USCIS Gives EB-5 Businesses a Green Light to Operate as “Real World” Businesses

BY MOLLY L. WESSEL

There has long been a disconnect between the application of EB-5 regulations to the adjudication of petitions and applications and the realities of a dynamic and ever-changing business environment.  USCIS has perhaps taken a step towards closing this gap in its May 30, 2013 Policy Memorandum (PM-602-0083) by directing its adjudicators to review I-829 petitions based on adherence to the actual language in the governing statute rather than the historical practice of mandating a direct connection between a business plan included in an approved I-526 petition and the removal of conditions on that investor’s green card. 

The May 30, 2013 Policy Memorandum states that:

“In order to provide flexibility to meet the realities of the business world, USCIS will permit an alien who has been admitted to the United States on a conditional basis to remove those conditions when circumstances have changed.  An individual investor can, at the prescribed time, proceed with his or her Form I-829 petition to remove conditions and present documentary evidence demonstrating that, notwithstanding the business plan contained in the Form I-526, the requirements for the removal of conditions have been satisfied.”   

USCIS notes, however, that a deviation from the business plan after the approval of the Form I-526 petition, but before the alien investor has obtained conditional lawful permanent resident status in the United States, may rise to the level of material change requiring that the alien investor file a new Form I-526 petition.

To remove conditions on the Form I-829 petition, the immigrant investor must show that he or she has invested, or is still actively in the process of investing, the requisite capital in a new commercial enterprise, resulting in the creation of at least 10 full-time jobs. If the jobs are not created at the time of the Form I-829 petition, they must be created within a reasonable time thereafter.  The intent of the EB-5 program is to promote the immigration of people who can help create jobs for U.S. workers through investment of capital into the U.S. economy. The program intent is not to ensure that the investor’s business activities do not deviate from the stated plan.

Whether a company utilizes EB-5 investment funds or not, it must adapt to the current business environment in order to compete effectively and sustain long term growth. Oftentimes the reality is that the current business climate may dictate a need for a company to shift its focus from the originally stated goal and re-focus on business operations that satisfy current market demands.  The May 30, 2013 Policy Memorandum indicated USCIS’ awareness that EB-5 investment funds are directed into businesses operating in the same markets as companies utilizing more traditional financing, and, like most companies, the goal is profit-generation and the growth of a successful business venture.  We have seen throughout history that many of the most successful companies have drastically altered their course of business, resulting in operations that are diversified or entirely different from the business activities planned at inception.    

Classic examples of well known businesses adapting to changing business environments and achieving great success as a result include widely known companies such as General Electric, Amazon, PayPal, Tiffany & Co. and Avon.

All of these companies have corrected course throughout their operating histories.  These changes have generally resulted in successful and innovative companies, many of which would not be the household names they are today if not for the ability to adapt. USCIS’ acknowledgement of this need for flexibility in business operations, while focusing on the goal of job creation exemplifies the convergence of real world business operations with EB-5 regulations. Other examples of USCIS’s awareness of the business needs within the EB-5 arena can be found through the following actions:

• Regional Center Amendments:  In the May 2013 Policy Memorandum USCIS stated that, “[b]ecause business strategies constantly evolve”, regional center amendments are permitted. Changes to a regional center’s approved industries and geographic scope, for example, would not require an amendment. Here USCIS is indicating that it understands that as different business opportunities arise, even if those opportunities are outside those originally conceived by the regional center, a regional center would be serving its best interests by exploring those opportunities, and, in some cases, the cumbersome requirements of a regional center amendment are not necessary.
• Targeted Employment Area (TEA) Designation:  EB-5 regulations allow state governments to designate an area as a TEA based on high unemployment. State governments are more capable of assessing the employment climate within their respective borders than the federal government and, therefore, can more accurately determine whether an area should be treated as a TEA.
• Job Sharing:  The Adjudicator’s Field Manual states that the position created by the EB-5 investment and not the employee is the critical consideration for determining full-time employment.  As such, if one position is shared by two or more people under a job sharing arrangement, this will be considered one full-time position. The allowance of job sharing in the EB-5 program provides flexibity to alien investors in finding the best staffing arrangements for business operations.    

The impact of the directive to USCIS adjudicators to not deny Form I-829 petitions solely on the basis of the failure to strictly adhere to the Form I-526 petition’s business plan remains to be seen.  However, it is a strong indication that USCIS will view a business utilizing EB-5 funds not in a bubble, but rather as an enterprise with goals the same as any other business:  to successfully generate a profit and create jobs by making business decisions that are in the best interest of the business itself.      

Hopefully, this apparent shift toward acknowledgment of business needs will manifest itself in other aspects of the EB-5 prgram such as:

• Tenant Occupancy:  Many businesses receiving EB-5 funds engage in commercial real estate development creating space for other businesses to operate resulting in significant job creation by developers and businesses operating within the commercial space.  This common business activity is responsible for significant job creation.
• Guest Expenditures:  Hotel developments result in job creation through the hotel construction and operations as well as the local spending by its guests.  Job creation through local spending related to destination hotels should continue to be explored.
• Tenant Mix:  When creating commercial space, developers and property managers cannot always say with certainty what the tenant mix will be or how the tenant mix will change as the demands of the local area dictate what goods and services are needed over an extended period of time.  As long as the commercial space is occupied by a business, the local economy is being stimulated. 

As USCIS focuses on the program goal of job creation through capital investment, it has become apprarent that allowing businesses utilizing EB-5 capital to operate within the “real world” business context will only further enhance this goal. 

Molly Wessel is an attorney at Global Law Group, an immigration law firm with an office in South Pasadena, California and a representative office in Shanghai, China.

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