Comment: Political Consequences of Behring Decision

The Behring court decision vacating the November 2019 Modernization regulations has turned the political calculus of Reauthorization upside down. 

Historically, the major political issue in EB5 has been TEA definition (whereas investment amount and integrity measures have been side shows politically). The battle on TEAs is between rural projects (smaller developers) and urban projects (mega developers).

The original EB5 regulations were pro-urban in practice; the November 2019 Modernization regulations were pro-rural. Not surprisingly, prior to the Behring decision, the rural lobby was pushing for long term EB5 Regional Center authorization, since the Modernization regulations were in effect. By contrast, the urban lobby was looking for a short term reauthorization that would give them time to negotiate “set-asides” carving out a piece of EB5 both for urban projects and rural projects alike. Now that the pro-urban original EB5 regulations are back in effect due to the Behring decision, Senators Grassley and Leahy who were championing long term reauthorization are now likely to oppose their own bill as the Behring decision has flipped the balance in favor of urban projects.

The Senate will leave for its July 4th recess on Friday--so it has barely a day to act. With all the prior incentives on reauthorization now up in the air, and with a fog of certainty of what exactly is being reauthorized, it is difficult to imagine how reauthorization can be accomplished with so little time left--so we are expecting the program to lapse at least until mid-July.

The urban lobby might think that it has won the war (not merely this battle), but it is important to remember that USCIS has two bites at the apple to stop a reversal of its policy. 

  1. USCIS can take appeal to the 9th circuit and ask for a stay of the Behring decision while the appeal is pending (probably a 2 year stay, effectively killing the Behring decision for now in EB5 markets)
  2. It can promulgate an Interim Final Rule republishing the Modernization regulations and make such a rule effective immediately upon publication in the Federal Register.

On the latter point, there seems to be a misunderstanding among many in the immigration bar that an interim final rule needs a comment period plus a 30-day notice to go into effect. So the immigration bar is proceeding as if for the next 30 days the investment amount and TEA definitions will be as they were before the Modernization regulations (hence there is a gold rush underway of a huge discount sale - $500k instead of $900k - with perhaps hundreds of skeletal I-526 applications being filed within the coming week). However, the Administrative Procedure Act has provisions that allow an agency to make an interim final rule effective upon publication and accept comments later and USCIS has used these provisions before. In this case, the urban lobby is fighting USCIS itself, because the regulation has been championed by Democratic and Republican administrations alike. Mr. Mayorkas, Secretary of DHS, has already let the court know of the Biden administration’s strong support of this regulation. It is hard to imagine that USCIS will not use all the tools at its disposal to fight the Behring decision.

US government consists of 3 branches - executive, legislative and judicial - with the Behring decision, we have heard from the judicial branch. Presently, the executive branch and legislative branch will each make their voice heard. Stay tuned.

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