On June 4, 2015, USCIS’ Immigrant Investor Program Office (IPO) hosted a stakeholder engagement to discuss expenses that are, or are not, includable for job creation under the EB-5 program. This engagement is part of the IPO’s EB-5 interactive series, which covers in depth topics and provides an informative discussion for EB-5 stakeholders. As stated by USCIS, this call was important because regional centers and EB-5 investors must submit evidence of job creation that results from the new commercial enterprise. Specifically, EB-5 investor’s must provide evidence at the I-526 stage that their investment will directly or indirectly create a minimum of 10 full-time jobs. As most filings rely on multiplier tables in an economic report (also known as input-output modeling) to estimate the number of jobs created, it is important to remember that in order to obtain a valid result, the expenses used in the modeling must be eligible for job creation purposes. Below is a summary of what was covered in the engagement:
Chinese buyers bought more U.S. homes, for more money, than any other foreign buyers last year, according to a new report released by the National Association of Realtors. The report is based on a survey of realtors about existing home sales to foreigners over the period of April 2014 through March 2015; for purposes of the report, the terms “China” or “Chinese” comprehend mainland China, Hong Kong, and Taiwan.
Of the approximately 209 thousand home sales involving a foreign purchaser, individuals from China accounted for the largest share of transactions at 16 percent, up 9 percent since this data was last collected in 2007. Together, home buyers from China purchased a whopping $28.6 billion worth of U.S. residential property during the year period. Impressively, this injection into the U.S. real estate market by Chinese buyers represented nearly double what Canadian buyers—the next largest foreign purchasing group and our geographic neighbors to the North—invested at $11.2 billion. Indian nationals make up the third largest purchasing group, which funneled approximately $7.9 billion into the American economy.
USCIS has issued a new Form I-829, Petition by Entrepreneur to Remove Conditions, with an edition date of May 7, 2015. Starting on Aug. 15, 2015, USCIS will only accept this edition.
The new I-829 consists of 13 pages of instructions and an 11-page form to be completed. There are a few important highlights of the new edition for attorneys, investors, and regional centers to note:
- More biographic information. Investors will need to disclose their height/weight, hair/eye color, and race/ethnicity, similar to what is presently done in Naturalization Applications.
- More information relating to the New Commercial Enterprise (NCE). The new form asks for additional information relating to the type of enterprise, similar to the I-526. Investors are also asked for the NCE’s North American Industry Classification Code (NAICS) and dates and amounts of all subsequent investments. The number of EB-5 investors in the NCE and their total capital must also be included. It is interesting to note this request, as it duplicates the information that regional centers are required to provide to the USCIS at the end of each respective fiscal year on the Form I-924A.
- Detailed information of direct job creation. In the new form, Investors must detail the number of full-time direct jobs at the time of initial investment and at the time of filing. Investors are also asked for estimates of direct jobs to be created within a reasonable amount of time if there is any delay in job creation.
- For Regional Center cases, detailed information of indirect job creation. Investors need to include a total number of indirect jobs created at the time of filing, as well as those to be created within a reasonable amount of time from filing. All RC-based filings must also include the RC Identification Number and the receipt number for the associated approved I-924.
- New procedures at the biometric appointment. At the time of the ASC appointment, the Form and instructions require the Petitioner to sign, under penalty of perjury, a declaration indicating that he/she has reviewed the I-829 filing and understand its contents, attesting that all materials filed are “complete, true, and correct.” The instructions to the new form recommend the petitioner review the filing prior to the appointment. If the petitioner cannot “make that attestation in good faith at that time,” USCIS will require the investor to return for another appointment.
The American Job Creation and Investment Promotion Reform Act, S. 1501, was introduced in the Senate by Senate Judiciary Committee Chairman Charles Grassley (R- IA) and Senate Judiciary Committee Ranking Member Patrick Leahy (D-VT). S.1501 seeks to reauthorize the program for five years and proposes a number of integrity reforms for the EB-5 program. EB-5 Investment Coalition has analyzed the Bill and produced a detailed section-by-section analysis.
A June U.S. Policy Metrics/Hamilton Place Strategies report Harnessing Private Capital For Job Creation: An Analysis Of The EB-5 Visa Program demonstrates the impact of the EB-5 visa program as a net job creator and budget-neutral catalyst for bringing private investment into the U.S. The report was commissioned by the EB-5 Investment Coalition (EB-5IC), a broad-based, bipartisan organization focused on reauthorizing and strengthening the EB-5 Regional Center Program. This report is authored by Steve McMillin, a partner at U.S. Policy Metrics and former deputy director of the White House Office of Management and Budget under President George W. Bush; Michael Solon, also a partner at U.S. Policy Metrics and former budget advisor to Senate Majority Leader Mitch McConnell (R-KY); and Matt McDonald, a partner at Hamilton Place Strategies and a former advisor to President George W. Bush.
Following USCIS’ recent stakeholder calls and the guidance issued on April 22 which signaled a departure from generally accepted successful strategies for source of funds, the industry has been abuzz with rumors as to what USCIS will and will not accept as the basis of a cash investment. One specific area of confusion involves Shareholder Loan cases. But to appropriate a famous quote by Mark Twain, rumors of the death of the Shareholder Loan case have been greatly exaggerated.
By way of background, many investors – especially those in China – prefer to make an EB-5 investment by investing cash derived from a loan. USCIS (taking a position that we would argue is not supported by the regulations) requires such loans to be collateralized with a personal asset valued at least as much as the loan itself. Although loans from banks collateralized with real property are the most common, many entrepreneurs seek loans from companies that they own, collateralizing their ownership equity as opposed to taking a profit distribution. The above-linked departure from historical USCIS practice affects these kinds of cases as well.
Yesterday, the U.S. Securities and Exchange Commission (SEC) ordered a US-based foreign finder operation to cease and desist from operation as an unlicensed broker-dealer. The charges are some of the first against brokers handling investments in the EB-5 Immigrant Investor Program and follow earlier SEC actions against fraudulent EB-5 offerings.
According to the SEC’s order, Ireeco LLC, of Boca Raton, Florida, and Ireeco Limited, a Hong Kong-based company operating in the U.S., were charged with acting as unregistered brokers for more than 150 EB-5 investors, which represents some $79 million of investments by foreigners seeking U.S. residency. The SEC Order states that Ireeco LLC and Ireeco Limited used their website to solicit EB-5 investors, some of whom were already in the U.S. on a temporary visa. Ireeco LLC and Ireeco Limited promised to help investors choose the right regional center to invest with, however most EB-5 investors were directed to a handful of regional centers that paid Ireeco LLC and Ireeco Limited commissions—about $35,000 per investor—once USCIS approved the investor’s petition for conditional residence. Neither company was registered as a broker-dealer while receiving these commissions, in apparent violation of U.S. securities laws. Without admitting or denying the SEC’s findings, Ireeco LLC and Ireeco Limited agreed to be censured and to cease and desist from committing or causing similar violations in the future. Ireeco LLC and Ireeco Limited will now undergo an administrative proceeding to determine whether they will be required to return their allegedly ill-gotten gains, pay penalties, or both, based on their violations.
As discussed in an earlier post, regulatory activity in the EB-5 area is increasing dramatically. Those with questions about compliance with the securities laws should seek advice from counsel before taking any action. Several years ago, Greenberg Traurig combined the efforts of its immigration team and its securities regulation team to provide comprehensive advice for industry participants. Greenberg Traurig regularly assists issuers, broker-dealers, regional centers and finders with understanding the broker-dealer rules, SEC/FINRA registration, and properly marketing EB-5 securities. If you have any questions about securities regulation in the EB-5 space, please do not hesitate to contact Greenberg Traurig.
The United States Conference of Mayors conference hosted their 83rd Annual Meeting on June 19-22, 2015 in San Francisco, California. The EB-5 immigration investor program was included in the adopted resolutions of the organization as listed herein:
WHEREAS, EB-5 is the designation for the fifth employment-based preference immigrant visa category established by Congress in 1990; and
WHEREAS, Congress established the Immigrant Investor Pilot Program in 1992 to create Regional Centers which aid foreign investors, by directing and professionally managing their investments while concentrating pooled investments in defined distressed economic zones; and
WHEREAS, EB-5 allocates 10,000 visas annually to foreign investors and their families who invest at least $1 million (or $500,000 in a target employment area) which must generate at least 10 jobs; and
WHEREAS, EB-5 has become a vital source of urban redevelopment funds; and
WHEREAS, since 2008 over $8.6 billion has been invested in qualified American projects; and
WHEREAS, that investment has supported over 171,000 American jobs; and Continue Reading
On June 16, 2015, USCIS announced the suspension of the USCIS Electronic Immigration System (ELIS) for Form I-526, Immigrant Petition by Alien Entrepreneur. Due to challenges with ELIS and in an effort to improve it, effective June 15, 2015, USCIS will no longer accept electronically filed forms for the EB-5 category. Additionally, USCIS ELIS will no longer support the Regional Center Document Library.
This change will not affect petitioners/applicants with pending cases in the system as of June 15, 2015. Filings submitted after this date must be filed in paper format. The following procedures will apply to pending electronic applications:
- Attorneys and customers who already started an electronic Form I-526 on or before June 15, 2015 will have 30 days from the day they commenced the application to complete it and submit it electronically. If the application is not completed within this period, a paper application will be required.
- Applications previously submitted through ELIS will continue to process and attorneys and customers will maintain continuous access to their electronic accounts.
- Applicants who filed Form I-526 electronically will retain access to ELIS to review existing documents uploaded by the document library manager, however the document library manager will not be able to create new document libraries. Applicants will be able to respond to RFEs and check case status online for electronically filed applications.
- Regional Centers will need to file documents in paper format in support of Form I-526 or Form I-924 applications.
For further information regarding the transition from USCIS ELIS to paper filed applications, please visit the USCIS ELIS website.
Greenberg Traurig attorney, Kate Kalmykov, was recently featured in The Real Deal article, EB-5: Who’s after China?, discussing new EB-5 investors in other countries.
Attorney Kate Kalmykov flew to China every other month last year to drum up EB-5 business. This year, her travel schedule includes new stops in countries including Vietnam, Brazil, Mexico and Dubai.