Consequences of New Wait Lines for Chinese EB-5 Investors-Four More Reasons to Support Immigration Reform

by Bernard P. Wolfsdorf and Minjie Xu

Charles Oppenheim, the Chief of Visa Control at the U.S. Department of State, recently announced that if EB-5 visa usage for Chinese nationals continues to grow, the issuance of EB-5 immigrant visas for Chinese investors may slow down sometime in the second half of fiscal year 2013. As demand continues to increase we can expect to see a quota waiting line appear during the period April 2013 until October 2013. Chinese EB-5 investors with approved petitions should do everything possible to move up their final interviews and avoid any delays, or they may be stuck in this new waiting line. This would be the first time in the over 20 year history of the program that a cut-off date will have been established in the Employment Fifth Preference category.

Mr. Oppenheim did say if this happens, the Department of State would consider opening up the quota again in October 2013 when the 2014 immigration fiscal year begins. While China continues to take most of these EB-5 visas, we are seeing demand from other countries increasing steadily so Chinese EB-5 investors must expect to see delays. The big question is, how long will those delays be? Because petitions are currently taking 6-8 months to adjudicate, we would realistically expect to see delays of up to one year, otherwise this retrogression would have little impact on the quota.

The impact of a visa wait line could be far-reaching. Below are some possible consequences for Chinese investors:

1) Ability to adjust status in the U.S.

Mr. Oppenheim has indicated the waiting period could be a few months to more than half a year but the actual retrogression depends on visa usage. If there is a waiting line, this would affect applicants who are currently in the U.S. under another legal status wishing to adjust their status once their EB-5 petitions on Form I-526 are approved. To adjust status, applicants need to maintain their legal status in the U.S. and have a visa number immediately available. For example, if an applicant is under F-1 status, and he is expecting to graduate in a year, it is possible he or she will not be able to adjust status assuming the processing time for I-526 is 6 – 8 months and the visa waiting period is longer than 6 – 8 months. In this case, the applicant will need to have sufficient time on their current status to remain in the U.S. so as to apply to adjust status. While other employment based categories allow for up to 6 months of unlawful status under section 245 (k) of the Immigration and Nationality Act, the EB-5 category does not allow for adjustment under section 245(k). Therefore, even one day of unauthorized employment or being out of status will cause the adjustment application to be denied. In that case, the applicant must depart the U.S. and will have to apply for an immigrant visa through the U.S. Consulate in his or her home country, when the priority date becomes current.

2) Age-out issue

Many EB-5 applicants have college-age children. For those applicants whose child has an age-out issue, there is hope for relief in some case, but not in all. The law allows the child to deduct the time the petition takes to be adjudicated from his or her actual age to potentially still be under the age of 21 at the time of applying for an immigrant visa or, filing for adjustment of status in the U.S. However, the backlog waiting period for a visa number cannot be deducted for this purpose. For example, Mr. Z files an I-526 petition two months before his child turns 21. If the adjudication of the I-526 takes 6 months, the child is still eligible for a green card as a derivative as long as he files the next adjustment application within 2 months of approval of the I-526, because the son’s age “freezes” for the immigration purpose during the adjustment adjudication. However, if there is a backlog at the time of I-526 approval, the child starts to “grow” again during the waiting period. As a result, if the waiting period is more than 2 months, the child may not be able to get the green card through his father’s application. Also, immigration requires the applicant to apply within one year of the date the priority date became current. So if the priority date was current and the applicant does not apply, and the EB-5 category later retrogresses, the child may lose the chance to immigrate with his or her parents. If the child starts the immigrant visa application process when the priority date was current by paying the required fees to the National Visa Center, his or her CSPA age remains “locked-in” and visa processing can continue when the priority date is current again. If not, the child’s CSPA age will be re-calculated once the priority date is current again. If at that time the CSPA age is still under 21 years, he or she will then be able to start the application process. If not, the child may be out of luck. The bottom line is some parents who are now filing just before their child turns 21 year old, may already be out of luck and their children may not be able to immigrate simultaneously. Fortunately, there has been some success with recent litigation that may provide relief for some of these children who will age out.

3) Feasibility of the business

In the stand-alone program, the investor is required to actively manage the business. However, the backlog in visa issuance will delay the investor’s entry to the U.S. creating a huge obstacle as the investor may not be allowed to work, or even visit the U.S., without another type of visa. During this time, the investment funds may not be available for the commercial enterprise, and there may not be any qualified management to run the business. Not only would further delays make it difficult for investors to seize business opportunities, but their ability to make commitments that would assist economic development would be severely impeded. This is one program where it simply is not going to be feasible to expect businesspersons to make substantial investments, and thereafter be unable to enter the U.S. to manage or direct their business enterprises. This would be like selling an automobile, without an engine.

4) Impeding the ability to file Form I-829, Application to Remove Conditional Nature of Permanent Residence

Most regional center projects today structure their investments as a loan to the job-creating enterprise where there is an undertaking to return the funds to the limited partnership that EB-5 investors formed. Most of these loan agreements anticipate a 5-6 year loan term. Therefore a backlog in issuance of the immigrant visa, even though the funds are released into escrow upon approval of the petition, will cause delays in the ability to file the I-829 application. If the visa wait backlogs are substantial, it is possible that at the time of the payback of the loan, the investors’ I-829 applications may not yet have been filed or adjudicated. This becomes a problem because USCIS may determine the capital is no longer “at risk”. Currently some EB-5 applications take close to 4 ½ – 5 years to complete, even without visa backlogs. If the loans are repaid prior to the approval of the final I-829, the funds may not be at risk and could impact the approvability of the final application. During a recent EB-5 stakeholder meeting, USCIS said it would be safest if investment funds were not returned to the investor before the I-829 adjudication is completed.

With only 10,000 visas available worldwide, and as the EB-5 program becomes more and more in demand amongst Chinese (and other) investors, a backlog will inevitably come. Exactly how long and how serious is not yet possible to predict. What we do know is adding additional uncertainty to the program, with this lingering visa wait line, is not what is needed to make the program work. The good news is the program has bipartisan support in Congress, and while Republicans are opposed to increasing visa numbers (that have been frozen for over 20 years) it is hoped Congress will do the right thing and add visa numbers for employment (and hopefully family) visa categories soon. The time for immigration reform is now.

About The Author

Bernard P. Wolfsdorf is a recent past President of AILA and Managing Partner of the top-rated Wolfsdorf Immigration Law Group with offices in Los Angeles and New York. Mr. Wolfsdorf has had a major impact on the practice of immigration law and a long history of commitment to AILA. Mr. Wolfsdorf is the recipient of the 2011 American Immigration Lawyers Association (AILA) Service Excellence Award for outstanding volunteer services advancing the mission of AILA for its members and the public. He has put in thousands of volunteer hours for the association and its members. For the previous three years, Mr. Wolfsdorf was named the "most highly rated immigration lawyer in the world" by the peer-reviewed International Who's Who of Business Lawyers. Best Lawyers in America selected Mr. Wolfsdorf as its “2012 Lawyer of the Year for Los Angeles.” Mr. Wolfsdorf has been recognized as one of the nation's Top 10 Immigration Lawyers by Human Resource Executive magazine. He has been a California State Bar-Certified Specialist in Immigration and Nationality Law for over 20 years.

Minjie Xu is a licensed attorney in the state of New York and practices exclusively in Immigration and Nationality Law. Mr. Xu has extensive experience assisting with EB-5 investment-based immigrant petitions and possesses substantial financial knowledge regarding financial reports, private placement memoranda, economic forecasting models, and business plans that enables him to assist with investor visa cases. He assists with employment and family-based immigrant and non-immigrant petitions.

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