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EB5 INVESTORS MAGAZINE

Prevailing Against the Notice of Intent to Terminate

by Christian Triantaphyllis

Each year USCIS-designated regional centers are required to report their activity by submitting the Supplement to Form I-924 (“I-924A”) as a means of providing annual reporting to USCIS. The I-924A is used to demonstrate the regional center's continued eligibility for its USCIS designation under the Immigrant Investor Program. For years, filing the I-924A was a fairly routine and predictable event: submit the I-924A to USCIS by the December 29th deadline, and as long as the regional center had not been involved in any illegal activity, USCIS routinely allowed for regional centers to continue in existence.

In today’s EB-5 climate, as the number of USCIS designated regional centers approaches 800, there has been a noticeable shift by USCIS toward monitoring whether regional centers are fulfilling the goals of the EB-5 program.  Until recently, most circumstances leading to the termination of a regional center involved USCIS reacting to illegal acts, such as fraud, committed by the regional center. However, the EB-5 community is now experiencing increased efforts by USCIS to monitor and shut down regional centers that are not active enough to warrant preserving their regional center designation based on the information provided in the filed I-924A.

The purpose of this article is not to analyze and consider all reasons for regional center terminations, including terminations that involve regional center wrongdoings, but instead it is focused on what USCIS is concerned about when issuing a Notice of Intent to Terminate (“NOIT”) that addresses regional center inactivity and is an attempt to provide strategies for prevailing against a NOIT in order to reaffirm the USCIS regional center designation.

The predictability that was once associated with the I-924A reporting system has disappeared for regional centers that are not able to demonstrate economic activity in accordance with the EB-5 regulations and the I-924A. As a result, it is estimated that more regional centers than ever before are receiving the NOIT from USCIS, and the NOITs are arriving soon after submitting the I-924A for the fiscal year. USCIS has terminated 37 regional centers as of October 22, 2015, with over half of all the regional center terminations occurring in 2015. Therefore, the I-924A is no longer a routine activity, but instead it can lead to a fight for survival for regional centers across the United States.

To best respond to a NOIT, it is necessary to understand what it is and why it might be issued by USCIS.  According to the USCIS website, USCIS may terminate a regional center’s participation in the Immigrant Investor Program when the regional center fails to:

  • Submit Form I-924A on an annual basis, on a cumulative basis and/or as otherwise requested by USCIS to demonstrate continued eligibility; or
  • Promote economic growth as required.

As a result, USCIS is issuing NOITs based on a regional center’s inability to promote economic growth, such as increased export sales, improved regional productivity, job creation, or increased domestic capital investment. The NOIT does provide the regional center an opportunity to respond in order to persuade USCIS to reaffirm its standing as a USCIS-designated regional center and avoid being terminated from the Immigrant Investor Program.

Keeping this background information and the goals of the Immigrant Investor Program in mind, the issues to overcome in a NOIT concerning inactivity can typically be broken down into the following categories:

  1. The regional center’s I-924A filings do not report any EB-5 capital investment or job creation for the last several fiscal years.   
  2. The regional center’s I-924A filings do not report any pending or approved I-526 or I-829 petitions demonstrating investments associated with the regional center.
  3. The regional center’s I-924A filings do not indicate that it has conducted activity that serves the purposes of the EB-5 Program since obtaining its regional center designation.

 

Responding to concerns about the lack of EB-5 capital investment or job creation for the last several fiscal years

For a regional center that cannot demonstrate any EB-5 capital investment or job creation since its inception, several arguments may help USCIS recognize the regional center’s ongoing efforts to instigate EB-5 capital investment or job creation.

For example, consider a regional center that has made significant efforts in the past to provide investment opportunities to EB-5 investors, which included developing a full set of project documents for EB-5 investors. Subsequently, the regional center determined that the project was not viable for the EB-5 program based on a new set of facts or market conditions, and so it cancelled the project. That type of foresight should be received positively by USCIS. The regional center should request that USCIS recognize such caution in its business dealings, which saved the regional center from continuing forward with a riskier investment opportunity that may have fallen short of raising the funds needed to complete the project.

Furthermore, effective arguments describe to USCIS any terms for projects that could not be agreed upon with developers that ultimately caused the regional center to stop moving forward with the project. Such terms might include being unable to secure conventional financing due to changing market conditions, or the lack of permits and licensing agreements.  Even if the regional center actively marketed the project and received investments from EB-5 investors, but ultimately refunded the investors when the project did not go forward, it is all worth mentioning to USCIS in a response to a NOIT. The key is to demonstrate that the regional center made every effort to provide investment opportunities to EB-5 investors, which included reaching the point of wiring investment funds to the project. Upon receiving investment funds for the project, the regional center elected to return investors’ funds once it was determined that the project was less viable than previously anticipated, which is the type of responsible action that USCIS should support.

It is also helpful for the regional center to demonstrate that there will be upcoming EB-5 capital investment for the use of job creation purposes, even though the upcoming EB-5 investment will occur after the I-924A reporting period in question.

For example, if the regional center recently filed or is in the process of preparing and filing an I-924 Exemplar Application then it is effective to include a detailed description of the project and the industry codes that will result in job creation. Then, demonstrate how the project will use the capital to be contributed by the EB-5 investors to finance and develop a project that will create jobs.

Responding to a failure to report any pending or approved I-526 or I-829 petitions demonstrating investments associated with the regional center.

The response to this issue may appear to be absolutely black and white: are there or are there not I-526 or I-829 petitions filed in connection with the regional center during the fiscal year in question. However, that’s not necessarily the case. If there are immigrant investor petitions filed subsequent to the relevant reporting period, by all means mention it when responding to the NOIT. The I-924A asks only about activity that occurred during the specific fiscal year. When responding to a NOIT, it is important to use it as an opportunity to advocate for the regional center and its associated investments, regardless of whether the activity occurred after filing the I-924A. USCIS will also perceive other factors in a positive light, such as pending regional center amendments, or other activities that promote economic growth. In addition, be sure to describe any project documents that can be referenced in a response to the NOIT in order to demonstrate that EB-5 investors will be sought in the near future, as well as the resulting economic and job creating impacts that those anticipated I-526 petitions and corresponding investment funds will have on the regional center’s EB-5 project. Providing such evidence will make it clear to USCIS that there will be I-526 petitions pending with USCIS in the near future, demonstrating investments associated with regional center.

Responding to the regional center’s I-924A filings’ inability to indicate that it has conducted activity that serves the purposes of the EB-5 Program since obtaining its regional center designation.

This issue is perhaps the broadest of USCIS’ list of concerns in a NOIT. In response to this issue, an argument can be made that the regional center has been involved with a variety of meaningful activities that serve the purpose of the EB-5 program by providing evidence of business dealings and contracts for services rendered for the purpose of establishing the regional center’s potential EB-5 projects. Such activity certainly demonstrates efforts performed by the regional center that intend to fulfill the goals of the Immigrant Investor Program.

Remaining consistent with marketing efforts and project goals will work to the regional center’s advantage, because USCIS reviews the I-924A along with the regional center’s previously submitted documentation. Expenditures on business consultants, economists, immigration attorneys, securities attorneys, foreign marketing firms, exhibits, and international trips to foreign countries for the sole purpose of marketing EB-5 projects, whether or not the projects come to fruition, all encompass activity that serves the purpose of the Immigrant Investor Program. 

Conclusion

The suggestions described above are arguments that can be implemented to breathe life into what appears on the surface to a dead regional center. To mitigate the risk of receiving a NOIT in response to future filings, consider providing as much detail as possible with regard to activities related to EB-5 projects that the regional center has undertaken during the fiscal year. If a NOIT is eventually issued by USCIS, continue to provide specific details on any progress made by the regional center to complete projects and recruit EB-5 investment, including what actions have been taken along the way and timelines and expectations for completing the project.

Responding to the initial NOIT may not be the end of the correspondence between the regional center and USCIS with regards to its activity during a given fiscal year. USCIS is capable of issuing further inquiries in response to the information provided to demonstrate economic growth and EB-5 investment, but the strategies listed above are known to be an effective, transparent way of prevailing against a possible termination of a valuable asset, the USCIS-designated regional center. 

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