5 Things to Know about Ira Kurzban’s New “Use of Loan Proceeds for EB-5” Decision by the D.C. District Court


On November 30, 2018, a federal judge in the U.S. District Court for the District of Columbia issued a memorandum opinion regarding the use of loan proceeds for an EB-5 investment in a new commercial enterprise. The specific issue in Zhang et al. v. USCIS et al. was whether loan proceeds invested as cash constituted “cash,” as the plaintiffs claimed, or “indebtedness,” as USCIS claimed, and the court in a class certified decision agreed with the plaintiffs. Had the judge concluded loan proceeds were “indebtedness,” they would have been a prohibited source of income based on past USCIS Administrative Appeals Unit decisions.

Here are five things to know about this new EB-5 court decision.

  1. Regulatory Definition of “Capital” is Unambiguous . The court ruled that deference to USCIS’ interpretation was not warranted because 8 C.F.R. § 204.6(e) is not ambiguous.
  1. USCIS’ Interpretation of “Cash” is Plainly Erroneous . The court looked to the ordinary meaning of cash and ruled that cash loan proceeds “are not transformed from cash into another asset when invested. It found that USCIS was “seeking to overcome the regulation’s obvious meaning” by adding additional requirement to the regulatory definition of “capital” not found within the text.
  1. Use of “Cash” for EB-5 Investment . The court found that USCIS’ interpretation “narrows the definition of ‘capital’” and ruled that USCIS’ interpretation that “cash” only qualifies as “capital” if not derived from an uncollateralized, third-party loan, was “divorced from the language of its own regulations and the statutory purpose animating the EB-5 Program.”
  1. Legislative Rule. This case could be a critical turning point for EB-5, as the court found that USCIS violated the Administrative Procedures Act’s (APA) notice and comment requirement by creating a new rule through an IPO stakeholder meeting. The court found that USCIS’ interpretation resulted in effectively creating a “binding norm that is finally determinative” for EB-5 eligibility and thus qualified as a legislative, substantive rule subject to the notice and comment procedures. It is possible this may result in changes as to how USCIS makes policy. It appears the courts may require USCIS to follow the APA’s rule-making procedures more carefully, though only time will tell.
  1. Practical Considerations . The next step is determining how to provide remedies to the class, so these investors can reverse their denials, keep their critical place in the waiting line, and obtain their green cards. Some of these immigrant investors who received I-526 denials were entitled to get their investment capital back after the denial. Since this litigation has been a two-year process, these investors must now prove, after re-investment, that they have “invested or [are] actively in the process of investing” to maintain their valuable priority dates and complete their cases, without having to re-file and being subject to the lengthy waiting lines currently impacting Chinese, Vietnamese and possibly other nationalities.

If your I-526 petition was denied because of USCIS’ erroneous interpretation, please contact Wolfsdorf Rosenthal LLP to see how we can assist you in saving your priority date.

This post originally appeared on Wolfsdorf Rosenthal LLP

About The Author

Bernard Wolfsdorf is the past National President of the 15,000-member American Immigration Lawyers Association (AILA) and is Managing Partner of the top-rated Wolfsdorf Rosenthal LLP immigration law firm. The firm is known worldwide for providing exceptional quality legal services. With over 80 professionals including 18 lawyers, and offices in Los Angeles, New York and Shanghai, the firm provides high-quality, excellent-value global immigration services. Mr. Wolfsdorf specializes in a broad range of immigration areas, including business and EB-5 investment visas and he also handles the full range of global immigration matters. Best Lawyer’s US News and World Report ranked him as its 2018 “Lawyer of the Year” for Los Angeles. In 2017, Mr. Wolfsdorf was listed as Who’s Who Legal’ s “Leading and Most Highly Recommended Immigration Lawyer in the United States” for the 7th year. Mr. Wolfsdorf secured the top spot after earning the most votes from hundreds of highly-rated immigration lawyers around the world. WWL calls Mr. Wolfsdorf a “leading expert in EB-5” who has “strengths in many practice areas.”

Joseph Barnett is a partner at Wolfsdorf Rosenthal LLP and a member of the firm’s EB-5 and business immigration practices. He is licensed as an attorney in Illinois and Wisconsin and practices exclusively in immigration and nationality law. Mr. Barnett represents immigrant investors seeking permanent residency in the United States through USCIS-designated Regional Centers and investment in their own businesses. Mr. Barnett also assists developers with the establishment of complex corporate and financing structures for EB-5 capital. He works with economists, securities lawyers, business plan writers, and other professionals to prepare Regional Center applications, amendments, and project “exemplar” approvals.

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.