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It came in the form of a direct question from an experienced immigration lawyer: May his client, who has an E-2 (treaty investor) nonimmigrant visa, take money invested in the United States and re-invest it in a regional center investment project?
The answer? Yes, indeed! There is nothing in federal law or regulations regarding the EB-5 Program to prohibit it.
As a matter of fact, I am discussing E-2 conversions to EB-5 with immigration lawyers representing several clients who came here from Iran and India. The investors still have to come up with the minimum investment amount of $500,000. And regional centers typically charge investors from $30,000 to $50,000 for five years of EB-5-related services to help the investors get the permanent green card.
Conversion also makes sense for investors in Canada's similar immigrant investor program who want to put a couple of hundred thousand dollars with their returns from the Canadian program and invest the money in the EB-5 Program in the United States.
These two sources of immigrant investors are generally untapped resources to help create badly needed jobs in the United States.
Having said the above, you should be mindful that this E-2 money is frozen out of the EB-5 Program if a direct investment of even E-2 revenues is used. So you must be very careful to develop new capital and have a good accountant at the ready.
In response to the question: May an E-2 investor grow his business and eventually qualify as an EB-5, as the business increases in value enough to meet the EB-5 investment threshold?
USCIS responded to the EB-5 stakeholder's question in this manner:
"8 CFR 204.6(e) defines 'capital'.
"Legislative History: S. Rep. 55, 101st Cong., 1st Sess. 5, 21 (1989) twice refers to EB-5 investments as
“new capital” that will promote job growth.
"The reinvestment of a commercial enterprise’s revenues cannot be considered part of a qualifying investment. See generally De Jong v. INS, Case No. 6:94 CV 850 (E.D. Texas January 17, 1997); Kenkhuis v. INS, No. 3:Ol-CV-2224-N (N.D. Tex. Mar. 7,2003)."
If USCIS could find more ways to strangle the EB-5 Program, it would. This federal agency demonstrates its hostility toward the EB-5 Program over and over again.
Tuesday, June 22, 2010
Tuesday, April 27, 2010
New rules ... finally
U.S. Citizenship and Immigration Services plans to issue rules to make changes to the EB-5 immigrant classification and to employment verification, according to the agency's semiannual regulatory agenda released April 26.
USCIS is expected to release a notice of proposed rulemaking in July proposing amendments to Department of Homeland Security (DHS) regulations to implement changes made by the 21st Century Department of Justice Appropriations Authorization of 2001. The legislation made various changes to the EB-5 alien immigrant classification.
The EB-5 program allots 10,000 visas per year for aliens and family members whose qualifying investments result in the creation or preservation of at least 10 full-time jobs for U.S. workers.
Applicants must invest between $500,000 and $1 million in “designated regional centers, areas of high unemployment or other qualifying rural areas.”
After five years, the investor and his or her family may obtain U.S. citizenship, subject to meeting all immigration requirements, as required under law.
USCIS is expected to release a notice of proposed rulemaking in February 2011 proposing amendments to regulations governing the types of acceptable identity and employment authorization documents and receipts that employees may present to their employers for completion of the Form I-9, Employment Eligibility Verification.
The rule is expected to propose removal of several documents from the list of documents acceptable for proof of identity.
USCIS said the effect of the proposed changes would be to improve the integrity of the employment eligibility verification process by simplifying the list of acceptable documents for ease of use by employers, ensuring that the list contains secure and fraud-resistant documents and adding safeguards to the verification process.
Also, final action on an interim rule is expected in September that would correct an error in a 2009 final rule governing the types of acceptable identity and employment authorization documents and receipts for completion of the Form I-9, Employment Eligibility Verification. The error allowed employers to accept expired documents in certain situations.
Under the interim rule published on April 3, employers could no longer accept expired documents. The interim rule also added a new document to the list of acceptable documents that evidence both identity and employment authorization and made several technical corrections and updates.
Frankly, anytime USCIS announces new rules or "guidance" in the form of memos, everyone in the EB-5 stakeholder community thinks, "What are they going to do do us now?"
USCIS is expected to release a notice of proposed rulemaking in July proposing amendments to Department of Homeland Security (DHS) regulations to implement changes made by the 21st Century Department of Justice Appropriations Authorization of 2001. The legislation made various changes to the EB-5 alien immigrant classification.
The EB-5 program allots 10,000 visas per year for aliens and family members whose qualifying investments result in the creation or preservation of at least 10 full-time jobs for U.S. workers.
Applicants must invest between $500,000 and $1 million in “designated regional centers, areas of high unemployment or other qualifying rural areas.”
After five years, the investor and his or her family may obtain U.S. citizenship, subject to meeting all immigration requirements, as required under law.
USCIS is expected to release a notice of proposed rulemaking in February 2011 proposing amendments to regulations governing the types of acceptable identity and employment authorization documents and receipts that employees may present to their employers for completion of the Form I-9, Employment Eligibility Verification.
The rule is expected to propose removal of several documents from the list of documents acceptable for proof of identity.
USCIS said the effect of the proposed changes would be to improve the integrity of the employment eligibility verification process by simplifying the list of acceptable documents for ease of use by employers, ensuring that the list contains secure and fraud-resistant documents and adding safeguards to the verification process.
Also, final action on an interim rule is expected in September that would correct an error in a 2009 final rule governing the types of acceptable identity and employment authorization documents and receipts for completion of the Form I-9, Employment Eligibility Verification. The error allowed employers to accept expired documents in certain situations.
Under the interim rule published on April 3, employers could no longer accept expired documents. The interim rule also added a new document to the list of acceptable documents that evidence both identity and employment authorization and made several technical corrections and updates.
Frankly, anytime USCIS announces new rules or "guidance" in the form of memos, everyone in the EB-5 stakeholder community thinks, "What are they going to do do us now?"
Thursday, April 22, 2010
EB-5 Program sputtering along
The EB-5 Program should be creating jobs like there's no tomorrow, but it's not. Why not? Because it is in the wrong federal agency. U.S. Citizenship and Immigration Services has no economic development mission and is hostile to the EB-5 Program. Only Congress can fix this. 350 investor visas issued during the last federal fiscal year ending October 1. Come on! Surely somebody in Washington is getting this.
Tuesday, March 16, 2010
Justia
An excellent law website called Justia has published a link to my blog. Thanks, guys.
http://blawgsearch.justia.com/blogs/categories/immigration-law
http://blawgsearch.justia.com/blogs/categories/immigration-law
Tuesday, March 2, 2010
Congress needs to step up
One could blame the perils of the EB-5 Program on the captive, law enforcement bureaucracy that has throttled it thus far. Yes, without a doubt, to a certainty, U.S. Citizenship and Immigration Services (USCIS) and its legacy agencies mismanaged the EB-5 Program since 1990, when Congress passed the law creating the Program, and which now throttles the EB-5 Program because it will not set it free.
And yes, there are enormous opportunities to create jobs NOW -- TODAY -- without the expenditure of a single taxpayer dollar. But that will not happen.
It will not happen absent action from a paralyzed Congress.
And, of course, action in Congress is a nonsequitur. It is not going to happen. Thousands and thousands of good jobs for Americans will not be created because Congress is paralyzed and cannot act because of lack of bipartisanship to create jobs for Americans. Foreign investment dollars will not flow into the United States under the EB-5 Program because Congress is paralyzed and cannot act.
Same old, same old.
Is there any wonder why I am discouraged?
And yes, there are enormous opportunities to create jobs NOW -- TODAY -- without the expenditure of a single taxpayer dollar. But that will not happen.
It will not happen absent action from a paralyzed Congress.
And, of course, action in Congress is a nonsequitur. It is not going to happen. Thousands and thousands of good jobs for Americans will not be created because Congress is paralyzed and cannot act because of lack of bipartisanship to create jobs for Americans. Foreign investment dollars will not flow into the United States under the EB-5 Program because Congress is paralyzed and cannot act.
Same old, same old.
Is there any wonder why I am discouraged?
Sunday, February 14, 2010
USCIS Q&A reveals serious problems
On December 14, 2009, coming hard on the heels of an EB-5 Program memo issued by U.S. Citizenship and Immigration Services (USCIS), the agency issued responses to questions posed by the American Immigration Lawyers Association EB-5 Investors Committee and the Invest in the USA Association.
There was good news and bad news concerning these opinions issued by USCIS.
USCIS confirmed, for the first time, that an EB-5 alien investor may use funds unrelated to his or her EB-5 investment to purchase insurance from a third-party insurer which would be paid to the investor if the EB-5 enterprise fails to repay the investor. Surprisingly, USCIS said the investor could purchase an indemnity policy as long as the investor's capital is "at risk" and the indemnity policy does not constitute a redemption agreement or a guaranteed buy-back arrangement for the
alien investor's investment in the EB-5 enterprise.
A response concerning Targeted Employment Areas (TEA's), which are 150 percent of the national unemployment rate and are designated by a state agency, confirms what appeared in a December 11 USCIS memo concerning the EB-5 Program. USCIS stated that it could not confirm that "gerrymandering" -- a finding of an area of high unemployment by a designated state agency by cobbling together census tracts or political subdivisions -- "is an acceptable business practice for EB-5 purposes." This response is troubling. Designated state agencies are not "frustrating congressional intent," as the USCIS response states. There are huge areas of geography in the United States which, today, during this ugly recession, cannot qualify under the 150 percent of the national unemployment rate because the national rate is near or at 10 percent. This means that in an area not qualified as a TEA, the investor must invest the minimum $1 million, and most -- if not all -- investors
would rather invest the minimum $500,000 in a TEA. USCIS will not allow rural areas within Metropolitan Statistical Areas, designated by these state agencies, to qualify for the lower minimum investment amount of $500,000 either, thus frustrating congressional intent.
USCIS confirmed that there was nothing in the law or regulations to preclude a guarantee from a third party to repay the borrower "as long as the alien investor's capital is still 'at risk', and the arrangement does not constitute a redemption
agreement or a guaranteed buy-back arrangement ...."
Most troubling was the USCIS response on the creation of indirect and induced jobs, which can be used by regional centers to help investors reach the 10 jobs created per investor, a requirement of the EB-5 Program. USCIS has misinterpreted a bad 1998 precedent decision called Matter of Izummi, which recognized, as a factual premise, that direct jobs were being created outside the boundaries of the regional center. Not once did the decision mention "indirect" or "induced" jobs. However, USCIS has issued its opinion, relying upon Izummi, that indirect and induced jobs created outside the geographic boundaries of a regional center do not count for EB-5 purposes. This is outrageous!
"While the regulation at 8 CFR 204.6(m)(3) provides that each reagional center must describe 'how the regional center focuses on a geographical region of the United States,' " the response stated, "USCIS interprets the statutory and regulatory prescribed focus to mean that the economic analysis methodology used by regional centers should also be focused on job creation within the bounds of the regional center. [See also Matter of Izummi.] As a result, a regional center should file an amended proposal seeking an expansion of the geographic area of the regional center if it wishes to include job creation within its economic models in areas outside of the bounds of the regional center."
If this opinion is allowed to stand, it has the potential to kill this job-creation program.
But see the December 11 USCIS memo at page 9, where it states that "Regional Center Proposals must demonstrate the following EB-5 eligibility requirements in order to be approved: ... (iii) A detailed prediction of the proposed regional center's predicted impact regionally or nationally on household earnings, greater demand for business services, utilities, maintenance and repair, and construction both within and outside the geographic area of the proposed Regional Center." 8 CFR section 204.6(m)(3)(iv).
Those are the words, right out of the Code of Federal Regulations, which USCIS is bound by.
There was good news and bad news concerning these opinions issued by USCIS.
USCIS confirmed, for the first time, that an EB-5 alien investor may use funds unrelated to his or her EB-5 investment to purchase insurance from a third-party insurer which would be paid to the investor if the EB-5 enterprise fails to repay the investor. Surprisingly, USCIS said the investor could purchase an indemnity policy as long as the investor's capital is "at risk" and the indemnity policy does not constitute a redemption agreement or a guaranteed buy-back arrangement for the
alien investor's investment in the EB-5 enterprise.
A response concerning Targeted Employment Areas (TEA's), which are 150 percent of the national unemployment rate and are designated by a state agency, confirms what appeared in a December 11 USCIS memo concerning the EB-5 Program. USCIS stated that it could not confirm that "gerrymandering" -- a finding of an area of high unemployment by a designated state agency by cobbling together census tracts or political subdivisions -- "is an acceptable business practice for EB-5 purposes." This response is troubling. Designated state agencies are not "frustrating congressional intent," as the USCIS response states. There are huge areas of geography in the United States which, today, during this ugly recession, cannot qualify under the 150 percent of the national unemployment rate because the national rate is near or at 10 percent. This means that in an area not qualified as a TEA, the investor must invest the minimum $1 million, and most -- if not all -- investors
would rather invest the minimum $500,000 in a TEA. USCIS will not allow rural areas within Metropolitan Statistical Areas, designated by these state agencies, to qualify for the lower minimum investment amount of $500,000 either, thus frustrating congressional intent.
USCIS confirmed that there was nothing in the law or regulations to preclude a guarantee from a third party to repay the borrower "as long as the alien investor's capital is still 'at risk', and the arrangement does not constitute a redemption
agreement or a guaranteed buy-back arrangement ...."
Most troubling was the USCIS response on the creation of indirect and induced jobs, which can be used by regional centers to help investors reach the 10 jobs created per investor, a requirement of the EB-5 Program. USCIS has misinterpreted a bad 1998 precedent decision called Matter of Izummi, which recognized, as a factual premise, that direct jobs were being created outside the boundaries of the regional center. Not once did the decision mention "indirect" or "induced" jobs. However, USCIS has issued its opinion, relying upon Izummi, that indirect and induced jobs created outside the geographic boundaries of a regional center do not count for EB-5 purposes. This is outrageous!
"While the regulation at 8 CFR 204.6(m)(3) provides that each reagional center must describe 'how the regional center focuses on a geographical region of the United States,' " the response stated, "USCIS interprets the statutory and regulatory prescribed focus to mean that the economic analysis methodology used by regional centers should also be focused on job creation within the bounds of the regional center. [See also Matter of Izummi.] As a result, a regional center should file an amended proposal seeking an expansion of the geographic area of the regional center if it wishes to include job creation within its economic models in areas outside of the bounds of the regional center."
If this opinion is allowed to stand, it has the potential to kill this job-creation program.
But see the December 11 USCIS memo at page 9, where it states that "Regional Center Proposals must demonstrate the following EB-5 eligibility requirements in order to be approved: ... (iii) A detailed prediction of the proposed regional center's predicted impact regionally or nationally on household earnings, greater demand for business services, utilities, maintenance and repair, and construction both within and outside the geographic area of the proposed Regional Center." 8 CFR section 204.6(m)(3)(iv).
Those are the words, right out of the Code of Federal Regulations, which USCIS is bound by.
USCIS memo on EB-5 Program: Problems and Challenges
On December 11, 2009, U.S. Citizenship and Immigration Services published a memo whose subject was "Adjudication of EB-5 Regional Center Proposals and Affiliated Form I-526 and Form I-829 Petitions; Adjudicators Field Manual (AFM) Update to Chapters 22.4 and 25.2 (AD09-38". Whew!
The memo requires the filing of a new (or amended) I-526 petition if there is a change in the capital investment and job creation scheme. If the new I-526 petition is approved, the memo requires the immigrant investor to file a new I-485, application to adjust status, if in the United States. Current immigration law does not require the filing of an I-485 requesting re-adjustment of status.
The memo does set out a "pre-approval process" for regional center investment projects that is very welcome. Pre-approval, based upon a USCIS determinaton that the project is EB-5 compliant, will give investors putting their capital at risk some comfort. It will also have the effect of streamlining adjudication of individual I-526 petitions related to the pre-approved EB-5 investment project.
The memo interprets "direct construction jobs" to count as permanent jobs if they are created by the investment project and "are expected to last at least two years, inclusive of when the petitioner's Form I-829 is filed." The "two-year rule" is an arbitrary one lifted from the "marriage fraud amendments" and has no relationship to business, investment, or construction. Further, the construction industry relies upon "man-hours," not "jobs" or "positions."
The memo's description of Targeted Employment Areas (TEA's) -- areas of high unemployment -- is tortuous. That is why reform legislation needs to designate federally recognized Areas of Substantial Unemployment, currently pegged at 6.5 percent unemployment.
The memo requires the filing of a new (or amended) I-526 petition if there is a change in the capital investment and job creation scheme. If the new I-526 petition is approved, the memo requires the immigrant investor to file a new I-485, application to adjust status, if in the United States. Current immigration law does not require the filing of an I-485 requesting re-adjustment of status.
The memo does set out a "pre-approval process" for regional center investment projects that is very welcome. Pre-approval, based upon a USCIS determinaton that the project is EB-5 compliant, will give investors putting their capital at risk some comfort. It will also have the effect of streamlining adjudication of individual I-526 petitions related to the pre-approved EB-5 investment project.
The memo interprets "direct construction jobs" to count as permanent jobs if they are created by the investment project and "are expected to last at least two years, inclusive of when the petitioner's Form I-829 is filed." The "two-year rule" is an arbitrary one lifted from the "marriage fraud amendments" and has no relationship to business, investment, or construction. Further, the construction industry relies upon "man-hours," not "jobs" or "positions."
The memo's description of Targeted Employment Areas (TEA's) -- areas of high unemployment -- is tortuous. That is why reform legislation needs to designate federally recognized Areas of Substantial Unemployment, currently pegged at 6.5 percent unemployment.
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