Material Changes May Require Reevaluation BUT Not Mandatory Denial

by Joseph Whalen

As USCIS more successfully refines and clarifies its own as well as EB-5 stakeholders' understanding of the Tenant-Occupancy Methodology as evidenced by the Guidance Memo dated December 20, 2012, but released via e-mail on December 28, 2012, perhaps we should next shift our focus to another matter. How about we take a closer look at the infamous and dreaded "material change"? In the EB-5 context, an earlier concept from Matter of Katigbak was overzealously adopted in Matter of Izummi, infra. While there are certain concise issues to which it applies, it has grown beyond its appropriate application. This concept needs to be revisited in a new Precedent or through APA[1] notice-and-comment rulemaking. If not, the Federal Courts may impose impractical changes upon USCIS. It is for that reason and those that follow that USCIS, the Regional Center industry, and the EB-5 stakeholder community would be best served by USCIS being proactive on this issue.

Matter of Izummi, 22 I&N Dec. 169 (AAO 1998) holds, in pertinent part,
(3) A petitioner may not make material changes to his petition in an effort to make a deficient petition conform to Service requirements.

That same decision goes on to further explain the underlying requirement, thus:
"A petitioner must establish eligibility at the time of filing; a petition cannot be approved at a future date after the petitioner becomes eligible under a new set of facts. See Matter of Katigbak, 14 I&N Dec. 45, 49 (Comm. 1971), Therefore, a petitioner may not make material changes to a petition that has already been filed in an effort to make an apparently deficient petition conform to Service requirements." [emphasis added]

Matter of Katigbak, 14 I&N Dec. 45 (Reg. Comm., 1971), held:
To be eligible for preference classification under 203(a) (3) of the Immigration and Nationality Act, as amended, the beneficiary must be a qualified member of the professions at the time of the filing of the visa petition. Education or experience acquired subsequent to the filing date of such visa petition may not be considered in support thereof since to do so would result in according the beneficiary a priority date for visa issuance at a time when not qualified for the preference status sought. [emphases added]

I have advocated for change in the application of these principles. In the preference visa petition context, regardless of whether it is a family-based or an employment-based visa petition, certain changes MUST be prohibited, but not everything. The fifth preference, employment-based preference visa petition is truly in a class by itself. In the I-526 self-petition of an entrepreneur or investor, the alien is NOT seeking an opportunity to come to the U.S. to work. Instead, this alien is seeking an opportunity to come to the U.S. to create employment opportunities for U.S. workers. All that the statute[2] demands of the alien entrepreneur or investor at the I-526 petition stage is to have sufficient lawful funds and pledge to or go ahead and make an attempt to create a minimum of ten (10) full-time permanent jobs for U.S. workers. The implementing regulations further clarify that the alien entrepreneurs or investors must either show evidence that they have already created the jobs or present a plan to create them. This makes sense.

Alternatively, within the Regional Center context only, §610(c) of Pub. L. 102-395 (Appropriations Act of 1993), as amended all the way through 112-176 (signed into law on Sept. 28, 2012) [8 USC § 1153 Note] allows the EB-5 self-petitioning alien to comply with the job creation requirement by putting forth "reasonable methodologies" that demonstrate what additional "indirect jobs" the EB-5 "project" or "investment vehicle" will also create and count them too. It has become the industry standard that if one is submitting a Business Plan (BP) in support of an I-526 visa petition (or a Dummy I-526 as an I-924 Amendment Application) then that BP must be complaint with the agency's Precedent Decision, Matter of Ho, 22 I&N Dec. 206 (AAO 1998). Such BP would then become a foundational document and supplied to an economist who will use the information in that BP to formulate an Economic Analysis (EA) to predict the final job count for the proposed project/investment as well as other "positive economic effects" regionally and/or nationally.

It has also become the industry standard that the economist will utilize an Input-Output (I-O) Econometric Model to produce the EA. Among the models most prevalently utilized are: IMPLAN, RIMS II, the Washington State I-O model, REMI, and REDYN (pretty much in that order). USCIS does not dictate which model to use in any particular project. USCIS will critically examine whatever is offered as supporting documentation. If the evidence is convincing, the investor and/or the Regional Center will be given a chance to implement their plans. Success or failure will be up to the investor and/or Regional Center through the implementation of the plan as presented or as it might evolve along the way. Changes to the plan may demand the presentation of a revised BP and another EA at the last stage of the EB-5 process when an I-829 is filed to request that conditions be lifted from the investor's status. A new BP and EA might be more easily understood as a "hindsight report" of what was actually accomplished.

It must be remembered that a Regional Center will have previously submitted an I-924 Application in order to gain Regional Center Designation. It was in that much earlier I-924 process that the Regional Center defined its own operational parameters or the "scope of the Regional Center". In order for the Regional Center-affiliated EB-5 investor to benefit from the "indirect jobs", the project/investment vehicle cannot stray outside the previously USCIS vetted and approved "scope of the Regional Center". If the project/investment vehicle were to stray outside the approved "scope" then only EB-5 direct jobs would count. This is because the affiliation would be lost and the EB-5 investor would revert to the same legal position as a "stand-alone" EB-5 entrepreneur/investor. This means that only the "EB-5 direct jobs" which are on-the-books employees of a business in which the EB-5 entrepreneur/investor has an equity interest or ownership stake (including as a limited partner) can be counted to fulfill the statutory employment creation requirement.

It is at this point that one must revisit the approved "scope of the Regional Center". Precisely which "kinds of commercial enterprises" did that Regional Center previously present as those which it would seek to "create", "support", and/or otherwise "facilitate" in their "establishment", "survival", and/or "growth"? What mechanisms were previously presented and approved concerning the "manner in which the funds would be applied" to the projects/investment vehicles that the Regional Center previously stated in its earlier application or any subsequent amendment to the "scope"? The answer the immediately preceding question is where we would find the money-to-jobs nexus which was previously found to be sufficient for EB-5 purposes. Exactly what "reasonable methodologies" were previously presented and found acceptable by USCIS? Taking these factors as the bare minimum of factors to consider in the analysis: how does the BP as implemented, stack up to the previously approved "scope"? In the "hindsight report", are previously approved "reasonable methodologies" utilized in the new job creation analysis? In sum, does the actual project as implemented withstand the "within the scope analysis" necessitated by a material change or multiple material changes from what was previously presented and approved? A variety of hyper-technical matters were previously presented and settled, some may permissibly change to a degree but others may not. These are case-specific, fact-specific, and highly individualized determinations.

That's my two-cents, for now.

1Administrative Procedures Act (portions of 5 USC).

2INA § 203(b)(5) [8 USC § 1153(b)(5)]

About The Author

Joseph Whalen is not an attorney. He is a former government employee who is familiar with the INA. His education is in Anthroplogy with a concentration in Archaeology and has both a BA (from SUNY Buffalo) and an MA (from San Francisco State University) in Anthroplogogy. He previously worked as an Archaeologist for the U.S. Forest Service before becoming an Adjudicator with INS which became USCIS.

The opinions expressed in this article are those of the author(s) alone and should not be imputed to ILW.COM.