Rumors are circulating in the EB-5 community that some I-526 petitions are being rejected because investors in regional center projects failed to pay their remaining committed investment amounts after making only partial payments by the time their petitions were reviewed.
U.S. immigration attorney Kate Kalmykov from Greenberg Traurig’s said the U.S. Citizenship and Immigration Services (USCIS) has been issuing these rejections because these partial investment petitions were not “approvable when filed,” according to her blog.
“The investor must have either fully invested the required capital or be in the process of irrevocably committing the funds for immediate use in the job-creating enterprise,” she explains.
The term “irrevocably” means that the funds must be on their way from the New Commercial Enterprise (NCE), which manages the capital, to the job-creating entity (JCE) account to be used according to the EB-5 project’s business plan. Therefore, the USCIS expects that the pending installment is fully committed, even if it has not yet reached the JCE.
If an EB-5 investor is only holding the funds and has not taken steps to process the remaining payment, the petition is not considered “approvable.”
The heart of the issue is the delay in paying the rest of the money, not the use of partial payment per se.
EB-5 attorney Robert Divine from Baker Donelson said he has also heard about these denials and that the best option is to make the whole payment as early as possible in the EB-5 application process.
“The safest approach contributing capital after filing I-526E is not to do it,” he says.
Total payments occur when applicants pay the full investment amount, whether it $800,000 if it’s invested in an EB-5 project located in a Targeted Employment Area (TEA) or $1,050,000 if it’s everywhere else in the U.S. Meanwhile, partial investments involve an initial payment, with the remainder due at a later agreed-upon date.
How much time do EB-5 investors really have to make later payments in a partial investment?
The USCIS reportedly denied some partial EB-5 petitions because of the failure of these investors to make these payments and complete the full amount in a timely manner while their petitions were processed.
Kalmykov says that the delay times seem to vary.
“We have seen a variety of responses, ranging from a few weeks to several months, depending on the stage of adjudication and the specific circumstances of the filing.”
For these petitions to have been compliant and approvable, the installments should have been “timely funded.”
However, what does “timely” mean in practical terms?
EB-5 attorneys agree that the most effective timing for partial investment is to have the pending portion in the process of being invested within six months of the initial payment.
“The timeline for installment payments largely depends on whether the project falls under a rural, targeted employment area (TEA), or infrastructure priority set-aside — and, critically, whether the Form I-956F for that project has already been approved,” Kalmykov says.
“In our practice, we’ve seen rural projects with approved I-956Fs receiving I-526E adjudications as quickly as two to six months after filing. In those cases, investors should be prepared for a very short window to make their second (or subsequent) installment payments. The same typically applies to infrastructure projects. For TEA projects, the process is generally somewhat longer, with adjudications currently trending around six to ten months post-filing.”
The attorney adds that, in the case of EB-5 projects that have filed but not yet received approval of their I-956F, they may offer investors “more flexibility to structure installment funding, since USCIS cannot adjudicate an investor’s I-526E until the I-956F is approved.”
How much should be paid in the first and second installments if they are approvable?
The EB-5 regulation does not specify a minimum amount of the first or second payment in a partial payment petition for a regional center investor before filing the I-526E form.
“The amount is typically determined by agreement between the regional center and the investor,” Kalmykov says.
However, she adds that I-526 submissions by regional center investors should include an installment agreement (or side letter) specifying the schedule for the remaining EB-5 funds to be contributed.
“As a best practice, investors should provide source-of-funds documentation, not only for the initial investment amount, but also for the future installments, demonstrating the lawful source and path of all funds that will be invested pursuant to the installment arrangement,” she says.
Divine adds that minimizing uncertainty regarding the pending payment will benefit the partial payment application.
“It’s by far the best practice to identify the specific sources that will fund the remaining payments and document them fully in your petition,” he says.
What other choice is there?
Divine adds that loans could be an option for securing the pending funding, so the payment is done promptly.
“Consider getting a loan for what you are missing if the lender (if not a proper bank) can show the sources of the loaned funds, just as you would need to if it were your capital,” he says. “For someone who must pursue partial payments, expect restrictions from the NCE, who needs to contribute all the capital timely to the JCE, and who wants to resolve any uncertainties with your capital with an early replacement.”
However, using a loan for EB-5 investments can lead to complications. There are reports that USCIS has rejected petitions when loans came from the NCE or regional center. According to Divine, this could explain the agency’s increased rejections of petitions involving late or undocumented partial investments.
“Antagonizing USCIS with NCE affiliate loans has spurred USCIS to take newly negative approaches to previously accepted practices, including partial payments, by saying that the later contribution of initially undocumented sources is a material change justifying petition denial,” he says.
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