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Looming Issues For Regional Center EB-5 Program


Published by www.ILW.com, a leading online immigration weekly around 2005. Author: Young Noh

Starting several years ago, I-526 petitions for the Regional Center EB-5 cases have been on the sharp rise, and as a result, numerous I-829 applications to remove the conditional status have been already adjudicated, and even more I-829 applications will be filed in near future. [1] The adjudications of these I-829 cases have already revealed certain procedural problems regarding I-829 applications that need to be overcome; and further adjudications of I-829 applications will likely bring up various unresolved issues concerning job-creation, which need to be clarified for the Regional Center EB-5 Program to continue its growth and become a more transparent method of emigrating for alien investors. The purpose of this article is not to discuss long-term solutions or policy directions of EB-5 Program but to identify existing issues/problems that have already cropped up or are fast approaching, and to suggest some common sense solutions.

The issues concerning Regional Center EB-5 that must be addressed expeditiously can be grouped under two areas.

1) Processing problems with I-829 applications.
2) Job-creation issues.

I-829 Processing Issues:

Currently, I-526 petitions for Regional Center cases are taking around three months or less to be adjudicated, so that's good news. Moreover, status of I-526 petitions can be tracked via USCIS online case status verification system. However, there is no USCIS system in place to allow applicants and/or attorneys to check the status of I-829 conditions removal applications. Other than the initial Receipt Notice (which frequently are not even sent out to attorney of record or applicant based on our past experience with I-829 applications) merely evidencing that I-829 application has been filed with USCIS, there is no way to check the status of pending I-829 application or even after I-829 has been adjudicated, other than calling the Customer Representative. Also, there appears to be a continuing problem with USCIS' generating or sending out Approval Notices. For many I-829 cases, neither Receipt Notice nor Approval Notice is sent out by USCIS. Not having Receipt Notice and/or Approval Notice obviously poses all sorts of problems for the applicant and his family members, who need to promptly remove their conditional permanent residence status and/or travel outside the United States while their I-829 application is pending, or who happen to be temporarily present outside the United States after the expiration of their conditional green cards. Because of the harsh consequences awaiting those alien entrepreneurs who fail to successfully remove the conditional status -- even after they made their requisite investments -- potential amendments should be considered. [2] With I-829 applications on the rise, the USCIS needs to establish an efficient processing system to allow applicant or attorney of record to not only easily verify status of pending I-829 applications but also to receive promptly Receipt Notice and Approval Notices. In addition, I-829 Receipt Notice should list the spouse and dependents to enable the spouse and dependents to prove that they were actually included in the I-829 conditions removal application and that they are currently in legal status. [3]

Applicants of I-526 and I-829 applications deserve more responsive service from USCIS, not only because they have invested substantial amount of money that help U.S. economy, but especially in light of a huge (and also horrendous) increase in filing fees for both I-526 and I-829 applications, set to become effective on July 30, 2007. [4]

Job-Creation Issues:

While the four AAO precedent EB-5 cases [5] have addressed and settled certain issues involving Regional Center or Targeted Employment Area ("TEA") EB-5 cases, these AAO decisions have not adequately clarified a myriad of potential issues concerning the job-creation, which is the underlying goal of EB-5 Program. Aside from holding [6] that 1) the job-creating businesses should be located in the subject TEA area, 2) the entire requisite investment should be given to job-creating businesses, and 3) the jobs created should be "permanent" jobs, these AAO cases and the legacy USCIS have not addressed other job-creation issues that are looming ahead. The primary reason for any lack of guidance on the job-creation issues is because in the past, almost all of denied TEA and Regional Center I-526 petition cases were based on, the then commonly-used grounds to deny I-526 cases, such as lack of lawful source evidence, guarantee of investment amount by the new commercial enterprise to the individual investors, usage of promissory notes, not actually investing the entire amount and the use of reserve funds by the new commercial enterprise to pay back individual investors. Because a majority of EB-5 cases were denied at I-526 stage, based on various grounds other than job-creation issues, USCIS and/or AAO simply did not have enough opportunities to address job-creation issues at I-829 stage and formulate practical guidance on the same issues.

According to said writer's research, the following issues concerning jobs-creation appear to have been decided already.

1) In Regional Center cases, job-creating business (usually the new commercial enterprise) should be located in the Region. This means a new commercial enterprise that helps to create jobs should be located in the Region, unless such new commercial enterprise engages in a lending activity, in which case only those businesses which create actual jobs must be located within the Region. See Matter of Izummi.

2) Jobs created should be counted based on the positions created, rather than persons occupying the positions - meaning different persons can be occupying the positions at any given time. In addition, two part-time employees for the same job-sharing position can be added to create one full-time position. And moreover, the position cannot include independent contractor positions. See definition of "employee" at 8 CFR 204.6(e).

3) Jobs created should be "permanent," rather than temporary. Accordingly, certain construction-related jobs temporarily created during construction or renovation stage of a building project, but which will disappear after the building construction activity has ceased, do not count as "permanent" jobs.

4) The direct jobs created should be located within the Region.

5) The entire investment amount of either $500,000 or $1 Million USD should be put towards the job-creation effort.

However, the following issues concerning job-creation requirement still remain; and to date, there appears to be no regulation, cases or USCIS guidance governing the following issues. [7]

Should relocated jobs created by a new commercial enterprise, which were moved from outside to within the Region, count? Let's say Company A, doing business outside Region, closes its operation outside Region and establishes a new operation in the Region and moves some or all of its employees from outside Region to inside the Region based on bona-fide business reasons. Should such positions count? The answer appears to be yes, based on the underlying policy of Regional Center, which is to create jobs (whether direct or indirect) within the region where Congress has deemed that new jobs are needed or existing jobs should be preserved. This common-sense view is also supported by the regulation [8] which state that the jobs created should be in the TEA area.

What if the above scenario takes place, except Company A does business both outside and inside the Region and moves the jobs from outside to inside the Region? It should not matter whether Company A is doing business both outside and inside the Region. The only relevant issue is whether the jobs were relocated due to a bona-fide business reason, not just to meet the job-creation requirement.

What if Company A relocates the jobs from inside the Region to another location within the Region and creates both direct and indirect jobs within the Region? In this case, since it could be argued that the Region itself has not benefited from additional, new jobs, such jobs should not count.

The 2002 Amendment [9] has ever subtly changed the 8 CFR 204.6 (e) definition of "Full-Time Employment" by explicitly stating that "the term 'full-time employment' means employment in a position that requires at least 35 hours of service per week at any time [emphasis added], regardless of who fills the position." This explicit addition of the phrase "at any time" indicates that even if the position requires 35 hours of service for only one week out of four weeks, such position should count as "full-time" position. But what if the position requires at least 35 hours of service per week out of the entire year but require only 30 hours per week for all other weeks out of the year? Should such position count as "full-time" position?

Now we get to even more interesting scenario. What if direct jobs are created in the Region, but all or some of the indirect jobs are created outside the Region? Often, indirect jobs for any project are created outside the Region, because indirect or induced effect of direct jobs extends to outside the Region. However, isn't the purpose of TEA or Regional Center to create jobs in the Region? Even the RIMS II model developed and used by the Bureau of Economic Analysis (BEA), a division of U.S. Department of Commerce, which calculates indirect jobs created based on a number of direct jobs, using a multiplier, assumes that the indirect jobs created are in the Region. This position has been confirmed emphatically by BEA. [10] The fact that RIMS calculation method counts only those direct, indirect and induced jobs within the Region (and not outside the Region), along with the 8 CFR 204.6(j)(6) requirement that the employment be created in a TEA area, are strong indications that for the purpose of the Regional Center EB-5 Program, the direct, indirect and induced jobs that should count are only those shown to be created within the Region. There is also a strong implication (if not an explicit assumption) in Matter of Izummi that both indirect and induced jobs should be contained within the Region.

Should the jobs that are claimed to have been created or projected to be created in I-526 petition be examined again at I-829 stage? The answer to this question really depends on the particular content of job-creation calculation methodology submitted at the I-526 stage. If the economic analysis calculating jobs created submitted at I-526 petition stage contains material assumptions or conditions, then the USCIS examiner should verify at the I-829 stage to see if these assumptions or conditions have been met. For example, using RIMS II model, if one of the assumptions is that 60 direct jobs must be created for the total number of jobs equal to 100 to be divided between 10 investors, then USCIS should check to see at I-829 stage if 60 direct jobs have been indeed created. An economic analysis[11], whose conclusion is based on certain assumptions, should be examined by the USCIS examiner at I-829 stage to verify whether those assumptions or conditions were indeed fulfilled. I-829 regulations also state that Petitioner must prove again that the jobs have indeed been created.

Given the fact that Regional Center designation allows investor to be credited with indirect and induced job-creation, USCIS should carefully examine the job-calculation methodology submitted with the Regional Center application to make sure that such methodology is "reasonable" as required by the regulation. What then should be the level of examination given to the proposed job-creation methodology? Furthermore, should the economic studies submitted 15 years ago be re-examined from time to time to see if certain assumptions relied upon are still valid? Said writer does not have answers to both of these questions, but it seems the Bureau of Economic Analysis, a division of the U.S. Department of Commerce is very experienced and can be consulted to determine wheat is a "reasonable" methodology.

In conclusion, because currently many Regional Center Programs have obtained numerous I-526 petition approvals, and many of the same cases are fast approaching the I-829 stage, certain I-829 related issues that have not been thoroughly examined in the past are bound to arise. USCIS' recognition of these issues and its issuance of practical and well-justified guidance on these issues will go a long way in helping the Regional Center Program achieve, in a more transparent manner, its intended goal -- which is to create jobs (direct, indirect and induced) within the designated Region, within the clearly-defined parameters of each Regional Center EB-5 Program. Only when the politicians and the public can see that the EB-5 Program actually creates jobs, there will be a push (or acceptance) to make the EB-5 Program permanent.

Endnotes

1 This resurrection of once almost dead Regional Center is largely due to the 2002 change in the requirements of Regional Center and the tireless efforts of Mr. Morrie Berez, the head of EB-5 Unit.

2 Said author believes that an amendment allowing investors who already invested and maintained requisite capital for two years and created necessary jobs within the same two years, and otherwise fulfill all EB-5 requirements, should be allowed to apply and obtain "permanent" green cards, without having to first go through conditional status. For example, aliens who have been married to U.S. citizens for two years or more can obtain "permanent" green cards without going through the conditional residence stage. As an alternative, said author believes that the requirement for the creation of ten jobs is not realistic, especially for regular, direct investment EB-5 cases; and the job numbers for regular EB-5 cases should be reduced to four or five full-time positions, excluding the applicant and his immediate family members, to encourage more direct investment EB-5 applications.

3 In fact, I-526 form should be amended to include spouse and dependents who will be adjusting or applying for immigrant visas.

4 Even Donald Trump might be shocked to find out filing fees for I-526 will cost $1,435 and approximately $3,000 for I-829.

5 Matter of Soffici, 22 I. & N. Dec. 158, 19 Immigr. Rep. B2-25 (Assoc. Comm'r, Examinations 1998); Matter of Izummi, 22 I. & N. Dec. 169, 19 Immigr. Rep. B2-32 (Assoc. Comm'r, Examinations 1998); Matter of Hsiung, 22 I. & N. Dec. 201, 19 Immigr. Rep. B2-106 (Assoc. Comm'r, Examinations 1998); Matter of Ho, 22 I. & N. Dec. 206, 19 Immigr. Rep. B2-99 (Assoc. Comm'r, Examinations 1998).

6 See Matter of Izummi.

7 Said writer does not claim to have done an exhaustive research by reading all of non-precedent EB-5 cases, but he has read applicable regulations, precedent case law and some of non-precedent cases. In addition, said author attended the recent AILA Conference at Orlando, Florida and attended all EB-5 seminars and meetings sponsored by both ILW and AILA.

8 8 CFR 204.6(j)(6) requires that the employment be created "in a targeted employment area".

9 21st Century Department of Justice Appropriations Authorization Act, Pub. L. No. 107-273, 116 Stat. 1758 (2002).

10 BEA professional staff confirmed in writing on April 24, 2007 that "the RIMS II direct-effect employment multiplier can be used along with an estimate of a change in direct employment to calculate the total employment impact of a project or event on a region. The total employment impact includes the direct + indirect + induced employment impacts when using Type II (Endogenous) multipliers. The estimated direct, indirect, and induced employment impacts all occur within the region. The RIMS II multipliers cannot estimate the impacts that occur outside the region."

11 It appears that most Regional Centers use RIMS II, REMI, or IMPLAN economic analysis.