Premium processingis unlikely to be implemented in the very near future.  My best estimate is the first half of calendar year 2012, and maybe the first quarter.  It will likely be limited to regional center designation applications and exemplar I-526 (project pre-approval) petitions.  There is a possibility that individual I-526 investor petitions will be eligible for premium processing at a later date.  In the meantime, regional centers and investors should file petitions in the normal fashion.  If premium processing is implemented, almost certainly it will apply to pending petitions.

There appears to be agreement between Republicans and Democrats in the House of Representatives for a long term and hopefully permanent extension of the regional center pilot program.  The biggest area of disagreement may be whether, as part of the extension, Congress implements a new EB-6 program for venture capital financing of startup ventures in the U.S.  If so, there is some indication that at least the Republicans in the House of Representatives may want to take the visa numbers for the EB-6 program out of the EB-5 quota.  EB-5 advocates will be arguing against any attempt to reduce EB-5 numbers.

USCIS has already hired three new business analysts and is in the process of hiring one or more economists.  Hiring and training these individuals will be a critical part of implementing premium processing and implementing the proposed Decision Board, which would allow for in-person or telephonic discussions between regional centers and CIS prior to decisions on regional center designations and project pre-approvals.

Even without premium processing, regional center designation applications and project pre-approval applications will likely be processed more promptly than the present 8 to 10 months.  Now that USCIS has mostly completed the November 2010 filings, and since there were far fewer filings in the months following November 2010, processing times should improve.  It is not as clear that processing times will improve on the investors’ I-526 petitions.

USCIS will not commit to a formal position on three legal issues “for several weeks” and likely will include most or all of the positions in a new policy memorandum.  The three issues are:

• Deference to safe designation letters with respect to geographical areas of TEAs;
• EB-5 money used to pay down bridge financing;
• Definition of “material change” for purposes of condition removal and what must be done in the event of a material change.
• It appears likely that CIS will agree that it should defer to state designation of geographical areas of TEAs and that EB-5 money can be used to pay down bridge financing.  Until issuance of a policy memorandum, there are indications that CIS adjudications on these issues have been more favorable since we had our meeting with Director Mayorkas on August 10.  The material change issue will likely be the subject of a separate USCIS stakeholders engagement meeting prior to issuance of any memorandum.

Following our August 10 meeting, it appears that USCIS is rethinking its policy on exemplar.  Hopefully, the policy memorandum will include a commitment that, if the documentation regarding the regional center and the project in the investor’s I-526 petition is identical with the exemplar 526, CIS will be bound by the approval of the exemplar.  Unless and until that happens, there does not appear to be any good reason for waiting the necessary time for approval of the exemplar 526 if it will be filed independently of a regional center designation application. If it will be filed concurrently with a regional center designation application, since the processing time will be the same as the regional center designation processing time, it may be sensible to continue filing the exemplar 526 for the first project.

Following the approval of the EB-5 petition, the investor needs to apply for adjustment of status or consular immigrant visa processing.  The immigration attorney can handle that work even if he does not handle the EB-5 petition.  Likewise with reentry permit applications, which are very common for EB-5 investors who become permanent residents.

Five years after obtaining conditional permanent residence based on an EB-5 petition, the investor and his family may choose to naturalize.  This is further spin off work for the immigration attorney.  After naturalization, the investor may sponsor family members for permanent residence, which creates even further spin off work.

Some immigration attorneys perform non-immigration legal services.  The EB-5 process leaves plenty of room for other services, including tax advice, corporate structuring advice, real estate purchases, employment law issues, etc.

Finally, the immigration attorney may receive a finder’s fee from a regional center even if he does not perform the legal work for the investor.  However, the finder’s fee should not be accepted until the attorney does a careful review of both securities law ramifications and the rules of professional responsibility in his jurisdiction of practice.

–a regional center designation has absolutely nothing to do with whether any particular project within a regional center is a good project for EB-5 purposes.

2. Don’t just accept an I-526 or I-829 package prepared by a regional center.

–if the package prepared by the regional center raises questions or issues in the mind of the investor’s attorney, it may very well raise questions in the minds of USCIS. The issues should be resolved in advance of filing.

3. It’s all about the I-829.

–the I-526 EB-5 petition must be prepared with the I-829 condition removal application in mind.

4. Only 6 regional centers have I-829 approvals.

–this does not mean that the other regional centers have had their I-829 applications denied. A very large majority of regional centers have not been around long enough to reach the I-829 approval stage.

5. An investor is best advised not to be the first or last investor in a project.

–the first investor may find to his chagrin that the project does not attract sufficient investors to be fully funded. The last investor might discover that insufficient jobs were created, and all of the created jobs were allocated to the earlier investors.

6. It is critical for a regional center to have a more general and conservative business plan, rather than a specific, aggressive business plan.

–any change in a business plan might be considered a “material change.” The more specific the business plan, the more chance of a change. Also, a more conservative business plan may have more reachable targets.

7. The availability of a reduced $500,000 investment is not known until each investor’s I 526 petition is approved.

–USCIS regulations and interpretations are that the targeted employment area (TEA) issue is not decided until the time of investment. In the case of an investment put in escrow until the I-526 is approved, the date of investment is considered the date that the escrow is released following the approval.

8. An investor does not have to prove the lawful source of all of his or her money.

–an investor only has to prove the lawful source of $500,00 or $1,000,000, depending on the amount of the investment.

9. There is a difference between a direct job as defined by USCIS and a direct job as defined by an economist.

–USCIS defines a direct job as being a W-2 employee of the new commercial enterprise in which the investor invests. Economists define direct jobs as direct employees of the job creating enterprise or the construction company, as opposed to indirect or induced employment.

10. It is better to rely on indirect and induced jobs, rather than direct jobs.

–reliance on direct jobs could result in condition removal denial if there are less direct jobs than projected or if some of the employees can’t be proven to be U.S. citizens or permanent residents. Relying on indirect or induced jobs, such as through an economic model that relies on expenditures, may result in the regional center having more control over proving the required facts for condition removal.

Director Mayorkas’ proposal has three major elements.

One element of great importance is providing for accelerated processing (target two months) and premium processing (15 day processing) for “shovel ready” projects. This would apply to the regional center designation application, the exemplar I-526 project preapproval and the petitions of the investors in these projects. Although the definition of “shovel ready” is ambiguous and might better be defined as a project for which the developer is ready to seek investment capital, the concept is a very important one. Present processing times are unrealistic, and developers cannot be expected to wait the 12 to 18 months necessary for a regional center to be approved, a project to be approved, and an investor’s petition to be approved.

The second key component of the Mayorkas proposal involves the hiring of qualified expert personnel to adjudicate regional center designation applications and project pre-approval applications. Director Mayorkas proposes to add economists and business analysts for this purpose. Economic development specialists might also be added to the USCIS staff. The issues to be adjudicated in these applications are both complex and technical, and the Immigration Service needs to bring to the task professionals experienced in dealing with these issues.

The third major component of the Mayorkas proposal is to change the regional center and project pre-approval process from an adversarial to a consultative process. The Director proposes to change the present petition filing/RFE/RFE response process into one where the developer would have the right to a hearing with the expert professionals described above in order for the Service to articulate any questions or concerns and for the developer and his team of professionals to provide answers. This should result in faster, better and more informed adjudications.

The public has had an opportunity to comment on the proposal. Although commenters no doubt suggested improvements to the proposal, there is no question that implementation of the proposal, with whatever changes are deemed appropriate, will be a major step forward in making the EB-5 program more attractive for businesses seeking capital. This would be consistent with President Obama’s Select USA Initiative to attract more foreign direct investment into the U.S.

Although the proposal is a major step forward, it means nothing unless and until it is actually adopted by USCIS. The public eagerly awaits notification of its implementation.

In no particular order, here are my thoughts:

1. Either USCIS must provide far more extensive business training to EB-5 examiners or it should partner with another agency in the government that can provide such expertise.

2. USCIS must increase the number of fully-trained adjudicators in order to bring processing times of both individual EB-5 petitions and regional center applications to acceptable levels commensurate with the needs of developers for capital on pending projects.

3. Both the regional center application process and the project pre-approval (exemplar I-526) process must be consultative rather than adversarial and must be completed promptly.

4. The notorious December 2009 “Neufeld Memo” must be rescinded and replaced with a policy that is both consistent with the regulation and that recognizes that business plans constantly change. Irrespective of a “material change” in the business plan, if an investor has sustained his investment and created 10 jobs, his conditions should be removed.

5. USCIS should publish statistics on regional center activity, including number of investors, number of approved and denied I-526 petitions and number of approved and denied I 829 petitions. This information is material in enabling investors to make intelligent choices in their investments.

6. USCIS should actively monitor regional centers. Regional centers with a record of denied petitions or with a long record of inactivity should be subject to careful review.

7. USCIS should follow the law in adjudicating EB-5 petitions and condition removal petitions. If USCIS believes that the regulations are inadequate, it needs to go through notice and comment rulemaking rather than adjudicating based on policy memos and other “lore” that is not supported or supportable by the statute, regulations or precedent decisions.

8. USCIS should implement premium processing and concurrent processing of I-526 and I 485 applications, as is done with other employment-based petitions, to provide expedited consideration as is provided for family members and employees of businesses.

9. In pooled investments and regional center investments, the determination of a “targeted employment area” should be made at the time of the first investor’s investment. Multiple investors in the same projects should not have to invest different amounts of money to qualify based on the same project, and developers should be able to have the assurance of the number of investors that will be required to meets its capital investment needs.

10. Although not within the realm of USCIS, Congress needs to make the regional center pilot program permanent in order to remove any fears in the investment community that this is a temporary program that could be shut down, jeopardizing their potential immigration future.

Let’s analyze both parts of the equation. The regional center EB-5 program provides capital for infrastructure and real estate development at a time when capital is often unavailable from traditional sources. Win!

In addition, it creates jobs for U.S. workers.  Win-Win!

It provides a method of obtaining permanent residence for wealthy, entrepreneurial foreign nationals who often would have no other method available to do so. Win-win-win!

However, what’s the flip side? USCIS restrictive interpretations, changing rules in midstream and processing delays have created a less than friendly environment for potential investors. In my next blog, I will discuss specific recommendations for how USCIS could make the environment more amenable to attracting investors.

The other potential challenge to the ongoing and future success of the EB-5 program is regional centers themselves. It may take only one unscrupulous or incompetent regional center operator to bring down the entire program if investors get bilked and litigation and/or media attention follows.

Already, competition by regional center marketers overseas has produced questionable practices and questionable claims that have the potential to put the program in disrepute or result in clampdowns by foreign governments to protect their citizenry against such claims.

Both of these deterrents to the future success of the EB-5 program are serious and need to be addressed. If addressed, a potentially terrific government program will reach its full potential.

One option is applying to be designated as a regional center.  A second option is seeking to have an already-designated regional center “adopt” the developer’s project.  The third option is to have prospective investors in a pooled investment project file individual EB-5 petitions. 

A new article entitled “Three Options for Developers Seeking Capital under the EB-5 Program” has been added to our EB-5 website www.eb5immigration.com.  This article provides a list of advantages and disadvantages of each of the three options.

The Neufeld Memorandum states that a “new petition”, rather than an “amended petition”, must be filed.  The distinction is critical.  If an amended petition must be filed, the investor keeps his conditional permanent resident status.  If a new petition must be filed, the investor must abandon his conditional permanent resident status.  USCIS states that the investor can then readjust status but must incur a new two year conditional residence period.  This is contrary to law, since INA§245(c)(7) prohibits such an adjustment of status.

The impact of this distinction is a serious one for the investor.  It is even more serious for family members.  USCIS states that, if a conditional resident spouse has been divorced, or if a conditional resident child has turned 21, the spouse or child cannot gain the benefit of the new I-526 petition.  Presumably, the spouse or child is subject to removal from the U.S.  This is wrong both as a matter of policy and as a matter of law. 

The Neufeld Memorandum relating to material change should be rescinded or challenged.

 
1. The EB-5 Regional Center Program, which allows immigrant investors seeking a greencard to invest $500,000 in a USCIS approved regional center;

 
2. E-Verify the internet-based Employment Eligibility Verification System run by USCIS that allows employers to electronically verify the employment eligibility of certain employees;

 
3. The Conrad 30 J-1 program which allows state health agencies to annually hire up to 30 foreign physicians to practice in rural and inner-city communities that often have difficulty recruiting physicians. The sponsored physicians are released from their two year home residency requirement if they work for a minimum of three years with the medically underserved population; and

 
4. The EB-4 Religious Worker Program which provides up to 5,000 permanent immigrants visas for religious workers which include ministers, professionals working in a religious vocation, and other workers in religious vocations.

 
The law also includes statutory authority for USCIS to complete processing of permanent residence applications for surviving spouses and other relatives of immigration sponsors who die during the adjudication process.