Six Things to Know about the August 29, 2016 EB-5 Stakeholder Engagement
On August 29, 2016, the U.S. Citizenship and Immigration Services (“USCIS”) hosted a “make-up” teleconference engagement with members from the Immigrant Investor Program Office (“IPO”) due to the poor technical audio issues at the July 28, 2016 engagement. USCIS did not repeat remarks previously made by IPO Chief Nick Colucci or by IPO Division Chief Lori Mackenzie.
Here are some interesting issues raised during the recent EB-5 stakeholder engagement:
- Update on Minors as Investors. IPO stated there is no age restriction in EB-5 regulations but also indicated that a minor normally lacks legal capacity to enter into certain types of contracts that are necessary to demonstrate the qualifying investment. The discussion indicated that an investor has the burden of proof to alleviate any concerns related to a minor’s capacity to contract and the possible voidability of contracts signed by a minor. Unfortunately, the IPO did not provide guidance on what documents could be used to prove that the investment contracts were binding, and the funds irrevocably committed and they indicated that each case would be analyzed on a case-by-case basis. Additionally, the IPO stated for the first time, that funds gifted by a minor investor’s parents can be wired directly into the projects escrow from a parent’s bank account, as long as child principal applicant can demonstrate his or her ownership of those funds (i.e. that the parents are transferring funds on the child’s behalf). For more information about minors as primary EB-5 applicants, click hereand here.
- Customer Support Information for Chinese EB-5 Investors. The IPO has published a Chinese-language version of the EB-5 customer support page. This has been done in recognition of the fact that the vast majority of investors are Chinese and will assist Chinese EB-5 investors with inquiries. IPO Director Nick Colucci mentioned that duplicate inquiry requests will be ignored and he advised all to wait at least 15 days before submitting another inquiry.
- Sustained Investment at I-829 Stage. IPO Deputy Chief Julia Harrison mentioned during the Q&A session that an investor “must sustain an investment during the two-year conditional residence period.” USCIS’ current adjudication policy requires an investment to be sustained during the entire period that the Form I-829 is pending. However, because there is an average processing time of 21.3 months for Form I-829s, as of June 30, 2016, IPO’s policy will have a huge impact on the structuring of EB-5 deals as it relates to repayment of capital. We do not expect any official guidance on this matter until 2017, despite the draft policy memorandum provided in August 2015. This poses a considerable additional burden on investors when evaluated together with the extended quota-based wait line for Chinese nationals. While presently only 30 months, it is expected that this waiting line will steadily increase creating undue hardship for Chinese investors. The two-year conditional period was designed to avoid fraud but this may now require investors to have their capital committed for 8-10 years, if the Chinese chargeable waiting line stretches to 4-5 years.
- Incorrect Factual Information in RFEs and NOIDs. In the event there is incorrect factual information in a Request for Evidence or Notice of Intent to Deny (like the name of certain entities), the IPO recommends using the email inquiry system (ImmigrantInvestorProgram@uscis.dhs.gov) to notify USCIS of the factual error, and if correct, USCIS may issue a replacement notice but only if the error impacts the ability to respond. Whether or not USCIS will do so within the strict 30-day period to respond to a NOID is not clear, so investors and their attorneys should still be prepared to respond to the NOID and in the process point out the incorrect factual information that USCIS based its analysis on.
- Use of Loans as EB-5 Investment Funds. The IPO confirmed that proceeds from a loan may qualify as capital used for EB-5 investments, as long as the indebtedness is secured by assets owned by the alien entrepreneur and the alien entrepreneur is personally and primarily liable for the indebtedness. Click here for more information on how the USCIS Administrative Appeals Office has recently ruled on this critical issue.
- Unanswered Questions. There were also many questions left unanswered by IPO, for example: (a) the status of pending I-526 petitions associated with a Regional Center that has been terminated; (b) the transfer of funds from an investor’s “friends and family” directly into project escrow; (c) the need to sustain job creation throughout the adjudication of a Form I-829; and (d) the future use of Chart B – Date for Filing for Adjustment of Status in order to “freeze a derivative beneficiaries age” under the Child Status Protection Act.
We are hopeful USCIS will provide answers to these critical issues as soon as possible and thank the IPO for providing meaningful guidance to immigrant investors and attorneys.
Reprinted with permission.
Bernard P. Wolfsdorf, Esq. and Joseph M. Barnett, Esq.: Bernard Wolfsdorf is the managing partner of the top-rated law firm, Wolfsdorf Rosenthal LLP (www.wolfsdorf.com), and the past national president of the 14,000-member American Immigration Lawyers Association (AILA). Established in 1986, Wolfsdorf Rosenthal LLP is known worldwide for providing exceptional quality legal services. With 19 lawyers and offices in Los Angles and New York, the firm was recently listed as a top-tier immigration practice by Chambers & Partners with several of the firm's attorneys listed in the 2015 International Who's Who Legal. Mr. Wolfsdorf specializes in EB-5 investment immigration in addition to the full range of global immigration matters. Joseph Barnettis licensed as an attorney in the State of Illinois and the State of Wisconsin and practices exclusively in immigration and nationality law. Mr. Barnett's practice focuses in the area of EB-5 Immigrant Investor Program; EB-1A foreign nationals with extraordinary ability in the sciences, arts, education, business or athletics; and other business immigration matters