What are the most important immigration legal aspects of regional center
that you need to consider when deciding in which regional center to invest?
First and foremost, the EB-5 investor needs to look forward to the I-829
petition stage to think about whether the regional center and its project
will enable the EB-5 investor to remove conditions, since it comes down
mainly to whether the project satisfies the requirements. For the I-829
removal of conditions petition, the investor mainly just has to maintain
the investment, stay out of trouble with the law, and spend enough time
living in the U.S. so as not to lose the conditional permanent residence
through abandonment (which is an issue generally raised by the Customs
and Border Protection officer at the point of entry to the U.S. when the
conditional permanent resident is returning from a long absence from the U.S.).
The job creation requirement
The job creation methodology is the single most important aspect to consider
when examining regional center programs. In order for an investor to qualify
for removal of the conditions from his or her conditional permanent residence,
USCIS must be convinced, based on calculations presented by an economist
using a reasonable methodology that sufficient jobs have been created,
that is, 10 jobs per investor in the program.
Different regional center programs use different methodologies for calculating
the number of jobs created. The simplest and most reliable method is by
showing indirect job creation calculated based on expenditures on construction
work. An example of this would be a regional center that makes loans to
project developers, who use the funds, together with other loans and equity
capital, to carry out construction of large-scale projects like hotels,
corporate headquarters, and warehousing facilities for large companies,
just to name a few types of projects. The job creation figure is then
calculated based on the total amount of money spent on construction and/or
renovation, including not only the regional center project’s loan
funds but also loans from banks used to fund the project. The advantage
of this approach is that it suffices for the construction work to be completed
and paid for, regardless of when or whether the business that will occupy
the developed premises opens for business or ever reaches the level of
income and business activity that is anticipated.
It should be noted that some regional centers, in the interest of placing
more investors into a project, do not stop with just the above-mentioned
indirect jobs creation from expenditures on construction work, but also
rely on the business occupying the premises reaching certain income targets.
Also, in the case of hotel projects, some portion of the job creation
might depend on the expenditures of guests staying at the hotel, which
means that the job creation calculation can depend on the hotel reaching
a certain occupancy rate. These approaches to job creation can leave EB-5
investors more vulnerable to denial for not achieving the full job creation
figure of 10 jobs per investor.
At this juncture, I would hasten to add that there is also a provision
in the regulations pertaining to the I-829 petition to remove conditions,
which allows for approval of the I-829 petition, even where all 10 jobs
per investor have not yet been created, but will still be created within
“a reasonable time”. To benefit from this flexibility provision,
it generally needs to be shown that all reasonable care and diligence
has been taken to bring about the job creation prior to the removal of
conditions, but that due to factors beyond the control of the project
developer and the regional center, the project was delayed. USCIS is currently
interpreting “a reasonable time” as 1 year.
I would also point out that the sufficiency of jobs is measured based on
the number of other EB-5 investors who have already gone through the I-829
petition process and those who are in the I-829 petition process at the
same time as the given EB-5 investor. It is not necessary to prove that
there are already enough jobs created in order to cover all investors
who will file the I-829 petition in the future. This situation is advantageous
for those EB-5 investors who are the earliest to file the I-829 petition,
but is no help to those who are among the last to file the I-829 petition
in the project. In the example given above, of the project relying on
a mixture of jobs, some from construction, some from operating income,
and some from guest expenditures, the earliest EB-5 investors to file
the I-829 petition get to claim the jobs created from construction expenditures,
whereas the later investors to file the I-829 petition depend on the less
reliable job creation from operating income and guest expenditures.
Consider factors that could keep the project from fulfilling the job creation
I raise this point not as a discussion of which regional center and project
keeps the investment safest, but rather in considering which regional
center and project will best enable the investor to cross the finish line
of obtaining approval of the petition to remove the conditions from the
conditional permanent residence. People often ask, “What if the
business fails? Will I still be able to remove the condition from my conditional
permanent residence?” This is an outcome that no one wants to face
or even contemplate, but in these uncertain economic times, one must consider
all possible outcomes. If the regional center project accomplished the
prior to the failure of the business, i.e., it took all steps that were the
basis for the calculation of the job creation, then the investor will
have a strong case for obtaining approval of the petition for removal
of conditions. The obvious downside is that the investor’s investment
would have to go down with the ship, so to speak, in order to succeed
under such a scenario.
What if, on the other hand, the business is still operating, but has not
yet completed all steps, or only recently completed all steps, for the
creation of jobs? Can the petition for removal of conditions be approved
in that case? As mentioned previously, USCIS regulations do provide that
where the job creation has not yet occurred at the time of filing for
removal of the conditions, but certain evidence is submitted indicating
that the job creation will occur within a reasonable time -- particularly
where it can be shown that the delay was beyond the control of the project
management -- then that can be an approvable case.
The best way to avoid these adverse consequences is to conduct a careful
due diligence in the beginning stage, when you are selecting the business
that is the basis for the regional center’s project. There are Regional
Centers whose investors have already obtained the permanent green card,
and others are presently starting the Removal of Condition process for
their investors, and there is little concern that the permanent green
card will not be approved for those Centers. The main point is: Sufficient
information is available for the investor to make a well-informed decision.
An important aspect of investing in a regional center program is that the
investor should have a well-defined exit strategy. However, the exit strategy
cannot run afoul of the legal requirement under the EB-5 program that
the investment be placed at risk without a guarantee; that there be no
disguised redemption option to cash out before the conditions have been
removed from the investor’s conditional permanent residence; and
that the investment not be a loan disguised as an investment. The investor
generally wants the fastest and easiest possible exit from the investment.
However, one must bear in mind that USCIS policy requires that the investment
be in place at least until the investor has removed the conditions from
his conditional permanent residence. It is a legal requirement that the
funds be placed at risk of partial or complete loss, just as any real
business investment would be.
How experienced is the regional center’s management and what is their
track record in helping EB-5 investors to clear all stages of the immigration process?
Nowadays, there are more than 1,000+ approved regional centers. This large
number of regional centers is more of a distracting statistic than a realistic
selection of viable options. The vast majority of these regional centers
have ben approved within the last 2-3 years, and have no projects or no
approved projects. In practice, the EB-5 investor should be considering
only those approximately 15-20 regional centers that have at least one
project that has received approval of the I-829 removal of conditions
petition. Having had approved I-829 petitions for past projects proves
several important points:
- The regional center’s management has proven that it can organize
a project that actually meets USCIS’s requirements.
- The regional center’s management has proven that it can pull together
the documentation to satisfy USCIS’s demanding review of its project,
and that it has probably surmounted several requests for evidence from
USCIS that can challenge the regional center’s management to defend
and vindicate its project.
- The regional center’s management has proven that its regional center
is not a complete scam designed to bilk investors out of their money,
since scam regional centers are unmasked as such already with their first
project because they do not actually carry out even the first project.
Approximately 5 such projects have been unmasked by USCIS in recent years.
It is also important to consider whether the regional center has had any
previous denials at the I-526 or I-829 petition stages. If so, then it
is important to consider what the regional center did that prompted USCIS
to deny the petition, i.e., what USCIS justified or unjustified in denying?
Was the regional center taking unnecessary risks, typically with its job
creation methodology or with changes to the project business activity
that prompted USCIS to deny the petition? How did the regional center’s
management react to the denial? Did the regional center litigate the denial
in federal court and fight the case through to approval of the investors’
cases? Did the regional center just let the matter go and not defend the
interests of its investors and not vindicate the validity of the regional
center’s approach in the project? Does the regional center’s
management have sufficient capital from which to litigate against USCIS
in federal court, which would typically take hundreds of thousands of
dollars? Is the regional center committed to standing behind its projects?
One final point, in connection with considering the regional center management’s
ethics and commitment to stand behind their project, it would be advisable
to look into whether any of the leaders in the management of the regional
center have any history of criminal offenses, sanctions from the Securities
and Exchange Commission (the securities regulation agency in the U.S.),
loss of any professional license for malfeasance, and so forth. These
are important questions to ask in order to determine whether you are working
with the best and safest regional center.
In selecting a regional center, it is important to judge the likelihood
that that regional center and its management are able and are on track
with the project that they are offering you to succeed at both the I-526
and the I-829 petition stages. Also, it is important to determine whether
the regional center’s management team have the experience and track
record of having safely ushered EB-5 investors all the way through the
EB-5 immigration process. Beware, though, that a successful track record
does not guarantee that the current project will be approved if the current
project is not well designed to qualify—consistent use of careful
strategies for qualifying the project is crucial. Finally, you need to
evaluate whether the regional center’s management team, based on
their past history, have the ethics and gumption to stand behind their
project if “push comes to shove” with USCIS.