Mark A Ivener, A Law Corporation

USCIS Holds Immigrant Investor Quarterly Meeting

U.S. Citizenship and Immigration Services (UCSIS) released its latest data on EB-5 filings and regional centers (RCs) at its June 30, 2011, “EB-5 Immigrant Investor Quarterly Engagement” stakeholders meeting. USCIS presented updates on case processing times and statistics, visa usage, I-924 (Application for Regional Center) guidance for annual reporting filings, and use of the governmental logo; RC economic analysis, including methodology and simple multiplier examples; and stakeholder suggested topics and questions, including the targeted employment area (TEA), solicitation of funds before official RC designation; the use of multiple legal organization plans, and reorganized and restructured businesses versus troubled businesses. There was also an open forum Q&A.

The following is a summary of selected points from USCIS’s presentation:

RC data. USCIS noted that there are currently 147 approved regional centers (RCs) operating in 39 states, including the District of Columbia and Guam. Most (90 to 95 percent) of the individual Form I-526 (Immigrant Petition by Alien Entrepreneur) petitions filed each year are filed by those who are investing in RC-affiliated commercial enterprises. There are 83 initial RC proposals, and nine RC proposals seeking to amend approved RCs, pending initial review with USCIS.

USCIS figures continue to show a steep increase in the number of RC filings and EB-5 visa approvals. The agency reported 146 initial RC proposal filings in the first and second quarters of FY 2011, compared to 110 initial filings in all of FY 2010. The number of amended RC proposal filings also increased by the end of the second quarter to 55, an amount equal to 131 percent of the 42 filings received for all of FY 2010.

The agency also reported that it has issued a higher percentage of approvals of RC filings. In the first and second quarters of FY 2011, the agency approved 25 initial RC proposals and denied 11, an approval rate of 69 percent. This was a big increase from FY 2010, when USCIS approved 36 and denied 30, an approval rate of 55 percent. The approval rate of amended RC proposals in the first and second quarters also rose to 78 percent, with 21 approvals and 6 denials. By comparison, in FY 2010 USCIS approved 42 amended RC proposals and denied 11, an approval rate of 71 percent.

USCIS also reported significant increases in individual I-526s and I-829s (Petition by Entrepreneur to Remove Conditions). In the first and second quarters of FY 2011, USCIS received 1,601 I-526 petitions, compared to 1,955 for FY 2010. The increase in the number of I-829 petitions was even more dramatic, with 1,150 received in the first and second quarters. By comparison, USCIS received 768 I-829 petitions in FY 2010.

In the first and second quarters of FY 2011, the agency approved 407 I-526 petitions and denied 96, while in FY 2010 USCIS approved 1369 and denied 165. USCIS approved 166 I-829 petitions and denied 26 in the first and second quarters, compared to approving 274 and denying 56 for FY 2010.

USCIS also reported that although the target processing time for I-526 petitions is 5 months, actual processing times are reaching 5.5 months; however, some in the field have said it is closer to 7 months. USCIS’s target processing time for both initial and amended RC proposals is 4 months; the agency reported current processing times of 4.5 months for initial RC filings but only 1 month for amended filings. For I-829 filings, the agency reports that it is beating its target processing time of 6 months; USCIS said current processing time for I-829 filings is 1 month. USCIS said it strives to finalize EB-5 cases within 30 days after responses to requests for evidence (RFEs) are received.

USCIS is on track to approve a record number of EB-5 visas. Its preliminary estimate is that 2,129 EB-5 visas were issued in the first and second quarters of 2011, compared to 1,885 in all of FY 2010. The previous record was 4,218 EB-5 visas issued in FY 2009.

TEA designations. USCIS said it is reviewing policy on TEA designations, keeping in mind that it must fulfill its responsibility to ensure statutory and regulatory compliance while not rendering a state’s TEA designation immaterial. In the meantime, USCIS is following current policy as set forth in its December 11, 2009, memorandum.

Soliciting EB-5 funds before designation approval. One questioner asked whether there is any restriction on an RC soliciting EB-5 funds before it receives its approved designation as an RC. USCIS said there is no specific prohibition on a proposed RC soliciting EB-5 funds before it receives its approved designation, but noted that the agency is aware that some prospective RCs have inappropriately represented on websites and in promotional literature that the entities have already received the RC designation. “Prospective regional centers may not make any representations that could potentially mislead an investor into believing that the entity has been approved for the regional center designation prior to the actual regional center approval by USCIS,” the agency noted.

Legal organization plans. Another questioner asked, when a U.S. business is unsure what legal organization would be best, may it submit several options with an RC petition or amendment? Will USCIS approve the ones that are acceptable and reject the ones that are not, without denying the entire petition? USCIS responded that an RC application may contain more than one legal organization plan. If upon review one or more of the legal organization plans do not appear to be EB-5 compliant, then USCIS will issue an RFE. If upon final adjudication USCIS determines that one or more legal organization plans are qualifying, USCIS would approve the RC application, and the legal organization plans that were deemed acceptable would be specified in the RC approval notice.

“Reorganized or restructured” versus “troubled.” The agency noted that there appears to be some confusion regarding the difference between a “reorganized or restructured business” and a “troubled business” for EB-5 purposes. USCIS explained that the “reorganized or restructured business” concept relates to the requirement that the commercial enterprise in which the EB-5 investor will invest must be “new,” which is defined in 8 CFR § 204.6(e) as “a commercial enterprise established after November 29, 1990.” USCIS also noted that 8 CFR § 204.6(h)(2) provided that a “new” commercial enterprise may consist of the “purchase of an existing business and simultaneous or subsequent restructuring or reorganization such that a new commercial enterprise results.” USCIS pointed out, however, that 8 CFR § 204.6(h) has been superseded by a subsequent statutory amendment (§ 11036 of Public Law 107-273) that eliminated the requirement that the investor had to establish the new commercial enterprise. Presently, an investor only has to invest in a new commercial enterprise.

USCIS noted that Matter of Soffici, 22 I&N Dec. 158 (Assoc. Comm. 1998) is a binding precedent decision that provides a detailed discussion regarding the factors that must be established to demonstrate that a commercial enterprise is new by virtue of being reorganized or restructured.

USCIS noted that if an immigrant investor makes an investment in a business that is already operating and does not meet the “troubled business” requirements, he or she may only be credited with jobs created as a result of the investment. Under the Soffici decision, a petitioner who acquires a pre-existing business must show that the investment has created, or at least has a reasonable prospect of creating, 10 full-time positions in addition to those existing before acquisition. The petitioner must, therefore, present evidence concerning the pre- acquisition level of employment. Simply maintaining the pre-acquisition level of employment is not sufficient unless the petitioner shows that the pre-existing business qualifies as a “troubled business.”

USCIS noted that the “troubled business” concept relates to the crediting of job creation through the preservation of jobs in an existing business that has incurred substantial net losses, and is defined as a business that has been in existence for at least two years, has incurred a net loss during the 12- or 24-month period before the priority date on the entrepreneur’s I-526, and the loss for such period is at least equal to 20 percent of the troubled business’s net worth before the loss. For purposes of determining whether the troubled business has been in existence for two years, USCIS noted that successors in interest to the troubled business will be deemed to have been in existence for the same period of time as the business they succeeded.

In the context of an RC investment project, USCIS said, “an acceptable economic analysis may demonstrate the preservation of indirect as well as direct jobs in a ‘troubled business’ through the EB-5 investment activity.”

In summary, the agency noted that issue of whether a business has been “restructured or reorganized” is related to establishing whether a business can be considered a new commercial enterprise. A “troubled business” must only be shown to have been “reorganized or restructured” if the commercial enterprise was established by November 29, 1990.

Use of governmental logos. USCIS said that it will be reviewing RC websites and promotional material as part of the I-924A review for inappropriate use of Department of Homeland Security and USCIS branding as well as material that is non-EB-5 compliant. The agency emphasized that it is illegal to use a governmental logo on nongovernmental EB-5 materials or websites.

Guidance on annual report filings. USCIS said it plans to devote a substantial portion of its September EB-5 stakeholder meeting to guidance on annual report filings for Forms I-924A that are due at the end of the year. USCIS said it has developed queries to generate RC- associated individual petition statistics. The data generated through these queries are still being validated but should be available at the September EB-5 stakeholder meeting as well.

USCIS also discussed RC economic analysis, including methodology and simple multiplier examples. USCIS’s agenda and full presentation are available here.

The full list of RCs by state is available here.

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Mark A. Ivener, A Law Corporation, a nationally recognized law firm, has successfully assisted hundreds of clients in immigration matters.