by Shae Armstrong
Since the inception of the EB-5 program, United States Citizenship and Immigration Services has continually heightened its scrutiny of Form I-924 applications (“I-924”)[1]. Presently, a competent I-924 application package may include over 1,000 pages of evidence supporting regional center designation. However, you may breathe a sigh of relief as this article will not attempt to be a global explanation of the contents of a perfect I-924 application, but will rather offer a basic overview of the essential components of the I-924 application along with fleeting references to recent I-924 application concerns.
Costs Associated with the Form I-924 Application
Presently, the Form I-924 filing fee is $6,230. Due to the complexities of the EB-5 program requiring the involvement of at least three EB-5 specialists (economist, immigration counsel, and securities lawyer) in the preparation of an I-924 application, total costs commonly exceed $100,000.[2] If an applicant is planning to build a regional center to facilitate the development of smaller projects, the applicant may consider simply affiliating with a previously approved EB-5 regional center in order to bypass these considerable costs. This is sometimes referred to as a shared services agreement or as some like to call it affiliating with a regional center. I have seen this “one-time” affiliation fee ranging from anywhere as low as 2,000 dollars an investor to as high as 15,000 dollars per investor; provided one must look at the total size of the offering to put things into perspective. Larger offerings are obviously going to successfully negotiate a lower fee than smaller offerings. Also, another consideration is the scope of services in the Shared Services Agreement. The prices I mentioned above are for limited use of the Regional Center designation and don’t offer other services. Like most things in life, this is a negotiation.
If an applicant is seeking to get into the Regional Center business or using a regional center for larger projects, the $100,000 cost allocated to building a regional center may seem nominal compared to the overall costs and future profits of the projects.
Preparing the Form I-924 Application Package
As mentioned above, the key to building a successful regional center is to create a team with both lawyer and non-lawyer EB-5 subject matter experts. That team can include EB-5 experienced economists, immigration and securities lawyers, and real estate finance professionals. Real estate developers and other business men and women seeking to make a splash in EB-5 via their first I-924 application need to remember that there is only one opportunity to make a good first impression. New applicants should treat this process similar to that of an important sales call to a new potential customer. In this case, the customer is the USCIS.
Upon filing the I-924 application, the applicant elects to include either hypothetical, actual, and/or exemplar project proposals. An actual project denotes a specific project proposal to USCIS supported by a Matter of Ho compliant business plan, and a hypothetical project refers to a project proposal that is not supported by a Matter of Ho compliant business plan. A hypothetical project proposal offers USCIS general proposals and predictions evidencing that the proposed regional center will more likely than not promote economic growth, improved regional productivity, job creation, and increased domestic capital investment. An USCIS approved I-924 application incorporating an actual project receives deference for that project at the I-526 stage. However, approved I-924 applications incorporating a hypothetical project will not receive deference as USICS will perform a de novo review of a regional center’s actual project at the I-526 stage. Exemplar projects are considered the most concrete and finalized regional center projects. Exemplar approval results in USCIS preapproval for the project. Thus, at the I-526 stage, the only significant documentation for USCIS to review is the investor’s source of funds.
Contents of the I-924 Application Package
I-924 application submission packages consisting of actual and/or exemplar project proposals contain more extensive documentation than hypothetical projects. I-924 applications with exemplar and/or actual projects should contain the following fundamental elements:
- Form I-924;
- G-28;
- Cover Letter;
- Executive Summary;
- Table of Contents / Index;
- Operational Business Plan of the Regional Center;
- Economic Analysis;
- Organizational Documents (i.e. certificate of formations, operating agreements);
- Offerings Documents (Private Placement Memorandum, Limited Partnership Agreement, Subscription Agreement, and if applicable, Escrow Agreement);
- Management Agreement, if applicable;
- Project Business Plan(s);
- Any other necessary exhibits such as TEA letters and/or bank statements.
Conversely, organizational and transactional documents contained in an I-924 application for a hypothetical project will not be reviewed by USCIS since these documents will undergo de novo review at either the I-526 stage or via a subsequent exemplar filing.
Form I-924
There are five core parts to the Form I-924. The first part involves basic biographical data about the regional center principle, and the second part asks the applicant to indicate whether the application is an initial application for designation as a regional center or an amendment to a previously approved regional center application. For the purposes of this discussion, this article will not comment on the amendment process and focus solely on an initial Form I-924 application.
The third part of the form is the heart and soul of the application and answers to this part account for the vast majority of the supporting evidence of the I-924 application package. In Section (B) & (C) of Part 3, USICS asks the applicant to disclose any management company or agencies, regional center principals, individuals, or entities who are or will be involved in the management, oversight, and administration of the regional center. The subsequent question in Part 3, Section (D) asks the applicant to describe the structure, ownership, and control of the regional center entity. Furthermore, later in the Form I-924 in question (8) of Part 3, USCIS asks the applicant to describe and document the current and/or prospective structure of ownership and control of the commercial entity (or entities) in which the EB-5 investors have or will make their capital investment. This line of questioning from these three important sections undoubtedly establishes USCIS’s concern with the management, ownership, and investment structure of the regional center and affiliated investments. In an attempt to address the concerns related to the management and control mechanisms of regional centers, United States Congressman Jared Polis introduced legislation to Congress on January 28, 2015. This bill proposes that individuals that have been found liable for certain criminal and civil acts such as securities violations or involved with certain illicit activities such as money laundering and human trafficking be prohibited from owning or managing regional centers.[3] This pending legislation would help purify the EB-5 industry of certain bad players.
In order to adequately satisfy USCIS’ concerns, an applicant should fully disclose all stake holders in the regional center’s ownership and management structure. The applicant should present well-defined structure diagrams supported by evidence and relevant commentary to USCIS, noting ownership and management of each particular entity across the regional center entity network. Regarding the proposed investment structure, it is recommended that the applicant present a separate and distinct investment structure diagram supported by evidence and relevant commentary within the Operational Business Plan demonstrating the flow of investment, loans (if applicable), and potential returns.
The third question of Part 3 asks the applicant to describe the geographic area of the regional center. USCIS asserts that this area must be contiguous, and requests an actual map as well. All too often maps provided to USCIS through the Form I-924, Executive Summary, and Operational Business Plan are not aesthetically acceptable as they are confusing, digitally incompetent, and messy. Maps presented to USCIS should include highlighted counties of the proposed geographic region, and if an applicant is proposing a larger regional center geography consisting of many counties, the actual names of the counties at play should not be listed on the map. For larger regional center geographies, the applicant should supplement the map with a table listing the counties involved. Further, the economic analysis within an I-924 application must demonstrate that the regional center’s activities will have an economic impact within the entire requested geographic region evidenced by analysis of factors such as industry trade flows and commuting patterns.
Question (4) of Part 3 asks the applicant to describe the regional center’s administration, oversight, and management functions to monitor EB-5 capital investment activities and resulting job creation or maintenance. This is an opportunity for the applicant to provide both in the Form I-924 and in its Operational Business Plan a brief analysis of its internal controls and monitoring systems.
The applicant should be attentive to Question (5) of Part 3 as USCIS has increased its inquiries concerning this section. Question (5) asks for a list of past current and future marketing activities. Additionally, USCIS asks for marketing budgets and information about the recruitment of potential investors. USCIS has issued RFEs asking applicants to indicate:
[t]he amount of funds dedicated to the Regional Center; The source of such funds; How the amount is sufficient to sustain the Regional Center; and The past, current and future promotional activities for the Regional Center, to include a description of the budget for this activity, and the source of the funds that have or will be used for these activities.[4]
A general statement should be made on the Form I-924 addressing this question. Furthermore, the applicant should provide a separate and distinct 2 to 4 page exhibit to the Operational Plan establishing the marketing activities, pro forma budget, start-up costs, and source of such funds associated with the regional center.
Question (6) of Part 3 inquires how the regional center examines and screens investors to ensure that their source of capital is lawful and that they are able to invest the amount of capital required. This is easily addressed by providing a statement that the regional center only markets to accredited investors and that the manager has designated a particular qualified employee or other qualified individual to screen all prospective investors as to lawful source of capital and to fully and timely invest the requisite amount of capital. This answer should be duplicated and re-emphasized within the Operational Business Plan.
Question (7) relates to listing the Industry Category Title and NAICS code which is also presented in the Economic Analysis. As alluded to earlier, this article does not attempt to tackle the minutiae of EB-5 economic analysis, but the suggestion to first time I-924 applicants is to retain an economist with a proven history of success in his or her economic methodological presentation to USCIS. An EB-5 economist selection should be handled with care.
Unlike other areas of immigration, RFEs on Form I-924 are the norm. Nonetheless, if an EB-5 team is properly selected, and the I-924 application package is drafted, compiled, and submitted with precision and accuracy, it is possible to obtain approval without an RFE.
[1] Form I-924, Application for Regional Center Under the Immigrant Investor Pilot Program
[2] Campion, J., He, L., Hirson, D., Jahangiri, A., Lau, L., Lurie, D., . . .Wright, K. (2014). The EB-5 Handbook. United States: EB5investors.com
[3] United States. Cong. House of Rep. To amend the Immigration and Nationality Act to provide for reforms to the EB-5 immigrant investor program, and for other purposes. 114th Congress. 1st Session. HR 616. Washington. GPO, 2015. Print.
[4] U.S. Department of Homeland Security, Notice of Action, November 22, 2013.
Shae Armstrong
Shae Armstrong is a partner at Bradley Arant Boult Cummings, LLP, based in the firm’s Dallas, Texas office. He has experience representing sponsors and real estate developers in numerous financings related to the EB-5 industry. He is licensed with the United States Court of International Trade, as well as with the Supreme Court of Texas. He holds series 22 and 63 securities licenses, and is a Texas licensed real estate salesperson. Armstrong has advised U.S. House and Senate offices and committees of the U.S. Congress, as well as policy and industry trade groups regarding EB-5 matters.
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