How EB-5 investors must prepare for rejection in their application process -

How EB-5 investors must prepare for rejection in their application process Staff

By Marta Lillo

The EB-5 immigrant investor program is a popular pathway to obtaining a green card in the United States. However, its application process can be complex and lengthy, and rejection is always possible.

Potential and current EB-5 investors should understand that the U.S. Citizenship and Immigration Services (USCIS) can deny petitions at any stage of the process.

Immigration attorneys recommend applicants prepare for the worst-case scenario from the beginning of their application to minimize potential losses and increase their chances of success.

“The reality is that cases are denied and/or rejected for various reasons and no lawyer can guarantee success on a case. This is especially true as it relates to the source of funds (the main reasons cases are denied),” says Charles Kuck, EB-5 immigration attorney and managing partner of Kuck Baxter Immigration Partners, LLC.

USCIS’s reasons for rejection at each stage of the EB-5 process

Filing form I-526 is the first stage of obtaining an EB-5 visa for standalone and regional center investors. Its fundamental purpose is for the applicants to prove that their capital investment comes from a lawful source of funds.

Failing to prove the legality of the EB-5 capital and project-related failures are the main reasons why USCIS rejects I-526 filings. “The most common reasons you will see is either a source of funds issue or a project filing that was incomplete or did not have the proper supporting documents such as permits, capital stack explanations, etc.,” Kuck says.

Upon rejection, the EB-5 immigration counsel should evaluate the arguments provided by USCIS and advise on how to proceed.

“A rejected I-526 can be refiled but will put you back at the end of the line, but a rejected I-526 with a rejected I-485 will cost you your status and your work authorization. There is no appeal to a court of a rejected I-526, at least not one that will be resolved quickly,” he cautions. 

“Do everything you possibly can to make sure you can trace the legality of the money you are investing,” he adds.

Meanwhile, Rakesh Patel, managing partner of Patel Law Group, advises hiring legal counsel who knows how to put together a strong source of funds file. “USCIS spends a good amount of time on the source of funds, and that is the most scrutinized part of the file that the investor controls. Rejections from the investor part of the file can come if the source of funds file is not thorough and complete. In addition, the deal the investor invests in needs to be well vetted to ensure it is EB-5 qualified as a project. Making sure the investor does their due diligence is extremely important. This is where hiring legal representation that can both put an I-526 together and review deal documents for its EB-5 compliance is extremely important.”

The I-485 and DS-260 forms come later in the process.

At this stage, the EB-5 investors file for adjustment of status (AOS) from nonimmigrant to conditional permanent resident through either form while their I-526 is under review (concurrent filing). I-485 pertains to applicants already in the U.S., while DS-260 applies to EB-5 visa applicants not in the U.S. and includes an interview at a U.S. consulate.

Brandon Meyer, managing partner of Meyer Law Group, explains I-485s “are generally denied because the applicant has issues related to fraud or inadmissibility.”

Kuck adds that “getting rejected at the removal of conditions stage is almost always because of a problem with the Regional Center or the failure to make the investment or create the necessary jobs within two years of the approval of the conditional residence.”

These denials can be appealed in immigration court, the EB-5 attorney adds, “but it requires an experienced lawyer to educate the judge and prosecutor (ICE) about these cases, as they have no training whatsoever on them.”

Patel also recommends that the EB-5 investor hires an immigration attorney familiar with the particulars of this part of the process. “They need to be prepared for interviews with knowledge of not only their funds but of the project as well.  This is probably the least intrusive of all the EB-5 steps but very important as this is where the investor receives their conditional green card.”

At the final stage of the EB-5 process is the I-829 form, which enables the investor to obtain lawful permanent residency in the U.S. Its approval leads to lifting the conditional residency restriction on the applicant, their spouse, and their unmarried children under 21, making them eligible to reside permanently in the country.

However, denials at this stage normally concern “failure to meet job creation requirements, although project-related fraud and/or the project returning investor capital too early or providing some types of impermissible ‘guarantee’ are sometimes also factors,” Meyer states.

Patel advises the investor to be “fully aware of the project progress/completion as this this is where the project will receive the most scrutiny.  Doing their due diligence at the tile of the I-526 filing and during the entire pendency until the I-829 is filed will result in unwanted surprises and allow the investor and their legal counsel to be better prepared for any obstacles that may arise.”

Tips for EB-5 investors to prevent denials

Meyer insists that it’s possible to avert failure before the process starts, particularly when doing due diligence of the EB-5 project. “Everyone involved in the transaction (investors, attorneys, Regional Center, project developers) should know relatively early on in the project life cycle whether or not the project will struggle to meet its job creation targets.”

Meanwhile, Kuck recommends his clients “to document every aspect of the case and check in with your attorney every six months after entry as a conditional permanent resident to make sure you are on track for a successful removal of conditions.”

Patel says that applicants need to understand that every detail counts in the EB-5 process, even for funds repayment once the EB-5 project is complete. “Many investors are unsure about this detail, so it is always good to ask your legal representation on this scenario. If the file is rejected at a later stage of the process (AOS or I-829), there will be a very specific reason for the rejection.”

The EB-5 lawyer insists all EB-5 legal representation must have a contingency plan for denials. “While there could be a solution, your legal representation should have an idea as to why this has occurred. For example, if the project never started or was paused or stopped, that could cause a rejection at the I-829 stage because of the lack of job creation. There may be ways to alleviate this issue, but the rejection reason has to be evaluated and communication with the developer and/or their representation will be necessary.”

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