The July terminations of regional centers due to their failure to pay the mandatory annual EB-5 Integrity Fund fee continue to raise concerns in the EB-5 community.
These terminations occurred parallel to the United States Citizenship and Immigration Services (USCIS) auditing process to improve control and transparency in the EB-5 investor visa program.
The EB-5 Reform and Integrity Act of 2022 (RIA), which renewed this employment-based visa program for five years, incorporated several reforms, including stricter regulation for non-compliant Regional Centers.
EB-5 professionals consulted by EB-5Investors.com concur that potential and current investors should understand their options when assessing the risk of investing in a regional center project if a situation like termination arises.
They insist that applicants must now, more than ever, demand rigorous due diligence processes from the regional centers they choose from their legal advisor teams. They recommend asking these institutions straight out for evidence of payment, the mandatory administrative fees, and the USCIS approval of their EB-5 projects (I-956F form).
Carolyn Lee, an EB-5 attorney and founder of Carolyn Lee PLLC, adds that the industry’s ongoing discussion about terminations and the best outcome of this regulatory process is the “ultimate test” for balancing the industry’s differing interests.
“On the one hand, we have the USCIS’s interests in implementing the RIA, and for sure, the RIA contemplates terminating regional centers that do not pay integrity fees. On the other hand, we have the equities invoked by the general fog of uncertainty still hanging over vast stretches of the RIA that created new laws from whole cloth. Once again, we have good-faith investors caught in the middle.”
Because it is not the applicant’s responsibility that their regional center was terminated, the USCIS will consider them to be in “good faith.” Lee adds that EB-5 regulation protects and remedies these individuals under sub-paragraph M. The term “good faith” is also used for regional centers that willingly seek voluntary terminations without paying administrative fees.
“The fog of uncertainty lays over subparagraph (M) as well. How will USCIS implement subparagraph [it]? An important question in this regard is the extent to which good faith terminated regional centers – that is, those regional centers seeking voluntary termination who have created the jobs and enabled sustaining investors’ investments – are also afforded protection. All this remains to be seen.”
EB-5 investors can consult the USCIS list of designated regional centers (updated in July). If a regional center fails to comply with USCIS requirements in the future, it will be removed from this list. EB-5 attorneys recommend checking this list for the minimum due diligence regional centers must undergo.
What happens to EB-5 investors if their regional center is terminated?
An investor’s EB-5 immigration process can be impacted if their regional center is terminated for failure to pay the Integrity fee. However, the effect will depend on whether the investor filed their EB-5 application before or after RIA. The “USCIS has not drawn a distinction between investors with pending or approved I-526 petitions or those who are already conditional permanent residents,” according to immigration firm Klasko, Rulon, Stock & Seltzer.
The RIA establishes that pre-RIA investors may remain eligible under the Immigration and Nationality Act if their regional center is terminated. However, their case will be reviewed individually. The law also says that these applicants may continue to rely on the direct or indirect jobs created by their EB-5 project even if the associated regional center is terminated, provided their capital remains invested at risk and the requisite jobs have been or are in the process of being created.
Under that premise, they can amend their I-526 form petition to inform if they decide to make a new investment in another regional center or remain with their initial project.
Meanwhile, a post-RIA investor’s application may proceed with the EB-5 process without having to file an amended I-526 petition or associate with a new regional center if their investment was sustained for the required two years and the requisite jobs were created before the regional center was terminated.
If their EB-5 investment has yet to complete the required two-year period or have yet to create the necessary ten jobs, the post-RIA investor must amend their EB-5 petition to continue with the immigration process.
Ongoing litigation against USCIS over termination because of unpaid fees
Last June, a U.S. court ruled that the USCIS cannot terminate a regional center for failing to pay program fees. The injunction came because of a claim from one of the terminated regional centers this year, the Northern Rockies Regional Center.
Federal court immigration litigator Brad Banias is part of Northern’s legal team. He explains that the agency “has shown no interest in settling the Northern Rockies case to date. “Said another way, USCIS continues to refuse to accept money. Our next step will be to file for summary judgment in Montana on the ground that we won the preliminary injunction. USCIS has 60 days to appeal, and their next filing is not “due” until mid-September.”
Banias further states that the USCIS aims to control the EB-5 program through informal guidance on its website and discussions with stakeholders instead of using formal rulemaking and established administrative decisions.
“The problems with these mechanisms are on full display here. They issued a federal register ‘notice’ claiming they had the discretion to push back the due date for FY 2023 while also claiming they had no discretion not to push back the due date for FY 2024. I am aware of one major EB-5 firm that advised their RC clients the FY 2023 fee was not due until October 1, 2023, because they interpreted the federal register notice in that way. When dozens of active RCs make the same “mistake,” it is more likely that USCIS was unclear than dozens of sophisticated businesspeople and their specialized counsel just got it wrong.”
Meanwhile, the American Immigration Lawyers Association (AILA) said it is in conversations with the USCIS regarding the terminations. Jennifer Hermansky, chair of the organization’s EB-5 Committee, says they are “ also advocating to allow late payments, as it appears some regional centers made the payment, but now USCIS is claiming no payment was received, and others failed to make a payment but did not realize it was due. There is now pending litigation on the issue [Northern], and we agree with the judge that, in that case, USCIS used its discretion to move the deadline multiple times on the Integrity Fee issue, yet it refuses to use any discretion to allow late payments. It benefits the program to allow these late payments, as there are more funds in the Integrity Fund to fund investigations. Also, this would allow regional centers to remain designated and report on their projects through the annual compliance process on Form I-956G, giving USCIS continued transparency into projects. We hope that USCIS will reconsider its position on this issue, given that there still remains no regulations published by the agency on these issues.”
EB-5 attorney Ronald Klasko concludes that new litigation will follow. “We have been in discussions with some regional centers regarding litigation.”
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