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  • Article: Surviving and Thriving in Times of EB-5 Quota Backlogs By H. Ronald Klasko

    Surviving and Thriving in Times of EB-5 Quota Backlogs

    by


    I have written several blogs on the anticipated EB-5 quota backlog, what it means and what it does not mean. This is a different blog. This blog is focused on how regional centers, project developers and migration agents can prepare for – and maximize opportunities during – times of quota retrogression.

    First, let’s discuss where we are today. The chances of EB-5 quota retrogression in 2015 for investors born in China remain very high. It is likely that the quota retrogression will commence in the April to July 2015 timeframe. The cutoff date will likely be sometime in 2013. Once a cutoff date is set, it will likely move slowly month to month – perhaps two to three weeks per month. This means that the quota backlog will continually get longer. That will continue indefinitely unless and until either the Congress or the President takes action to increase the numbers.

    The chances of the Congress increasing the numbers are not good. Most likely, EB-5 numbers will not be increased until quotas for all other immigration categories – employment and family – are addressed. Quotas for all categories likely will not be addressed outside of comprehensive immigration legislation. The chance of comprehensive immigration legislation in the near future is highly speculative at best.

    There are two possible presidential executive actions that could address the problem. One is removing family members from the worldwide quota. This author believes that such presidential action would be justified based on the existing language of the Immigration and Nationality Act, but the politics behind taking such action relating to EB-5 and other immigrant quotas are complicated at best. The other possibility – which might have a greater chance of happening before the end of the year – is presidential action to “recapture” unused visa numbers. This would not be as good of an administrative solution as removing family members from the quota, but it would provide at least a short term fix that would likely eliminate EB-5 quota backlogs for at least a year or two. The prospect of a presidential decision to recapture unused visa numbers is also speculative, but perhaps better than the chance of removing family members.

    So what actions should be taken in the short term to prepare for the onset of an EB-5 quota waiting list for China? Here are some thoughts:

    1. Encourage investors who are interested in the EB-5 program to invest now. It is almost certainly already too late to avoid the impact of the quota backlog. However, there is no doubt that investors who invest in 2014 and 2015 will have far shorter waiting lists than investors who invest in subsequent years.

    2. Explain to investors that what looks like a two year backlog is really less than one more year than the current wait. Let’s assume that in the middle of 2015 a cutoff date of June 2013 is established. This looks like a two year wait for investors. However, the current I-526 processing time is approximately 14 months. This means that investors currently have a 14 month waiting period. In this example, the additional waiting period would only be 10 months.

    3. Encourage investors with children to invest sooner than they otherwise would have. The prevailing wisdom has always been that it is sufficient to file the I-526 petition before the child turns 21 in order to prevent the child from aging out. As explained in previous blogs, this will no longer be the case when quota backlogs set in. Investors with children who are approaching age 18 should be encouraged to invest now in order to maximize the chance that the child will be able to immigrate with the family.

    4. If the child is already over age 18, consideration should be given to having the child be the investor, which eliminates any concern about the child aging out. If the entire family wants to immigrate, two $500,000 investments would be the safest course.

    5. Explain to investors that the quota backlog in the EB-5 category is likely to be far shorter than the quota backlogs in almost every other category of family and employment-based immigration for people born in China.

    6. Encourage investors to invest sooner rather than later to avoid an increase in the investment dollar amount. Through either administrative action or Congressional action, it is certainly possible that the minimum investment amount could be increased within the next year or two. Although this is far from a certainty, an investor who invests while the level is $500,000 will be grandfathered, even if there is a subsequent increase in the minimum investment amount. Also, it should be noted that the $500,000 investment amount – while it still exists – is lower and often substantially lower than investment amounts required in other countries with investment immigration programs.

    7. Explain to investors that the waiting lists actually provide increased safety and somewhat less risk relating to the condition removal and ultimate permanent residence process. Here is why: the key to the condition removal process is jobs. The delay in the onset of the investor receiving conditional residence will mean a delay in the ultimate filing date of the condition removal petition. This means that the developer will have more time to create the necessary number of jobs. This can be very important in projects with unexpected delays. In addition, many projects previously counted only construction jobs because operations – or at least stabilized occupancy – would not occur until after the condition removal process. With the delay in the condition removal window, developers will now be able to include operations jobs, thereby potentially increasing both the number of jobs and the potential EB-5 capital raise.

    8. Another silver lining for the regional center and project developer is that EB-5 quota retrogression will not delay the availability of investment funds coming into the project. Since quota retrogression does not delay EB-5 petition approval, and since funds flow to the project on or before EB-5 petition approval, the delay affects only the dates that the investor can immigrate to the U.S. It does not delay the availability of EB-5 investment funds to the project.

    “Every cloud has a silver lining.” EB-5 quota retrogression, without doubt, is a cloud. Hopefully, the information provided in this blog provides the silver lining.

    We will hear directly the perspective of the Chinese migration agents on the impact of the expected quota retrogression at our seminar on February 25, 2015.

    Related Information:


    This post originally appeared on EB-5 Resource Center on November 6, 2014. Reprinted with permission


    About The Author


    Ronald Klasko H. Ronald Klasko is recognized by businesses, universities, hospitals, scholars, investors and other lawyers as one of the country’s leading immigration lawyers. A founding member of Klasko, Rulon, Stock & Seltzer, LLP and its Managing Partner, he has practiced immigration law exclusively over three decades. Under his leadership, the firm was chosen with five other firms by Chambers Global in 2006, 2007, 2008 and 2009 as the top U.S. business, hospital and university immigration law firm. Ron, himself, was named as the world’s most respected corporate immigration lawyer (The International Who’s Who of Business Lawyers 2007 and 2008) and one of the country’s top immigration lawyers by clients and other immigration lawyers who said he is “revered for coming up with unique arguments that can save a client” (Chambers Global). A former National President of the American Immigration Lawyers Association (AILA), Ron served as General Counsel of that organization for three Presidents and has been a member of its Board of Governors since 1980. He has served as National Chair of AILA’s U.S. Department of Labor Liaison Committee and Business Immigration Committee, and he served as National Chair of that organization’s INS General Counsel Liaison Committee, Department of Labor Liaison Committee, and the National Task Forces on Labor Certifications, H-1 visas, L-1 visas and Employer Sanctions. He presently serves as Chair of the EB-5 Committee.


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

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