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[HOT] The logical and practical concept of "material change" needed for the EB-5 Program to survive


* Note that the concept of "material change" is lurking even under the recently-announced Director Mayorkas' new proposal for changes to EB-5 processing. This is because some changes -- minor or material -- can still take place after the pre-approval of actual "shovel ready" project. For example, if the pre-approved project's business plan stated that the job-creating factory will manufacture pencils, but when I-526 is submitted, the business plan says the factory will manufacture pens, is this a material change? This is why a logical and practical definition of "material change" is absolutely necessary because the likelihood of some kind of "change" lurks everywhere in the EB-5 processing. Right now, the best definition of "material change" is whatever change CSC examiner considers to be "material" -- sadly I am not being frivolous or sarcastic in saying this -- and that is no way to run the EB-5 Program. This is because on many issues concerning the EB-5 Program, there simply was no guidance. Good parents should not be punishing kids when the parents never told the children that something was a "no-no".

** Note also that said author has no problem with USCIS issuing whatever EB-5 policy memos (ultimately, we really have no real control over USCIS issuing whatever EB-5 policy memos it wants to issue except to complain to them), as long as they are applied prospectively, but said author disagrees strongly with the unfairness of USCIS applying any newly enacted EB-5 law, regulation or policy memos (substantive changes or interpretations) retroactively.

USCIS has to come up with a logical and practical concept of "material change" after I-526 approval that will give a clear guidance to the EB-5 community and comports with the specific EB-5 regulations, instead of trying to misapply the holding in the 9th Circuit Chang case.

USCIS has to acknowledge that in a real business world, changes or deviations from best laid out business plans do occur all the time. In other words, the change is the norm in the business world. Surely, USCIS is not saying that any change after I-526 petition approval dooms I-829 approval, and is using the 9th Circuit Chang case to support this argument?

Therefore, when USCIS refers to "material" changes, USCIS has to mean those changes that is fatal to the I-829 being approved, right? That's the only logical conclusion. Any other definition takes the EB-5 Program up to the mountain top which is shielded from the real world business practices and commercial needs. Another way of saying this is that USCIS is not comfortable dealing with the real world business practices and needs.

Now, let's examine what are the specific I-829 requirements which must be evidenced for the investor-petitioner before his or her I-829 conditions removal petition "shall" be approved.

The last time I checked the EB-5 statutes and regulations, they were:

1. That a NEW commercial enterprise be established. [Note that a job-creating enterprise is often not a new commercial enterprise where the new commercial enterprises engages in making loans to job-creating businesses per Izumii.

2. That the EB-5 investor-petitioner made the requisite capital investment into the new commercial enterprise and furthermore, that capital investment was sustained in the new commercial enterprise. [Where the new commercial enterprise made a loan to a job-creating business, the new commercial enterprise made the loan of the capital investment to the job-creating business -- also a requirement per Izumii]

3. That the EB-5 investor-petitioner create the requisite number of jobs.

Read the regulations, I am not lying.

Having read the above regulations, the changes that occur after I-526 petition is approved cannot and must not be the kind of change that:

1. Does away with the existence of new commercial enterprise, such as dissolution.

2. Pulls out capital investment from the new commercial enterprise.

3. Makes the new commercial enterprise just hold on to the money, instead of making loans to job creating businesses.

4. Does not lead to job-creation.

As long as the changes allow the above requirements to be met, then, by definition, that change must be immaterial or not material change, period.

This means the below types of changes are "material changes":

1. The new commercial enterprise (usually partnership) is dissolved.

2. The investor or partnership pulls out the investor's money from the new commercial enterprise and gives it to a third-party.

3. In case the new commercial enterprise is supposed to make a loan to a job-creating entity, the new commercial enterprise just holds on to the money, never making a loan.

4. Requisite jobs cannot be created.

On the other hand, the below types of changes are "immaterial" changes:

1. The job-creating entity decides to produce another product from the product described in the business plan of the approved I-526 petition.

2. The job-creating entity moves its location, as long as the location is still in the TEA area, or builds a hotel instead of a commercial office building.

3. The jobs created per investor is reduced from 15 per investor to 10 per investor.

4. The new commercial enterprise makes a loan to job-creating entity B instead of job-creating entity A as originally planned.

Now, the problem is USCIS does not agree with the above concept of "material change", and the only legal support they cite is the 9th Circuit Chang case which said something like I-526 petition and I-829 petition cannot be de-coupled, and then held that as long as the petitioner carried out the business plan of the approved I-526 petition, the I-829 should be approved. However, the Chang case does not and cannot be used for the proposition that ANY changes from the approved I-526 petition dooms the I-829 petition. In fact, the logic dictates that only "material" change as defined above dooms the I-829 petition. In other words, the only logical way to apply the Chang holding is not to say that any changes from the business plan dooms the I-829 petition, but to hold that only "material" change as defined above dooms the I-829 petition. Furthermore, I challenge any EB-5 project to stick exactly to the plan laid out in the approved I-526 petition in every small details. I know only one way to get around this -- and USICS is unknowingly encouraging such practice -- and that is by making the business plan in the I-526 so general and not specific that USCIS cannot accuse at the I-829 stage that the petitioner failed to comply with every minute details of the I-526 business plan.

USCIS' continued failure to deal with this issue and provide a logical definition of "material" change in a clear manner is doing a serious injustice and damage to bona-fide EB-5 projects which will create jobs and help the stagnant U.S. economy. Otherwise, more than 25% or even 35% denial rate per annum of I-829s will become a common occurrence and eventually doom the EB-5 Program. EB-5 investors are not that dumb.