by Kate Kalmykov and Dillon Colucci
A successful journey for an EB-5 investor can be long and bumpy as he or she works to overcome three distinct hurdles: the I-526 Immigrant Petition for Alien Entrepreneur, the immigrant visa application or adjustment of status (green card application), and finally the I-829 Petition to Remove Conditions of Residency. Each stage presents its own challenges for the investor and the attorney working on the case.
In this edition of Kate’s Corner, we present one particular case to provide a window into these challenges, including source of funds obstacles, security clearance delays, and being the last investor in a project to file an I-829 petition. This particular EB-5 case began its journey in 2006, prior to the exponential growth of EB-5. The EB-5 applicant was a native of the Middle East, an area of the world that was enduring multiple armed conflicts and so his case posed a unique set of challenges. Nonetheless, this example sheds light on many challenges commonly faced by applicants and their counsel. While this case is not representative of all EB-5 cases, there are general lessons to be learned from this investor’s experience and success.
The I-526 petition
Documenting a legal source of funds is a key component of any investor’s I-526 petition. Due to the circumstances in his country, the investor’s business that served as the source of his investment was destroyed in an explosion—along with most of his records—significantly impacting his ability to adequately document the source of his funds in a straightforward manner. Before he could file his I-526, the investor had to find alternate means to prove his lawful source of funds. By showing evidence of the bombing with news reports and maps, along with recreated banking records from outside sources, the investor was able to meet the preponderance of the evidence standard to show the lawful source of funds.
The lesson: As EB-5 attorneys have discovered, confronting challenges is part and parcel of EB-5 practice. This case is a perfect example of the necessity to think outside of the box and to employ creative lawyering when presenting source of funds evidence. The application must meet the standard of proof stipulated by USCIS and argue that the evidence shows it is more likely than not that the source of funds is lawful, but do not let difficult situations limit you; there may be third party sources of evidence that can help establish the case. Such strategies led to the approval of this investor’s I-526 petition.
The immigrant visa/adjustment of status process
After filing the I-526 petition, applicants—either in the United States through adjustment of status or in their home country through consular processing—file for permanent residence.
At the time of filing his I-526, the investor in our case study was living in the United States holding temporary non-immigrant status. However, the length of the adjudication of the I-526 petition caused the investor’s lawful status in the United States to lapse without the possibility of an extension, forcing the investor to return to his home country and process for an immigrant visa at a consulate abroad. Because he had originally intended to adjust his status in the United States, the investor had to file an additional form (I-824) to notify the National Visa Center and the relevant U.S. Consulate that he now wished to process at a consulate abroad. This added additional wait time to the normal six to eight months it takes for an EB-5 applicant to receive an immigrant visa at a consulate abroad.
The lesson: In order to avoid delays with an I-824 application, it is best to indicate on the I-526 petition that the applicant will process for an immigrant visa at a consulate abroad, even if the investor is eligible for adjustment of status. By doing so, in the event the investor wants or needs to process for an immigrant visa, the I-824 application will not be required. If the investor wishes to process through the adjustment of status process, they can do that without filing an I-824 as well.
Applicants in the United States, such as F-1 students, should be advised of the effect on nonimmigrant status before filing an I-526 petition. The length of I-526 petition processing times may cause a lapse of lawful status. As an I-526 demonstrates immigrant intent, it can disqualify applicants from receiving or renewing nonimmigrant visas during the pendency of their I-526 petition.
The effect of immigrant visa delays
Another issue that can affect investors is the rigorous background check all immigrant visa applicants must undergo at the immigrant visa or adjustment of status stage. Investors, especially those native to Middle Eastern countries, may confront a situation where they appear on a U.S. watch list because they share a name with an individual barred entry to the United States. Security delays may also arise for Chinese investors who may have worked with sensitive technologies in China or who were former members of the Communist Party. These issues can cause significant delays, and in some cases, the State Department can refuse to act on a pending immigrant visa petition for several years. In our example, the investor’s immigrant visa application was stalled over three years in security clearance checks.
These sorts of delays can have serious effects on an EB-5 investor’s conditional permanent residency. For instance, many projects determine job allocation by the date an EB-5 investor receives approval of a Form I-485 or enters the United States on an immigrant visa. EB-5 applicants who file their I-526 petition first may still end up behind later-filed EB-5 investors in the “job line” due to delays at the consular processing or adjustment of status stage. If there is a shortfall in jobs created at the I-829 petition stage in that scenario, the investor may lose out.
The lesson: Counsel should ensure that the investor understands how jobs are created and how job creation is allocated among investors in the new commercial enterprise.
I-829 petition issues
A late-filed I-829 petition demonstrates the need to keep accurate records regarding each EB-5 applicant in a project and also adequate project business records. In the case of our investor’s project, job creation was demonstrated through tenant occupancy. The significant lag time between the other applicants and this investor required the regional center to refresh their job creation evidence. USCIS required evidence of the tenants at the time of this investor’s I-829 petition, which occurred three to four years later than all other investors in the project. If there was a shortfall of tenants in the building, this investor may have had the I-829 petition denied.
Other issues that could arise with late-filed I-829 petitions typically occur with a “loan-model” project. The typical EB-5 loan is usually outstanding for four to six years. If there is a security clearance delay, the EB-5 applicant may receive conditional permanent residency months or years after the date of their I-526 petition approval. The EB-5 loan could mature and be repaid to the new commercial enterprise before or during the period of conditional permanent residency. This presents unique issues, because according to Matter of Izummi and the May 30, 2013 EB-5 Adjudications Policy Memorandum, an EB-5 applicant must place his or her investment “at risk” for the purpose of generating a return during the period of conditional permanent residence.
It is not clear what position USCIS would take at the I-829 stage if the investment amount is repaid to the new commercial enterprise during the period of conditional permanent residency for an investor. Fortunately for this investor, his partnership made an equity investment into a project, and thus, his investment remained outstanding throughout his eight-year process. If the partnership had made a loan, this investor would have had another hurdle to overcome at the I-829 stage.
The permanent green card
Despite the myriad of issues involved in this case, the investor achieved unconditional permanent residence in 2014. Eight full years passed from I-526 petition filing to I-829 petition approval. While this case presented challenges at every step and as a result was severely delayed it highlights the importance of keeping an eye towards the future when preparing each step in an EB-5 investor’s journey and employing creative strategies when necessary.
*To protect the privacy of the investor, identifying details have been removed.