U.S. Citizenship and Immigration Services issued a policy memorandum draft on August 10, 2015, “Guidance on the Job Creation Requirement and Sustainment of the Investment for EB-5 Adjudication of Form I-526 and Form I-829,” which can be found here. In relation to the policy draft, various issues concerning job creation, I 526 and I 829 adjudications, at risk issues including redeployment of funds and other related matters are discussed below.

It is interesting that, pursuant to the draft policy memorandum and contained in footnote 11, there is a citing to the Supreme Court case of Kungys v. United States involving the definition of “materiality” in the context of denaturalization. That reference in the policy memo was relevant from the point of view that, with respect to materiality in connection with a specific transaction and business plan, it is apparent that the standards utilized by the Supreme Court in the Kungys case may be applicable. The key in that case was a Supreme Court determination that a misrepresentation or concealment by a naturalized citizen was material if it was more likely than not to have produced an erroneous result as a result of the misrepresentation. The Supreme Court held that in the particular case, the date and place of birth that was not correctly stated was not material in affecting the ultimate outcome of a decision to naturalize the applicant, and therefore, the Supreme Court ruled on behalf of the immigrant.

For more information about the memorandum, as well as a copy of the draft, please click here to go to USCIS’ related Web page.

U.S. Citizenship and Immigration Services Stakeholder’s Call

As follow-up to the USCIS stakeholder’s call on August 13, 2015, the following EB-5-related takeaways are the most relevant:

  1. The fact that USCIS is continuously increasing its staff and currently has 112 employees, together with four more that have been hired, with the intent to have 20 more employees by the end of the calendar year.
  2. That adjudications of I-526s have increased to around 1,000 per month, and the percentage of adjudications has therefore increased dramatically.
  3. The apparent success rate of I-526 adjudications has been approximately 90% this year. The 829 petitions success rate is approximately 99%. The success for 924 application approvals is approximately 85%.
  4. It was noted that there was a significant spike in 924 petitions for the month of July, and USCIS understands that this spike will continue dramatically as a result of the new proposed legislation in the Senate (Bill No. ___ p. ___), which otherwise dictates that the filing of a 924-a petition prior to the effective date of the new legislation will “grandfather” the project and all petitioners thereunder from the proposed increase in the TEA investment amount from $500,000 to $800,000.
  5. Processing time still remains slow, and as of May, the timing was 13.4 months for 526’s, 13.6 months for 829’s and 11.5 months for 924’s.
  6. The new retrogression date has now been moved to September 2013.
  7. There was a discussion about EB-5 protocols related to certain matters.
  8. There is a new team that has been added for regional center compliance, which is unique. This will heighten the investigation and oversight of the regional center program, including site visits, audits and holding regional centers more accountable in order to increase the integrity of the EB-5 program. Strides will be made to maintain risk management activities and collaborate with other U.S. agencies, including the SEC, the FBI and ICE.
  9. It was acknowledged that a change of ownership in the JCE (job creation entity) should not otherwise be a problem with respect to 829 adjudication.
  10. 1Another significant factor involved remaining at risk and what that means. It was noted by the chief economist that having a sinking fund in and of itself should be permissible, providing the investor has no direct access to those funds and that the sinking fund is consistent with a bond sinking fund for bond offerings.
  11. One of the most important takeaways at the stakeholders meeting was the concept of “redeployment.” It was acknowledged that a loan could be repaid before 829 adjudications have been finalized for all investors, and that the NCE would then have the obligation to redeploy the loan proceeds in a manner that maintains the “at risk” requirement. There were several questions raised from attendees and parties calling in about what it means to be at risk. USCIS indicated that it would take into account suggestions made by those parties wishing to provide comments by September 8 in order to make a final policy decision. In connection, suggestions were made that money funds, marketable securities and the like should qualify, and USCIS said, in trying to come up with a policy memorandum, it would take under advisement all suggestions. It would appear to me that investments in money funds would probably not work since they are not risky enough. Marketable securities may or may not comply. Another possibility would be to invest in a real estate investment trust (REIT), which arguably is a replacement of a real estate investment in a real estate fund, so that as 829 are adjudicated, the shares could be liquidated and used to repay the investor that receives 829 final adjudication.

All in all, the positions taken by USCIS were very encouraging with respect to their attitude of trying to speed up administration, add more due diligence and compliance to the regional center program, clarify the sinking fund concept as well as the redeployment of funds.