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Frequently Asked Questions - Regional Centers -- Features, Benefits & Requirements
Yes, there is no limit to the number of regional centers USCIS can approve within a state or city. Actually, in our opinion, USCIS should set a limit on the number of regional centers they can approve every year, due to budget and staff constaints.
It's akin to a model type project -- a model type of project hypothetical project. Actually, an "exemplar" project can be either a hypothetical or "actual, shovel-ready" project; and the current pre-approval process allows for the pre-approval of both types of projects via either "exemplar" pre-approval procedure or amendment pre-approval procedure. Therefore, the name "exemplar" does not indicate whether the underlying project is a model type of project or an actual project.
We feel the introduction of the "exemplar" concept just adds to the confusion and provides no benefit, because when the actual project comes along, you still have to submit a RC amendment just to confirm that the actual project fits within the "exemplar" project approval. Too time consuming and is needless. USCIS has to focus on providing certainty and avoid this kind of "cute" concepts and procedures. Real projects have no time to engage in this kind of time-consuming procedures which provide no practical benefit, unless USCIS is willing to allow any and all actual projects which fall under the parameters of the "exemplar" projects approved to be used as substitute projects to replace the initial project. We just do not see the need for pre-approving hypothetical projects. Just pre-approve "actual, shovel-ready" projects as fast as possible, and that should be fine.
Employees of retail tenants of a new shopping center project do not appear to fit neatly into any of the below definitions. I would think they have to be defined as "direct" jobs, but USCIS has yet to provide a clear answer to the question of where these jobs fall under.
Direct jobs are those jobs that establish an employer-employee relationship between the commercial enterprise and the persons that they employ. Regional centers typically use the RIMS II or IMPLAN economic models to determine the number of indirect jobs that will be created through investments in the regional center’s investment projects.
Indirect jobs are the jobs held by persons who work for the producers of materials, equipment, and services that are used in a commercial enterprise’s capital investment project, but who are not directly employed by the commercial enterprise, such as steel producers or outside firms that provide accounting services.
There is a sub-set of indirect jobs that are calculated using economic models that are known as induced jobs. Induced jobs are those jobs created when direct and indirect employees go out and spend their increased incomes on consumer goods and services.
Although it is legally permissible, practically, it is very difficult to divide up the pooled investment in multiple job-creating projects at the same time. USCIS' statements indicate as much.
In reality, not that much, because there needs to be some reasonable basis to go outside the regional center geographic area and count indirect/induced jobs effect. In other words, there needs to be some persuasive reason or evidence, and the geographic areas where a majority of inputs occur should determine the geographic area whose multipliers should be used.
Our opinion is that the "pre-approval" procedure is not that helpful, mainly because CSC takes too long -- 4 to 5 months -- to issue a pre-approval. This is puzzling because in the recent past, CSC had encouraged EB-5 practitioners to go through the "pre-approval" process to speed up the I-526 review/adjudication process.
Also, we heard that CCS is questioning even the RC based projects which they themselves pre-approved, undermining the entire pre-approval procedure.
As of March 12, 2011, we know at least one EB5 regional center possessing an extensive track record of both I-829 approvals and return of investments.
As of March 12, 2011, we know several EB5 regional centers with "many" (50 or more) I-829 approvals.
FL, CA, WA and NY states appear to have most number of EB-5 regional centers.
Legally speaking, there is nothing in the EB-5 law that says the entire United States cannot form a regional center geographical area. However, to date, there is no regional center with the entire USA as its scope.
Some regional center designations have also managed to include the entire state.
We think USCIS should allow the entire USA territories to form the base of its regional center designation in certain business structures.
1. Can "try" to be allowed to count indirect/induced jobs, in addition to "direct" jobs. This is a big advantage, as it is often not feasible to meet the 10 jobs per investor requirement by counting only "direct" jobs. This is why for a direct, individual EB-5 case, the jobs number should be reduced to something more reasonable, let's say 5 full-time jobs. In addition, it doesn't make sense not to be allowed to count part-time jobs.
2. Note both regional center based EB-5 project and direct, individual (non-regional center) project can "try" to do a TEA, i.e., $500,000 USD investment EB-5 projects.
1. Costs substantial money and time to get the regional center designation.
2. There are cumbersome reporting requirements set by USCIS.
First, take a look at the actual letter itself at: http://www.eb-5center.com/files/Mayorkas%20to%20Leahy%20on%20location%20...
Although this letter helps regional centers now to include additional jobs "estimated" to be created outside the regional center area, we are not sure to what extent CSC will comply with or give effect to this letter, although unofficially, a CSC officer has told us that they will honor the letter. Presumably, Director Mayorkas' letter amounts to a formal change in USCIS policy, but USCIS will probably not issue a formal guidance memo regarding this policy change. We confess it is getting to be extremely difficult and confusing to ascertain what is USCIS policy on any EB-5 issue. In addition, we are not certain that all CSC examiners are aware of what the exact current USCIS policy is on important EB-5 issues such as this.
Although this letter is helpful to regional centers, it does not change the fact that the letter's analysis is flawed in its logic. We believe a regional center designation inherently implies that only those jobs creation effects arising within its regional center geographic area should be counted.
Specifically, although there is nothing in the EB-5 statutes or regulations which specifically prohibit indirect/indirect jobs OUTSIDE the regional center's geography from being counted for I-829 petition, there is nothing in the EB-5 statutes and regulations which allows it either. In other words, it's up to USCIS to choose to go either way. Up to this point, USCIS' favorite way of not allowing certain reasonable EB-5 policies was by saying "There is nothing in the EB-5 law/regulations that specifically allow such proposal." Let's be honest: How many times have USCIS officials uttered these very words to dismiss some very good proposals that actually make sense for the EB-5 Program? We personally have asked USCIS officials during EB-5 Stakeholders Meetings why certain position is not being adopted by USCIS, and USCIS officials always answered our questions with the words: "Well, we would like to, but we believe EB-5 statutes and/or regulations do not specifically permit such policy." However, USCIS is now suddenly and completely reversing its position? If so, there are many more important EB-5 issues on which USCIS should reverse its positions, not just this one.
More logically, USCIS could easily have accomplished the same thing by allowing the entire USA and Territories to count as the regional center area. In fact, there is nothing in the EB-5 statutes or regulations that specifically states that the entire USA and Territories cannot form a regional center. In effect, the job calculation methodologies are going to use the entire USA and Territories as the applicable geographic area to take advantage of the new policy under the letter. This letter will in practice make the current policy of limiting a regional center geographic area almost meaningless because most of the job-calculation methodologies are really designed to count indirect/induced jobs WITHIN the regional center area. Be prepared for some job calculation methodologies to go into a twilight zone, because now even indirect/induced effects of job creation taking place in Guam even though an underlying project takes place in Maryland can count.
Again, the most paramount thing is for USCIS to be consistent and not penalize regional centers and EB-5 investors who followed certain methods or procedures when there was no formal policy on certain issues. This is more important than "liberalizing" the regional center program by expanding jobs which can be counted. Without consistent policies and adjudication, the confusion will reign.
The best thing USCIS can do is be consistent; clearly communicate its positions on important EB-5 issues; do not penalize regional centers and EB-5 investors where they took certain actions at a time when there was no clear or formal policy on the very issue; and adjudicate EB-5 cases fairly and consistently.
Otherwise, the Congress and USCIS should just do away with the EB-5 Program entirely.
Don't bet on it. Getting a pre-approval for a regional center based EB-5 project will not lead to quicker adjudications of I-526s or guarantee approvals. At best, having a pre-approval will probably increase the likelihood of CSC examiners approving I-526s, but no guarantee.
Contrary to many regional centers' statements, getting a pre-approval for the underlying EB-5 project in advance does not mean I-526s will be approved more quickly. Basically, it might, but not necessarily. Is that confusing enough for you?
No. USCIS doesn't have the resources or staff to really do this kind of stuff. The reason? All the money received from EB-5 cases do not go into supporting EB-5 services, but instead, get drained for usage in other areas of immigration. Therefore, large filing fees for EB-5 cases do not lead to better services for EB-5 cases.
No, any individual willing to spend money can set up a regional center. Theoretically, even a person who previously has a fraud conviction can set up a regional center.
Good try, but USCIS has rarely even approved the entire single state as a regional center, although it has done so in a few occasions. One legal reason for this is that the regulations require the regional center area to be "contiguous" area. A practical reason might be that USCIS just doesn't want to allow the entire USA to be a regional center area, although I must admit there is no per se legal reason why USCIS cannot approve the entire USA as a single regional center geographic region.
I actually think USCIS make it easy on themselves and allow the entire USA to be a regional center geographic area in certain cases where projects are likely to arise all across the USA. It would be a waste of time to force the regional center applicant to file the same application for each state.
Yes and no. It's true that USCIS has reviewed their regional center designation application and approved the general parameters of the approved regional center application. However, the fact that a specific EB-5 project is carried out pursuant to the approved regional center does not guarantee approval of I-526s submitted for that specific project because:
1. USCIS still has to review the project to see if it complies or is consistent with the regional center parameters.
2. USCIS could decide that the approved regional center was approved by mistake or oversight and should be amended.
3. Even when USCIS approved the regional center structure, and a particular project complied with the approved regional center structure, USCIS can at any time change its mind and deny I-526 petitions -- which leads to confusion and inconsistency in the adjudication of EB-5 cases.
First, because you as an investor is a limited investor, you will not have the right to manage on daily basis. You will have the right to vote as a limited partner on important decisions facing your investment and immigration status. This cannot be helped as if each limited partner investor had the right to do as he or she wishes, there would be no way to run a project.
Second, the limited partner investor's investment is locked in for a certain period of time, usually for 5 years. This also cannot be helped because if every investor had the right to pull out their investments, the project could not be run properly.
Let's look at what USCIS has said on this issue.
Once USCIS approves a proposal for Regional Center designation, the Regional Center does not have the flexibility to accept a project or offer investment options outside its original application area of operation. If the Regional Center wishes to pursue a project outside its original application area of operation, an amendment must be filed with USCIS. There is no requirement to include an exemplar I-526 document when filing an amendment for a Regional Center. We have not seen many of these yet, but we have issued a couple of amended Regional Center approvals. At this time, it is too soon to determine if having the exemplar documents along with the I-526 make it easier to adjudicate the I-526.
In some cases, USCIS may approve a proposal for Regional Center designation when an actual investment project does not yet exist. The approval is therefore based upon a hypothetical investment project. If this is the case, when the immigrant investor files Form I-526 Immigrant Petition by Immigrant Entrepreneur, an analysis will be done to determine if the actual business plan provided in support of the Form I-526 comports with the hypothetical business plan provided in support of the Regional Center application. For example, a Regional Center may have a hypothetical plan to build assisted living facilities. Although the geographic location of these assisted living facilities has not been identified, the hypothetical business plan demonstrates the logistics and feasibility of building the facilities within the geographic area of the Regional Center. Since the business plan does not relate to an actual project, it is considered a hypothetical investment project.
It is a new form proposed by USCIS and a draft was circulated by USCIS for comments. As of September 16, 2010, we did not hear that the form became official. The form is supposed to be used as the application form to apply for a regional center designation and to make amendments to the designated regional center. Now, some EB-5 practitioners believe the real reasons for the form are:
1. To collect more fees: there currently is no fee for regional center designation applications or amendments.
2. To impose more requirements, such as having to get a renewal designation every 5 years, etc.
3. To slide in additional substantive EB-5 requirements.
[Q] USCIS appears to be using a term "capital investment project", but I can't find this term in the EB-5 regulations. What does the term "capital investment project" mean anyway?
The term "capital investment project" is a term -- not mentioned in either EB-5 statutes or regulations -- made up by USCIS to deal with a regional center based project where often there are two entities involved: new commercial enterprise and the job-creating entity. Really, the "capital investment project" is the job-creating entity to which the new commercial enterprise must either invest or give a loan to and be received and used by the same job-creating entity in activities which create jobs.
Because Matter of Izumii already refers to a job-creating entity in the same context, USCIS did not really have to come up with a new fancy term called "capital investment project", because having another term just confuses things.
For a Regional Center case involving a TEA investment, the question asks where the new commercial enterprise entity and the job-creating entity (which USCIS confusingly is referring to as the "capital investment project") must be located.
* key words: location of new commercial enterprise within TEA or principal place of business in TEA?
Legally, we would say the location of the new commercial enterprise does not matter (per Matter of Izumii), but USCIS appears to be requiring that the new commercial enterprise does its business principally in the TEA area. Here is the background on how this new issue arose.
During June 16th 2010 stakeholders meeting, USCIS stated that while the capital investment project (better to call this entity the job-creating entity because no EB-5 case or law ever referenced anything called "capital investment project", whereas the term "job-creating entity" has been referenced in the precedent Matter of Izumii case) which actually creates the required jobs have to be in the TEA area, the new commercial enterprise entity receiving aliens' capital contributions must be doing business principally in the TEA area. USCIS has declined to define what kinds of evidence must be submitted to show that the new commercial enterprise is principally in the TEA area. Note this does not mean that the new commercial enterprise entity has to be physically located in the TEA area; there is a difference between the actual physical location vs. the location where it is doing business principally.
This position will create another troublesome issue as to what constitutes sufficient evidence of "doing business principally" in TEA area. Also, we are not sure Matter of Izummi holds this. Our understanding is that Izummi does not require a new commercial enterprise entity to be located in the TEA area. Let's take a look at what Izumii case actually says because I find that often times what USCIS says the case holds is misleading:
(1) Regardless of its location, a new commercial enterprise that is engaged directly or indirectly in lending money to job-creating businesses may only lend money to businesses located within targeted areas in order for a petitioner to be eligible for the reduced minimum capital requirement.
(2) Under the Immigrant Investor Pilot Program, if a new commercial enterprise is engaged directly or indirectly in lending money to job-creating businesses, such job-creating businesses must all be located within the geographic limits of the regional center. The location of the new commercial enterprise is not controlling.
Now, does the above content seem like Izumii case cares about where the new commercial enterprise is located? We don't think so, but that's not what USCIS says. USCIS is probably relying upon 8 CFR 204.6(j)(6) which says:
(6) If applicable, to show that the new commercial enterprise has created or will create employment in a targeted employment area, the petition must be accompanied by:
(i) In the case of a rural area, evidence that the new commercial enterprise is principally doing business within a civil jurisdiction not located within any standard metropolitan statistical area as designated by the Office of Management and Budget, or within any city or town having a population of 20,000 or more as based on the most recent decennial census of the United States; or
(ii) In the case of a high unemployment area:
(A) Evidence that the metropolitan statistical area, the specific county within a metropolitan statistical area, or the county in which a city or town with a population of 20,000 or more is located, in which the new commercial enterprise is principally doing business has experienced an average unemployment rate of 150 percent of the national average rate; or
From the above, USCIS could logically argue that although it does not matter where the new commercial enterprise is located (Izummi), the new commercial enterprise entity must be principally doing business in the TEA area.
* Note that USCIS has stated nothing it says during any meeting or in guidance memos creates any legal right in dispute or litigation with USCIS. However, you can bet CSC examiners will rely upon such "opinions" expressed by USCIS. Basically, USCIS' opinions, even if unreasonable and not supported by the EB-5 law, will carry the force of law in so far as how CSC examiners must adjudicate EB-5 cases. :)
No, but it can certainly invest the capital contributions received from alien EB-5 investors into a non-profit, job-creating company's project which would in turn create new jobs. Read Matter of Izummi, AAO precedent case. The precedent AAO case says it can, so that should be that.
Investment structures of various regional centers differ because of different industries their EB-5 projects are involved in, offering documents, job-calculation methodology and capital investment structures contained in regional center applications submitted to and ultimately approved by CSC.
From a broad perspective, approved regional centers can be divided into two types of investment structures: the controlling New Commercial Enterprise entity engages in EITHER full or part equity participation or the controlling New Commercial Enterprise engages in lending activities. There are advantages and disadvantages in both kinds of investment structures, depending again on the nature of projects.
Therefore, although one can say investment structures of regional centers are pretty much similar, different EB-5 projects can vary in important aspects.
The best analogy we believe in comparing regional centers is comparing cars. The same manufacturing company can own and operate several brand names, and each brand car has slightly different emphasis that appeal to different consumers.
Yes, it's called IIUSA, and their website is at: www.iiusa.org. There is an annual fee, and members of the IIUSA are composed of regional centers and immigration attorneys and other professionals who work or are interested in the area of regional centers. Anyone interested is encouraged to contact IIUSA directly for more information.
[Q] What is USCIS’ position on whether and when jobs have to be created for regional center projects at either the I-526 stage or the I-829 stage? What is USCIS’ specific legal basis for these positions?
USCIS Answer: We hope that we have answered this in the June 17 memo:
EB-5 Center comments: The above is an important USCIS guidance memo. Not only do requisite 10 full-time jobs have to be created, but they have to be created within the requisite time as set forth by USCIS. Therefore, not only "how many" but "when" are controlling questions. This all goes to show you that it's not easy to set up a good EB-5 regional center based EB-5 project.
[Q] Practitioners are concerned that there is little certainty on which investors can rely in assessing job creation. After a regional center’s job creation methodology is accepted in deciding the regional center’s charter, RFEs on I-526s and I-829s question the same methodology and economist reports repeatedly. People are frustrated that they have to repeatedly prove the same methodology for indirect job creation. For example, a regional center’s economic model is accepted for I-526s for numerous projects and then it is questioned again in I-829s, long after it was accepted for other I-526s in the same project. Can Headquarters help with creating more consistency in adjudications?
USCIS Answer: We know that this is an issue. This was addressed in the June 17 memo: http://www.uscis.gov/files/nativedocuments/eb5_17jun09.pdf. At the I-829 stage the inquiry is limited to assessing milestones that were predicted at the I-526 stage of the process. Example: at the I-526 stage the plan was to build a shopping center and lease out the space. At the I-829 stage we would want to know if the space had been substantially leased as predicted. In the alternative, if jobs were predicted based on total expenditure, we would want to know if the funds had been spent as planned. Presently, USCIS is in the process of drafting another guidance memo which will clearly state what will be adjudicated and when (at which stage of the process). Our goal is to not “re-adjudicate” issues previously decided in instances where circumstances remain unchanged.
Yes, if a particular regional center no longer serves the purpose, and inactivity could be the reason for such action. However, no particular inactive period is used, and any decision will be made on a case-by-case basis.
Practically, USCIS does not have sufficient staff to really oversee the activities of all designated regional centers. Therefore, any revocation or notice of termination of already-given designation will be very rare.
[Q] What factors are considered in determining whether the necessary jobs will be created within a “reasonable time” in adjudicating an I-829 petition, per 8 C.F.R. § 216.6(a)(4)(iv)? Section 25.2(e)(4)(D) of the Adjudicator’s Field Manual lists some factors in making the reasonable time determination, but how do CSC adjudicators apply those factors in actual cases? For example, what if a regional center has an approved job creation methodology, proof that the investment has gone into the project, and has leased up the project but the tenants have not moved in when the I-829 is filed? What if the project is almost but not completely leased? Will USCIS approve an I-829 in such a case? If so, what documentation would be required?
USCIS' answer is as follows.
CSC adjudicators follow the guidance put forth in the Adjudicator’s Field Manual (AFM) at section 25.2(e)(4)(D), which states:
In making the “reasonable time” determination, officers should consider the evidence submitted along with the petition that demonstrates when the jobs are expected to be created, the reasons that the jobs were not created as predicted in Form I-526 , the nature of the industry or industries in which the jobs are to be created, and any other evidence submitted by the petitioner.
If after considering the evidence, the officer determines that the jobs are more likely than not going to be created within a reasonable time, Form I-829 should be approved consistent with 8 CFR 216.6(d)(1) if the petitioner is otherwise eligible to have his or her conditions removed. If, however, the officer determines that the jobs will not be created within a reasonable period of time, Form I-829 should be denied consistent with 8 CFR 216.6(d)(2) .
CSC adjudicators apply the factors outlined above when analyzing the facts in each individual case using the preponderance of evidence standard. Note: It is not possible to answer “what if” questions such as this question in the abstract. Whether a particular case will be approved is dependent upon the determination of eligibility, based upon the specific evidence of record.
[Q] Based on the USCIS June 17, 2009 memo regarding EB-5 job creation, it is our understanding that USCIS has accepted the use of economic models that are based on infusion of capital into a particular industry. Please confirm that if such a model is used to calculate job projections at the I-526 stage, an investor would receive credit for job creation at the I-829 stage simply by establishing that he/she invested the requisite amount into the new commercial enterprise, and that the new commercial enterprise spent that capital, regardless of any data about actual job creation.
See USCIS' own answer on this issue. The answer is "yes", but such spending methodology should be detailed and not be based on a flimsy data or structure.
This form of capital investment involves more than simply investing a certain amount of investment dollars into a particular industry. An important aspect to any economic analysis model is the feasibility and quality of the business plan that is the basis for determining the appropriate inputs into an economic model, such as RIMS II, IMPLAN, etc. If the infusion of capital occurs according to the approved business plan and economic analysis, and the capital investment scheme comes to fruition in the manner outlined in the business plan, then the economic data provided in support of the Form I-526 petition regarding indirect job creation may be sufficient to demonstrate the creation of the indirect jobs without the submission of further data about job creation at the Form I-829 petition stage.
[Q] Where a new commercial enterprise such as a large mixed-use commercial real estate development wishes to file a regional center application after some EB-5 investors have already invested in the same project under the regular EB-5 program, please confirm that it is permissible for a regional center proposal to be submitted for the new commercial enterprise in this situation as long as the economic impact analysis report indicates that the number of direct jobs already allocated to EB-5 investors under the regular program are not “double-counted” for subsequent investors under the regional center program.
Yes, as long as the jobs are not “double-counted.”
[Q] At the October 19, 2009, AILA EB-5 conference in San Francisco, CSC officials indicated that an acceptable EB-5 investment in a regional center context may consist of an equity investment in a commercial enterprise that in turn makes a loan with the invested capital to a borrower. CSC officials also appeared to state at the conference that the commercial enterprise could receive a guarantee from a third party that the borrower would repay the borrowed funds to the commercial enterprise. Please confirm that this is acceptable. It should be, since even a third party may not be able to pay the guarantee (e.g., AIG). Similarly, the borrower may not be able to repay the commercial enterprise, even if it receives money from the third party (e.g., General Motors). Also, does it matter whether the third party guarantor is a private insurer, bonding company, or a government entity?
Let's see what USCIS says clearly on this issue, and then our comment.
Yes, there is currently nothing in the statute or regulations to preclude the guarantee from the third party as long as the alien investor’s capital is still “at risk”, and the arrangement does not constitute a redemption agreement or a guaranteed buy-back arrangement for the alien investor’s investment in the commercial enterprise. A determination as to whether a specific third party guarantee is contrary to the statutory and regulatory requirements has to be made on a case-by-case basis.
Actually, whenever USCIS says there is "nothing in the statute or regulations", they can go either way. In other words, USCIS could have prohibited such arrangement based on the same rationale that there is "nothing in the statutes or regulations" which specifically permit such arrangement. Actually, USCIS should have held that where such third-party guarantee falls within the "standard commercial practice", it is permissible.
USCIS interprets the set aside of visas to ensure that a minimum of 3,000 visas are available for regional center based applicants. We do not see the set aside as limiting the number of visas that can be granted to regional center based applicants.
This is a good news for regional center program; therefore, up to 10,000 IV numbers per annum is available to regional center cases. Assuming an average family number of 4 members per 1 family, this means a maximum of 2,500 families per annum can obtain immigrant visas via regional center EB-5 program.
[Q] For regional center projects, do indirect jobs created outside the regional center's geographic area count? For example, a regional center may be approved for Los Angeles County. The regional center’s first project may be a bakery located in Los Angeles County, and direct jobs are created in that county. The economic model, however, may not specify where indirect jobs are created. The flour distributing company that has to hire an additional employee to transport flour to the Los Angeles bakery may be located in Riverside County, for example. We believe that an indirect job in such circumstances should count for EB-5 purposes. Please confirm.
Because this question is such an important one in context of regional center based EB-5 cases, let me quote the USCIS' answer in its entirety. In short, the answer is a clear "no". And a regional center better expand its underlying regional center's geographic area if it wants to count direct and indirect jobs created outside the current regional center area.
Section 610(a) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note), as amended states that: “A regional center shall have jurisdiction over a limited geographic area, which shall be described in the proposal and consistent with the purpose of concentrating pooled investment in defined economic zones.” While the regulation at 8 CFR 204.6(m)(3) provides that each regional center must describe “how the regional center focuses on a geographical region of the United States,” USCIS interprets the statutory and regulatory prescribed focus to mean that the economic analysis methodology used by regional centers should also be focused on job creation within the bounds of the regional center. [See also Matter of Izummi.] As a result, a regional center should file an amended proposal seeking an expansion of the geographic area of the regional center if it wishes to include job creation within its economic models in areas outside of the bounds of the regional center.
Note: Regional economic impact models have limitations; one of the biggest is that they ARE regional in nature, so if most of the direct inputs are not locally produced the user of the model must account for this in their calculations. Problems occur when people misuse models like RIMS II by using data that is not limited to the area that is the focus of the regional center, but then claim job creation within the bounds of a regional center. The BEA defines geographic region as the area that will supply the majority of the direct inputs of production (including labor). So, if in the above example, if the RIMS II data for Los Angeles County was used in the economic impact analysis it will not tell you about an indirect job in Riverside County or any other County. The use of economic data, such as RIMS II input/output tables for areas outside of the bounds of the regional center does not accurately assess the impact of economic activity within the regional center.
In regard to direct jobs, it's safe to say that the direct jobs created outside the underlying "region" will not be allowed to count.
As to "indirect" jobs created outside the underlying "region", it's not clear in context of a regional center based eb-5 case, but in our opinion, these indirect jobs created outside the underlying region probably will not or should not be allowed to count, because the underlying regional center geographic area boundary seems to imply that only the jobs (whether direct or indirect) created within the underlying region should count. As far as we know, USCIS has, to date, not issued any formal guidance on this specific issue in regards to whether indirect jobs created outside the region should be counted. It seems to us counter-intuitive if indirect jobs created outside the underlying region are counted, but as we stated several times before in this site, the EB-5 law is whatever USCIS says it is on these unclear points.
A related issue is: Isn't it wiser to allow indirect jobs created outside the underlying region to be counted, because after all, jobs are jobs? But then, an equally strong argument could be made that if only the direct jobs created within the underlying region are counted, why should indirect jobs created outside the region be counted? After all, a regional center should have a geographic region, and the purpose of the regional center program is to foster jobs within these regions, not all over the place, although any jobs located in the U.S. is a good thing. This goes to show you that there are many EB-5 issues which are still unsettled.
Anyway, we heard that USCIS even has a part-time economist now, so we don't know how things will change in job-counting area. This is why we personally believe USCIS should sit down with regional centers and decide on one or several conservative, permissible methodologies that are acceptable to USCIS.
In addition, this highlights the fact there is a greater need for a more thorough review of regional center designation applications and a pre-approval procedure for EB-5 regional center project. It also raises a question whether it is reasonable to expect or require CSC examiners to become well-versed in very complex economic methodologies when they are already burdened with a lot of work? But this is why a pre-approval process is needed, to avoid inconsistent results that no one wants to go through.
Of course, the question already assumes that a particular regional center has been designated as a regional center by USCIS for an investment structure involving pooling funds from investors and using such fund to make loan(s) to job-creating business(es). Otherwise, the answer would be "no". With this understanding, see below.
This question had already been answered in the affirmative by the precedent AAO case, Matter of Izummi case. Basically, a Regional Center project can form a limited partnership and receive capital contributions from individual EB-5 investors and then the limited partnership, as a new commercial enterprise, can make a loan to a job-creating business or businesses, as long as such investment structure has been submitted and approved by USCIS as a regional center.
Also, during October 19th 2009 AILA EB-5 Conference in San Francisco, CSC adjudicating officers present at the panel again specifically confirmed that "third-party" guarantee of the loan made by a limited partnership to the job-creating borrower (but not any guarantee on investor's investment into a limited partnership) is also permissible. Basically, we believe that any such guarantee has to fall within the real-world, commercial practices.
We would guess that anywhere between $50,000 USD to $100,000 USD plus a lot of effort and time (currently 5 to 8 months) are needed to obtain a regional center designation from USCIS. Contrary to popular belief, anyone can obtain a regional center designation. However, successfully operating a designated regional center is NOT easy. Many are under a mistaken impression that once a regional center designation is obtained, foreign EB-5 investors will start pouring money into their regional center, but nothing could be further from the truth. The potential EB-5 investors are not dumb.
In short, we believe and noticed from a distance that running a relatively successful regional center is very difficult, and one needs to put together a team composed of various professionals from different backgrounds and skills in order to succeed. You need to be a lawyer, business man and marketer -- and execute well -- in order to succeed in the long run.
As of March 3, 2011, there are over 100 regional centers designated by USCIS, and there are more than 50 regional center applications pending. This means within one-year time, there may be over 150 designated regional centers. Note that not all designated regional centers are active, and the track records vary greatly among designated regional centers.
Does this increase of regional centers mean that the EB-5 regional center program is a huge success? No. It just means the economy sucks, and there are some desperate developers looking for low financing. Also, a few regional centers did well, so every new regional center thinks that it can do just as well.
USCIS has accepted such methodologies as IMPLAN, RIMS II, REDYN and REMI. Job creation studies vary from project to project and that the more specific and conservative the study, the more likely that the assumptions that the predictions are based on will be met.
[Q] A "fund" style Regional Center involves offering multi projects in which investors' funds will be spread around, similar to mutual fund. Is there any restriction imposed by USCIS?
USCIS recently announced during September 16, 2009 Stakeholders conference that this type of fund Regional Center must state at I-526 petition submission stage what projects the investors will be investing in. This appears to mean the projects' descriptions cannot be general in nature, such as "will be invested in hotel construction and/or shopping center construction" but must be specific description. The logical rationale for this policy is to make this "fund" type of regional center to have specific projects set up for investors' participation, instead of the other way around. However, in the real-life commercial context, it's very, very difficult to line up multiple number of EB-5 projects in which investors' funds will be spread around.
A flippant answer would be "too many", and my honest and serious answer would be "too many for the current EB-5 market demand". There are around 50 or more designated regional centers scattered throughout the U.S., but my feeling is there are greater number of regional centers which are kinda inactive.
I have been saying this for some time, but here I go again: "Regional Center market will grow and shrink depending on what USCIS and Congress will do and not do." To reach the next level of growth, EB-5 Regional Center Program needs to be made permanent quickly and USCIS EB-5 HQ (overall policy setting division) and CSC (adjudicating division) need to work closely together to make reasonable, consistent and sensible decisions that are in keeping with the fundamental purpose of EB-5 Regional Center Program.
Although USCIS-designated RCs involve numerous industries or targeted business areas, they generally use one or more of the below investment structures permissible under the EB-5 law. It should be noted that limited partnerships formed pursuant to the Uniform Limited Partnership Act of applicable states are used by most RCs because the entity allows for participation by multitude of EB-5 investors.
1. Form a limited partnership to "pool" capital contributions from individual EB-5 investors and then use the total funds to make an equity investment (and receive equity stake) in a job-creating business.
2. Form a limited partnership to "pool" capital contributions from individual EB-5 investors and then use the total funds to purchase a real property and/or make substantial renovations to attract commercial tenants who create new jobs.
3. Form a limited partnership to "pool" capital contributions from individual EB-5 investors and then use the total funds to make equity investment in a business entity developing a real estate project.
4. Form a limited partnership to "pool" capital contributions from individual EB-5 investors and then make loan(s) to job-creating borrower business(es) operating in various industries, including developing real estate projects.
Now, there are advantages and disadvantages with any one of the above investment structures (the structure of the specific EB-5 project has to be closely examined); but generally speaking, the trend of the investment structure utilized by RCs appears to be moving towards the number 4. Also, the trend set by various leading RCs appears to be moving towards big projects.
No, absolutely not. To our knowledge, no RC Program is carrying on this kind of investment structure involving individual EB-5 investors lending directly to a job-creating borrower entity for at least three reasons: 1) it's against EB-5 law; 2) no RC Program would be this ignorant; and 3) USCIS will not approve a regional center with such investment structure. :)
Having said this, however, pursuant to a precedent AAO decision, Matter of Izumii, it is permissible for individual investors to invest (or contribute capital) in a limited partnership which can then lend that money to job-creating business carrying out a project that creates jobs either directly or indirectly (or induced), to foster an economic growth and job-creation in a particular geographic region. In other words, the limited partnership can engage in lending activity.
We believe designated RCs now generally are pretty careful to follow all requirements of EB-5 law, especially in light of the EB-5 RC Program's checkered history.
This is one of misconceptions about the Regional Centers. No government (either federal government, state, city or even a village) "sponsors" the RC. Therefore, if anyone tells you their program is a government-sponsored RC Program, it's somewhat misleading. Now, some RCs work with state or city quasi-governmental economic development agencies; we hope people understand that these quasi governmental economic development agencies are not the same thing as the state or city.
Now, is the RC Program which work with a particular economic development agency of a city or a state somehow "better" than other RCs? Not necessarily. It's like asking whether you prefer any project to be run by a government rather than Google, Comcast, Microsoft, Walmart or any well-run private company? It all depends. We are not saying, however, that govt-affiliation has no advantages at all.
[Q] Some RCs and/or attorneys take the position that for RC EB-5 case, job-creation needs to be shown only at I-526 petition through use of "reasonable" methodology. Is this true?
No, it's not as simple as that -- far from it. USCIS has already spoken very clearly on this issue through its carefully-crafted June 24th 2009 Neufeld guidance memo and USCIS' responses to Ombudsman's EB-5 recommendations. Basically, USCIS stated that although a "reasonable" methodology can be used at I-526 petition stage to estimate a future job-creation number, the underlying assumptions and/or variables on which the future job numbers were based will be re-examined at the I-829 stage by USCIS examiners, although the methodology itself will not be re-examined. In our opinion, this was the only position USCIS could have taken. Anyway, do not rely on our answer here; read the Neufeld guidance memo and USCIS' response to the Ombudsman's EB-5 recommendations and then decide for yourself what they say.
Even if all the jobs are created indirectly, underlying key assumptions and/or variables must be verified at the I-829 stage. We would actually love it if USCIS takes the position that it will not check the underlying assumptions and/or variables at the I-829 stage, but that just is NOT going to happen in our opinion, unless EB-5 statute itself is amended by Congress. As long as the EB-5 Program's underlying purpose is to create jobs, then USCIS is not going to budge from this position -- unless EB-5 statutes are amended.
Let me give you an example. Assume I-526 petition contains an IMPLAN methodology stating that within 3 years 300 direct and indirect jobs will be created in the applicable geographic region, based on spending of $100 Million and based on 70% occupancy by commercial tenants. Now, the economist who wrote up this job-creation estimate studies probably did a good job, but if you were USCIS, wouldn't you want to check at the I-829 stage that at least $100 Million was spent and there is 70% occupancy rate? If you answer "no", you are either a very nice guy or don't really care about the job-creation. In our opinion, if you don't check whether the assumptions actually were met at the I-829 stage, you will see all sorts of methodologies with inflated job numbers submitted at the I-526 stage, never to be reviewed. [I actually think they should lower the require job number from 10 to 5, but Congress, not USCIS, has to do this through statutory amendments.]
Lastly, USCIS has always been pretty clear on this issue ever since RC Program re-emerged in 2003; therefore, it's not as if USCIS ever stated otherwise or misled anyone on this issue. Having said this, we would be just fine with any statutory amendments doing away with this requirement, but we just don't think this will happen. The day it does happen, we will stop the operation of this website and we might even try to set up a RC Program of our own. :) Just kidding. Anyway, we would recommend that the required job numbers be lowered to 5 from 10 and make it easier for RCs and regular EB-5 projects to meet the job requirement. We actually think having to create 10 full-time jobs is an outrageous requirement now days, especially for non-RC EB-5 project. I think American public and politicians will also support this change.
Am I going overboard when I say that any immigrant who creates even 5 full-time jobs should not only be given green card but be toasted by the Americans living in his neighborhood?
[Q] Are there constraints on the kinds of job-calculation methodologies that can be used for RC-based EB-5 projects?
Pursuant to EB-5 regulations, any "reasonable" methodology may be used to calculate direct, indirect and induced job-creation resulting from investment, but according to recent USCIS guidance memos, including the Neufeld guidance memo of June 17, 2009, the methodology utilized by the RC Program should contain the time-frame before expiration of which the requisite jobs are supposed to be created. Therefore, the requisite jobs cannot be created 4 or 5 years down the road. It is strongly recommended that the Neufeld memo be reviewed for details. See www.eb-5center.com/node/382.
[Q] USCIS already stated that indirect and/or induced construction jobs may be credited for I-829 purposes, but had not taken a formal position on the issue of whether direct construction jobs may count. This is the first time that USCIS was forced to take a clear stance on this issue.
Both direct, indirect and induced construction jobs may count, as long as certain conditions are met. USCIS said in one of its letter responding to Senator Cornyn that construction-related jobs can count as direct jobs only if such positions lasts for 2 years or more. Not very likely due to the nature of construction jobs. Review the recently-issued Neufeld guidance memo for details. See www.eb-5center.com/node/382.
Curiously, CSC examiners appear to be not following their own issued AFM by not counting indirect/induced construction jobs based on spending where construction activities do not last more than 2 years. This issue is in flux so no one knows what is the law. That's the problem with the EB-5 Program according to many EB-5 practitioners -- no one knows. And different examiners appear to be deciding differently.
It should be noted that this new policy overrides the holding in the federal district court case called Spencer case; this shows that USCIS can override past decisions if it wants to.
Yes, the Featured RCs work with well-known, third-party banks to open escrow account for each EB-5 case. This is very important to make sure that the EB-5 investor's escrowed funds are released only pursuant to the agreed-upon terms and conditions in the escrow agreements with the full advance consent of EB-5 investors and also in compliance with the EB-5 law.
No, absolutely not. No EB-5 Regional Center, Limited Partnership or any immigration attorney handling your EB-5 Project is allowed to "guarantee" the return of the investment amounts directly to individual investors. That would be not only be against EB-5 law but unethical and seriously dumb thing to do.
However, it is well-established under the EB-5 law (Matter of Izummi, a precedent AAO decision) that the Limited Partnerships can make loan(s) to a job-creating borrower-entities, and when the Limited Partnerships make loan(s) to borrower-business, that borrower can and do issue signed documentary promissory notes and/or loan agreements to the Limited Partnerships which act as lenders. That's how the loans are made in the real commercial world. In other words, commercial rules and practices of how business is done in the real world govern. However, these loan agreements or promissory notes to the Limited Partnerships are only strong as the borrowers' financial conditions are, and these are not direct guarantees to the individual investors by these borrowing companies or lending Limited Partnerships; they are promises by borrowing, job-creating company to repay the loan amount to the lending limited partnership. This is how loans are made in a real world.
Some do, some don't. It can be good or bad. I would say working with incompetent government agencies is worse than not working with them, but working with good government agencies is better than not working with them.
Every year, there are 10,000 immigrant visa numbers (the 10,000 number includes immigrant visas for dependent family members) available for investors and their dependent family members. Out of this 10,000 immigrant visa numbers per annum, 3,000 is set aside for applicants who invest in TEA cases, and additional 3,000 is set aside for applicants who invest in Regional Center cases. This means if you assume each Investor has 3 dependent family members, there are only enough Immigrant Visa numbers per annum for approximately 2,500 EB-5 cases. This isn't that much. Practically speaking, since most RC cases are also TEA cases, there are at minimum 6,000 immigrant visa numbers available for RC/TEA cases, which translates into 1,500 RC/TEA cases. This also is not all that many.
According to the information disclosed by USCIS during February 27, 2009 stakeholders meeting, Regional Center EB-5 cases compose of approximately 90% of all EB-5 cases filed with USCIS. This is in line with our personal experience. The problem is that USCIS does not keep a clear stats on RC vs. non-RC cases; therefore, this is an estimate. However, we are almost certain RC EB-5 cases will continue to make up at least 80% + of all EB-5 cases filed with USCIS. The reason? Good RC EB-5 projects offer the best way to meet the job-creation requirements.
Under the relevant regulation, EB-5 project can involve a "troubled business".
means a business that has been in existence for at least two years, has incurred a net loss for accounting purposes (determined on the basis of generally accepted accounting principles) during the twelve or twenty-four month period prior to the priority date on the alien entrepreneur's Form I-526, and the loss for such period is at least equal to twenty per cent of the troubled business's net worth prior to such loss. For purposes of determining whether or not the troubled business has been in existence for two years, successors in interest to the troubled business will be deemed to have been in existence for the same period of time as the business they succeeded.
The regulations confer certain benefit(?) to an EB-5 project involving "troubled business", as follows:
(ii) Troubled business. To show that a new commercial enterprise which has been established through a capital investment in a troubled business meets the statutory employment creation requirement, the petition must be accompanied by evidence that the number of existing employees is being or will be maintained at no less than the pre-investment level for a period of at least two years. Photocopies of tax records, Forms I-9, or other relevant documents for the qualifying employees and a comprehensive business p lan shall be submitted in support of the petition.
The non-legal problem with an EB-5 project involving a "troubled business" is a negative connotation associated with the troubled business. Many potential EB-5 investors may say rightly or wrongly "I don't want to invest in an EB-5 project if it's troubled."
Also, certain undetermined issues related to "troubled business" EB-5 project is whether there must be 10 or more full-time jobs at pre-investment point of time. For example, if there were only 7 full-time jobs at the pre-investment point of time, can this qualify? What if 3 new full-time jobs are created in addition to maintaining 7 full-time jobs that pre-existed? As you can see, the questions remain.
You receive all the rights and obligations that you are entitled to as a Limited Partner in a Limited Partnership formed pursuant to the Uniform Limited Partnership Act (the "ULPA") of the particular state. Under ULPA, certain standard provisions have been included to protect the interests of the Limited Partner. These rigths are essentially to participate in policy formation via being able to vote on important issues facing the Limited Partnership, according to the terms of the Limited Partnership agreement. Also, as a Limited Partner, your liability is limited to the amount of your investment.
You, as a Limited Partner, should receive Unit of Certificate, which basically says that you have Limited Partner interest in a particular Limited Partnership formed pursuant to ULPA. You can also ask questions to General Partner and review the progress reports and discuss and make suggestions to General Partner.
The fact is that without this kind of arrangement, there is no way multiple group of EB-5 investors can participate in large EB-5 projects. Basically, without the presence and role of a General Partner and structures imposed by a Limited Partnership, none of Limited Partners will be able to agree on any important issues. In addition, this is how it's done in commercial settings. Therefore, the Regional Centers are not in some way trying to "limit" your powers for some ulterior motives; but, the rights of Limited Partners in a Limited Partnership is generally "limited"; yet this arrangement is specifically allowed under the EB-5 law, because USCIS and Congress recognizes the reality that without such arrangement, large Regional Center EB-5 Program simply cannot exist or function. This is akin to the U.S. business law allowing legal entities of corporations and limited partnerships. Otherwise, no one will conduct any business.
Frankly, if you wish to retain and control the new commercial enterprise, you should be the majority interest holder in a regular, direct, individual EB-5 project, so you can do whatever you wish.
Although the Regional Center (RC) EB-5 projects are engaged in a variety of industries, and after you examine many RC structures, it becomes readily apparent there are just two types of investment structures utilized by the Regional Centers.
One type of structure utilized by RCs pool the requisite investments from multiple EB-5 investors, then usually adds additional money from another party -- up to this point, it's the same for all RC -- and then partakes an equity interest in an actual business, such as renovating, building and operating a commercial real estate properties, dairy farms, ethanol manufacturing plants, which hire new employees. Then, the profit (if any) is divided between General Partner (either the RC operator or an affiliate) and Limited Partners (composed of EB-5 investors).
The second type of structure pools the requisite investments from multiple EB-5 investors into usually a Limited Partnership structure which acts as a New Commercial Enterprise -- up to this point, it's the same structure as the first type -- and then makes an investment loan(s) to a third-party company (both for-profit and non-profit) which borrows the loan for the specific purpose of using the investment loan to partly finance the bona-fide and job-creating project. The project can range from building hotels, hospitals, manufacturing plants, expanding shipyards, renovating huge office buildings, large, and high-class restaurants to using the investment loan to finance film production activities.
The gradual trend appears to be towards the second type of structure. Another trend is towards undertaking bigger projects, primarily because it takes a great deal of time and efforts to put together good EB-5 projects.
Which one do we prefer? It really depends on the specific characteristics of a particular EB-5 project, but everything being equal, we generally prefer the 2nd type of investment structure.
The common characteristics of "good" EB-5 Regional Centers are:
1. Relative strong track records in having developed, completed and successfully marketed numerous number of regional center EB-5 projects.
2. Extensive experience in having promoted numerous Regional Center EB-5 projects and having handled I-526 and I-829 applications.
3. Many years of experience in having managed EB-5 projects and being aware of EB-5 issues.
4. A transparent investment structure which has been tested through all phases of EB-5 procedures.
5. Utilizes an understandable, "reasonable" job-calculation methodology in conservative manner.
6. Good team of advisors, including experienced U.S. immigration attorneys.
7. Capable staff dedicated to serving the investors' needs and managing the EB-5 investment projects.
8. Track record of I-829 approvals and having recouped the investments.
Yes, if you wish, you should bring your attorney, CPA or your advisor, or anyone whose advice you trust, and hopefully, who is smarter than you when it comes to this kind of matters. Also, if you do not speak or understand good English, you should inform the RCs in advance. Some RCs will expect you to bring your own English translator, which might be as well, because if I were an investor, I rather trust the English translator I hired rather than supplied by the RC itself, not because I doubt any RC's honorable intentions but because their translator may not be as competent as the translator hired by the investor.
Yes, most escrows are pretty well-known banks, and I have never heard so far any problems with the escrow banks used by Regional Centers. However, if the escrowing company is a very small bank or non-financial company, I would be concerned, if I were an EB-5 investor who was told to deposit my funds in some unheard of bank at some Caribbean island. Like I said, most RCs I know use well-known, bona-fide banks to act as escrows.
For two reasons. One, RC cannot have the investor's money wired into the Limited Partnership's bank account until I-526 is approved, because under the EB-5 law, there should not be any commingling of money that is not of lawful source. Therefore, it is always prudent to wait until I-526 petition is approved before releasing the money in the escrow account to the Limited Partnership's account. Second, this is to protect individual investors who do not want to release their moneys until at least their I-526 immigrant petitions are approved, because the chances is if their I-526 petitions are approved, they should in all likelihood obtain Conditional Permanent Resident (CPR) status.
However, as noted in another section, USCIS already released an official statement stating that it is in violation of EB-5 law to guarantee the return of the initial investment in case I-829 is denied for any reason, because this comes close to a guarantee. Therefore, do not even ask the RC if they can guarantee the return of your money if your I-829 is denied. Even if the RC wants to do that, they cannot. It's like asking them if they are willing to violate EB-5 law to help you.
Basically, any RC must comply with the governing rules and parameters set by USCIS for Regional Centers, so that their RC designation is not taken away by USCIS. Their second goal is to try to minimize the risk that investors' initial investments are not lost, while enough new jobs are created so that all investors can acquire Lawful Permanent Resident (LPR) status. Really, their last goal is to try to increase the return of profit to Investors. However, you tell me how much profit the RC projects can really generate for you when the RCs have other goals to achieve? To be frank, if I were an EB-5 investor I would stay away from an EB-5 project that says they can generate very high profits while achieving other objectives. If any RC can consistently generate very good profits while achieving the above-described objectives, the principals of that RC are either geniuses or incredibly lucky people.
[Q] I know most, if not all Regional Centers, require that you deposit the requisite funds in the designated bank escrow accounts. Does this money get refunded to the investor in the event I-526 is denied?
Yes, the escrow agreement contains a provision mandating that the money be released from the escrow account directly to the investor in the event of i-526 denial. Therefore, the money does not even go to the Limited Partnership's account; the money is released directly to the investor from the escrow account.
[Q] Regional Center EB-5 projects contain many investors who invest in the same project as pooled investors. If I get the requisite money money and documents ready, can I go ahead and apply for I-526 immigrant petition without having to wait for other investors to get ready their money and docs?
Yes, even though a RC EB-5 project has many EB-5 investors participating as investors, each investor can proceed with their EB-5 case according to his own schedule. Otherwise, RC-based EB-5 projects would not be feasible.
Note that Regional Center concept has nothing to do with the amount of investment; it has everything to do with the way you are allowed to create jobs -- directly, indirectly and induced. Therefore, a Regional Center can, and often do, require $1 Million USD investment. The TEA concept governs the amount of investment, not RC concept. That's why an easy way to remember is to repeat "It's good to have TEA in RC".
It can cost anywhere between $50,000 to $100,000 USD to prepare a RC designation request or proposal, and it can take anywhere between 1 to 2 years. Also, getting a RC designation does not automatically lead to EB-5 investors lining up at your door. The RC market is becoming very competitive, like any business.
Although we cannot be certain, we would say RC based EB-5 cases are between 70% ~ 80%.
We believe there is a possibility that this amount might be raised in future -- but not until 2011 or later. There are some talks on this issue, but we would personally not be surprised if this happens. Do we agree or like it? No. But is there some likelihood? Yes.
The investor must be "active" in the management of the investment by engaging in the management of the new commercial enterprise, either through day-to-day managerial control or through policy formation. However, the law does specifically allow that an investor will qualify as a "limited partner" as defined in the Revised Uniform Limited Partnership Act. The Limited Partnership (the "LP") meets all the regulation requirements by enrolling the investor in the investment as a limited partner. This role allows the investor to continue to engage in his or her own business without needing to participate in the day-to-day management operations. However, the limited partner is required to participate in the formation of policy activities for the Partnership. The limited partnership business structure allows the investor to live where he or she pleases, and gives him or her the option to enter and exit the U.S. without any obligation to manage the daily affairs of the investment. Most importantly, the limited partner, like the corporate shareholder, is only liable to the enterprise to the extent of the agreed-upon investment. The RCs uses this business structure to protect the investor.
Let's examine the controlling regulation:
(5) To show that the petitioner is or will be engaged in the management of the new commercial enterprise, either through the exercise of day-to-day managerial control or through policy formulation, as opposed to maintaining a purely passive role in regard to the investment, the petition must be accompanied by:
(i) A statement of the position title that the petitioner has or will have in the new enterprise and a complete description of the position's duties;
(ii) Evidence that the petitioner is a corporate officer or a member of the corporate board of directors; OR
(iii) If the new enterprise is a partnership, either limited or general, evidence that the petitioner is engaged in either direct management or policy making activities. For purposes of this section, if the petitioner is a limited partner and the limited partnership agreement provides the petitioner with certain rights, powers, and duties normally granted to limited partners under the Uniform Limited Partnership Act, the petitioner will be considered sufficiently engaged in the management of the new commercial enterprise.
Note the key word "or" above, which implies that in a non-corporate NCE situation, such as LLC, "(i)" requirement will have to be met showing that the investor-petitioner "is engaged in either direct management or policy making activities" of the NCE.
Yes. If the petition was submitted in good faith, the full investment will be returned to the account from which the funds originated.
The USCIS requires that some financial risk be involved so all Regional Centers and/or immigration attorneys cannot guarantee the return of the investment to individual EB-5 investors, but the featured Regional Centers make best efforts to minimize the amount of risk by making sure that the investment loans are properly collateralized and that the borrowing companies are in strong financial standing. All limited partners will receive semi-annual reports with financial and partnership information from the General Partner.
he EB-5 program allots 10,000 visas per year for aliens and family members whose qualifying investments result in the creation or preservation of at least ten (10) full-time jobs for U.S. workers. Three thousand immigrant (3,000) of these visas are set-aside for aliens who invest through regional centers. In addition, 3,000 immigrant visas are allotted to TEA EB-5 cases. Putting together, this means, if certain RC EB-5 project combines both RC and TEA features, 6,000 IVs are available for picking under the current system. That's interesting.
Well, it really depends on who you talk to. Some will say say it was USCIS who suddenly changed their EB-5 policies and put in all kinds of restrictions that made the Regional Center Program an unworkable vehicle to attract foreign investors. Some will swear that the problem lies with too aggressive Regional Centers who took too much risk and pushed their Regional Center Program off the slippery slope of common sense in order to get away from the too restrictive requirements enforced by USCIS. It's hard to say. But probably, no one will argue that it was probably a combination of both factors that caused the Regional Center and also regular, direct, individual EB-5 cases to remain stagnant for many years from 1995 to 2003.
Perhaps the reason for this confusing history of EB-5 Program is because EB-5 contains two conflicting motivations by two parties: U.S. governments want the foreign investors to take as much risks as possible and create many jobs, while the foreign investors want to NOT take any risks while obtaining green cards. There is a tug of war between the two conflicting motivations, and we believe the EB-5 ball has settled somewhere in the middle of requiring the job-creation, while relaxing other requirements. As long as the foreign investor puts his or her money of lawful source to create or foster the job-creation of requisite numbers of full-time positions, the USCIS is being supportive of the Regional Center Program, and in fact, in 2004, had to become a cheerleader for the Regional Center Program to jump start it after no one wanted have anything to do with the Regional Center Program. See the attached USCIS Press Release PDF file.
[Q] It is my understanding that Regional Center Program meandered for many years from 1995 to 2002 and then starting around 2003, made a resurgence of sort. Is there specific reasons for this?
Yes, without the changes in the EB-5 law, we believe the Regional Centers would have continued to meander and never have taken off. What were the important statutory amendments? They were:
- Doing away with the job-creation requirement that were related to export activities of the region, and allowing the job-creation from any investment activities in the region;
- Doing away with the establishment of new commercial enterprise requirement by the investor, and allowing third-parties rather than investors to first create a new commercial enterprise, i.e., limited partnerships first and then attract investors -- per real-world commercial demands;
- Reaffirming that a limited partnership is included in the definition of "new commercial enterprise";
- Defining full-time positions as the positions that require 35 hours per week any time (rather than all the time) regardless of who fills the positions.
The above amendments in one swoop made the Regional Center Program comport with the real-world commercial requirements. Without these amendments (and subsequently by various policy changes), there is no way Regional Center Program would have taken off. Therefore, people who refer to "regional centers" as some sort of "shady schemes" are not aware of the very problems that initially caused the regional centers to become "schemes" and then subsequent amendments that allowed Regional Centers to carry on as bona-fide businesses to attract foreign investors' funds.
Said author often tells potential clients that they really have to understand the checkered history of the Regional Center Program and the reasons for the problems, before they can understand that there have been definite improvements made that made the Regional Center doable Program that can function in the real-world, commercial requirements.
USCIS has released the following statement in January 2009.
Please send Regional Center Proposals to:
USCIS California Service Center
ATTN: EB5 RC Proposal
P O Box 10526
Laguna Niguel, CA 92607-0526
For non-US Postal Service:
USCIS California Service Center
ATTN: EB5 RC Proposal
24000 Avila Road, 2nd Floor
Laguna Niguel, CA 92677
In addition, please place a cover sheet (preferably in RED) on top of your proposal packet with BIG BOLD LETTERS "EB5 RC PROPOSAL" so that the contractor can more easily identify them and not reject them.
The "contractor" referred above means the contracting company's staff who opens the mails and sorts them. We do not know if it is a good idea to have the same governmental body which adjudicates the EB-5 applications to approve or deny proposal/request for designation of a regional center. Evaluating regional center proposal request is not an easy work because there is a bundle of economic analysis, commercial and immigration issues.
For various reasons, the Western parts of the United States have the most number of designated regional centers, and to a lesser extent, some Eastern states. Perhaps it's because it's easier to set up projects, or because they are the areas where foreign investors and families want to emigrate, or those are the areas where the principals of the regional centers live and work. Not sure of the reasons, but those are the facts.
[Q] Some people tell me that direct, individual $1 Million USD EB-5 case will get you LPR status directly without having to go through CPR status, as opposed to regional center EB-5 case. Is this true or false?
Absolutely false. All EB-5 cases, whether Regional Center or non-Regional Center, regardless of the amount of requisite fund, have to go through Conditional Permanent Resident (CPR) status first, before fulfilling all requirements for applying for I-829 conditions removal to obtain LPR status. Don't think there is any additional immigration benefit by investing more money. That's just not the case.
Many people have prejudices against Regional Centers because of the "troubled" or "checkered" history, but the EB-5 law governing regional centers have become a lot clearer (not to say there are no left-over issues), and USCIS is in the process of issuing several guidelines to further clarify many of the points. In short, the Regional Center Programs, largely due to USCIS' greater involvements and efforts, have cleaned up their acts. Most EB-5 regional centers I know, although hoping for a more relaxed requirements, try to abide by the EB-5 law and try to work within those constraints. USCIS has made it clear that no funny business will be tolerated. One thing is for sure: most major Regional Centers know about each other's practices, and if any particular Regional Center does something they should not be doing, the word will get around very quickly, and to USCIS' office, especially in this age of instantaneous internet.
Most Regional Centers, for consistency purposes, may have their own designated, preferred, recommended, or allowable U.S. immigration attorneys for EB-5 investors. From an efficiency point of view, the RCs want to work with experienced U.S. immigration attorneys who can represent the Investors well; but at the same time, from a marketing point of view, the RCs might have to work with any U.S. immigration attorneys to have a greater chance of attracting Investors to their EB-5 Projects. It all depends on the philosophy and needs of a particular RC. Obviously, any RC would probably like to work with a proven U.S. immigration attorneys who know their system and requirements.
It should be noted that there is a healthy competition among Regional Centers, and at the same time, they are bound by common goal of furthering the interests of the Regional Centers and EB-5 law to better accommodate the needs and interests of Regional Centers.
One purpose of this site is to further the interests of potential EB-5 Investors.
This differs for each designated regional center, but in general, the General Partner is the entity that is running the day-to-day activities of the Limited Partnership (new commercial enterprise). They follow the changes or progress of the EB-5 project, monitors the job-creation developments, reports to Investors, answer your questions, and then also calls for voting on any significant issues that require voting of limited partners pursuant to the limited partnerships. In some limited number of regional centers, the General Partner may also work with a governmental economic development agencies on these matters. In most regional centers, the participation of the limited partner investors are pretty "limited", meaning you can reside anywhere in the U.S. and do not have to be near the EB-5 project.
U.S. immigration attorney of EB-5 investors work and communicate with the General Partner to keep you abreast of the important developments.
For various reasons, most Regional Centers use the Limited Partnerships formed pursuant to the Uniform Limited Partnership Act of the applicable state law. But there is no reason not to use corporations, etc.
First, regional center designation letter controls the type of project, structure and the specific geographic region. Therefore, any EB-5 project must comply with the conditions of the RC designation letter.
Most RC projects involve building or expanding big buildings, such as Pennsylvania Convention Centers, UPENN hospital, building shipyard factories, hotels, real estate development projects, and helping film production studios make movies.
Unfortunately no. USCIS recently ruled that this blanket provision stating the return of the money in the event of I-829 denial is not allowed. The rationale for this is that if this was allowed, there would be almost no risk for EB-5 investors. We can tell you that if this was allowed, many regional centers would accommodate such provision, but it's not allowed, so that's that. Also, practically speaking, it's hard to return the investor's money once the money has been invested into a EB-5 project towards the job-creation activities.
Most of the better-known regional centers probably do. The offering documents contain a provision that the EB-5 investor's fund will be returned promptly in the event Immigrant Visa or I-485 is denied. The investor doesn't have to worry about the money being returned in the event of I-526 petition denial because their money is being held at an escrow account, so it will be released in the event I-526 petition is denied.
[Q] Do all regional centers require that the investment amount be deposited into a designated escrow account, and when is the release date of such fund to the new commercial enterprise entity?
Probably yes, because this is designed to protection to EB-5 investors and at the same time hold the funds in a designated escrow account until it has been demonstrated to be of lawful source through I-526 petition approval.
The release date may vary according to regional centers. Most require the release after the approval of I-526 petition, to be safe, because this date is a balance between the need to wire the money as soon as possible to help the EB-5 project, and also to make sure that EB-5 investor will be protected.
Most Regional Center Programs require the minimum $500,000 USD investment amount. In addition, they generally have additional costs and fees of $25,000 to $55,000 USD. The difference in the additional costs and fees might be due to the difference in including immigration attorney fees or having the investor pay the immigration attorney fees on his own.
A "Regional Center" is:
1) Ann entity, organization or agency that has been approved as such by the USCIS;
2) Which focuses on a specific geographic area within the United States; and
3) Which seeks to promote economic growth in the region through investment, or any improved regional productivity, creation of new jobs, and increased domestic capital investment.
Of the 10,000 investor visas (i.e., EB-5 visas) available annually, 3,000 are set aside for those who apply under a pilot program involving an CIS-designated “Regional Center.”
Basically, the advantage for an EB-5 investor is that a regional center can employ a "reasonable" methodology to show that the new jobs were created Directly, Indirectly or by induced means, or any combination thereof. This is an advantage because adding Indirect jobs definitely increases the number of new jobs created. For direct, individual EB-5 case, they are limited to using only directly-created new jobs.
Note a regional center EB-5 project can be either $500,000 USD or $1 Million USD investment. In other words, it can be either a TEA project or non-TEA project.
Any governmental entity or for profit entity can apply to designated a regional center. It can take up to 1.5 years or it can be approved quickly. It all depends how thorough are the documents submitted in connection with the request to become a regional center. There is a concern whether the processing times of EB-5 related applications will be adversely affected by more regional centers.
There are close to 70 designated centers spread across various states as of December 2009. Note many of them do not have track records on completed projects, approved I-526s or I-829s. You may go to www.eb-5center.com/RC_list to view the most current list of designated regional center list.
Yes and no. It is true that an approved regional center can include new positions created directly, indirectly or by induced means. However, the term "pre-approved" implies that USCIS will not question the job-calculation at the I-829 stage once I-526 petition is approved; this just is not true. A more accurate way to describe is that a specific job-calculation methodology that is included and submitted as part of I-526 petition (as well as part of the regional center designation request letter and approval) is deemed to be approved by USCIS when the underlying I-526 petition is approved. However, most, if not all, job-calculation studies contain some key assumptions that underlie the job numbers results reached by utilizing the job-calculation methodology. At I-829 stage, USCIS has discretion to question whether the material assumptions underlying such job-calculation studies have been met.
Therefore, it is not technically correct to say the job numbers have been "pre-approved" if and when I-526 petition is approved. Rather, the job-methodology containing certain key assumptions have been approved. It is hard to imagine that any job-calculation study which has been stripped of any and all key assumptions can be considered a "reasonable methodology" contemplated by the EB-5 regulations.
Basically, the relevance of being designated as a regional center is that the applicant (a for-profit or non-profit company can apply for designation) can establish EB-5 projects within the geographic region and the parameters set forth in the regional center designation letter in terms of investment structures and types of industries, etc. in order to attract foreign investors.
The biggest benefit is that the requisite creation of ten full time and new positions can be achieved directly, indirectly or induced means. A specific, acceptable job-calculation method should be set forth in the regional center designation letter, and all the projects taking place pursuant to the specific regional center must comply with the conditions contained in the designation letter.
Pilot Program is the type of EB-5 investment program created by a specific EB-5 statute, and Regional Center is an EB-5 investment mechanism falling with the Pilot Program. For the practical purposes, they are the same thing.
Yes, if the Regional Center commits fraud and misrepresents or remains inactive for a prolonged period of time without setting up EB-5 projects, or violates the parameters set out in the Regional Center Designation Letters, then USCIS may issue a Notice of Intent to Withdraw the Regional Center designation.
As of September 17, 2010, it appears that at least one designated regional center received a Notice of Intent To Terminate A Regional Center Designation for failure to follow the permitted parameters of their RC designation.
[Q] Many sources say or state that the Regional Center EB-5 Program has been "revived" or "re-established" in 2002. What does this mean? Is this true? I thought the Regional Center Program existed since 1993?
It's largely an accurate description. Even though the Regional Center Program existed since 1993, from 1997 to 2002, the Regional Center Pilot Program suffered a severe set-back that resulted from the varying positions taken by the USCIS and also by some Regional Center Program which pushed the EB-5 law over the edge of common sense. Starting 2002, USCIS (spearheaded by Morrie Berez who is no longer involved in the EB-5 Unit) started to support and clarify many of the problematic issues that had been serious impediments to the Regional Centers' moving forward. USCIS became more reasonable, and a sort of compromise has been reached. Many of the issues remain, and USCIS stated during teleconference that it is in the process of drafting official guidances on many of the issues.