On Jul 02 2013 by H. Ronald Klasko
Are We at the Dawn of the Golden Era of EB-5?
Having recently returned from the IIUSA Conference in Las Vegas, I was struck by the unprecedented confluence of events that together provide a rational basis for believing that the golden age of EB-5 may well be at our doorsteps.
Although there are clouds that could overshadow this sunny outlook – processing delays, quota backlogs, another fraudulent project, among others – I would like to share some of the reasons for my optimism:
The May 30, 2013 “binding” CIS EB-5 Policy Memorandum. This has been a long time coming. As I indicated in my last two blogs, it was worth the wait. Even if the substance of the Memorandum hadn’t been nearly as positive, it would still be a favorable development to finally have written and binding USCIS policy rather than trying to discern USCIS policy through a plethora of RFEs. However, the policies set forth in the Memorandum are in most cases policies that will enable the EB-5 program – and especially the regional center EB-5 program – to flourish. Regional centers are no longer limited to sponsoring projects in any particular industry and now have a streamlined mechanism of expanding their geographical boundaries. EB-5 money can be used to replace any form of temporary lending even if EB-5 money was not contemplated at the time the temporary lending was initiated. Business plans can be considered compliant even if they don’t meet every element of Matter of Ho. Matter of Ho business plans are not required for hypothetical projects. Indirect and induced jobs can be created outside of the boundaries of the regional center. USCIS adjudications will be given deference in future filings. Business plans can change, even materially, between the approval of conditional permanent residence and the filing of a condition removal petition and the investor can still have conditions removed upon proving sufficient job creation. And more.
EB-5 Legislation. Although not without warts, the EB-5 provisions within the comprehensive immigration bill passed by the Senate are largely favorable. Although ultimate passage of a comprehensive immigration bill is likely a prerequisite to EB-5 legislative reform, the Senate Bill’s favorable provisions are worth noting. The regional center program would be permanently authorized. Concurrent processing of I-526 and I-485 applications would be authorized. The path would be cleared for premium processing of I-526 petitions. Spouses and children would be removed from the EB-5 quota, thereby significantly reducing the chances of any quota backlog for at least many years. Among others.
USCIS Reorganization. Correct or not, the perception has long existed that the California Service Center is not EB-5-friendly. The reorganization of the EB-5 function within USCIS, and the transfer of the EB-5 unit to Washington, DC, should be a major favorable development in the medium to long term. The appointment of Dan Renaud, as Acting Head of the EB-5 Unit, and Robert Coxe as his deputy, are rightfully lauded within the EB-5 community. Mr. Renaud has a long history of successfully administering various USCIS programs, and Mr. Coxe had a significant role in the successful launching of the USCIS Entrepreneurs in Residence program. It is also very comforting to know that USCIS Director Mayorkas and his Special Counsel Rob Silvers have been major outspoken advocates of the importance of the EB-5 program.
However, some words of caution are in order. The full transition will likely take at least the remainder of 2013 to complete. New staff are being hired and trained. Any time new people are brought into any program, it is reasonable to expect growing pains and delays. We do not know the views of the newly-hired economists. This is likely to be short term pain for long term gain.
Another wild card is the Presidential nomination of Mr. Mayorkas to be Deputy Secretary of Homeland Security. Since Director Mayorkas has been the foremost advocate of the EB-5 program, his loss will be significant. For now we can only hope that his replacement will also see the great benefits of this program. There is some consolation in knowing that his new position description will include oversight of USCIS.
I-924 Adjudications. After a 2012 that produced virtually no I-924 adjudications, the first half of 2013 produced an unprecedented number of new regional center approvals and amendment approvals. The number of regional centers now numbers almost 300. Although a very substantial backlog of I-924s continue to exist, the pace of adjudications has quickened. The backlog is being reduced, and the chances of continuing backlog reduction are enhanced by the fact that, for some period of time, adjudications will take place both in California and Washington.
EB-5 Industry Standards. For the first time ever, the regional center EB-5 industry, through IIUSA, has disseminated a list of industry best practices involving all aspects of operations of regional centers, investor relations, marketing, securities issues, immigration law issues, jobs issues, escrow issues, project selection, conflict issues, insurance, etc. These best practices are the result of a full year’s worth of discussions and meetings among 15 of the most respected EB 5 industry leaders. I had the privilege of being the chair of this august group, and we all believe that the result will be a valuable educational tool to guide regional centers and professionals working with regional centers to protect regional centers, investors and the EB-5 industry as a whole.
Perhaps the number one cloud on the horizon that remains is the unacceptably long processing times for both I-924 petitions and I-526 petitions. Although we have become reluctantly accustomed to the I-924 delays, I-526 delays have doubled to a period of 12 to 14 months; this is simply unacceptable both to investors and to developers since, in many cases, project funding is delayed during the pendency of the I-526 petitions. This will be and should be the focus of advocacy efforts in the coming months.
So the forecast is mostly sunny with a few clouds. Just in time for the summer.