On Feb 27 2015 by Anusree Nair

USCIS Stakeholder’s Meeting – Source and Path of Funds

On February 26, 2015, USCIS held a Stakeholder’s Meeting to discuss EB-5 source of funds issues. The speakers included Ebony Turner – Relations Officer, Julia Harrison – USCIS Deputy Chief, and several USCIS EB-5 SPOF adjudicators. I appreciate USCIS taking the time to hold the meeting and listen to the questions posed by Stakeholders and hope that USCIS considers the feedback received from Stakeholders seeking consistent adjudication of I-526 petitions.

USCIS focused on three major sources of funds: (i) income accumulation (salary, bonuses, dividend distribution); (ii) personal property (using sale of property or home equity loan); and (iii) company equity. For each of the three sources of funds listed above, the officers reviewed the type of documentation generally required, major issues, and possible RFE triggers. There was little mention of path of funds.

For the most part, USCIS did not deviate from the document checklist and RFE triggers that our firm has been providing to our clients for years. But there were three interesting points where USCIS was clearly deviating from their previous adjudications:

1.  According to USCIS, administrative fees do not need to be sourced as USCIS does not have a “legal basis for requiring the . . . administrative fee . . . [to have] a lawful source.” Instead, USCIS only requires proof of administrative fee payment as confirmation that the administrative fee was not deducted from the $500,000 or $1 million investment.

This is a clear change from previous USCIS adjudications and policy. In a prior Stakeholder’s Meeting, Alejandro Mayorkas, then director of USCIS, confirmed that the administrative fees must be sourced. More importantly, in cases where the administrative fees were not sourced, USCIS has routinely issued requests for evidence requiring investors to source the administrative fees.

Our firm has previously argued that the regulations do not require administrative fees be sourced. So while this is a welcome change, it highlights a bigger issue that EB-5 attorneys and investors face every day: USCIS deviates from long-held policy and adjudication practices with no prior notice. Accordingly, until there is clear guidance from USCIS in writing, our firm will continue to recommend that administrative fees be sourced.

2.  USCIS noted that it was re-visiting its current policy on personal loans. Specifically, in cases where the investor uses private property as collateral for a personal loan from a family member, friend, or business associate, USCIS is debating whether to require the private lender to source the funds of the loan in addition to the source of the investor’s collateral.

Currently, USCIS only requires the investor to source the funds used to purchase the collateral and does not require the private lender to source the loan proceeds. If there is to be a change in policy, we hope USCIS will issue a public notice confirming the change in policy and, more importantly, not apply the new standard to pending cases.

3.  For property cases, USCIS noted that the collateralized property/sale of property must either be owned by the investor or the proceeds of the sale/loan must be gifted by the owner to the investor.

It is common practice in Asian culture, especially in China and India, for parents to purchase a property and register it in the names of their children. Subsequently, when making an EB-5 investment, one parent will obtain a loan using the property as collateral and use the loan proceeds as the source of the investment funds.

Over the past several years, USCIS has routinely approved these types of cases. However, USCIS recently began issuing NOIDs and denials on exactly these types of cases – again with no prior notice to the public.

Without set guidance from USCIS, we rely on previously approved petitions to determine whether a source of funds for subsequent petitioners will be successful, with the expectation of USCIS deference for adjudication of such cases. Conversely, USCIS appears to be applying new guidelines to pending petitions, without prior notice of policy change.

These inconsistent adjudications are causing uncertainty in the EB-5 space at a time when, with the establishment of the new IPO, it is reasonable to expect more transparency and consistency with no drastic changes in policy. We hope USCIS takes note of Stakeholder’s concerns in the February 26 call and offers clear and timely responses to the questions raised.