The EB-5 Highway: The Risks & Rewards in Racing to Acquire Regional Center Status

by Michael Harris

Today, more business developers are interested in the EB-5 Visa, which has been reported by the news media as potentially being a less expensive means of obtaining financial capital for commercial enterprises. A race to obtain EB-5 capital is well underway with many competitors seeking rewards, but not fully comprehending the inherent risks. There are a few different options for businesses to enter the EB-5 arena, such as by offering direct non-Regional Center pooled investments; entering into an umbrella licensing agreement with an existing regional center; or forming a new regional center. This article is written to describe the risks and rewards for those seeking to claim the highly desired title as an EB-5 Regional Center by purchasing an existing one.

Created over 20 years ago, the Immigrant Investor Pilot Program, otherwise known as the EB-5 Regional Center Program, has only recently started to experience exponential growth in the number of commercial enterprises approved to act as a “Regional Center” by the U.S. Citizenship and Immigration Services (USCIS) (available at In 2007 there were 11 existing Regional Centers in 2007; in contrast, today there are currently 292. See">1 In the next year, that number may once again increase by unexpected amounts.2 Perhaps, as a result of this demand, in only the last few years the manner in which USCIS has regulated EB-5 Regional Centers in the EB-5 marketplace has drastically been transformed. In order to bring more formality to the process, in August 2010, USCIS introduced a new application process that requires a new set of forms called the I-924 and I-924A. Each form must be used for requesting initial designation of an EB-5 Regional Center and for approved regional centers to use each calendar year in order to report their business activity to USCIS. With the force of law, the application process has augmented many of the objectives initially set out by the Pilot Program passed into law in 1992, as well as by introducing new rules which are not specified by the properly promulgated regulations. For example, the new application process mandated that each request for designation specifically state the North American Industry Classification System (NAICS) codes that are relevant to the desired projects. This was not the case before, nor included in the law or regulations, and many regional centers were able to obtain designations without a specific NAICS code designation. Many regional centers continue to exist and operate without having a formal NAICS. As well, many regional centers have wide geographic scopes, with some encompassing entire states. Today, in the submission of Form I-924 filings, USCIS limits regional centers to geographic scopes which have a nexus to the specific planned job creating projects and regional economic impacts. Hence, each of these factors raised above are critical when considering whether to purchase an existing regional center, especially one which was designated prior to 2010. Will the purchase of an existing regional center without any NAICS codes attributed to it cause any foreseeable problems? What if the new planned projects occur in regions of a state nowhere near any of the previous regional center owner’s projects?

The road barriers to seeking a new EB-5 regional center designation are clouded by the long processing delays currently ongoing EB-5 adjudications, as well as by the planned relocation of the USCIS EB-5 Program Office from California to Washington, D.C. During the last few years, the adjudication processing time for approving new EB-5 Regional Centers has drastically increased. In October 2010, the USCIS was reporting that processing times for designating new regional centers was 5 months and for amending existing regional centers it was 1 (available at">3 Today, processing times are reported at an estimated 9 months for initial I-924 applications and 10 months for amendments to existing regional (available at, published on October 14, 2010.">4 Yet many EB-5 Regional Centers and pending applicants will tell you the process can take over a year. It is therefore extremely critical for commercial enterprises seeking to rely on capital from the EB-5 program for new projects, which are either included with a request for designation as a new Regional Center or subject to a USCIS amendment, to seriously consider the effect current estimated processing times may have on their plans to obtain EB-5 capital. As such, it is this principle concern why many companies that are new in the EB-5 arena may consider acquiring or purchasing an existing EB-5 Regional Center in order to speed up their ability to raise funds. If a business owner has a project that is ready to commence operations or construction, why wait over a year if they can start raising EB-5 capital tomorrow?

Regional Centers are limited in both their geographic and industry scope, as determined by USCIS in a designation approval letter. Being able to avoid having to seek either a new Regional Center designation or amendment by USCIS is a very attractive option. Controlling your own regional center for your own planned project may reduce the costs in entering a licensing agreement with regional center.5 But there are other reasons why it might be fraught with difficulties. Points to consider are that many older regional centers were broadly approved for geographic areas and industrial sectors without having to undergo today’s strict requirements to submit specific, verifiable sourced information for their projects. These older regional centers, properly approved in years past by USCIS and the legacy Immigration and Naturalization Service (INS), do now know how recent changes to the EB-5 Regional Center program may impact them or if USCIS will implement new policy. Some regional centers are left to interpret non-binding written correspondence between their companies and the USCIS. Regional Centers that are designated today with specific NAICS industry codes are divided among the Regional Centers from just a few years ago which were not required to utilize NAICS industry codes. It’s currently a land of the haves and have-nots. Some actual projects have not been required to seek USCIS pre-approval. Yet others, new to the EB-5 marketplace are advised to seek such pre-approval by USCIS through the submission of an I-924 or I-924 amendment, along with a request for a decision on an exemplar I-526 petition which will fully comply with EB-5 law, policy, and precedent court decisions. If seeking to purchase an existing Regional Center, the new owners should be cautious in evaluating whether their planned projects will receive increased scrutiny by USCIS.

In general legal terms, purchasing an existing, ongoing business can come with a host of liabilities and obligations for a purchaser. Purchasing or incorporating a going business, or forming a new business entity and acquiring the assets of a business may not mean that the new company can escape all of the preexisting liabilities. In comparison, those seeking to purchase an existing regional center, which is a corporate entity that may take a number of different state-government authorized forms (e.g. corporations, limited liability companies or LLCs, or other partnership types), should consult with a qualified business law and U.S. securities law attorney licensed in the state in which they will purchase the company. Within each regional center, U.S. securities offerings (which are typically seeking an exemption from SEC and/or State Blue Sky registration) are made, marketed and sold to foreign investors, and thus the regional center or project owner may be an issuer under SEC rules.6 From an immigration point of view, there are also a number of risks and liabilities, as well as rewards, which may be derived from purchasing an existing EB-5 Regional Center – even if certain business liabilities do not transfer on a corporate, transactional, or securities law basis. For example, many EB-5 Regional Centers will serve as the general partner to limited partnerships that receive equity interests from, or provide loans to, EB-5 projects which each may take five years or longer to fully distribute and return capital (if available) to foreign EB-5 investors. Even if a Regional Center’s prior owners were not the general partner (or manager in the LLC context), the new purchasers may still have various immigration liabilities because the prior owners licensed the Regional Center’s USCIS designation to non-affiliated businesses. Additionally, the winding up and liquidation of any EB-5 Regional Center projects can become complicated because they cannot return an investor’s capital contribution until a minimum of 5 years has passed, or at least until the foreign investor’s conditional residence is removed. Hence, if someone desires to purchase an existing EB-5 Regional Center, they may be required to assume the role (or comparable liability) as general partner of any ongoing EB-5 projects. Thus by taking on a management role in overseeing any preexisting EB-5 projects, new owners of a Regional Center will be advised to engage in an audited accounting, business review, and review of past marketing practices in order to evaluate items such as current liabilities, accounts receivables, and potential U.S. securities violations which may impact the Regional Center’s ability raise more capital.

In a perfect world, even if from a financial or corporate standpoint that a new Regional Center owner does not maintain financial liability for the debts, legal liabilities, and financial hazards of their center’s past owners, there are still immigration risks based on the past conduct of previous owners. The USCIS imposes strict reporting requirements via its mandatory I-924A annual report which must be filed prior to the end of each calendar year. The Form I-924A is a new creature of creation, developed by USCIS in 2010 as a means of bringing more oversight to the program. As provided by USCIS in its instructions to the form, last viewed on May 1, 2013.">7, “Failure to timely file …for each fiscal year in which the regional center has been designated for participation in the [EB-5] Program will result in the issuance of an intent to terminate the participation of the regional center …which may ultimately result in the termination of the approval and designation of the regional center.” (Emphasis added.) The instructions go on to provide that USCIS may terminate an existing Regional Center if it determines that the center is no longer serving the purpose of the EB-5 program, namely “promoting economic growth… improved regional productivity, job creation, and increased domestic capital investment.” As provided by USCIS, it may require Regional Centers to report on their compliance with EB-5 law and policies on a “cumulative basis… covering a succession of fiscal years….” (available at, published on December 6, 2011.">8 (Emphasis added.) This means that new owners of a Regional Center will need to ensure that any commercial enterprise associated with their center as a “vehicle for investment into other business entities that have or will create or maintain jobs for EB-5 purposes” be able to identify and document direct/indirect job creation or maintenance connected to each EB-5 job creating business, as well as how many investors have been approved, denied or revoked EB-5 visas., last viewed on May 1, 2013.">9 USCIS may even ask for original records, and so previous owners of a Regional Center must provide that to a purchaser. Prospective purchasers of a Regional Center should be granted access to all of these materials prior to completing the sale, which includes proof of the direct jobs created, the expenditures paid by the center’s EB-5 project, and other aspects as defined in the previous EB-5 filings. Further, if a regional center has been dormant for too long, it could be possible that USCIS could revoke a designation because the regional center is no longer fulfilling the goal of the EB-5 Regional Center Program by causing an regional economic impact as defined by law.

In conclusion, purchasing an existing EB-5 Regional Center is complex. Indemnification clauses may not be the best protection. Today, EB-5 Regional Centers are involved in at risk transactions involving not only serious immigration consequences, but other areas of federal law, state law, business, financial, and U.S. Securities concerns. In addition to having an EB-5 immigration attorney conduct a review of the enterprise, a corporate transactional and securities attorney will be necessary. For Regional Centers which are dormant and or have never had any activity, the risks may be low (if USCIS does not revoke their designations prior to the filing of future investor projects), and the rewards will be great if new projects can speed by the increasingly delayed processing time for new centers and amendments. Yet the added level of ongoing (perhaps years of) compliance regarding preexisting EB-5 obligations related to past Regional Center owners, may make it better to try seeking a new designation with USCIS. Until more guidance from USCIS or case law is available, the acquisition of an existing Regional Center will entail careful consideration.

About The Author

Michael A. Harris is an attorney and managing partner of HarrisLaw, P.A; based in Miami, Florida. As an attorney practicing federal immigration law, he is permitted to represent immigration clients around the world. He received his Juris Doctor Degree from Nova Southeastern University Law Center in Ft. Lauderdale, Florida in 2007. He earned his Bachelor’s Degree in Political Science and English from the University of Florida in 1999. As well, Mr. Harris studied Political Science for two years in the nation’s capital at The George Washington University in Washington, D.C. Before being admitted by the Florida Bar in 2007, Mr. Harris spent over seven years working for highly distinguished immigration law firms. During this time, he was educated and trained by some of the country’s leading experts, authors and attorneys in the field of Immigration and Nationality Law.

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