Sustaining the Investment and Liquidation Events

by Jeff Campion


When an issuer offers a project to an EB-5 investor, the investor is provided with a series of documents including the business plan and private placement memorandum for the project. These explain to the investor what the project contemplates to do with their funds and the risks associated therewith.

After the investor has been a conditional resident for twenty one months, they will file their I-829 to remove conditions and become a permanent resident. The Immigration and Nationality Act (the “Act”) under 216A (d)(1) requires that the investor has:

  1. invested the capital required,
  2. sustained the investment throughout the period of their residence in the U.S.; and,
  3. otherwise conformed to the requirements of 203(b)(5) of the Act.

The lack of clarity around the requirement to “sustain the investment” has created questions for investors, regional centers, and developers.  For example: can the asset be sold (a hotel, multi-family building, etc.) prior to the I-829 being approved for the investor?  If sold, can the capital be returned to the new commercial enterprise?  Can the capital be redeployed by the NCE or the job creating entity?  Can the capital simply be placed in a bank account of the NCE or the JCE?  These questions become increasingly more important as the possibility of visa backlog time and retrogression looms. Below, these issues are discussed as they relate to “sustaining the investment.”


As seen above, the requirement to “sustain the investment” could have dire consequences that result in the Investor not receiving permanent residency. Moreover, it could prevent the developer from selling an asset at the most efficient time. Thus, it is critical to all parties involved in the EB-5 transaction to know what impact this requirement could have and what is permitted. This issue becomes more complicated as one analyzes the current typical time to permanent residency compared to what could occur if there is a visa backlog and/or retrogression.

Each employment-based category is granted a limited number of immigrant visas per year.  The EB-5 classification is allocated 10,000 visas per fiscal year. This number is effectively reduced to around 3,300 visas because the investor, their spouse, and their children all count against the 10,000 available.

To analyze the visa backlog or retrogression impact, assume there is a backlog of eighteen months for Mainland China. When an investor files the I-526, they are assigned a priority date (in this case, the date of filing). If the investor files on January 1, 2015 and the case takes 14 months to approve, the investor would have to wait another four months to begin the consular process because the priority date for the investor still is not ripe (assuming the 18-month visa backlog). Now, assume that the consular process takes six months. It has now been 24 months since the investment was made – Jan. 1, 2017.  Thereafter, the investor takes six months to enter the U.S. It is now July 1, 2017 and the Investor will not file for removal of conditions until May 1, 2019.  This is four and a half years from the date of the initial investment. It is easy to see how these times can be impacted is the backlog becomes two or three years. But, this, at some level, muddies the issue.

The issue is that in many real estate transactions a developer looks to build, stabilize, and sell; a cycle could be just three years. In such a case, regardless of visa backlog or retrogression, the developer needs to know whether the sale of the underlying asset will result in the investor not complying with the requirement to “sustain the investment.”

As seen above, the INA requires the capital to have been invested and that such investment is sustained throughout the period of conditional residency. The May 30, 2013 USCIS Memo references a “change in plan” with respect to liquidation and reallocation or redeployment of capital concluding that it may result in the petition not complying with the requirement to “invest and sustain the investment.”  It is unclear (1) as to what type of “change” is contemplated under the Memo and (2) whether USCIS has specifically noted and approved business plans that contemplate liquidation and redeployment of capital as part of the project’s business plan.[1] It is important to note that inherent in a “change in plan” analysis by USCIS is the good faith of the petitioner. The absence of this “good faith” could result in the petitioner’s conditional resident status being terminated.[2]  If an NCE and/or JCE contemplated changes to the submitted business plan and private placement memorandum prior to their submission to USCIS without disclosure, none of the analysis below would be applicable. In fact, there could be fraud issues with both USCIS and SEC resulting in serious penalties to the parties involved. What is more frightening is the possible impact on an investor that was unaware of the action: the investor could lose his/her residency.[3]

In the introduction, some questions were posed regarding the sale of the asset, if it could be sold, and what could be done with the capital if sold. Below, I discuss “sustaining the investment” under both the Loan Model and Equity Model structures.

The Loan Model

In the Loan Model, an investor makes a qualifying investment into the NCE which then makes a loan to the JCE.  The JCE deploys the money to be used in the project such as construction of a hotel or other business.

The investor invests in the NCE, not the JCE. Thus, the plain meaning of the INA is that investment must be sustained at the NCE level. While the capital must be available to the entity most closely related to job creation per Matter of Izummi, 22 I&N Dec. 169 at 196 (Comm. 1998) for job creation, the issue here is not one of job creation; rather, it is sustaining the investment. Moreover, Matter of Izummi involved the I-526 petition, not the I-829 petition (i.e. the removal of conditions phase).  Because the investor has made an investment in the NCE under the Loan Model, redeployment of capital into another JCE (or another asset) should be allowable and not affect the “sustaining the investment” requirement.  If this were the case, there are no substantive issues to be addressed regarding “sustaining the investment.”[4] Therefore, the proper analysis for the loan model, assuming all other requirements are satisfied for removal of condition, is whether the investor’s investment is still sustained at the NCE.  If the NCE decides to redeploy capital in the case of early payment of the loan (and such was disclosed in the initial business plan), or there was an actual good faith change in plan, there should be no effect on the analysis of the “sustaining the investment” requirement.

The Equity Model

In the Equity Model, the investor, normally, invests directly into the JCE. In that instance, should the JCE decide to liquidate the asset, and assuming all other requirements for removal of conditions have been met, the conditions should be removed, as the investor remains an investor in the JCE.  In short, the capital remains as risk. Moreover, if the JCE decides to redeploy the capital (and such was disclosed in the initial business plan), or there was an actual good faith change in plan, there should be no effect on the analysis of the “sustaining the investment” requirement.    

In the case of the Equity Model where the investor invests into an NCE and the NCE deploys the capital into a JCE as equity, the same analysis for the loan model should apply. That is, assuming all other requirements are satisfied for removal of condition, the Investor’s investment should be deemed sustained with the NCE.  If the NCE decides to redeploy capital in the case of early return of the equity (and such was disclosed in the initial business plan), or there was an actual good faith change in plan, there should be no effect on the analysis of the “sustaining the investment” prong.


So long as (a) the investment is not returned to the investor in violation of the EB-5 requirements, and (b) liquidation and possible capital redeployment was disclosed in the initial business plan or there was an actual good faith change in plan, USCIS should deem the “sustaining the investment” requirement to have been met irrespective of whether the there is a liquidating event at the JCE level and/or redeployment of capital by either the JCE or the NCE.

[1] The author has seen business plans that contemplate liquidation and redeployment approved.  However, one is left wondering as to whether USCIS noted such and would defer to such previous approval.

[2] The Memo states at page 25, that “a Form I-526 must be filed in good faith and with full intention to follow the plan outlined in that petition.  If the alien investor does not demonstrate that he or she filed the Form I-526 in good faith, USCIS may conclude that the investment in the commercial enterprise was made as a means of evading the immigration laws.  Under these circumstances, USCIS may terminate the alien investor’s conditional resident status.”

[3] This underscores the need for the Investor to know the principals of the JCE and the NCE.

[4] The author has emphasized that liquidation and/or redeployment should be have initially contemplated in the business plan submitted to USCIS and delivered to the Investor.  The reason for this is twofold.  One, there must be transparency with USCIS in what is actually contemplated.  Two, the Investor has the right to know what could take place with the Investor’s money.  Or, in the alternative there must be an actual good faith change.  If the plan of the NCE and/or JCE was always to allow for capital redeployment and such was not communicated, then there may be issues of fraud and disclosure to both USCIS and SEC.

Jeffrey E Campion

Jeffrey E Campion

Jeff Campion is an immigration attorney who works with high net worth individuals and their immigration structuring in the United States. He also represents regional centers in formation, as well as in project compliance. He is a principal of the Texas Urban Triangle Regional Center, LLC and the Gulf States Regional Center, LLC. He can be reached at jcampion@campionlaw.com.


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