What is an EB-5 Material Change with AILA EB-5 Chairperson Carolyn Lee – Episode 79
What qualifies as material change? How do you defend against it in the absence of an objective standard? In this episode, Mona and Mark are joined by Carolyn Lee, the Chair of IIUSA’s Public Policy Committee, to discuss the concept of material change and its adverse consequences. Listen in for Carolyn’s insight around how USCIS formulates policy, why some policies around material change violate due process, and what she is doing to initiate a dialogue with the agency.
In the last few weeks, EB-5 processing times have jumped from 24 to 29 months to 45 months. This delay creates a huge issue in terms of material change. It hardly seems fair that cases filed today be adjudicated based on 2023 policy guidelines. In addition, material change is a subjective concept with no clear definition. So, how do you defend changes in a business plan to USCIS, explaining why departures should NOT be deemed material? Is there anything we can do as an industry to change flawed USCIS policies around material change?
Carolyn Lee is the Founder of Carolyn Lee PLLC, the Chair of the American Immigration Lawyers Association (AILA) National EB-5 Committee, and the new Chair of IIUSA’s Public Policy Committee. For well over a decade, she has represented Regional Centers, developers, funds and investors, helping clients raise $2.5B in EB-5 capital. Carolyn is also an advocate for workable reform in EB-5, and her current work in this realm focuses on long-term reauthorization of the program.
Today, Carolyn joins Mona and Mark to define what constitutes a material change and walk us through the adverse consequences. She explains where to go to find USCIS policy guidelines around material change and offers examples of directives that violate due process. Listen in for insight around how to defend material change in the absence of an objective standard and learn Carolyn’s approach to initiating a dialogue with USCIS to promote the rational adjudication of a material change.
Defining Material Change
- There is no clear definition of a material change. In general terms, it points to a big or substantial change in a project, but it’s a subjective concept. We have to trust that USCIS will not nitpick at ordinary changes that happen in the course of doing business.
- From an immigration standpoint, there are significant adverse consequences when a change is deemed material. In fact, a pending EB-5 petition can be denied, and an approved petition can be revoked.
Defending Material Change
- In the absence of an objective standard, we must explain why a change does not qualify as material. Carolyn suggests emphasizing the similarities with the project’s original business plan.
- Defend changes to a project by carefully explaining why departures occurred in spite of your best efforts to mitigate risk. Ensure that no fraud is being committed and describe how the changes came about due to factors beyond your control.
Changing Operating Agreements
- If you identify a mistake in an operating agreement that is administrative (e.g.: typos), amending the document should not qualify as a material change. Carolyn recommends including necessary corrections in subsequent filings and annotating those corrections to notify USCIS of the minor changes.
- Otherwise, be very careful about making any other changes to documents during the process. There is a wide zone of gray area regarding what constitutes a material change, and the Matter of Katigbak determined that “a petitioner may not make material changes to a petition that has already been filed … to conform to service requirements.”
How USCIS Formulates Policy
- Because the regulatory process is long and uncertain, USCIS provides agency guidelines for adjudicating immigration benefits through the publication of an online policy manual. Though this system is imperfect, it’s better than those instances in which USCIS adopted new positions in the course of adjudicating a case (e.: indebtedness and geographic expansion).
- Policies published in the EB-5 section of the online policy manual are not necessarily based on precedent and become particularly problematic when they have a retroactive impact on pending cases. As we know, processing times have increased to 45 months, and it simply isn’t fair to decide a case filed in 2019 using entirely different policy guidelines four years later.
- In her role as the new chair of IIUSA’s Public Policy Committee, Carolyn plans to prioritize issues related to due process. (For example, moving to a new Regional Center currently qualifies as a material change, even if your original Regional Center was terminated through no fault of your own.)
- EB-5, as an industry, must break through the wall of silence and initiate a dialogue with USCIS in order to make positive change. Carolyn believes we must be persistent and respectful yet demand accountability and transparency from the agency.