On Oct. 30, 2018, USCIS issued an update to the USCIS Policy Manual clarifying the types of agreements that constitute an impermissible debt arrangement. USCIS revised Part G, Volume 6, Chapter 2, Section A.2. to reflect various scenarios where an operating agreement of a new commercial enterprise will or will not constitute an impermissible redemption agreement.
As defined by USCIS, an impermissible debt arrangement is an arrangement whereby an EB-5 investor has a contractual right to repayment of the invested capital. The Code of Federal Regulations specifies that a contribution of capital in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement between the EB-5 investor and the new commercial enterprise does not constitute a contribution of capital for the purposes of the EB-5 Program. This principle is also supported by the precedential decision Matter of Izummi, which found that an arrangement where an EB-5 investor provides funds in exchange for an unconditional, contractual promise that such funds will be repaid at a fixed maturity date constitutes an impermissible debt arrangement.
In Matter of Izummi, the petitioner had a sell option that enabled him to require his investment be repaid at a certain price. Between Matter of Izummi and this update to the USCIS Policy Manual, USCIS has taken an expansive view of whether the terms of an EB-5 investment constitutes an impermissible debt arrangement. USCIS previously believed that sell options and purchase options constituted impermissible debt arrangements, oftentimes with the following language contained with a Notice of Intent to Deny: “’For the alien’s money truly to be at risk, the alien cannot enter into a partnership knowing that he already has a willing buyer in a certain number of years, nor can he be assured that he will receive a certain price.’ Matter of Izummi, 22 I. & N. Dec. at 186.”
This interpretation has been subject to multiple federal court litigations. Most recently, in Chang v. USCIS, the U.S. District Court for the District of Columbia found USCIS’ expansive view of the holding of Matter of Izummi and 8 C.F.R. 204.6(e) to be arbitrary and capricious. In Chang, the general partner of the new commercial enterprise possessed a call option to cause an EB-5 investor’s withdrawal of the new commercial enterprise by paying the EB-5 investor an amount equal or greater than the investment either before the investment was used to provide a loan or after the EB-5 investor became a lawful permanent resident. USCIS denied the I-526 Petition in Chang v. USCIS, claiming the call option constituted an impermissible debt arrangement. The court found that USCIS had acted in a manner that conflicted with the plain language of its regulations, was not compelled by statutory or regulatory purpose, unreasonably stretched the rationale of Matter of Izummi, and ran counter to the evidence in the record. Chang v. USCIS was the second federal court to make this holding.
USCIS has finally updated its Policy Manual to conform to these federal court decisions. The USCIS Policy Manual now states that USCIS generally does not consider options exercisable by the new commercial enterprise to be impermissible debt arrangements. Accordingly, operating agreements or limited partnership agreements of a new commercial enterprise may contain call options exercisable by the manager or general partner to pay an investor a set amount at a fixed date.
 8 C.F.R. 204.6(e).
 Matter of Izummi, 22 I&N Dec. 183 (Assoc. Comm’r 1998)
 Matter of Izummi, 22 I&N Dec. 183-185 (Assoc. Comm’r 1998)
 Chang v. USCIS, 289 F.Supp.3d 177 (D.D.C. Feb. 7, 2018).
 Doe v. USCIS, 239 F.Supp.3d 297, (D.D.C. Mar. 10, 2017).
 USCIS Policy Manual, Part G, Vol. 6, Chpt. 2, Sec. A.2.