The EB-5 Reform and Integrity Act of 2022 brought many changes to the EB-5 program. For the latest information, please click here.
The adjudication of I-924 applications for regional center designation, amendments of regional center designations for geography or industry code and exemplar I-526 (project pre-approval) has, for all practical purposes, ground to a halt. This is not news. Its roots can be traced to the months preceding the February 9, 2012 announcement by USCIS of the implementation of its new policy on “tenant occupancy methodology.” Many I-924 applications were pending for lengthy periods of time – sometimes one year or longer – at the time the new policy was announced. Those applications, as well as virtually all of the applications filed in the intervening months, have remained pending. One RFE on these applications is a minimum. Many have been the subject of two or three RFEs. Virtually all such applications have one thing in common – they remain pending. Approvals or denials are a rarity.
There are various speculations as to the reason that USCIS refuses to adjudicate these applications. Perhaps we will explore some of the possible theories in a future blog. Suffice for now to state that I believe the number one candidate is the failure of USCIS after nearly one year to formulate its policy on tenant occupancy coupled with the fact that most I-924 applications either have some element of tenant occupancy contained within them or the Service believes that its policy on tenant occupancy could ultimately affect its adjudication of the remaining petitions.
This state of affairs raises two issues. First, what to do about it. Second, how it changes strategies for regional centers and project developers.
Regional centers and project developers have two choices:
- Be patient and hope that some action is imminent even though no signs presently point in that direction; or
- File a mandamus action in federal court.
For those unfamiliar with mandamus, it is the procedure established by Congress to empower federal courts to force government agencies to adjudicate – approve or deny – pending applications for which adjudication has been unreasonably delayed. The procedure is relatively straightforward and often results in prompt adjudication of the pending application. In almost all cases, USCIS adjudicates the petition prior to the court order because USCIS is responsible for paying the legal fees of the petitioner if the court grants the mandamus and determines that the USCIS inaction was not “substantially justified.”
The last time we experienced pervasive USCIS delays was when large number of applications for adjustment of status to permanent residence and applications for naturalization were held up pending indefinite delays in the FBI issuing security clearances. Many hundreds of mandamus actions were filed, resulting in USCIS not only taking action on the pending applications but also revising its procedures so as not to delay such applications in the future.
So how has the USCIS inaction changed the strategy for developers with projects seeking EB-5 capital? Unless the developer is willing to wait an indeterminate amount of time – probably at least one year or longer – for approval of a new regional center application, an amendment or an exemplar I-526 petition, the strategy of choice is to find an existing regional center that is approved for the geographical area and the industry code of the project and negotiate an arrangement whereby that regional center will “host”, “sponsor” or “adopt” the project. Such an arrangement allows the developer to market the project immediately rather than waiting a year or more to begin marketing for investors.
This strategy may be implemented in conjunction with filing of an I-924 application. The I-924 application could be based on a hypothetical project, which will enable the developer to market future projects under its own regional designation assuming that the I-924 is eventually approved.
Another option that we have advised developers to consider is a direct EB-5 proceeding concurrently with the adjudication of the I-924 application for regional center designation. If the project will have enough direct employees to raise sufficient capital to move the project forward, the project can be marketed to direct EB-5 investors with future investors relying on indirect and induced employment once the regional center is approved.
One of the indirect results of the I-924 stalemate is the realization by investors and investors’ agents that looking for projects that have been “pre-approved” is no longer an option. Since the project pre-approval requires the filing of an amended I-924, since the quoted processing time for amended I-924s is ten months and since all of these applications get at least one RFE, investors and their agents are coming to realize that investment opportunities being offered in the marketplace are likely not to be pre-reviewed or pre-approved by USCIS.
Finally, one last strategy being considered by developers is purchasing an existing regional center that has an approval for the desired geographical area and industry code. Unfortunately, this is not a complete solution to the problem. USCIS takes the position that a change of ownership requires an I-924 amendment filing. Although it is unclear whether the amendment filing is more in the nature of a notification or a request for approval, it is possible that USCIS will take the position that I-526 petitions filed while the amendment application is pending are not approvable and may even have to be refiled after the amendment is approved.
This entire scenario is indeed unfortunate. An exemplary government program that brings foreign direct investment to the U.S. and creates countless numbers of jobs is being thwarted by government inaction. The purpose of this article is to clarify that some options may be available to counteract this dilemma and hopefully to once again put the EB-5 program in motion, so that it can achieve its laudable goal.