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Regional Centers -- Features, Benefits & Requirements

[HOT] [Q] Can a third-party guarantee a NCE's loan to a job-creating entity for a RC EB-5 project?

[Q] At the October 19, 2009, AILA EB-5 conference in San Francisco, CSC officials indicated that an acceptable EB-5 investment in a regional center context may consist of an equity investment in a commercial enterprise that in turn makes a loan with the invested capital to a borrower. CSC officials also appeared to state at the conference that the commercial enterprise could receive a guarantee from a third party that the borrower would repay the borrowed funds to the commercial enterprise. Please confirm that this is acceptable. It should be, since even a third party may not be able to pay the guarantee (e.g., AIG). Similarly, the borrower may not be able to repay the commercial enterprise, even if it receives money from the third party (e.g., General Motors). Also, does it matter whether the third party guarantor is a private insurer, bonding company, or a government entity?

Let's see what USCIS says clearly on this issue, and then our comment.

[Q] Is regional center program limited to only 3,000 IV numbers per annum?

USCIS interprets the set aside of visas to ensure that a minimum of 3,000 visas are available for regional center based applicants. We do not see the set aside as limiting the number of visas that can be granted to regional center based applicants.

[HOT] [Q] For regional center projects, do indirect jobs created outside the regional center's geographic area count?

[Q] For regional center projects, do indirect jobs created outside the regional center's geographic area count? For example, a regional center may be approved for Los Angeles County. The regional center’s first project may be a bakery located in Los Angeles County, and direct jobs are created in that county. The economic model, however, may not specify where indirect jobs are created. The flour distributing company that has to hire an additional employee to transport flour to the Los Angeles bakery may be located in Riverside County, for example. We believe that an indirect job in such circumstances should count for EB-5 purposes. Please confirm.

Because this question is such an important one in context of regional center based EB-5 cases, let me quote the USCIS' answer in its entirety. In short, the answer is a clear "no". And a regional center better expand its underlying regional center's geographic area if it wants to count direct and indirect jobs created outside the current regional center area.

[Q] Can a regional center project count (direct and indirect) jobs created outside the region?

In regard to direct jobs, it's safe to say that the direct jobs created outside the underlying "region" will not be allowed to count.

[Q] Can a regional center's EB-5 project engage in loan-making activity?

Of course, the question already assumes that a particular regional center has been designated as a regional center by USCIS for an investment structure involving pooling funds from investors and using such fund to make loan(s) to job-creating business(es). Otherwise, the answer would be "no". With this understanding, see below.

[Q] How much money and effort is needed to obtain a regional center designation?

We would guess that anywhere between $50,000 USD to $100,000 USD plus a lot of effort and time (currently 5 to 8 months) are needed to obtain a regional center designation from USCIS. Contrary to popular belief, anyone can obtain a regional center designation. However, successfully operating a designated regional center is NOT easy.

[Q] How many designated regional centers are there and how many are pending?

As of March 3, 2011, there are over 100 regional centers designated by USCIS, and there are more than 50 regional center applications pending. This means within one-year time, there may be over 150 designated regional centers. Note that not all designated regional centers are active, and the track records vary greatly among designated regional centers.

[Q] What are some types of job-calculation methodologies USCIS has accepted for regional centers and any advice?

USCIS has accepted such methodologies as IMPLAN, RIMS II, REDYN and REMI. Job creation studies vary from project to project and that the more specific and conservative the study, the more likely that the assumptions that the predictions are based on will be met.

[Q] For a "fund" style Regional Center, what is the recent restriction announced by USCIS?

[Q] A "fund" style Regional Center involves offering multi projects in which investors' funds will be spread around, similar to mutual fund. Is there any restriction imposed by USCIS?

USCIS recently announced during September 16, 2009 Stakeholders conference that this type of fund Regional Center must state at I-526 petition submission stage what projects the investors will be investing in.

[Q] How many USCIS-designated Regional Centers are there as of August 15, 2009?

A flippant answer would be "too many", and my honest and serious answer would be "too many for the current EB-5 market demand". There are around 50 or more designated regional centers scattered throughout the U.S., but my feeling is there are greater number of regional centers which are kinda inactive.

[Q] Generally, what kinds of investment structures are utilized by USCIS-designated Regional Centers?

Although USCIS-designated RCs involve numerous industries or targeted business areas, they generally use one or more of the below investment structures permissible under the EB-5 law.

[HOT] [Q] Can any RC EB-5 project involve a loan directly from individual investors to a job-creating borrowing company?

No, absolutely not. To our knowledge, no RC Program is carrying on this kind of investment structure involving individual EB-5 investors lending directly to a job-creating borrower entity for at least three reasons: 1) it's against EB-5 law; 2) no RC Program would be this ignorant; and 3) USCIS will not approve a regional center with such investment structure. :)

[HOT] Are any RCs government sponsored, and if so, are they better than non govt-sponsored RCs?

This is one of misconceptions about the Regional Centers. No government (either federal government, state, city or even a village) "sponsors" the RC. Therefore, if anyone tells you their program is a government-sponsored RC Program, it's somewhat misleading.

[HOT] [Q] Some say for a RC EB-5 case, all you have to do is prove the job-creation at I-526 stage? True?

[Q] Some RCs and/or attorneys take the position that for RC EB-5 case, job-creation needs to be shown only at I-526 petition through use of "reasonable" methodology. Is this true?

No, it's not as simple as that -- far from it. USCIS has already spoken very clearly on this issue through its carefully-crafted June 24th 2009 Neufeld guidance memo and USCIS' responses to Ombudsman's EB-5 recommendations.

[Q] What kinds of job-calculation methodologies may be used for RC-based EB-5 project?

[Q] Are there constraints on the kinds of job-calculation methodologies that can be used for RC-based EB-5 projects?

Pursuant to EB-5 regulations, any "reasonable" methodology may be used to calculate direct, indirect and induced job-creation resulting from investment, but according to recent USCIS guidance memos, including the Neufeld guidance memo of June 17, 2009, the methodology utilized by the RC Program should contain the time-frame before expiration of which the requisite jobs are supposed to be created.