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Like many in the EB-5 community, I tuned into the EB-5 Stakeholder Engagement held on September 10 hoping to learn more about the Immigrant Investor Program Office’s (“IPO”) perspective regarding the State Department’s announcement that the maximum number of EB-5 visas which may be made available for use by mainland-born Chinese had been reached for Fiscal Year 2014–the effect of which is likely to precipitate a prolonged EB-5 quota backlog for China in the 2nd or 3rd quarter of 2015.
While the IPO did not offer much by way of substantive insight into the ramifications of the impending quota retrogression–beyond reiterating that the State Department’s announcement would not affect the IPO’s ability to accept, process and approve EB-5 petitions filed by Chinese applicants–Director Colucci did provide significant information relevant to regional centers’ annual reporting obligations.
The regulations governing the EB-5 program provide that all regional centers “must provide updated information to demonstrate the center is continuing to promote economic growth, improved regional productivity, job creation, or increased domestic capital investment in the approved geographic area . . . on an annual basis,” 8 C.F.R. § 204.6(m)(6), through the filing of their annual Form I-924A Supplement. The regulations further state that USCIS will issue a notice of intent to terminate a regional center’s participation in the EB-5 Program if the regional center fails to file the Form I-924A Supplement on an annual basis, or USCIS determines that the regional center “no longer serves the purpose of prompting economic growth, including increased export sales, improved regional productive, job creation, and increased domestic capital investment.” 8 C.F.R. § 204.6(m)(6). If USCIS ultimately determines that a regional center’s participation in the EB-5 Program should be terminated, the regional center will be notified of the Service’s decision and reasoning in writing, after which the regional center will have 30 days to appeal the determination. 8 C.F.R. § 204.6(m)(6).
During the EB-5 Stakeholder Engagement, Director Colucci indicated that 340 of the 369 regional centers that were required to file a Form I-924A Supplement in Fiscal Year 2013 (October 1, 2012–September 30, 2013) actually did so. He further noted that the 29 regional centers that failed to file the Form I-924A Supplement were issued notices of intent to terminate, and that several of these regional centers filed the I-924A with explanations. Director Colucci indicated that the IPO has already terminated some of the regional centers in this group of 29, and is continuing to work through the remaining cases.
Equally significant, Director Colucci indicated that the IPO had issued 24 additional notices of intent to terminate to regional centers that had timely filed their Form I-924A Supplements but whom the IPO alleged were no longer serving the purpose of promoting economic growth as described in 8 C.F.R. § 204.6(m)(6). Affected regional centers then had the opportunity to submit evidence in opposition to the grounds in the notices.
The actions taken by the IPO underscore three points of fundamental importance to approved regional centers and those with pending Form I-924 Applications.
First, USCIS has two independent bases for issuing a termination notice. It could either do so when: (1) the regional center fails to timely file its annual Form I-924A Supplement; or (2) USCIS determines that the regional center no longer serves the purpose of promoting economic growth. The disjunctive nature of USCIS’ regulatory authority effectively gives the Service “two bites at the apple” to revoke a regional center’s charter. The second “bite” is potentially the most lethal, for it could lead to decertification even if a regional center has timely filed a Form I-924A Supplement every fiscal year since initial designation, so long as USCIS determines of its own accord that the regional center has failed to adhere to and comply with 8 C.F.R. § 204.6(m)(6). It is important to note that, in determining whether a regional center is continuing to promote economic growth, USCIS’ review is not necessarily limited to the representations in previously filed I-924A Supplements and any accompanying documentation. Rather, as we have seen from our own practice, USCIS can examine and consider factors and information (or lack thereof) not explicitly contemplated by, or requested in, the Form I-924A Supplement, such as whether there are any pending Form I-526 or I-829 Petitions associated with a regional center.
Second, it is critical for existing regional centers and those with pending Form I-924 Applications to know whether they’re actually required to file a Form I-924A Supplement for a given fiscal year. The instructions to the Form I-924A Supplement indicate that “each designated regional center entity must file a Form I924A Supplement for each fiscal year (October 1 through September 30) within 90 days after the end of the fiscal year (on or before December 29) of the calendar year in which the fiscal year ended.” Thus, for Fiscal Year 2014 (the current filing year), any regional center that was designated as a qualifying participant in the Immigrant Investor Program on or before Tuesday, September 30, 2014 must file a Form I-924A Supplement on or before Monday, December 29, 2014. The simplest way to determine whether a regional center is obligated to file a Form I-924A for Fiscal Year 2014 is to look at the date of the initial regional center designation notice–if the date listed on the notice is September 30, 2014 or earlier, the regional center is obligated to file a Form I-924A Supplement. Note that even if the physical designation notice is received after September 30, 2014 (e.g., because of courier delay), so long as the notice is dated September 30, 2014 or before, the regional center must file a Form I-924A Supplement for Fiscal Year 2014.
Finally, regional centers should consider filing with their Form I-924A Supplements additional narratives explaining the steps they have taken to promote economic growth and the timeframe of planned activities because, as Director Colucci suggested during the EB-5 Stakeholder Engagement, such information could potentially mitigate the appearance of a lack of activity based on other facts present in a case, as noted by Director Colucci. The Form I-924A, by itself, is a fairly static document, which, if taken literally, could create the false impression that the regional center is not promoting economic growth despite the existence of countervailing factors. A few examples of this occurrence are in order:
- Part 3 of the Form I-924A requests information about the “Aggregate EB-5 Capital Investment” that has been the focus of new commercial enterprises sponsored through the regional centers. As the EB-5 regulations and FAQs to the Form I-924A make clear, capital investment occurs when an EB-5 investor’s capital is actually transferred to the new commercial enterprise. Capital placed in escrow that is set for release to the new commercial enterprise upon the occurrence of a condition precedent (i.e., approval of the Form I-526 Petition) is therefore not considered “invested” for the purposes of completing the Form I-924A. Accordingly, a regional center sponsoring a new commercial enterprise that is actively subscribing investors, but where investor capital is held in escrow at the time of filing the Form I-924A, would enter “0” in the Part 3 notwithstanding ongoing economic activity within its purview.
- The Form I-924A Supplement also requests information about the number of approved, denied, and revoked Form I-526 and I-829 Petitions filed by EB-5 investors making capital investments sponsored by the regional center. Unfortunately, the Form I-924A Supplement, by its terms, does not capture information regarding pending petitions. This is particularly problematic given the current protracted processing times of the Form I-526 Petition (13.3 months) and Form I-829 Petition (7.6 months), which may compel a regional center to undervalue the extent of its economic activity in circumstances where a significant number of Form I-526 and I-829 Petitions are pending at the time of filing its Form I-924A Supplement.
- In several parts, the Form I-924A Supplement requests information regarding job-creation that has been the focus of EB-5 capital investments sponsored through the regional center. The FAQs to the Form I-924A Supplement indicate that, in reporting statistics, USCIS estimates job creation (10 jobs-per-investor) based upon the number of Form I-829 Petitions that were approved within the period of time under study. If, however, a regional center chooses to adopt a job—creation-reporting methodology using economic impact modeling for the job-creating business activities that occurred within its capital investment projects during the fiscal year, then a detailed narrative and analysis should be provided with the Form I-924A Supplement that identifies the jobs that were created during the fiscal year and the methodology used to estimate the job creation. Accordingly, if a regional center chooses to report job-creation based on I-829 approvals, it could potentially underestimate the scope of economic activity and job–creation resulting from the capital investment opportunities it has sponsored if the number of approvals is low or simply non-existent at the time of filing the Form I-924A Supplement.
In an effort to mitigate these potential pitfalls and the corresponding appearance of a lack of activity, we encourage our regional center clients to bolster their Form I-924A Supplement with additional explanations of their ongoing compliance with the regulatory obligations as described in 8 C.F.R. § 204.6(m)(6). Our EB-5 compliance group works closely with regional centers to help them prepare and file such comprehensive Form I-924A Supplements. Regional centers that would like our assistance should submit a request to EB5compliance@klaskolaw.com.
