I was tempted to fire off some comments quickly on the new EB-5 draft policy guidance to show I am out there in front of EB-5 issues. I'm not, so I waited, and I'm glad I did. This new draft policy guidance recognizes some basic facts about the EB-5 Program, which is a good thing.
Read it here.
I find some language I can agree with, but I still have some disagreements with the draft guidance, and that is troubling, because I am an end-user and have to explain this program to lawyers, investor recruiters, and investors. This draft guidance shows me that I am not even close to doing this competently. This guidance and other guidance and memoranda issued by USCIS have always been uniformly bad for the EB-5 Program. Where USCIS makes pronouncements about EB-5, it always reveals its misunderstanding of how the EB-5 Program is supposed to operate and what standards, requirements, guidance and procedures should apply.
USCIS is great at quoting law and regulations in its guidance, memoranda, requests for additional evidence, and administrative appeals office decisions, but it is lousy at applying them or even understanding them. So many of USCIS "impressions" about how the EB-5 Program should work are blatantly confused between the regular (sometimes referred to as the "standalone") EB-5 Program and the regional center statutory version. They are very different. Often USCIS doesn't recognize this or even appreciate it.
This situation is not hopeless, but it's not good. I come at this with an acknowledged agenda. I think the EB-5 Program should be managed well and properly, by a federal agency with an economic development mission, for the benefit of the people of the United States. Not what we have now. Not even close.
I was doing well during my first review of the draft policy guidance, which stated law and regulations (as USCIS normally does in the early going in an attempt to prove they know how to copy stuff), until I got to the bottom of page 18 and the top of page 19 (of 25).
"For an immigrant investor who is investing in a new commercial enterprise that is part of a regional center:
"o The entity seeking designation as a regional center will file a Form I-924 that, together with the supporting evidence, demonstrates by a preponderance of the evidence that the requirements for a regional center have been met. The individuals who establish the regional center can be, but need not be, the immigrant investors themselves; and,
"o Once USCIS designates the entity as a regional center, each immigrant investor will file a Form I-526 that, together with the supporting evidence, demonstrates by a preponderance of the evidence that the immigrant investor has invested, or is actively in the process of investing, lawfully obtained capital in a new commercial enterprise in the United States that will create directly or indirectly full-time positions for not fewer than ten qualifying employees."
The predicate is just wrong, and USCIS mixes up administrative procedures. This is not at all helpful to an understanding of the process.
Regulations permit investors to prove that they have created 10 jobs -- direct, indirect, or induced -- if the new commercial enterprise in which they invested is within the geographic boundaries of a regional center and has been adopted as a regional center investment project. 8 C.F.R. § 216.6(a)(4)(iii-iv).
Although USCIS seems to recognize this, we have seen few statements that it does.
There is a very troubling paragraph on page 20 concerning creation of jobs "within a reasonable time".
"The regulations require that the business plan submitted with Form I-526 establish a likelihood of job creation 'within the next two years.' 8 C.F.R. § 204.6(j)(4)(i)(B), demonstrating an expectation that EB-5 projects will generally create jobs within such a timeframe."
Every EB-5 lawyer knows that the so-called "two-year rule", which USCIS in this paragraph incorrectly identifies as a "law", was literally lifted from the "marriage fraud amendments" wherein an alien who marries a U.S. citizen obtains "conditional residence", which is converted to lawful permanent residence if the alien can demonstrate that a bona fide marriage has existed for two years. But it gets worse.
USCIS wrote in that same paragraph: "Jobs projected to be created beyond that time horizon (that is, more than three years after USCIS approved the petitioner’s Form I-526) will usually not be considered to be created within a reasonable time, unless extreme circumstances, such as force majeure, are presented."
Strict adherence to this "two-year rule", which bears no relationship to any principles in the business world, sound business practices, or the painfully slow-growing economy, and the corollary "within a reasonable time" rule is neither logical nor helpful.
Although still very "project-centric" when discussing regional centers, there is one little phrase at the top of page 21 that seems to recognize my regional center's project hosting business model: " ... [A]n affiliated commercial enterprises's organizational structure."
USCIS seems to have taken a more reasonable view of "material change". I write "seems" because it's not clear. We'll see when some new adjudications start coming out of the California Service Center bunker in the near future. The agency pulled a definition of "material change" from a denaturalization case. It has adopted the following: "A change in fact is material if the changed circumstances would have a natural tendency to influence or are predictably capable of affecting the decision," citing Kungys v. United States.
The recognition that changed circumstances may not be the fault of the EB-5 project developer(s) on page 21 is a watershed moment in EB-5 history. Also, for the first time, USCIS has recognized that the law does not require a direct connection between the business plan and job creation in accordance with the business plan.
"While that position [the business plan and job creation] is a permissible construction of the governing statue, USCIS also notes that the statute does not require that direct connection." And there is this:
"Pursuant to this policy, USCIS will no longer deny petitions to remove conditions solely based on failure to adhere to the plan contained in the Form I-526 ...."
While acknowledging its "deference" policy and recognizing "the fluidity of the business world" and material changes to the business plan after the alien obtained conditional resident status, USCIS states that alien investors who avail themselves of this new flexibility decreases the degree of predictability they would enjoy if they (or project developers) adhered to the business plan.
I am rarely able to praise USCIS for doing or not doing something, so I take this opportunity to
congratulate USCIS for some tweaks that could actually benefit the EB-5 Program and the national EB-5 community.