Navigating A Notice Of Intent To Terminate – Episode 104
The USCIS compliance team has gotten much more aggressive in issuing NOITs, terminating eight Regional Centers in the first two months of 2020 alone. On this episode, Mona, Mark and Rebecca explain what the termination process looks like and what a Regional Center can do to address a NOIT. Listen in to understand the Regional Center’s key responsibilities around compliance and learn how a termination impacts EB-5 investors.
Between 2008 and 2018, the number of Regional Centers grew by 2,490%, reaching an all-time high of 822 in 2018. Since then, USCIS has gotten much more aggressive in its oversight, terminating 130 Regional Centers in a single year, and issuing eight terminations in the first two months of 2020 alone. Why are so many Regional Centers receiving the Notice of Intent to Terminate (NOIT)? And what does that mean for EB-5 investors?
On this episode of EB-5 Investment Voice, Mona, Mark and Rebecca sit down to discuss the trending increase in issuances of NOITs for Regional Centers. Rebecca shares the numbers around how many Regional Centers have been terminated versus approved in the last two years, and Mona explains why she welcomes this action from USCIS.
Mona, Mark and Rebecca go on to walk us through the termination process, describing what a Regional Center can do to respond to a NOIT and how a termination impacts the Regional Center and its EB-5 investors. Listen in for insight around the recent court case USCIS lost due to “arbitrary and capricious” termination and learn what data a Regional Center must track and report to remain in compliance with USCIS guidelines.
The Increase in Issuances of NOITs
· On September 16, 2019, there were 822 approved Regional Centers. As of February 10, 2020, there are only 783.
· Since 2008, we’ve seen 402 Regional Centers receive terminations from USCIS. Eight terminations have been issued in the first three months of 2020 alone.
Unqualified Regional Center Operators
· Yes, the USCIS Regional Center “compliance police” have been much more aggressive in issuing NOITs as of late. But Mona welcomes this action, as Regional Centers had turned into a cottage industry in the last few years, growing to an all-time high of 822 in 2018.
· In many cases, developers are eager to take investors’ money but less eager to carry out the necessary compliance and oversight required to run a Regional Center—with some operators even failing to file the I-924A (Annual Certification of Regional Center).
From Approvals to Terminations
· Between 2008 and 2018, the number of Regional Centers grew by 2,490%, with USCIS approving 750 in a five-year period. This leads Mona to believe that the agency was not conducting proper oversight.
· Today, the number of Regional Centers in trending in the opposite direction. Between January and September of 2019, USCIS terminated 75 Regional Centers and only approved six, creating the largest deficit in net Regional Center growth in the history of EB-5. In addition, the agency terminated a record high 130 Regional Centers in 2018.
The Termination Process
· USCIS informs a Regional Center of impending termination by issuing a Notice of Intent to Terminate (NOIT). The NOIT explains the reasons for termination and the appeals process. The Regional Center then has 30 days to respond.
· From 2008 through 2017, USCIS terminated only those Regional Centers involved in cases of fraud or misrepresentation. Since 2017, however, the agency has begun terminating Regional Centers that fail to demonstrate sufficient capital investment or job creation as well as those lacking in I-526 or I-829 petitions.
· The Immigrant Investor Program Office (IPO) typically gives a Regional Center three years to sponsor projects and get the EB-5 applications in. (It is worth noting that putting up a Regional Center is an expensive process, with operators spending $100K or more.)
Responding to a NOIT
· Regional Centers receiving a NOIT for lack of EB-5 capital investment, lack of job creation, or lack of I-526 and I-829 petitions can fight termination by showing USCIS that they made significant efforts to put up a project, originate project documents and market the opportunity to prospective EB-5 investors.
· In the course of doing business, projects come up against adverse market conditions, lawsuits, financing issues or issues obtaining the necessary permits and licenses. USCIS must recognize these unforeseeable circumstances and look at the overall picture of a Regional Center’s activity rather than a single year in isolation
The Practical Implications of Termination
· Regional Centers that are terminated cannot solicit, generate or promote investors or investments for any EB-5-related project. In short, they can no longer participate in the EB-5 program at all.
· The new regulations do allow investors in a terminated Regional Center to jump to a different Regional Center. However, that may not be possible if, for example, their application is still pending or the investor has a conditional green card, for example. (It is Rebecca’s hope that USCIS will allow Regional Centers to operate until all pending I-526s or I-829s have been approved.)
Justified vs. Arbitrary & Capricious Terminations
· In December of 2019, the Matter of SDRC was litigated in the US District Court for the Western District of Washington. The court ruled that the Regional Center’s termination was “arbitrary and capricious,” and it ordered USCIS to reopen the Regional Center and re-adjudicate the I-526 petitions associated with that Regional Center.
· The court decision stated that “just because a Regional Center failed to promote economic growth for a short period while management changed hands does not mean that the Regional Center has not continued to promote economic growth after that point when, in fact, it provided jobs on a successful construction project.” The case also shows that EB-5 investors should not be penalized for the criminal actions of a third party, so long as the bad actors were removed.
The Regional Center’s Responsibilities
· Mona admits that for a short time, she believed it was okay for a developer to act as their own Regional Center. But she quickly changed her mind, realizing that third-party oversight is necessary to ensure that they follow the rules and take EB-5 investors’ best interests into account.
· Operating a Regional Center is a privilege that comes with the responsibility of compliance. Rebecca encourages developers to solicit guidance from a qualified EB-5 attorney who knows what USCIS is looking for.