1. EB-5 101: Green Card Through Investment
Jennifer Hermansky, Greenberg Traurig, LLP
Mona Shah, Mona Shah and Associates
Genevieve Roman, Extell New York Regional Center
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2. Agenda What is the Eb-5 Program? I-526 Petitions for Alien Investors
Direct Investments (Non-Regional Center)
Regional Center Investments
What is a Regional Center?
Why become a Regional Center
Regional Center Investment Vehicles
Indirect job creation
I-829 Petitions to Remove Conditions
Direct and Indirect Job Creation
Material Change Issues
I-829 Denials – Litigation and Removal Proceedings
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3. Eb-5 Basics
EB-5 category created in 1990 for foreign nationals who invest in a new commercial enterprise that will benefit the U.S. economy and create at least 10 full-time jobs.
Congress set aside 10,000 immigrant visas annually for investors and their immediate family members.
Immigrant Investor Pilot Program enacted in 1993, providing for regional centers – due to sunset on September 30, Job creation may be estimated using “reasonable methodologies.”
Foreign nationals can get a green card if:
Invest $500,000 or $1,000,000 (depending on geographical area); and
Investment creates full-time jobs for 10 U.S. workers
Green cards conditional for 2 years
Conditions removed if investment sustained and jobs created
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4. Regional Center v. Individual Eb-5
Individual Eb-5 Petition
Investor buys business or starts new business
Must be 10 direct full-time, W-2 employees who are USCs or LPRs
Few applications
Regional Center Eb-5 Petition
Investment into a business associated with a USCIS Approved Regional Center
95% of all applications
Main advantage
Indirect employment counts through the use of an economist report to predict project job creation.
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5. I-526 Petition – Individual Investors
General requirements – INA § 203(b)(5) and 8 CFR § 204.6
New commercial enterprise
$500,000 or $1 million from a lawful source
At risk investment
Investment will create at least 10 full-time jobs
Investor must be engaged in the management of the enterprise
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6. I-526 – Individual Investors
New Commercial Enterprise
Created after November 29, 1990
Matter of Soffici, 22 I & N Dec. 158, (1998), Matter of Hsiung, 22 I & N Dec. 201 (1998); OR
Substantial change from investment - 40% expansion of net worth or number of employees
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7. I-526 – Individual Investors
Actively in the process of investing $1 million or $500,000 if the investment is in a targeted employment area
Targeted employment area
A rural area of less than 20,000 in population; or
An area which as unemployment of at least 150% of the national average
Evidenced by submitting a letter from the state’s agency confirming that the area has high unemployment and defining the statistical area
USCIS may disagree with the state’s calculation, but generally will defer to the geographic area
Matter if Izummi 22 I & N Dec. 169 (1998) and USCIS Revised Draft Policy Memo on EB-5 Adjudications (January 11, 2012)
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8. I-526 – Individual Investors
Investment must be at risk
Matter of Soffici, Matter of Izummi, Matter of Hsiung, 22 I & N Dec. 201 (1998) , Matter of Ho 22 I & N Dec. 206 (1998)
Must be an equity investment
Debt instrument prohibited/no guaranteed repayment
Personal funds or loan secured by personal assets
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9. I-526 – Individual Investors
Lawful source of Investment Funds
Matter of Soffici and Matter of Izummi
Examples
business earnings, salary, gifts, loan, etc.
Evidenced by personal tax returns, financial statements, etc.
Office of foreign assets control (OFAC) must be consulted if investor is from Iran or other country against which the U.S. has sanctions
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10. I-526 – Individual Investors
Tracing
USCIS requires the petitioner to demonstrate that the personal funds derived from the lawful source and were ultimately invested in the EB-5 enterprise
Numerous transactions between investor and the EB-5 enterprise investment would require the investor to provide documentation from each transaction
EB-5 Enterprise
EB-5 Investor
$$$
$$$
$$$
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11. I-526 – Individual Investors
Job creation
The investment must result in the enterprise creating or saving 10 full time jobs (35 hours per week) for US workers (USC citizen, LPR, work authorized immigrant)
Must be direct job creation, i.e. W-2 employees evidence by submitting I-9 forms of employees and for US workers (supporting docs copy of passport, I-551 card with the I-9 forms)
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12. I-526 – Individual Investors
Job creation
Defined in terms of the position, not the person. The position must be created and filled by a US worker
Investor and family members do not count
Troubled business
Where investment sustains current employees (saves jobs), the investor must show that the enterprise is a troubled business which experienced a net loss for one or two years exceeding 20% of net worth
Must save all jobs, and must be at least 10 per immigrant investor.
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13. I-526 – Individual Investors
Engage in business on day to day basis or through policy formation
Title of description of job duties
Evidence of corporate officer or director position
Board position (policy formation)
Purely passive investor not permitted
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14. What is a Regional Center?
Entity that:
Focuses on a geographic region
Promotes economic growth through increased exports, regional productivity, domestic investment, and job creation
Applies to USCIS for designation approval
Oversees capital investment projects for alien investment
Markets for investors
Due diligence on investors
Prepares I-526 package templates
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15. Regional Centers Continued
Oversight of I-526 filings
Tracks infusion of capital into job-creating enterprise
Monitors compliance with business plan and foundation facts in economic report
Ongoing administration and compliance responsibilities
Allocates jobs between investors
Prepares I-829 package templates
Decides on new projects
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16. Regional Center Functions
Provide I-526 templates to investors
Provide I-829 templates to investors
Coordinate with immigration attorneys
Track, monitor and report on Form I-924A
May provide investor/project updates
May screen investors for securities and immigration issues
May review investor source of funds

17. Regional Center v. Eb-5 Project
Not the same thing, but affiliated
Project developers may create their own regional center
Project developers may have a project sponsored by a non-affiliated regional center
Oversight/compliance obligations independent of the project
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18. Why Become a Regional Center?
Can count indirect and induced employment opportunities, and not just direct jobs, in meeting the ten jobs per investor requirement.
notwithstanding the requirements of 8 CFR 204.6, the Attorney General shall permit aliens admitted under the pilot program to establish reasonable methodologies for determining the number of jobs created by the pilot program, including such jobs which are estimated to have been created indirectly (Section 610, 1993 Act)
A particular project within the regional center may be pre-approved by USCIS.
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19. What is an Indirect Job?
Jobs created in the regional economy as the result of the economic stimulus of the investment
To be demonstrated via “reasonable methodologies” (economic forecasting tools):
multiplier tables
feasibility studies
market analyses
other economically or statistically valid forecasting devices
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20. Input/Output Models
Forecasting tools to predict increased employment resulting from defined changes in the economy:
Employment
Revenues
Expenditures
Types of Models – RIMS II, IMPLAN, REDYN
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21. Regional Center Approvals
Approved for certain industries – NAICS codes
Approved for a certain geographic area
Approved for a certain economic methodology
What should an attorney look for in a RC designation when representing an investor?
All of the above PLUS
Project Pre-Approval?
Job Allocation between investors?
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22. Regional Center Eb-5s New commercial enterprise – LP or LLC
$500,000 (TEA) or $1 million from a lawful source
At risk investment – No guaranteed redemptions
NCE loans funds or makes equity investment into Job Creating Enterprise
Job Creating Enterprise must be in the TEA
Investment will create at least 10 full-time jobs in the Job Creating Enterprise
Indirect Job Creation – use of economist report
Investor must be engaged in the management of the enterprise – through LP or LLC policy formation
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23. Eb-5 Securities Issues Eb-5 Structure Alternatives for the NCE:
Direct equity model
Investors receive equity in existing company in exchange for investing capital to be used for the company’s job creating project
Fund model
Investors receive equity in new investment fund in exchange for investing capital to be used to invest in debt or equity of the job creating project company
Choice of entity (e.g., LP vs. LLC)
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24. Regional Center Investors
Choosing a Regional Center – Due Diligence
Immigration Track Record?
Number and type of Amendments?
Loan or Equity projects?
RFEs or NOIRs for job creation or business plan issues?
How is job creation tracked? How is it allocated between investors?
TEA designation?
Escrow or Refund policy if I-526 is denied?
Reporting on status of investment to investors?
Other successful capital raises?
Affiliated with any government entity?
Complied with I-924A?
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25. Common Issues in RC Investor’s SOF
Lack of 5 years of tax returns
Sale of Property as SOF
Purchased more than 7 years ago
Purchased less than 7 years ago
Home Equity Loans as SOF
Proof Investor can make payments on loan from a lawful source
Loans from Petitioner’s Business
Proof of payments on loan
Approval by Board
Salary as SOF
Lack of Accurate Records of ongoing salary
Proof of yearly expenses and savings
Retained Earnings from Investor’s Business
Proof that Investor was allowed to access the funds and distribute them to himself
Gift Issues
Same issues, but with Giftor’s source of funds
Proof of payment of applicable gift tax
Intent to repay the gift?
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26. China Specific Issues in RC Cases
Chinese currency laws restrict exchange of Chinese Yuan Renminbi to $50,000 per year
“Friends and Family” tactic
Use of a 3rd Party in Hong Kong
What is the investor’s burden of proof in tracing?
Trace each transaction to 10 friends and family members
Trace each transaction from 10 friends and family members
Trace from Investor to the new commercial enterprise
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27. Issues in the NCE Offering – RC Cases
Guaranteed Interest Payments
Does it negate the “at risk” requirement?
Guaranteed rates of return for preferred equity investments
Where can the return come from? Operating/Investing profits
Guaranteed Redemptions of Capital
No guarantee to repurchase at a predetermined rate if I- 829 petition denied
Fair market rate acceptable provision
Involvement of the Investor
LP Agreement or LLC Operating Agreement should give the investor all the rights and responsibility under the ULPA or the Uniform LLC Act.
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28. Issue Spotting in RC I-526 Petitions
Consistency between business plan and economic report – facts should be the same
All inputs in the econ report must be found in the business plan
Adequate job creation “cushion” – 20-30%
Be concerned with overly aggressive inputs
Revenues, expenditures, direct jobs
Timelines should be realistic
Reliance on direct jobs should be minimized to avoid I-829 issues
Easier inputs: expenditures and revenues
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29. I-829 Petitions
Within 90-day period preceding CLPR expiration, investor must file Form I-829 and supporting documentation with USCIS —California Service Center to remove conditions from status. Filing fee is $3,750 (plus $85 per dependent for biometrics).
Spouse and children included if CPR
Failure to file I-829 petition timely may result in termination of conditional resident status and initiation of removal proceedings.
Late petitions may be accepted with “good cause and extenuating circumstances”
If I-829 petition denied, investor may not appeal decision. However, if placed in removal proceedings, investor- petitioner may seek review of USCIS’s decision before an immigration judge. Government bears burden of proof that decision was correctly made.
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30. I-829 Requirements INA §216A and 8 CFR §216.6
Requirement of regulations
Petitioner invested or is in process of investing required capital;
Investment and commercial enterprise have been sustained throughout two-year conditional residence period; and
Investor created —or can be expected to create within a reasonable period of time – 10 full-time jobs.
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31. I-829 Documentary Requirements
8 CFR § 216.6(a)(4): May include but not limited to:
Federal, State annual or quarterly tax filings
Audited financial statements
Bank statements
Invoices, receipts, contracts, business licenses
Payroll records, Forms I-9
Also, evidence of execution of business plan found in I-526 petition
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32. What Is Not Re-adjudicated from I-526 Petition?
12/11/2009 Neufeld Memorandum amending Adjudicator’s Field Manual:
“generally give deference to … I-526 approval… if the facts presented in the earlier proceedings remain unchanged to include:”
Capital investment structure
Whether enterprise is “new”
Direct and indirect job creation methodology
Whether lawful source of capital
Whether within TEA
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33. I-829 Issues Sustaining the Investment Job Creation Issues
Return of Investment v. Return on Investment
Distributions on Schedule K-1s
Operating Losses on Schedule K-1s
Job Creation Issues
Documenting Foundation facts in the economic report
Documenting Direct Jobs
Material changes to the business plan
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34. Documenting Direct Job Creation
W-2 employees of NCE
Payroll Records (35+ hours per week)
Forms I-9
Proof of LPR or citizenship status (beyond the I- 9)
Discrimination Issues in the Hiring Process
DOJ Office of Special Counsel Opinion
How to protect against discrimination in the hiring process
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35. Documenting Indirect Job Creation Regional Center I-829 Petitions
What is the burden? Show the underlying facts in the econ report came true and the jobs are “deemed created”
Documentary Evidence - Verification of underlying facts found in the economic report:
Proof of construction expenditures (auditor’s report, invoices, proof of payments, expenditure reports)
Revenues – Audited Financial Statements of job creating entity
Tenant occupancy – Proof of tenants/leases and # of employees
Direct employees – USCIS position to prove W-2, payroll records, I-9s and immigration status
Visitor occupancy – hotel cases using visitor spending
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36. USCIS Policy – Material Change
Material Change Policy- December 2009 Neufeld Memorandum
No material change to business plan in between I-526 and I-829
What is considered material?
If material change, file new I-526, I-407, I-485 or CP
New 2 year period of conditional residence
Age out issues
Material Change Policy – Draft Eb-5 Memo January 2012 and its iterations
Changes prior policy, if made final
Conditions can be removed if investment sustained and jobs created
Material Change v. “Reasonable Time”
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37. What if the I-829 Is Denied?
USCIS Issues NTA with the I-829 denial decision
Investor appears before an IJ
Investor renews I-829 petition before IJ
Government has the burden in proceedings to prove that the I-829 was correctly denied - INA § 216A(c)(3)(D) [except late filed petitions]
Government has the burden to produce the immigration record
Investor can put on any additional evidence necessary
Appeals of denial to BIA and then to Circuit Court
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38. I-829 Litigation in Federal Court
If I-829 denied, but no NTA served on Investor, then there is a chance to litigate in U.S. District Court
Jurisdictional Issues
Stripped of jurisdiction if NTA is issued
Hinges on getting into Federal Court prior to NTA service
See Kyu Seock Lee et al. v. USCIS et al., 10-cv-1423, document 22, Order and Opinion Denying Motion to Dismiss for Lack of Jurisdiction, (CDCA June 2, 2011).
Allegations:
Declaratory judgment
APA (arbitrary and capricious)
Retroactivity
Ultra vires
Due process
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39. Disclaimer
This presentation outline and the presentation itself are for general educational purposes only and are not intended to provide specific guidance or legal advice about what to do or not to do in any particular case. You should not rely on this general information to make decisions about specific immigration matters. If you are not yourself a lawyer, you should seek the assistance of an immigration lawyer to help you resolve these issues. Thank you.
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