On October 30, 2018, the United States Citizenship and Immigration Services updated its Policy Manual on the point of immigrant investors and debt arrangements as announced on the Policy Alert of the same date. 
Since May 2018, there have been four EB-5 related Policy Manual revisions out of a total of ten covering all areas of immigration. Clearly, EB-5 is a special focus area for USCIS. We can expect the scrutiny to continue based on Director Francis Lee Cissna’s June 2018 Senate testimony and the EB-5 “pre-rule” the Department of Homeland Security issued in the Fall 2018 regulatory agenda. 
This article summarizes the Policy Manual revisions and highlights the recurring due process problems we see with these fast-coming EB-5 Policy Manual revisions.
Impermissible Debt Arrangements: Denial Based Repayments Now Banned?
The Policy Manual as revised now states a broad prohibition:
Any agreement between the immigrant investor and the new commercial enterprise that provide the investor with a contractual right to repayment is an impermissible redemption agreement.  (emphasis added)
USCIS currently permits agreements allowing redemptions when the immigrant investor receives a denial of his or her I-526 petition or immigrant visa/adjustment of status application. In the author’s opinion, this allowance is consistent with governing authority as a denied investor is no longer “seeking to enter the United States for the purpose of engaging in a new commercial enterprise”  under the statute. Similarly, such an investor also has no actionable “petition for classification as an alien entrepreneur”  under the regulations. Accordingly, USCIS’s policy to date has been consistent with existing law.
With this new language, we now have a question mark looming over the vast majority of EB-5 projects that currently allow redemptions for denied investors, including projects with exemplar approval. Unless USCIS provides clarification soon that denial redemptions are not prohibited debt arrangements, the industry will be evaluating potentially mass amendments with attending securities and investor management implications.
If USCIS did not intend to raise this question, this is surely an instance where a clear, prospective effective date set after a solid comment period would have served all. More on that is further below.
Are Investments Like Marriage?
As should be expected in redemption-related guidance, Matter of Izummi’s shadow presides. The Policy Manual revision, though, highlights a fundamental flaw in Izummi’s reasoning. We now have new language freely borrowed from Izummi:
An agreement evidencing a preconceived intent to exit the investment as soon as possible after removing conditions on permanent residence may constitute an impermissible debt arrangement. … In general, the petitioner may not enter into the agreement knowing that he or she has a willing buyer at a certain time and for a certain price. 
Preconceived intent to leave the marriage once the green card is obtained is the very definition of marriage fraud. But is this the right analogy for investment? In the EB-5 context, for an investment to be “at risk,” the investor must have the intent to make the investment knowing that it may gain or lose. The notion of “gain” in an investment relates to gain on top of the principal.  So the preconceived hope of getting the principal capital plus a return is actually a requirement of EB-5 eligibility. Accordingly, the marriage petition analogy is misplaced in Izummi and fares no better in the Policy Manual.
On the notion of preconceived intent, USCIS has also proven to be overly zealous in finding disqualifying evidence “suggestive of a prohibited redemption mechanism,”  and “indicative of a prohibited debt arrangement.”  USCIS’s finding along these lines were ruled errors in two federal court decisions cited in the Policy Manual Alert.  The key takeaway here is that rather than interpreting innocent provisions to be masking a debt arrangement, EB-5 adjudication should instead look to the objective hallmarks of a contractual obligation, nicely set out by the D.C. district court in the later decision, Chang v. USCIS. 
Due Process Problems: Who is Affected by the Policy Revision?
USCIS has failed on this and past occasions to inform the public about the Policy Manual revision’s actual effective date. On this occasion, we have a stated effective date of October 30, 2018. However, we don’t know whether this means the policy revision affects cases pending onOctober 30, 2018, or those filed after October 30, 2018.
Applying revised policy to pending cases would result in retroactive impact – that is, cases filed under the prior policy would now be adjudicated under the revised policy. To avoid retroactive impact at minimum, the Policy Manual update should have clarified that pending cases will be decided under guidance in place at the time of filing.
Applying revised policy to cases filed after the effective date, unfortunately, is also inadequate in the EB-5 context due to EB-5 projects’ long shelf lives. The investor subscription period can span well past a year depending on project size and market conditions. There are harmful consequences to the project and previously filed investors if the project is forced to amend project terms resulting from USCIS policy change. Would such changes affect deal terms in place with borrowers and other entities? Would they then impact feasibility of job creation? Would the amendments needed to project documents relate back to prior investors? Would they then be owed rescission rights? Could the project still be viable with related capital loss? Would the capital stack need to be restructured while the offering is amended? Is such restructuring feasible? Even if yes, would doing so impair EB-5 participation?
To at least partially insulate projects from these incredibly consequential issues, the deference policy is critical to uphold. Approved projects, represented by approved exemplars or prior I-526 approvals, should be accorded deference even in the face of policy change. Currently, the deference policy resides in Chapter 6 of the Policy Manual.  There it should remain for the sake of program stability.  Accordingly, the Policy Manual update should have clarified that deference will be accorded to prior approvals, notwithstanding the revision.
While deference does not strictly apply, the same logic holds for projects in the market now awaiting approval. Given 20-26 months processing time on exemplars and 21-27 months on Form I-526s, the same consequences attend yet-unapproved projects in the market, some for years now and prepared under then-applicable guidance.
Finally, 10 business days is simply an inadequate a timeframe for comments. USCIS has itself acknowledged that EB-5 is complex. Given such complexity, 10 business days is not enough for stakeholders to absorb, analyze, research, poll and draft. Coupled with the effective date being the same as the announcement date, the comment period suggests that USCIS does not intend to give much weight to public comments. This is a major problem given the lack of clarity on most policy manual updates and the scale of on-the-ground changes involved.
Here are the takeaways on what we need but did not get by way of due process:
· Clear, prospective effective date,
· Affirmance of deference to previously approved projects, and
· Adequate comment period.
USCIS should avail itself of all resources needed to administer the EB-5 program with integrity. We are indeed seeing active exertions, but lack of process is the flaw. With the best of intentions, an administering agency can only touch a part of the complex elephant that is EB-5. When contemplating a policy revision, in the interest of promulgating policy consistent with the law, USCIS needs to provide a real comment period and give itself time to evaluate the comments before making policy revisions effective. Equally importantly, there must be no uncertainty about deference accorded, regardless of policy revisions. The significant reliance interests involved in launching an EB-5 project cannot be underestimated.
 See U.S. Citizenship & Immigration Service (hereafter, “USCIS”), Dep’t. of Homeland Security, PA-2018-11, Immigrant Investors and Debt Arrangements (Oct. 30, 2018) https://www.uscis.gov/policymanual/U…Agreements.pdf.
 Supra note 5.
 Immigration and Nationality Act § 203(b)(5)(A).
 8 C.F.R. § 204.6(c).
 6 USCIS-PM G(2)(A)2; see Matter of Izummi, 22 I&N Dec. 169 (Assoc. Comm’r 1998). (“To enter into a redemption agreement at the time of making an ‘investment’ evidences a preconceived intent to unburden oneself of the investment as soon as possible after unconditional permanent resident status is attained. This is conceptually no different from a situation in which an alien marries a U.S. citizen and states, in writing, that he will divorce her in two years.”)
 See the definition of “investing” at https://www.investopedia.com/terms/i/investing.asp (“Investing is the act of committing money or capital to an endeavor (a business, project, real estate, etc.), with the expectation of obtaining an additional income or profit.”) (emphasis added).
 Doe v. USCIS , 239 F. Supp. 297 (D.D.C. 2017).
 Chang v. USCIS , 2018 WL 746081 (D.D.C. Feb. 7, 2018).
 See supra notes 10 and 11.
 See Chang , note 11.
 Note that USCIS has recently repealed its deference policy in the nonimmigrant visa petition context.