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  • Article: EB-5 Job Creation Issues: Is A Regional Center Project Preferable To A Direct Pooled Project In The Face Of EB-5 Visa Retrogression For China? By Mona Shah, Esq. and Yi Song, Esq.

    EB-5 Job Creation Issues: Is A Regional Center Project Preferable To A Direct Pooled Project In The Face Of EB-5 Visa Retrogression For China?

    by


    The news of visa retrogression for Mainland China EB-5 investors initially resulted in a flurry of information. The inevitable uncertainties arising from visa retrogression, however, have sparked much speculation and conjecture. Both agents and prospective investors in China remain confused as to whether they should invest in regional center or direct pooled projects under the circumstances. Although some practitioners advised that jobs in direct projects would need to be sustained for lengthy periods in the event of visa retrogression, the authority cited for such an onerous requirement warrants examination.

    WHY ARE SOME PRACTITIONERS SUGGESTING REGIONAL CENTER PROJECTS SHOULD BE THE PROJECTS OF CHOICE?
    The intended purpose of an individual EB-5 investment is to benefit the U.S. economy through capital investment and to create at least 10 full-time jobs for qualifying U.S. workers within 2 years of an investor receiving his conditional residence. Some practitioners have suggested that in the face of Chinese visa retrogression, investors should primarily invest in regional centers and forego direct projects (pooled or entrepreneur). Why?

    The reason this distinction is being made appears to be that the regulations at 8 CFR §204. 6(j)(4)(i)(B), providing that the business plan must show the need for not fewer than ten qualifying employees, along with the approximate dates within the next two years when such employees will be hired, is expressly relevant to direct projects. In contrast, the regulations relating to regional center projects do not contain a comparable two-year job creation rule. The Authors disagree -- rather, 8 CFR §204.6(j)(4)(ii) only requires evidence that the direct or indirect employment will be created from the investment that is made, but does not specify a time period within which such job creation must occur.

    STATUTORY AND REGULATORY REQUIREMENTS FOR JOB CREATION AND CONGRESSIONAL INTENT
    The statute provides plainly that job creation is a condition that is satisfied upon its occurrence, i.e. once the jobs are deemed to be created. The statute does not distinguish between jobs that may be filled or not filled, or those that never are made available or are subject to frequent turnover. The statute does not impose any conditions on the created jobs other than that they are to be full-time jobs. The fact jobs are being created and their full-time nature is not affected by whether the jobs are sustained for any particular period of time. Unlike the clear statutory mandate requiring evidence that the Petitioner's investment must be sustained for the 2 year period of conditional residence, there is no requirement whatsoever that the jobs created must be sustained for the relevant two-year period. Indeed, the statutory language is markedly distinct. The language of INA § 216A(d)(1)(A)(ii) provides specifically that the investment must be "sustained . . . throughout the period of the alien's residence"[1]. In contrast, INA § 203(b)(5)(A), which is referenced in INA § 216A(d)(1)(B), contains no such language and no such requirement.

    The same distinction is found in INA 216A(b)(1)(B) and (C), relating to termination of status for failure to sustain the investment. [2] Moreover, the corresponding regulations provide that the investor will be found to "have sustained the actions required for removal of conditions if he or she has, in good faith, substantially met the capital investment requirement of the statute and continuously maintained his or her capital investment over the two years of conditional residence."[3] No comparable finding is necessary to establish compliance with the job creation requirement.[4]

    The intent of Congress is contained in the language of the statute. It is well-established that when Congress uses language in one section of a statute and omits it in another section, the two sections are meant to be given different meanings. See INS v. Cardoza Fonseca, 480 U.S. 421, 431 (1987). Accordingly, the absence of any language stating that the jobs created in the course of the EB-5 investment process must be "sustained" makes clear that the EB-5 investors are not expected to sustain the job creation condition once it has been accomplished. To the extent that the regulations or agency policy goes beyond the terms of the statute and imposes such a requirement it is ultra vires and cannot or should not be enforced.

    Congress established the EB-5 Program in 1990 to stimulate the U.S. economy through capital investment by foreign investors and job creation. [5] Although job creation certainly was a principal interest in creating the EB-5 program, it was not the reason that Congress imposed a two-year. period of conditional permanent resident status. [6] Rather, the intent of Congress in making an investor's permanent resident status conditional for a two-year period was to deter fraud. As legacy INS observed in its rule-making process, investors are "admitted as conditional permanent residents as a means to deter immigration-related entrepreneurship fraud."[7]

    DEVELOPMENTS IN JOB CREATION STANDARDS
    Interestingly, the emergence of large scale real estate projects as part of the EB-5 program was not originally envisioned at the inception of the EB-5 program, and is instructive with respect to today's interpretation of the job creation requirement. In fact, in 2003, the 9th Circuit Court of Appeals decision in Spencer Enterprises, Inc. v. United States[8] made it extremely difficult to argue that construction jobs should qualify as full-time employment. In Spencer, the court held that full-time employment meant continuous, permanent employment, and as such, excluded the more temporary and seasonal jobs typically available in the construction industry. Id. at 1039. As a result, during this period, EB-5 construction jobs (direct and indirect) could not be included in final job creation numbers.

    The concept of job "permanency", introduced in Spencer Enterprises, supra. may be the factor that underlies the contention by some that an investor must show that 10 full-time jobs were created and sustained during the conditional residence period. Although it might be asserted that a permanent job is one that can be expected to last for 2 years, no such temporal limitation exists or applies. As used in the EB-5 context, a permanent job means one that is not temporary; it doesn't mean a job that may not change or even end unexpectedly.

    It was the financial crisis in 2008 that in fact, paved the way for the change. At the time, banks were unwilling to lend and many construction projects were halted prior to completion. Since the EB-5 program had been established to create jobs though alternative sources of investment capital, it made very little sense as a practical matter to stifle the growth of the construction industry, a large creator of jobs and provider of much needed tax revenues.

    Senator John Cornyn (R- TX) was the leading advocate for the inclusion of construction jobs in EB-5 investment projects. His December 10, 2008 letter to USCIS facilitated the change in the Service's views and interpretation of construction jobs. (See the "Neufeld Memo" issued on June 17, 2009.)

    The argument that regional center real estate projects should be preferred in the event of retrogression is certainly not one that logically flows from the origins of the EB-5 program. In light of visa retrogression, it is possible to accommodate direct project investments by construing the statute and regulations in a way that continues a reasonable and flexible approach to healthy EB-5 activity. Indeed, the example of how real estate and construction jobs were found acceptable over time under the EB-5 statute demonstrates that investors have not been required to show that jobs were sustained to be deemed acceptable for EB-5 purposes. Such flexibility is consistent with Congressional intent to stimulate the economy and create jobs without imposing rigid rules that in fact frustrate the purpose of the EB-5 program.

    POLICY SUPPORTING THE JOBS TO BE CREATED RATHER THAN SUSTAINED
    EB-5 has evolved tremendously over the last 3 years. Over this time, the program uniformly has adhered to a sensibly functional approach to the implementation of its provisions and avoided rigid, restrictive positions that would frustrate the purpose of the program.

    The policies implemented to date reflect USCIS's commitment to run the EB-5 program with the degree of reasonableness and flexibility that is essential to successful business operations. [9] It is notable that the EB-5 program allows an immigrant investor to become a lawful permanent resident without any job creation if the immigrant investor has established a new commercial enterprise, substantially met the capital requirement, and can be expected to create within a reasonable time the required number of jobs.[10] There is no implication that this relates to regional center cases only or is limited in any other way.

    Rather, it encompasses both regional center cases and direct pooled projects. In such a situation, all of the goals of capital investment and job creation need not have been fully realized before the conditions on the immigrant investor's status have been removed. Instead, the EB-5 program provides that if such an investor is otherwise conforming to the program requirements, the conditions generally will be removed and the immigrant investor will be deemed to be a lawful permanent resident.[11] Moreover, the statute does not require investors to sustain investment in perpetuity, as the statute specifically prescribes the period of two years as the time during which investment must be sustained.

    Although the EB-5 Program is seeking to attract individuals from other countries who are willing to put their capital at risk in the United States, "the entire amount of capital need only be at risk to some degree."[12] See also Matter of Izummi.[13] Furthermore, the EB-5 Adjudication Policy memo of May 30, 2013, reflects the intention of the program to "provide flexibility to meet the realities of the business world," and permits removal of conditions when circumstances have changed.

    DUE PROCESS AND THE FUNDAMENTAL RIGHTS OF AN INVESTOR
    Arguments relating to due process or fundamental rights ordinarily are not extended to employment or status-based immigration benefits conferred by statute. Notwithstanding this reality, certain practices being advocated in the context of today's Chinese visa retrogression deserve comment to the extent that they unfairly accommodate some immigrants and disadvantage others. Although Congress has deliberately enacted a statute that distinguishes among nationalities and categories of visa applicants, the interpretation of the statute and regulations need not be one that is inherently unreasonable or prejudicial when various options are available. Rather in the context of visa retrogression, adherence to an inclusive, flexible approach that is consistent with the EB-5 program's history is desirable.

    (1) id (emphasis added)
    (2) See also 8 CFR §§ 216.6(a)(4)(iii) and (a)(4)(iv) containing the same distinctions.
    (3)8 CFR §216.6 (c)(1)(iii).
    (4)Id. at 8 CFR §216.6 (c)(1)(iv).
    (5) See Public Law 101649, Section 121(a), INA § 203(b)(5). See also EB-5 Adjudications Policy Memorandum of May 30, 2013, PM-602-0083 at 1-2.
    (6) See 136 Cong. Rec. S7622, 7626 (daily ed. July 11, 1989); S. Rep. No. 101-55, at 21 (1989).
    (7) See Commentary to Final Rule, 59 Fed. Reg. 26588 (May 23, 1994).
    (8) Spencer Enterprises, Inc. v. United States, 229 F. Supp. 2d 1025, 1039 (E.D. Calif. 2001) aff'd 345 F. 3d 683 (9th. Cir. 2003).
    (9) EB-5 Adjudications Policy Memorandum of May 30, 2013, PM-602-0083 at 27.
    (10) INA §216A(d)(1); 8 C.F.R. § 216.6(c)(iii) and (iv).
    (11) Id. 8 CFR §§ 216.6(a)(4)(iii) and (iv). See also EB-5 Adjudications Policy Memorandum of May 30, 2013, PM-
    (12) Id. p.5.
    (13) See also Matter of Izummi, 22 I&N Dec. 169, 180 (Assoc. Comm'r 1998).

    Reprinted with permission


    About The Author


    Mona Shah, Esq.
    Mona Shah, Esq. has over 17 years of legal experience, with more than 13 years concentrated in U.S. immigration and family law and litigation. Mona’s extensive knowledge of all facets of U.S. immigration law, and her practical expertise ranges from specialist business petitions to complicated, multi-issue deportation and removal litigation. Her firm, Mona Shah and Associates, represents individual, high profile and corporate clients from all over the world. Mona is highly proficient and experienced in EB-5 law and practice, and is the author of a published book for investors on the EB-5 laws and procedures (EB5 for the Chinese Investor, available on Amazon). The second updated edition is scheduled to be published shortly. Mona is voted Top 25 EB-5 Attorneys by eb5investors.com and Top 10 EB-5 Attorneys by eb5info.com. She is also an adjunct professor at the Zicklin School of Business at Baruch University





    Yi Song, Esq.
    Yi Song, Esq. is an attorney at Mona Shah & Associates in New York City. Yi is a dual licensed attorney in the US (New York State) and in People’s Republic of China. Before joining Mona Shah & Associates, she worked at a securities litigation firm in Manhattan. She clerked at China’s highest court – the Supreme Court of People’s Republic of China. At Mona Shah & Associates, Yi practices EB-5 law and securities law and works on many successful EB-5 capital raising projects. She received her LL.B. degree from Beijing Foreign Studies University and she is a graduate from Georgetown University Law Center in Washington, DC. Her articles on EB-5 and securities law are published by LexisNexis, AILA, eb5info.com, eb5investors.com and ILW. Yi serves on the advisory board of eb5investors.com Magazine Chinese Edition and is a speaker on American Immigration Lawyers Association (AILA) EB-5 Conference. She writes a column for the Chinese newspaper Legal Weekly on American law and society. Yi is a native speaker of mandarin Chinese. She speaks fluent English and basic French.


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

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