Summary of EB-5 Adjudication Policy Memorandum USCIS Stakeholder Meeting on January 12, 2012

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Summary of EB-5 Adjudication Policy Memorandum USCIS Stakeholder Meeting on January 12, 2012

Summary of EB-5 Adjudication Policy Memorandum

USCIS Stakeholder Meeting on January 12, 2012

Introduction:
On January 12, 2012 USCIS held a stakeholder meeting in Washington, DC with Director Mayorkas aiming to collect constructive comments on the recently issued draft of EB-5 Adjudication Policy Memorandum. The meeting was conducted in a conversation and discussion format, with 25 representatives from Regional Center, law firms, bar association and projects interested in EB-5 finance. The meeting lasted approximately 2.5 hours.
 
Noted Changes and Further Analysis:

  1. 1.      Wholly owned enterprise within a portfolio of businesses:

USCIS tends to accept more flexible business models in the EB-5 investment. The memorandum gives an example to illustrate the “wholly owned enterprise”: in an area in which the minimum investment amount is $1,000,000, the investor can satisfy the statute if the commercial enterprise deploys $600,000 toward one business that it wholly owns, and $400,000 toward another business that it wholly owns. (In this instance, the two wholly-owned businesses would have to create an aggregate of ten new jobs between them).
Director Mayorkas and the meeting participants seemed to disagree on how to define “wholly owned enterprise”. There is no disagreement that this example should apply to the regional center scenario. However, in the later examples given by Director Mayorkas that suppose there are 3 investors invested money in 3 hotels wholly owned one regional center, the first two hotels failed to create any jobs, the third hotel creates 30 jobs, the Director emphasized that in this scenario only the third investor satisfies the EB-5 job creation requirement. The attendees at the meeting disagreed radically commenting on the impracticality to separate the investment in the regional center escrow account and the impossibility to allocate whose money creates what.
Director Mayorkas tended to define the new commercial enterprise as each particular project under one regional center, as the regional center usually runs multiple projects, while the participants tended to push the boundary of the “wholly owned enterprise” to cover the entire regional center, which may further loosen the requirement on the job creation allocation on each EB-5 investors.
There is no agreement reached at the end of this portion of discussion. To be on the safe side, it is advisable that the regional center should always provide sufficient evidence to prove that each project creates enough jobs that should satisfy the job creation requirement for all EB-5 alien entrepreneurs.
 

  1. 2.     Reasonable time

At the meeting, Director Mayorkas also discussed “reasonable time” requirement at I-829 stage as to the timeline of how many jobs are created by the new commercial enterprise. The notion is that USCIS is unwilling to give a specific bright line standard to “reasonable time”, it varies from industry to industry. It is mentioned that the investment documents and the business plan should specify the allocation of the job creation in a specific time period. If the jobs are not yet created at the I-829 stage, the business documents should clarify the reason for the delay, the specific business plan for the next phase, the timeline of the job creation, and whether there is the likelihood of completion for the project.
The attendees expressed their concerns on the USCIS unilateral judgment on what defines “reasonable time”. In the matters governed by administrative agencies, there is no case law for the lawyers to refer to. So far the moral in this matter is that USCIS tends to approve short period of time as “reasonable time”, unless there is a credible justification supported by specific business plan for the delay. Director Majorkas also inquired for specific “fact patterns” on this matter, as to what constitutes “reasonable time” for different project in different geographic area in different industries.
 
 

  1. 3.     USCIS Enforcing Laws of Foreign Jurisdiction

The attendees expressed concerns on a recent RFE requiring evidence to prove the administrative fee apart of the minimum investment $500,000 is also obtained through lawful means. Director Mayorkas confirmed that the standard will not be loosened in this matter, as it is difficult to separate the EB-5 investment funds from the administrative fee because the foreign investor usually wired the money overseas in one transaction. Director Mayorkas mentioned USCIS will have to oversee the funds are “clean money” from the investor’s home country.
The discussion further extended to whether USCIS should enforce other countries’ law. The attendees mentioned that the USCIS should not have enforcing power outside its jurisdiction. It should not request further evidence on the matters of other countries’ foreign currency law, securities law, tax law, etc. The author believed this is an inevitable tendency in the US government; a notorious example would be the Foreign Corruption Practices Act. It is advisable for the investors to put into extended evidence on complying with laws and regulation of their home country.
 

  1. 4.     Targeted Employment Area

The January 11, 2012 memorandum addressed the targeted employment area and the state’s designation power. In the redline version of the memo, USCIS added “USCIS must ensure compliance with the statutory requirement that the proposed area designated by the state in fact has an unemployment rate of at least 150 percent of the national average rate.”
“Acceptable date sources for purposes of calculating unemployment include Local Area Unemployment Statistics produced by a government agency, US Census Bureau data, and data from the American Community Survey. State unemployment determinations should be based on the most recent publicly available data from the source relied upon. This is likely to be USCIS’ intention to rectify the gerrymandering in the census tracks in certain geographic area.
 
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