USCIS officer misspeak? Oh well . . . ]

Does Operating Loss that reduce investor's capital account not constitute redemption of capital? Investor's capital account includes investor's relative profit and loss which can be reduced by distributions, leaving retained earnings. Operating loss is not a return or redemption but a natural function, of either profit or loss.

Are the standards different for preferred equity vs. loan-based investment? Equity investment must be made be first made in the NCE, but NCE can invest or loan to JCE.

Industry code in I-924: Form I-924 must demonstrate in verifiable details how jobs will be created. Form I-924 Instructions require business plans. How specific do business plans have to be? To receive due deference at I-526 stage, that actual project must meet for a specific capital investment project pre-approval. Matter of Ho. The project like this should be advanced enough so work can begin immediately with a dummy exemplar form I-526 with all supporting docs for I-526 petition, and any approval notice will refer to the project name and in case of denial, the reasons for denial. Two Memos on due deference noted.

How many digits required? 4 digits is sufficient to properly evaluate projects, but some may require additional digit.

Proposed geographic boundary is flexible according to EB-5 law. Economic impact must resonate throughout the region, even though a large area. The area should contribute to supply chain and/or labor pool. Commuter data or labor data needed. Highly factual.

Multiple RFEs: Officer or Supervisor can consult with USCIS attorney or economist in issuing RFEs.

EB-5 capital with non-EB-5 capital such as bank loan: Such arrangement is fine. What evidence is necessary that non-EB-5 financing will be obtained? USCIS understands certain projects rely upon non-EB-5 capital or financing, and that these non-EB-5 financing is contingent upon EB-5 capital coming in. EB-5 law is flexible, but some evidences can include executed loan agreement or commitment letter, letters from prospective lenders, showing probable likelihood that non-EB-5 financing will be obtained. USCIS understands business realities.

Can the investors receive returns on their investments made during 2 years? Absolutely, as long as these are derived from operating profit. Cannot return the principal. [This kind of questions where clear answers exist should not be asked during teleconference and take up valuable time.]

Are withdrawals of I-526 after RFE included in denial statistics? USCIS treats those as denials because they are also termination of cases.

If developer invests in "something" that is essential to tenant's business, will this be allowed? On tenant-occupancy issue, they should be addressed to USCIS economists at the Public Engagement email address.

Can a bank loan with investor's property as a collateral be used? No prohibition in the EB-5 law. [No problem with this arrangement as this has been used often.] How far back will the lawful source requirement go. No hard and fast rule as to the level of tracing. Matter of Ho. Path of fund is important from EB-5 investors to NCE. How detailed dependent on the facts.

Review Board: Can I-924 applicant request a meeting? Can it be telephonic? How much time to prepare will be granted? NOID will give an option to request a meeting, in person or telephonic at CSC within 30 days. One hour meeting probably required. No need to come into CSC.

How long does capital investment need to remain in NCE after 2 years of CPR status? Some I-829s may be pending. Can the money be returned after 2 years of CPR even while I-829 is pending, i.e. entire period of CPR? USCIS said to follow up on the question with the Public Engagement. Related question: NCE lends money to JCE, and the JCE repays some portion of the loan to NCE while I-829s are pending? USCIS will release a FAQ to answer clearly.

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Can investors receive condo or real estate as a return on their capital investment? Potentially, as there is no prohibition in the EB-5 law. But based on their practical experience, where EB-5 investors receive condos [from whom?] denials were issued. Acquisition of real estate does not result in jobs. Investment structure where EB-5 investors are guaranteed to receive condos or real estate, such arrangement is guarantee or is deemed "at risk" investment.

I-924 amendment have longer processing times than initial I-924 processing? Often, amendment request is more complex, so that USCIS must conduct an entirely new analysis of RCs for proposed economic growth and compare against the initial I-924 RC docs. Economists and attorneys will participate in review.

Due deference policy: Exceptions: material change, fraud or misrep, prior determination or approval was legally deficient. USCIS is aware that predictability is important. May and Dec Guidance.

Q & As:

If a developer gives concession to tenants but developer does not generate profit because of the concessions, does this mean investment is not at risk? Want to avoid economic issues, but making no profit at the end of the day does not mean this is no risk investment.

TEAs and HUAs: Can HUA be based on average unemployment rate of 2 years, rather than most current unemployment rate? USCIS' only comment and according Soffici the date of filing of I-526 filing or when the investment was made into the NCE, whichever is earlier. If there is newer data, then there might be some integrity question. USCIS will follow up on this question.

If I-924 is filed for multiple industries, can USCIS approve RC for certain industry sectors that meet the RC designation requirements? All or none? For example, some industry sectors may have tenant-occupancy issues. A letter can be submitted to USCIS making a request for narrowed scope of industries. An applicant can decide to take out an industry sector if he or she wishes.

Market studies that seem to be needed to support hotel projects: Who need to do market studies? Quality is the key, not whether the same or separate economist did the market study.

EB-5 investor acquires an existing business: Must be 10 additional, new jobs, unless a troubled business. What if the investor is investing a business to be shut down or already shut down, i.e., asset acquisition with previous employees. Any investment outside of troubled business investment, 10 additional, new jobs must be created. If the old employees are "retained", then these are not new employees. Fact specific analysis needed. Does it make a difference if the company let their employees go and then rehire later after asset acquisition? Fact specific. Are these "new" positions? [We got an idea that this is not a good idea.] If they are doing the same duties with a different investor, then this may be a problem.

Reorganized or restructured business guidance coming out? On restructuring, Soffici is a guidance. Buying an existing business and polishing up that business does not make a new business. Soffici says what does not qualify, but it does not say what does qualify. Next draft policy memo will cover this issue. Job sharing is already covered in the regs. What actually shows the job-sharing situation? USCIS will examine and see if they can issue a further clarification.

Material change & deference policy: If it's easy to find prior adjudication legally deficient, then it would defeat the due deference purpose. If I-526s are different from the exemplar project approval, then you need to go into whether the changes are "material" changes, then this may be a problem. There was a discussion as to what kind of changes are "material". [We would say the changes are material if it affects I-526 petition outcome.] If there is no change or the change is not material, then due deference policy should be followed. USCIS says it's hard to provide guidance on material change, but the questioner suggested that the materiality should be determined based on the specific eligibilities presented. [We believe a specific type of benefit sought is the key in this determination.]

Pre-I-924 RC approvals are now adjudicated under the current tenant-occupancy issues, and some of the languages that are used now days are not present in the old RC approval letters. This undermines the predictability which USCIS says it supports, no? USCIS does not want to get into any particular tenant-occupancy issues. Certainty is needed in tenant-occupancy issues.

If someone takes over an existing business, is augmenting existing employees include both legal and illegal existing employees? Which employees count at which specific time because the number of the employees which existed in the past can vary throughout the years. Basically, the questioner asked based on what number of employees and which employees, should the augmentation of employees take place? USCIS says the number of qualifying employees which existed should be the base. On the timeline issue, USCIS said it will get back on this issue.

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Closing remarks by Director Mayorkas: USCIS is dedicated to EB-5 Program and job creation and also understands the need for predictability, etc. Look forward to next draft guidance memo which will address a series of issues left unresolved.

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USCIS also emailed EB-5 statistics in advance of the teleconference.

http://eb-5center.com/files/EB5_Statistics_Q3_2012.pdf