An issue that has been percolating since the EB-5 visa category first retrogressed in 2015 is how to comply with the EB-5 legal requirements that an EB-5 investor sustain their investment throughout the period of conditional permanent residency in the U.S. USCIS originally released draft guidance in 2015 to solicit feedback and changes that were finalized and incorporated as part of the USCIS Policy Manual in 2017. Now, USCIS has reversed key aspects of their 2017 guidance and are seeking to apply this guidance retroactively, potentially imperiling numerous petitions.
THE REDEPLOYMENT REQUIREMENT EXPLAINED
The Immigration and Nationality Act (INA) requires each I-829 petition to demonstrate that an investor has invested the requisite amount of capital and sustained that investment “throughout the period of the” investor’s “residence in the United States,” among other requirements.[1] The regulations track the statute by stating that each investor must demonstrate that they have both invested the requisite amount of capital and sustained that investment “throughout the period of the” investor’s “residence in the United States,” among other requirements.[2]
While sustainment in the context of an I-829 petition has not been defined by case precedent, USCIS’ policy is to apply the interpretation of “invested or is actively in the process of investing the required amount of capital” from the I-526 petition requirements found at 8 CFR § 204.6(j)(2) to the I-829 petition requirement of sustainment. Namely, that an investment must demonstrate sustainment of the action of investing the required amount of capital by demonstrating that he or she has placed the required amount of capital at risk for the purpose of generating a return on the capital placed “at risk.”[3] “At risk” is defined by the seminal case precedent Matter of Izummi, which held that for the capital to be “at risk” there must be a risk of loss and a chance for gain.[4]
In order to satisfy the I-829 petition requirement of sustainment of an investment throughout the two years of conditional permanent residency status, the investment must remain “at risk” during that two year period.
REDEPLOYMENT AND RETROGRESSION
Generally speaking, most EB-5 investments are structured via regional centers to be a loan from a new commercial enterprise to a job creating entity with a five year term. This initial five year term represented stakeholders best guess as the time it would take an applicant to process through the EB-5 category and receive I-829 petition approval.
Unfortunately, the heightened demand from certain countries, such as individuals born in mainland China, has caused the EB-5 visa category to retrogress for certain applicants.[5] This has caused the time to receive I-829 petition approval for certain applicants to stretch well beyond five years and, in certain cases, likely approaches 15 years. Also, individuals affected by retrogression must wait to enter the U.S. and attain conditional permanent residency status, which can delay the receipt conditional permanent residency status for years.
Because USCIS’ interpretation of the I-829 petition requirements mandates that the “at risk” nature of the investment be sustained throughout the conditional permanent residency period, which may be far after the initial five year term of the loan, new commercial enterprises must “redeploy” the immigrant investor capital to new investments.
USCIS PRIOR REDEPLOYMENT GUIDANCE
USCIS had previously provided guidance in the Policy Manual for how an investor can meet the “at risk” requirement after the job creation requirement was satisfied.[6] As stated by USCIS:
“Once the job creation requirement has been met, the capital is properly at risk if it is used in a manner related to engagement in commerce (in other words, the exchange of goods or services) consistent with the scope of the new commercial enterprise’s ongoing business. After the job creation requirement is met, the following at-risk requirements apply:
- The immigrant investor must have placed the required amount of capital at risk for the purpose of generating a return on the capital placed at risk;
- There must be a risk of loss and a chance for gain; and
- Business activity must actually be undertaken.
For example, if the scope of a new commercial enterprise was to loan pooled investments to a job-creating entity for the construction of a residential building, the new commercial enterprise, upon repayment of a loan that resulted in the required job creation, may further deploy the repaid capital into one or more similar loans to other entities.”[7]
In sum, this previous guidance promulgated the following guidelines:
(1) Redeployment must be within the scope of the new commercial enterprise’s business;
(2) Redeployment must be done within a commercially reasonable period of time;
(3) Redeployment must ensure the EB-5 capital remains “at risk,” which USCIS defined in this context as “…used in a manner related to engagement in commerce (in other words, the exchange of goods or services);” and
(4) Redeployment must be “…adequately described…” in the I-526 petition.
USCIS’ REVISED REDEPLOYMENT GUIDANCE
On July 24, 2020, USCIS issued an amendment to the Policy Manual via an alert titled “Clarifying Guidance for Deployment of Capital in Employment-Based Fifth Preference (EB-5) Category,” essentially contradicting its prior guidance and imposing such changes retroactively. The revisions to the Policy Manual impose the following requirements on redeployments:
- Redeployments must be made within a reasonable amount of time, which USCIS now defines as 12 months but will consider evidence showing that a longer period was reasonable for a specific type of commercial enterprise or into a specific commercial activity under the totality of the circumstances;
- Redeployment can be made into any commercial activity that is consistent with the purpose of the new commercial enterprise to engage in the “ongoing conduct of lawful business,” which likely includes any for-profit activity formed for the ongoing conduct of lawful business; and
- Redeployment must be within the regional center’s geographic area, including any amendments approved prior to the redeployment, which does not have to be within or with the same job creating or targeted employment area.
As demonstrated by the comparison above, the new policy creates new requirements out of whole-cloth. USCIS has never imposed a requirement that redeployment be within the regional center’s geographic scope, nor has it required a specific time period for when a redeployment must occur.
The most objectionable is arguably the requirement that redeployment may only occur within a regional center’s geographic scope. This requirement does not appear to have any basis in law or regulation. The citations proffered by USCIS are not persuasive. USCIS cited to the general regulation that a petition must be eligible for the benefit at time of filing and through adjudication.[8] The regulatory requirement of an investment in a regional center merely requires the investment to occur “within a regional center” and such investment “will” create sufficient jobs indirectly.[9] The regulations contain no requirement on that, after making an investment within a regional center, any additional investments must be made within that same geographic area. Any interpretation of such would lack a statutory legal basis, as the law authorizing regional centers only states such investment shall involve a regional center for the promotion of economic growth, sets aside 300 visas annually, and permits those admitted under the regional center program to determine jobs indirectly via reasonable methodologies.[10]
The Policy Alert further states that these updates apply to all Form I-526 and I-829 petitions pending on or after July 24, 2020, which applies these requirements retroactively to previously filed petitions. This is likely ultra vires, as USCIS generally lacks the legal authority to impose policy changes retroactively unless such changes are authorized by statute.[11] Indeed, in a similar situation in 2017, USCIS sought to impose a change in how regional center geographic amendments are adjudicated retroactively, before back tracking and clarifying that such policy did not apply to those who filed prior to the announcement of the change.[12]
USCIS published draft redeployment guidance in 2015 and final guidance in 2017, neither of which included the above-listed restrictions. EB-5 stakeholders have been operating under the previous USCIS guidance for almost five years. There may be litigation over these changes given that they were published.
Notes:
[1] INA § 216(d)(1). 8 USC 1186a(d)(1).
[2] 8 CFR §216.6(c)(1); the regulations go further by stating: “The alien will be considered to have sustained the actions required for removal of conditions if he or she has, in good faith, substantially met the capital investment requirement of the statute and continuously maintained his or her capital investment over the two years of conditional residence [emphasis added].” This language is also consistent with the USCIS Policy Manual, Vol. 6, Part G, Chapter 5, Section A. FN 4, which states: “The sustainment period is the investor’s 2 years of conditional permanent resident status. USCIS reviews the investor’s evidence to ensure sustainment of the investment for 2 years from the date the investor obtained conditional permanent residence. An investor does not need to maintain his or her investment beyond the sustainment period [emphasis added].”
[3] 8 CFR § 204.6(j)(2)
[4] Matter of Izummi, 22 I&N Dec. 169, 179 (Assoc. Comm’r 1998).
[5] Historically, this included those born in mainland China, Vietnam, and India.
[6] USCIS Policy Manual, Vol. 6, Part G, Chapter 2, Section A2.
[7] Id. See also USCIS Policy Manual, Volume 6, Part G, Chapter 5, Section C.
[8] See 8 CFR 103.2(b)(1)
[9] See 8 CFR 204.6(m)(7).
[10] See Pub. L. 102-395, 106 Stat. 1828, 1874 (October 6, 1992).
[11] See generally, Bowen v. Georgetown University Hospital. 488 U.S. 204 (1988); Nat’l Mining Ass’n v. Dep’t of Labor, 292 F.3d 849, 859 (D.C. Cir. 2002); Landgraf v. USI Film Prods., 511 U.S. 244 (1994); and Grant Med. Ctr. Center v. Burwell, 204 F. Supp. 3d. (D.C. Cir. 2016).
[12] See USCIS Policy Manual, Volume 6, Part G, Chapter 4, Section A.
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