Direct EB-5 Makes a Comeback

by

H. Ronald Klasko










Long Delays in I-924 Adjudications Continue








The adjudication of I-924 applications for regional center
designation, amendments of regional center designations for geography or industry code and exemplar I-526 (project pre-approval) has, for all
practical purposes, ground to a halt. This is not news. Its roots can
be traced to the months preceding the February 9, 2012 announcement by
USCIS of the implementation of its new policy on “tenant occupancy
methodology.” Many I-924 applications were pending for lengthy periods
of time – sometimes one year or longer – at the time the new policy was
announced. Those applications, as well as virtually all of the
applications filed in the intervening months, have remained pending.
One RFE on these applications is a minimum. Many have been the subject
of two or three RFEs. Virtually all such applications have one thing in
common – they remain pending. Approvals or denials are a rarity.

There are various speculations as to the reason that USCIS refuses to
adjudicate these applications. Perhaps we will explore some of the
possible theories in a future blog. Suffice for now to state that I
believe the number one candidate is the failure of USCIS after nearly
one year to formulate its policy on tenant occupancy coupled with the
fact that most I-924 applications either have some element of tenant
occupancy contained within them or the Service believes that its policy
on tenant occupancy could ultimately affect its adjudication of the
remaining petitions. This state of affairs raises two issues. First, what to do about it.

Second, how it changes strategies for regional centers and project
developers.

Regional centers and project developers have two choices:


  • Be patient and hope that some action is imminent even though no signs presently point in that direction; or

  • File a mandamus action in federal court.


For those unfamiliar with mandamus, it is the procedure established
by Congress to empower federal courts to force government agencies to
adjudicate – approve or deny – pending applications for which
adjudication has been unreasonably delayed. The procedure is relatively
straightforward and often results in prompt adjudication of the pending
application. In almost all cases, USCIS adjudicates the petition prior
to the court order because USCIS is responsible for paying the legal
fees of the petitioner if the court grants the mandamus and determines
that the USCIS inaction was not “substantially justified."

The last time we experienced pervasive USCIS delays was when large
number of applications for adjustment of status to permanent residence
and applications for naturalization were held up pending indefinite
delays in the FBI issuing security clearances. Many hundreds of
mandamus actions were filed, resulting in USCIS not only taking action
on the pending applications but also revising its procedures so as not
to delay such applications in the future. So how has the USCIS inaction changed the strategy for developers
with projects seeking EB-5 capital? Unless the developer is willing to
wait an indeterminate amount of time – probably at least one year or
longer – for approval of a new regional center application, an amendment
or an exemplar I-526 petition, the strategy of choice is to find an
existing regional center that is approved for the geographical area and
the industry code of the project and negotiate an arrangement whereby
that regional center will “host”, “sponsor” or “adopt” the project.
Such an arrangement allows the developer to market the project
immediately rather than waiting a year or more to begin marketing for
investors.

This strategy may be implemented in conjunction with filing of an
I-924 application. The I-924 application could be based on a
hypothetical project, which will enable the developer to market future
projects under its own regional designation assuming that the I-924 is
eventually approved.

Another option that we have advised developers to consider is a
direct EB-5 proceeding concurrently with the adjudication of the I-924
application for regional center designation. If the project will have
enough direct employees to raise sufficient capital to move the project
forward, the project can be marketed to direct EB-5 investors with
future investors relying on indirect and induced employment once the
regional center is approved.

One of the indirect results of the I-924 stalemate is the realization
by investors and investors’ agents that looking for projects that have
been “pre-approved” is no longer an option. Since the project
pre-approval requires the filing of an amended I-924, since the quoted
processing time for amended I-924s is ten months and since all of these
applications get at least one RFE, investors and their agents are coming
to realize that investment opportunities being offered in the
marketplace are likely not to be pre-reviewed or pre-approved by USCIS.

Finally, one last strategy being considered by developers is
purchasing an existing regional center that has an approval for the
desired geographical area and industry code. Unfortunately, this is not
a complete solution to the problem. USCIS takes the position that a
change of ownership requires an I-924 amendment filing. Although it is
unclear whether the amendment filing is more in the nature of a
notification or a request for approval, it is possible that USCIS will
take the position that I-526 petitions filed while the amendment
application is pending are not approvable and may even have to be
refiled after the amendment is approved.

This entire scenario is indeed unfortunate. An exemplary government
program that brings foreign direct investment to the U.S. and creates
countless numbers of jobs is being thwarted by government inaction. The
purpose of this article is to clarify that some options may be
available to counteract this dilemma and hopefully to once again put the
EB-5 program in motion, so that it can achieve its laudable goal.





About The Author






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.





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