EB-5 & Other Investor News from the Alliance of Business Immigration Lawyers Vol. 2, No. 2 • May 01, 2012
Headlines:
1. USCIS Creates Controversy Over Tenant-Occupancy Economic Model – USCIS issued a memo in February questioning certain EB-5 projects that use a tenant-occupancy economic model. USCIS Director Alejandro Mayorkas held a call on April 27 on the tenant-occupancy economic model and related RFEs. USCIS issued guidance on May 8 on what deference it would give prior EB-5 adjudications that involved tenant-occupancy issues.
2. USCIS EB-5 Stakeholders Meeting Provides Little New Information – An EB-5 stakeholder meeting on May 1 provided few new details on how the agency plans to improve processing times.3. EB-5 Investor Lawsuit and Counterclaim Dismissed; South Dakota Beef Facility Moves Forward – The processing plant is close to beginning operations after more than six years battling a variety of issues.4. Michigan Touts EB-5 Program To Revitalize the State – The “Global Michigan Initiative” includes public and private organizations’ efforts to attract new immigrants and investors, retain those who obtain advanced degrees from Michigan universities, and find those who are already in Michigan but underutilized.5. New Publications and Items of Interest – New Publications and Items of Interest6. Member News – Member News7. EB-5 Government Agency Links – EB-5 Government Agency Links
Details:
1. USCIS Creates Controversy Over Tenant-Occupancy Economic Model
U.S. Citizenship and Immigration Services (USCIS) created a new controversy in the EB-5 immigrant investor world when it released a memorandum on February 17, 2012, concerning what it calls the “tenant-occupancy” economic methodology. According to USCIS, the tenant-occupancy methodology seeks credit for job creation by independent tenant businesses that lease space in buildings developed with EB-5 funding. According to a standard request for evidence (RFE) that many EB-5 regional center applicants received after issuance of the memo:
USCIS has concerns that the attribution of certain direct jobs to the EB-5 investment may not be based on reasonable economic methodologies, and therefore do not demonstrate in “verifiable detail” that the requisite jobs will be created. Rather, contemporary economic methodologies appear to indicate that such jobs would more appropriately be attributed to the tenants themselves and not to the regional center because the demand for labor precedes the decision about where to house that labor as a general economic principle. For example, if a federal agency determined that additional federal employees needed to be hired to fulfill the agency’s mission at a particular location, the federal agency would seek to hire the requisite number of employees and as part of that process, would also take steps to lease the appropriate physical premises to provide sufficient workspace for the new hires. In this instance, it is the federal agency that is creating the jobs through its decision to hire more employees, not the landlord who will ultimately lease the workspace to the federal agency.
USCIS has issued over 80 RFEs concerning the tenant-occupancy methodology in recent months. Some regional centers have complained that the new memo constitutes a change in policy and that in any event, USCIS should not apply its new interpretation retroactively to already approved regional centers or EB-5 petitions that were filed before the February 17 memo.
In an effort to explain its position, USCIS Director Alejandro Mayorkas held a conference call on April 27, 2012, on the tenant-occupancy economic model and related RFEs. According to an unofficial transcript of his comments, Director Mayorkas said there would be a follow-up engagement on this topic and that USCIS plans to release a tip sheet with economic analysis guidance. He noted that USCIS has hired full-time economists and business analysts to improve the quality of the agency’s work and the analysis of EB-5 petitions.
Director Mayorkas noted that USCIS decisions on the economic methodology presented in EB-5 cases are “very fact-specific.” He said that USCIS has a “deference policy” and is “communicating to our adjudicators that they are to accord deference to prior adjudications.” He noted that USCIS’s adjudicators “should rely on a previous determination that the economic methodology is reasonable when [it] is presented to us in a later proceeding based on materially similar facts.” For example, he said, if USCIS approved an I-924 regional center application based on a specifically identified project, including the specific locations and industries involved, the agency would not revisit the determination that the economic model and underlying business plan were reasonable when adjudicating related I-526 petitions, I-485 applications, or I-829 petitions. If USCIS approved an I-526 petition for an immigrant investor based on a specifically identified project not associated with a regional center, the agency would not revisit the determination that the business plan was reasonable when adjudicating the investor’s related I-485 or I-829 petition, he said. If the facts underlying the application of the economic methodology have materially changed, however, USCIS would conduct a fresh review of the new facts “to determine whether the petitioner or applicant has complied with the requirements of the EB-5 program, including the job creation requirement.”
On May 8, 2012, USCIS provided guidance on what deference it would give prior EB-5 adjudications that involved tenant-occupancy issues. The memorandum stated that in general, “a prior favorable decision will be relied upon in later proceedings unless the facts underlying the prior decision have materially changed, there is evidence of fraud or misrepresentation in the record of proceedings, or the previously favorable decision is determined to be legally deficient.”
USCIS cautioned that the economic methodology presented in an EB-5 case is “very fact-specific.” USCIS adjudicators “should rely on a previous determination that the economic methodology is reasonable when the methodology is presented to us in a later proceeding based on materially similar facts.” “If, however, the facts underlying application of the economic methodology have materially changed,” USCIS “will conduct a fresh review of the new facts to determine whether the petitioner or applicant has complied with the requirements of the EB-5 program, including the job creation requirement.”
On the previous EB-5 stakeholders engagement call in January, USCIS had acknowledged that many regional center applications were being held up at headquarters pending resolution of economic methodology issues. On that earlier call, USCIS said it was analyzing all the I-924A forms submitted by regional centers and would draft a report that includes regional center-specific information sometime this year. The agency also noted that it would revise the I-924 form to provide greater consistency.
The February 17 memo on tenant-occupancy methodology issues is HERE. An unofficial transcript of Director Mayorkas’ April 27 comments is available HERE. The May 8 USCIS memorandum is available HERE.
2. USCIS EB-5 Stakeholders Meeting Provides Little New Information
U.S. Citizenship and Immigration Services (USCIS) held a quarterly EB-5 stakeholders meeting on May 1, 2012. Over 250 people attended in person, and over 300 listened by phone. Despite the interest in the meeting, USCIS did not provide much information. For example:
- USCIS did not allow questions about and did not comment on the “tenant-occupancy” methodology issue, stating that the issue is under review. See the prior article. USCIS confirmed that applicants who were issued a “tenant-occupancy” RFE will be contacted with a notice that their deadline for response will be extended. However, there were no promises of forthcoming guidance related to the RFE.
- USCIS did not answer stakeholder questions that had been submitted before the meeting.
- USCIS expressed no specific plan or goals to improve processing times, which have slowed in recent months.
- USCIS expressed no specific plan or goals to improve communication through the public engagement mailbox or through the I-924 applicant e-mail lines.
- USCIS expressed no specific plan or goals to communicate expectations and standards in a more open manner.
- USCIS suggested that a new draft of its “foundational” EB-5 policy memo would be emerging “in a few weeks,” and that the agency is not currently deferring to the draft memo or implementing the “material change” guidance included in the current draft.
- USCIS refused to say how it would handle pending EB-5 petitions if Congress fails to extend the EB-5 pilot program after September 30, 2012. USCIS said it would address this issue at its July EB-5 stakeholders meeting.
According to the latest EB-5 program statistics based on preliminary data for the second quarter of fiscal year (FY) 2012, USCIS received 2,771 I-526 (Immigrant Petition by Alien Entrepreneur) petitions and had approved 2,101 and denied 384 so far. This was an 85 percent approval rating, compared to an 81 percent approval rating for all of FY 2011 and an 89 percent approval rating for all of FY 2010. As of the second quarter of FY 2012, USCIS had received 375 I-829 (Petition by Entrepreneur to Remove Conditions) petitions and had approved 522 and denied 24 so far. This was a 96 percent approval rating, matching a 96 percent approval rating for all of FY 2011 and exceeding an 83 percent approval rating for FY 2010.
USCIS also noted that as of March 31, 2012, processing times were reaching 6 months for an I-924 initial application (target is 4 months), and were reaching 8 months for an I-924 amendment application (target is 4 months). USCIS recently approved four new regional centers: the California Regional Center, LLC; Las Vegas EB-5 Immigration, LLC; New York City Real Estate Regional Center, LLC; and Lone Star Regional Center, LLC. The full list of RCs by state is available HERE.
The next USCIS stakeholder engagement meetings are scheduled for July 26, 2012 (regional center discussion) and October 23, 2012 (general EB-5 discussion).
Additional details on the engagement meetings and the latest statistics.
Recording of the stakeholder engagement.
Latest statistics. are available HERE.
Latest EB-5 regional center statistics and information page.
3. EB-5 Investor Lawsuit and Counterclaim Dismissed; South Dakota Beef Facility Moves Forward
A lawsuit that threatened construction of a Northern Beef Packers cattle processing facility in South Dakota was dismissed recently, along with a counterclaim. The lawsuit alleged that investors did not receive crucial facts about the project and were not included in key decisions as agreed upon. The processing plant is now close to beginning operations after more than six years battling a variety of issues. The project, which attracted Korean investors in 2009, has been delayed by lawsuits, liens, tax problems, flooding, local opposition, and other issues.
Northern Beef Packers is owned 41 percent by Oshik Song and 69 other Koreans, who each invested $500,000 or more via the EB-5 program. The project also borrowed $30 million under a private loan arrangement and will receive millions more in loans and financial help, once it starts processing cattle, from a state economic development authority and the U.S. Department of Agriculture Rural Development.
Initial complaint that was dismissed
4. Michigan Touts EB-5 Program To Revitalize the State
Michigan’s Governor Rick Snyder has been working hard to attract foreign investors and high-skilled talent to his state. The “Global Michigan Initiative” includes public and private organizations’ efforts to attract new immigrants and investors, retain those who obtain advanced degrees from Michigan universities, and find those who are already in Michigan but underutilized.
Michigan’s Economic Development Corporation has noted that although the EB-5 program falls under the purview of the federal government, the state of Michigan plays a role in identifying and designating targeted employment areas (TEAs) based on high unemployment rates. At the request of an applicant, the state may determine whether a specific metropolitan statistical area or county is a TEA. Among other qualifications, the area in question must have an average unemployment rate of 150 percent of the national average.
For more information on Michigan’s EB-5 and related efforts, see HERE.
5. New Publications and Items of Interest
Entrepreneurs in Residence executive summary. U.S. Citizenship and Immigration Services (USCIS) has released an executive summary of its information summit held in February 2012 on the “Entrepreneurs in Residence” initiative. The summary discusses the panel discussion and breakout sessions held, and emerging themes, including demonstrating the legitimacy of startups through investments, understanding the organizational structure of a startup, defining specialty occupations, training and culture, and requests for evidence. Stakeholders interested in sharing additional feedback and concrete suggestions with the USCIS Tactical Team can e-mail [email protected] with the subject line “Entrepreneurs in Residence.” Executive summary.
New York Times op-ed. An op-ed by Ann Lee published in the April 15, 2012, edition of the New York Times, “Making Visas-for-Dollars Work,” notes that the EB-5 program brought in approximately $1 billion in investment to the United States over the last fiscal year. The op-ed also discusses the risks in the program and notes a lack of understanding among government administrators of more sophisticated business models that may have a greater chance of generating profits and jobs than the simpler business models that are likely to receive approval.
Several ABIL members co-authored and edited the new publication, Global Business Immigration Practice Guide, to be released on May 31, 2012, by LexisNexis. The Practice Guide is a one-stop resource for dealing with questions related to business immigration issues in immigration hotspots around the world.
This comprehensive guide is designed to be used by:
- Human resources professionals and in-house attorneys who need to instruct, understand, and liaise with immigration lawyers licensed in other countries;
- Business immigration attorneys who regularly work with multinational corporations and their employees and HR professionals; and
- Attorneys interested in expanding their practice to include global business immigration services
This publication provides:
- An overview of the immigration law requirements and procedures for over 20 countries;
- Practical information and tips for obtaining visas, work permits, resident status, naturalization, and other nonimmigrant and immigrant pathways to conducting business, investing, and working in those countries;
- A general overview of the appropriate options for a particular employee; and
- Information on how an employee can obtain and maintain authorization to work in a target country.
Each chapter follows a similar format, making it easy to compare practices and procedures from country to country. Useful links to additional resources and forms are included. Collected in this Practice Guide, the expertise of ABIL’s attorney members across the globe will serve as an ideal starting point in your research into global business immigration issues.
The book will be discounted 20% for pre-orders through May 31. ORDER HERE. The discount code is ABIL20 (enter this code at checkout). International customers who do not want to order through the bookstore can order through Nicole Hahn at (518) 487-3004 or [email protected].
Green Card Stories. The immigration debate is boiling over. Americans are losing the ability to understand and talk to one another about immigration. We must find a way to connect on a human level. Green Card Stories does just that. The book depicts 50 recent immigrants with permanent residence or citizenship in dramatic narratives, accompanied by artistic photos. If the book’s profilees share a common trait, it’s a mixture of talent and steely determination. Each of them overcame great challenges to come and stay in America. Green Card Stories reminds Americans of who we are: a nation of immigrants, from all walks of life and all corners of the earth, who have fueled America’s success. It tells the true story of our nation: E pluribus unum–out of many, one.
For more information or to order, visit Green Card Stories.
ABIL on Twitter. The Alliance of Business Immigration Lawyers is now available on Twitter: @ABILImmigration. Recent ABIL member blogs are available HERE.
Mark Ivener and Charles Kuck were quoted in the February 3-9, 2012, edition of New Orleans CityBusiness, in an article on EB-5 investors, “Lawmaker Wants Foreign Investment for Terminal.” In an article about Louisiana state senator A.G. Crowe wanting to use EB-5 investment funds to finance the Louisiana International Gulf Transfer Terminal, currently an idea for a port at the mouth of the Mississippi River, Mr. Kuck said the EB-5 program is ill-suited for such massive, unfunded ventures. “Some people view this EB-5 program as this limitless supply of money from naïve foreign investors. I have frankly yet to meet investors willing to say ‘I’ll be the first investor in your program and hopefully two years from now you will have actually done your deal and created jobs.” He said EB-5 investors calculate their risk and they are leery of being guinea pigs for projects lacking seed funding. Although the article notes that there are currently 194 regional centers, Mr. Kuck said there are “no more than 10 or a dozen that any rational person would recommend” to EB-5 investors. Mr. Ivener commented on potential conflicts of interest that can result if brokers represent regional centers to which they are steering investors. Mr. Ivener noted that it is common to represent both types of clients separately.
Ron Klasko was a VIP speaker at the “Invest in America 2012” Summit and Exhibition held in March 2012 in Shanghai, China. The second annual event drew an estimated 1,000 potential Chinese investors and U.S. developers to Shanghai to learn about the investor visa program. He addressed the attendees on performing immigration due diligence on potential investment projects.
Robert Loughran will be speaking on perfecting EB-5 regional center petitions at an EB-5 seminar sponsored by ilw.com in Nashville, Tennessee, on June 13, 2012. In addition:
FosterQuan held a seminar, “Pasaporte al Exito: Estrategias Claves Inmigratorias de los EE. UU. Para el 2012 y en Adelante,” which focused on business opportunities and procedures for Mexican entrepreneurs looking to invest in the United States. This seminar was held in Harlingen, Texas, on February 7, 2012, and in Rio Grande City, Texas, on February 8, 2012.
FosterQuan presented at The Inter-Connect Business Expo’s “Orientación y Servicios en Nuestra Comunidad” seminar, which focused on business opportunities and procedures for foreign nationals looking to invest in the United States. This seminar was held in The Woodlands, Texas, on April 10, 2012.
FosterQuan attorneys spoke at a seminar, “McAllen’s Mexican Investors Summit,” which focused on immigration law for Mexican nationals. The seminar was held in McAllen, Texas, on May 16, 2012.
FosterQuan attorneys have been invited to speak at the 2nd Annual Select USA Seminar series, “How to Invest in the U.S.,” which will focus on business opportunities and procedures for Mexican entrepreneurs looking to invest in the United States. The seminar will be held in Mexico City on June 5, 2012, in Guadalajara on June 6, 2012, and in Monterey on June 7, 2012.
FosterQuan recently advised a major technology industry entrepreneur, partnering with the City of Houston and the Greater Houston Partnership (the largest chamber of commerce in the greater Houston metropolitan area), in the formation of a new EB-5 regional center for the Houston region. The Lone Star Regional Center will initially focus on investments in new energy technologies and hotel and leisure industry projects . FosterQuan advised the Lone Star regional center when the regulatory landscape surrounding EB-5 regional centers was in a state of continual change.
Initially filed well before the promulgation of the I-924 form, the application was nevertheless caught up in the maelstrom of USCIS requests for evidence related to I-924-specific information. Most interestingly, USCIS raised some novel issues in a Notice of Intent to Deny. USCIS argued that the project business plans for the hypothetical or sample projects included in the application lacked detail required for a business plan pursuant to Matter of Ho. USCIS further alleged that the applicant did not provide evidence that the sample projects fell within a Targeted Employment Area (TEA). Finally, USCIS challenged the North American Industry Classification System (NAICS) codes selected for the energy project.
FosterQuan’s successful response to these challenges drew a distinction between the Matter of Ho requirements for business plans for actual projects, and the requirements for a sample business plan, which in essence should provide the same level of specificity. Concerning the TEA analysis, FosterQuan’s successful response further directed USCIS to review and apply its own guidance from the Neufeld Memorandum of December 2009 and the Adjudicator’s Field Manual, which confirm that USCIS makes TEA determinations only at the time that an I-526 immigrant petition is filed – not at the time that an I-924 application for a regional center is filed.
Finally, in relation to the issues raised by NAICS codes, the USCIS analysis revealed the difficulties in selecting NAICS codes for novel industries. Through detailed background evidence, USCIS accepted the original NAICS codes because they were the most appropriate among the available industry code options.
The Lone Star Regional Center was approved by USCIS in May 2012 and should begin operations shortly.
Angelo Paparelli has published “.” For more on this topic, see the first article in this issue, above.
The Wolfsdorf Immigration Law Group is presenting several free webinars. The upcoming topic is Investors/Traders (E Visas), to be held Thursday, May 10, 2012. For more information or to register, see HERE.
Stephen Yale-Loehr and Mr. Klasko spoke at an EB-5 international investment and economic development forum sponsored by IIUSA: Association to Invest in the USA on April 30, 2012, in Laguna Hills, California. Mr. Yale-Loehr spoke on I-829 EB-5 petitions and Mr. Klasko spoke on the prospects for an extension to the EB-5 pilot program in Congress. Mr. Yale-Loehr will speak on I-829 issues at the ILW EB-5 seminar in Nashville, Tennessee, on June 13, 2012.
7. EB-5 Government Agency Links
USCIS Web Page on EB-5 Immigrant InvestorsUSCIS Policy and Procedural Memoranda on EB-5 Investors
Immigrant Investor Regional Centers List
Form I-526, Immigrant Petition by Alien Entrepreneur
Form I-829, Petition by Entrepreneur to Remove Conditions
Form I-924, Application for Regional Center Under the Immigrant Investor Pilot Program