I have always said you need a strong stomach for EB-5. Even those blessed with bellies of steel are reaching for their bedside Pepto these past weeks. Stocking up seems the best advice for the near future and here’s why.
On March 15, 2022, we got nearly 100 pages of new EB-5 law bringing reform and reauthorization after 9 months of lapse in the regional center program. But before the first bottle of champagne emptied and mid-high five, we were dealt floor comments from Congress suggesting that regional centers needed to seek redesignation under the EB-5 Reform and Integrity Act of 2022 (RIA) before operating again. Mais, comment?
IIUSA then dispatched a letter to USCIS with the message, Whatever you do, please do not follow this interpretation; if you absolutely must, please allow redesignation with an attestation-only filing and not a filing requiring your adjudication. Because speed isn’t everyone’s forté. Receiving no response, IIUSA sent a second letter in April emphasizing the same message, hoping no doubt, to head off any USCIS misdirection.
On April 29, 2022, USCIS gave the EB-5 community its answer. It wasn’t the one beseeched. By a web posting entitled EB-5 Questions and Answers, USCIS indicated that regional centers would indeed need to apply for designation and furthermore obtain approval before operating. The USCIS Questions and Answers state: “The EB-5 Reform and Integrity Act of 2022 repealed the legacy Regional Center Program. As a result, previously designated regional centers must reapply by filing the new Form I-956, Application for Regional Center Designation.”
The USCIS Questions and Answers further state that investors must wait until the I-956 is approved, and further an exemplar filed and receipted before filing their associated I-526 petitions: “Individuals seeking status as an immigrant investor whose investment project is associated with a regional center (with an approved Form I-956 after May 14, 2022), may file a Form I-526, Immigrant Petition by Alien Entrepreneur, only after the regional center has submitted a project application and received a receipt number for that application.”
The USCIS Listening Session later that day on April 29 made matters worse. As well-intentioned as it was, the Listening Session showed that USCIS is tone-deaf to stakeholder expectations and reasonable alternative interpretations of this massive new body of EB-5 authority. Advocacy point #1 coming – wait for it: USCIS must find a way to engage substantively with EB-5 stakeholders in advance of momentous RIA implementation. This can be done consistently with RIA’s transparency provisions. The alternative is a series of lawsuits.
Speaking of which (or shall I say “Exhibit A”), not taking USCIS’s position sitting down, in April 2022, Behring Regional Center LLC sued USCIS challenging its RIA interpretation as requiring regional center redesignations. In May 2022, IIUSA, CanAm Enterprises, EB5 Capital, Pine State Regional Center, Golden Gate Global, and Civitas Capital filed a second lawsuit against USCIS on similar grounds. Your Honor, “Exhibit B.” Based on the last hearing held June 2, 2022, it appears Judge Chhabria in the Behring case is inclined to rule for the plaintiff. The question is whether the ruling will be limited to favor just the plaintiff, Behring, or cover similarly situated regional centers more broadly. IIUSA has astutely intervened to request a broader remedy covering all similarly situated regional centers.
What could happen from here?
The Behring court could rule that USCIS needs to go back and formulate reasoning for its RIA interpretation and rule in the plaintiff’s favor. What would be the impact?
If the remedy favors Behring alone, then Behring will enjoy a windfall until either IIUSA members’ lawsuit wins broader remedy or USCIS backs up its original RIA interpretation with more analysis, whichever happens first.
If the remedy favors regional centers more broadly, then all the pre-RIA regional centers are back in business. In that scenario, the regional centers must simply file a business plan with the new Form I-956F and its new EB-5 investors can file as soon as USCIS issues a receipt.
What then? Impact on investors?
It’s all about two big gifts from RIA. First, the set-asides.
The State Department’s position is that the set-asides are for post-RIA investors only. This means that a window will open for new Chinese investors with “current” visa availability in the 32% set aside categories (Rural, High Unemployment, Infrastructure) although still backlogged in the “5th Unreserved” category. See the July 2022 Visa Bulletin:
Importantly, we have nearly double the normal EB-5 numbers this fiscal year due to unused family numbers spilling over. This is much the same “spillover” phenomenon as experienced last year. The effect is that rather than merely about 3,200 set aside EB-5 visas, we have about 6,400. Moreover, unused set aside numbers will roll over to the next fiscal year and be added to the FY 2023 annual reserve. That means in FY 2023, we could have a maximum of over 9,000 visas in the set aside categories, almost what we normally have in all of EB-5 annually. Wow.
We must face the hard fact that many of these wonderful numbers will go unused if USCIS I-526 processing times continue to lag. We’d need rapid and sound adjudication of I-526s in FY 2022 to allow these abundant FY 2023 numbers to be allocated. So Advocacy point #2: Even if processing times across the board cannot be ameliorated, USCIS must give effect to prioritizing “current” cases per its own “visa availability approach.”
Accompanying Advocacy point #3: figure out a way to classify at least pending I-526 petitions with the new set aside categories; if possible, reclassify the approved I-526 petitions with the new set aside categories also. Doing so will allow the optimum number of backlogged investors who filed pre-RIA to benefit from the set asides.
Second, it’s about concurrent Adjustments of Status (AOS) applications.
Let’s start here with Advocacy point #4: we need to figure out a way to allow EB-5 investors abroad to enter the U.S. to file concurrent adjustments of status. The State Department, we are told, is still struggling to recover from Covid. And the world’s conflicts have not helped as we extend our humanitarian helping hand through our diplomatic missions. USCIS is better equipped to scale, we are told.
If this is true, here comes the closer – Advocacy point #5: we must support and at the same time press DHS and USCIS to expediently adjudicate Forms I-485, Adjustment of Status (AOS) applications. Concurrent filings are wonderful and a reason to celebrate RIA’s arrival. But unless the I-485s are approved, we are letting precious visa numbers go unused. With consulates’ meagre EB-5 visa issuances particularly in Guangzhou, we must all do all we can to allow eligible AOS applications to be efficiently approved. Doing so will optimize the EB-5 visas windfall in FY 2022 and FY 2023, giving everyone a good reason to empty that first champagne bottle with gusto and indeed, crack open the second.
It’ll be turbulent in the meantime and our little sky window may not reveal exactly where we’re going. But I’m looking forward to the warmth and sunshine where we land.