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The Pros and Cons of EB-5's Future: An Interpretation of The Drafted Policy Memo for Public Comments Issued by USCIS on August 10, 2015

By Linda Lau

On August 23, 2014, the U.S. State Department announced there would be no increase on the per-country cap on Chinese investors for the EB-5 visas in the current fiscal year. This was the first instance in the program’s history that the per-country cap policy wouldn’t meet the demand of investors. On May 1, 2015, the visa office of the State Department announced a “queue” regulation was going to be applied to the per-country cap for EB-5 investors who were born in mainland China (excluding those born in Hong Kong, Macao, and Taiwan), meaning that even after the approval of their I-526, mainland Chinese investors would still need to wait for their immigrant visa interview at the U.S. Consulate in Guangzhou or wait for their adjustment of status in the United States.

The creation of a “queue” regulation has an impact on the scheduling of jobs created or sustained by project initiators as well. In response to the relevant issues created by this queue regulation imposed on mainland Chinese investors, such as job creation, the USCIS issued a drafted policy memorandum[1] on August 10, 2015. The USCIS collected comments from the general public, and the deadline for submission of those comments was September 8, 2015. PM-602-0121 is intended to elaborate on two major criteria under the influence of queue regulation:  job creation and sustainable investment.

Two Phases Are Planned in Terms of Job Creation: I-526 and I-829

  1. I-526 phase: Under the current policies and regulations, I-526 applicants are required to prove their investment has created ten jobs within two years, which begins roughly six months after their I-526 application is approved. In other words, in the past with no queue regulation, investors waited six months on average after the approval of their I-526 to obtain approval for their EB-5 visa or the I-485 adjustment of status. After obtaining their conditional permanent residency (a temporary green card) they would need to provide evidence their investments were used to create ten jobs within the two years allotted by this green card. Due to the queue regulation, dramatic scheduling changes in application procedures either for immigrant visas or for I-485 immigrant adjustment of status are taking place. The USCIS cannot accurately predict which changes will be applied because of the queue regulation to the two aforementioned application procedures, nor can they predict the impact on the eligibilities of the immigrant visa applicants. Therefore, the USCIS announced that considering the uncertainties caused byscheduling issues, no changes will be enacted within two and a half years.
  2. I-829 Phase:Within the drafted memorandum, the USCIS will not require that ten jobs created before an investor files his I-829 continue to exist, as long as the ten jobs created by investment funds are regarded as permanent employment. This term should be applied to all EB-5 programs, including both regional center and non-regional center based projects. In case of a loss-generating enterprise, they will only need to maintain their original employment level with no reductions.
    1. The USCIS doesn't provide any groundbreaking explanations on the permanency of job creation in this drafted memorandum, but it does point out that in some industries such as construction and tourism, a great number of positions are perhaps intermittent, temporary, or seasonal. Therefore, the USCIS will provide guidance to ensure that the aforementioned positions will not be excluded from the permanent category. Furthermore, the memorandum provides elaboration through examples. In a construction project, for example, if an application can reasonably spell out how a labor force will be needed for several years and the labor force will be required to work at least 35 hours per week within the time span of the project, these positions would fulfill the permanency requirements. However, if the same project needs to recruit only a few electricians to conduct a five-week session of short-term electrical services, the positions are regarded as intermittent and do not meet the permanency requirements.
    2. The USCIS also stresses in the memorandum that the key point of permanent positions lies in the positions themselves, and not the employees, meaning that even if one position requires coordination among multiple employees, it doesn’t necessarily disqualify the position from being permanent. This point is also consistent with previous policies.
    3. The USCIS stresses that in terms of job creation, the positions do not need to be created upon the submission of an I-829. Nevertheless, they should be created within a reasonable period of time. In accordance with previous policies, the USCIS holds that job creation within three years of conditional green card issuance is considered reasonable. In other words, upon submitting an I-829, applicants are given an additional year to continue creating job positions in order to fulfill the requirements of the USCIS.

Continuous Investment

Applicants must maintain investment within the two years that they hold a valid conditional green card. In the meantime, they also have to ensure that their investment is at risk and maintained within a single new commercial enterprise.

Due to the impact of the visa queue regulation, the term of investment is not limited to the two years of conditional permanent residency; it also includes the waiting period caused by the new system. Since most new enterprises inject the applicant’s investment into the companies so job creation can occur, the most probable outcome is that the applicants will be unable to obtain their conditional permanent residency or reach the I-829 phase upon the maturity of the loans.

In the drafted memorandum, the USCIS states that loans meant for investment funds must be maintained in the same new enterprise to ensure the execution of the investment upon the maturity of the loans during the two-year conditional residency. However, the difference is that, after the required job positions are created:

  1. 1. If it is a conventional project and the business proposal has been carried out, then the investment can be re-deployed.
  2. 2. If it is a regional center-based project, the investment can be transferred to other businesses at risk.

The newly drafted memorandum also mentions that if an applicant loses all of his or her investment, he or she still meets the requirements with relation to "maintaining the investment" in the approval of the I-829. However, the investors need to prove that the loss of funds is directly caused by the investment and all funds were injected into the EB-5 program.

Substantial Changes

As compared to the memorandum issued by the USCIS on May 30, 2013 (hereinafter referred to as the 5-30 memorandum), the newly drafted memorandum does not provide much new information. The 5-30 memorandum in 2013 quoted the case of Matter of Izummi1, stressing that any substantial changes made on documentation will cause the following results:

  1. If after the submission of an I-526 application, certain application materials have changed substantially, this application is likely to be nullified. For instance, if an I-526 corresponds with a project in regional center A, but after the application is submitted, the application is changed to a different project, then it will not be approved.
  2. If a I-526 application is already approved, but the applicant has not yet completed adjustment of status in the United States or has entered into the United States, while at the same time the project proposal has changed substantially in comparison with when the I-526 was submitted, the applicant will need to re-apply for an I-526, and the originally approved application will be nullified. At the same time, the applicant could face a denial of entry into the United States, or adjustment of status in the United States.
  3. If conditional permanent residency is already granted, but some substantial changes have occurred during the I-829 application process, as long as the applicant can prove to the USCIS that their investment is sufficient to meet the requirements for removing conditional status, their I-829 can still be approved. The pre-condition is that when the applicant is submitting I-526, they must be candid and plan on conducting investment according to the business proposal submitted. Any applications that go against this pre-condition will be rejected.

In the newly drafted memorandum, due to the prolonged proceedings caused by the visa queue regulation, more variability in the process of doing business may be caused by the uncertainties of investment. In this drafted memorandum, with regard to any substantial changes in the process of EB-5, the USCIS continues to quote the case of Matter of Izummi as a reference, and there is also a continuation of the points made in the 5•30 memorandum.

It is worth noting that in the newly drafted memorandum, a project initiator may modify documents including a proposal that is given to a new enterprise, or liquidation provisions to ensure that the investment will continue to be at risk. For instance, due to the current visa queue regulation imposed upon Mainland Chinese investors, the operating cycle of the project will run longer than previous I-526 applications. To ensure that the investment injected into the project is still "at risk,” the project initiator may re-invest the funds to another business that is “at risk;” for instance, they can expand the project to a new venue or a completely new business.

Linda Lau is an attorney with 25 years’ experience in the field and her specialty is EB-5 immigration investment projects. She is the president of the Global Law Group, a leading U.S. Law firm specialized in immigration law, and this law firm is committed to assisting Chinese enterprises and investors in diversifying their investment projects in the U.S. Linda Lau received her Juridical Doctor at the University of California, Los Angeles (UCLA), and she was once the vice president of the American Immigration Lawyers Association (AILA) EB5 committee.


[1] PM-602-0121

Linda Lau

Linda Lau

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