Interim EB-5 Tenant-Occupancy GM December 2012

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It's about time we something clearly stating what is acceptable! I have attached an earlier article/essay that further explains the guidance.

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Interim EB-5 Tenant-Occupancy GM December 2012

  1. 1. U.S. Citizenship and Immigration Services Office of the Director (MS 2000)This is a very welcome message from USCIS even if it is Washington, DC 20529-2000LONG OVERDUE! This GM contains several keyprinciples that this advocate and critic has beenespousing. It looks like USCIS was paying attention to thestakeholders after all (or at least, eventually). See pages 9& 10 of the attached essay and compare it to this GM. December 20, 2012 GM-602-0001 Guidance Memorandum By Joseph P. Whalen at 5:39 pm, Dec 28, 2012 SUBJECT: Operational Guidance for EB-5 Cases Involving Tenant-Occupancy Purpose This guidance memorandum (GM) is intended to facilitate adjudication of cases involving issues related to the “tenant-occupancy” methodology for establishing job creation in EB-5 cases. The guidance has been formulated following careful internal deliberation, consultation with sister government agencies, and review of responses to requests for evidence (RFEs) issued in February 2012 to a number of outstanding Regional Center applicants who relied on the tenant- occupancy methodology. This guidance will be applied to pending cases and cases filed on or after the date of this guidance that rely on the tenant-occupancy methodology. This guidance does not rescind or supersede other EB-5 guidance. Scope Unless specifically exempted herein, this GM applies to and binds all U.S. Citizenship and Immigration Services (USCIS) employees. Background Among the issues raised in the February 2012 RFEs, USCIS sought evidence that the projected jobs attributable to prospective tenants (which would occupy the commercial space created by the EB-5 capital) would represent newly created jobs, and not jobs that the tenant had merely relocated from another location. This determination is necessary to assess whether there is a reasonable causal link between the EB-5 enterprise and the job creation that would allow for the attribution of the tenant jobs to the EB-5 enterprise. These RFEs suggested the types of evidence applicants could submit to make this showing.NEXUS! Implementation Prior to issuing the February 2012 RFEs, USCIS determined that the tenant-occupancy methodology can satisfy the EB-5 program requirement of presenting a “reasonable methodology” that is “supported by economically or statistically valid forecasting tools,” if the applicant presents in “verifiable detail” information sufficient to establish by a preponderance of the evidence that the tenant jobs have resulted from the EB-5 enterprise (i.e., that the creation of
  2. 2. GM-602-0001: Operational Guidance for EB-5 Cases Involving Tenant-OccupancyPage 2tenant jobs were facilitated by the EB-5 enterprise, for example through a showing of constrainton the supply of appropriate commercial space or of excess demand for such space).In regional center cases that rely on tenant occupancy models, as in any other regional centercases, USCIS requires evidence that the claimed jobs result, directly or indirectly, from theeconomic activity of the EB-5 commercial enterprise. Jobs that are merely re-located rather thancreated do not count. With respect to indirect job creation, the task for the applicants andpetitioners is to project the number of newly created jobs that would not have been created butfor the economic activity of the EB-5 commercial enterprise. In making that projection, they areto use economically and statistically valid forecasting tools.Whether an applicant or petitioner has demonstrated that an EB-5 enterprise caused the creationof indirect tenant jobs will require determinations on a case-by-case basis and will generallyrequire an evaluation of the verifiable detail provided and the overall reasonableness of themethodology as presented. To claim credit for tenant jobs, applicants and petitioners maypresent evidence backed by reasonable methods that map a specific amount of direct, imputed, orsubsidized investment to such new jobs. However, for applicants and petitioners that insteadseek to utilize a facilitation-based approach, USCIS will not require an equity or direct financialconnection between the EB-5 capital investment and the employees of prospective tenants.Rather, facilitation-based tenant job credit will depend on the extent to which applicants orpetitioners can demonstrate that the economic benefits provided by a specific space project willremove a significant market-based constraint. One way applicants and petitioners can make thisshowing is to indicate how a specific space project will correct market imperfections andgenerate net new labor demand and income that will result in a specified prospective number oftenant jobs that will locate in that space. In high unemployment areas in which new projects arenot likely to significantly displace other income or labor, applicants and petitioners shouldgenerally indicate how a specific project will fill an existing investment void in that area togenerate new demand for the tenant business. Prospective tenant jobs demonstrated byreasonable methods and supported by verifiable evidence pursuant to the above approaches maybe used as direct inputs into appropriate regional growth models to generate the number ofindirect and induced jobs that result from the credited tenant jobs.Where applications for regional centers are approved based on their use of tenant-occupancy This isprojections, the approval notices should contain appropriate language regarding the assumptions totallyunderlying the approval, which if not borne out may impact related adjudications at the I-526 or new forI-829 stages. 1 For example, a Form I-924 with I-526 exemplar may be approved where no USCIS.specific tenant has been identified to occupy space but where the applicant or petitionerreasonably projects that a restaurant will eventually lease the premises. 2 If, after approval of theI-924, the space is leased to a different type of tenant (i.e., a type of restaurant that yieldsdifferent expected employment or a non-restaurant), or fails to achieve previously projected1 USCIS will still apply the principles outlined in this guidance to Regional Centers that currently have an approvalnotice that does not include this language, subject to application of established USCIS policy calling for deference toprior decisions.2 A specific tenant does not need to be identified in order for the business plan to meet program requirements.However, the type of industry of the prospective tenant should be identified (e.g., a restaurant tenant or a clothingstore tenant) to meet the legal requirements set forth in Matter of Ho and 8 CFR 204.6(j)(4)(i)(B).
  3. 3. GM-602-0001: Operational Guidance for EB-5 Cases Involving Tenant-OccupancyPage 3occupancy rates, such a change alone will not generally constitute a material change that triggersthe elimination of deference in an actual Form I-526 or negates any possibility of individualinvestors removing their conditions at the Form I-829 stage. 3 However, while such modifiedtenancy arrangement(s) may be permissible under EB-5 program rules, they could neverthelessimpact the project’s ultimate job creation numbers. Therefore, the approval notice shouldcaution that the approved job creation estimates are based on a restaurant occupying that space,and that if no tenant or a different type of tenant eventually occupies the space, the economicimpact analysis and ultimate job creation numbers will be revisited in future adjudications thatrelate to that project.USCIS will issue separate guidance on crediting jobs in a situation where more than one EB-5entity may be seeking credit for the identical job position. In the interim, where only one casefiled with USCIS has sought credit for a specific job position, that case should be credited withthe job, provided that all program requirements have been satisfied.Adjudication of cases involving tenant-occupancy should proceed based on these principles.UseThis GM is intended solely for the guidance of USCIS personnel in the performance of theirofficial duties. It is not intended to, does not, and may not be relied upon to create any right orbenefit, substantive or procedural, enforceable at law or by any individual or other party inremoval proceedings, in litigation with the United States, or in any other form or manner.Contact InformationQuestions or suggestions regarding this GM should be addressed through appropriate channels tothe Service Center Operations Directorate.3 For example, it is not necessarily a material change if a shopping mall fails to lease one out of 50 retail spaces. Bycontrast, for example, if the projection was for a single type of tenant to occupy the entire building space and notenant materializes, that may be a material change.
  4. 4. A Trade Off Between Quality and Quantity in EB-5 1 By Joseph P. Whalen (September 30, 2012)The stand-alone EB-5 entrepreneur is held to a different demonstrable 2 resultthan the Regional Center affiliated investor for valid reasons. Let’s explore them.The ordinary family-based immigrant new arrivals of nearly one-million per yearcontain among them enough small-scale entrepreneurs to fill that historic niche inAmerican society and our nation’s economy. After all, just how many mom-n-popgroceries, liquor stores, gas stations, dry-cleaners, and diners does America need?We get by just fine as is. There is no need to allow the tiny fragment of immigrantvisas allocated under the EB-5 category to be wasted on these types of businesses.The maximum number of EB-5 visas is approximately 10,000 (it is a percentageavailable from the overall pool, which is usually this figure in practical reality).That maximum includes both the principal investor and his or her dependentspouse and unmarried children under age 21. In reality, the category would becomefully subscribed each year once somewhere between 3,000 and 3,500 I-526petitions have been approved and all the principals’ and dependents’ visas havebeen issued and/or adjustments of status completed for the fiscal year. Even ifusing the grossly overstated allocation figure of 10,000 visas per year, because thevast majority of EB-5 investments are at the TEA rate of $500,000 each, that onlytotals 5 billion dollars. Realistically, using the 3,000 low-end visa use estimate peryear, we are more likely looking at 1.5 billion. That is less than USCIS’ annualbudget. If 3,500 investments were made at the TEA rate, we would only belooking at 1.75 billion invested. That is also, less than USCIS’ annual budget.The EB-5 true entrepreneur is forced to create a minimum of ten (10) full-time,permanent jobs for qualifying employees 3. The true entrepreneur was initiallyenvisioned as one of those pioneers of business that we all learned about in historyclass or dream about becoming “one day”. They were never envisioned as runningthe corner minimart which has replaced the corner grocer, butcher, or baker in oldethnic neighborhoods of yesteryear. There are still plenty of small-scale immigrantentrepreneurs who are self-employed and who employ their family in suchbusinesses but they are generally already immigrants based on a family connection.Grandma’s brother waited 20 years for a visa; he has to survive when he gets here!1 It’s a trade off in quantity and quality of JOBS CREATED!2 Definition of demonstrable adjective • clearly apparent or capable of being logically proved: the demonstrable injustices of racismAbove found at: http://oxforddictionaries.com/definition/english/demonstrable3 8 CFR § 204.6(e) work authorized folks, excluding self and family. Page 1 of 10
  5. 5. On the other side of the EB-5 equation are the large-scale projects that pool thefunds of multiple EB-5 investors plus domestic investors. Those large-scale pooledinvestments are intended to be large enough to have ramifications or a wide rippleeffect at least in the regional economy and quite possibly the national economy.What the investors’ contributions lack in quality, it makes up for in quantity. Thereverse is applied to the stand-alone true entrepreneur. What the solo performerlacks in quantity, (s)he is expected to make up for in quality.By now you may be grumbling something like: “What the heck is he babblingabout now?” I am talking about compliance with the terms of the EB-5 visademanded for the lifting of conditions and the differences in that compliancebetween two dissimilarly situated I-829 filers. Still lost? I will break it down.§610(c) of Pub. L. 102-395 (Judiciary Appropriations Act of 1993) [8 USC § 1153Note], as amended, modifies the mechanisms for demonstrating compliancewith INA §203(b)(5) when submitting a request to lift conditions as required byINA § 216A. The following chart might help you see what is required of each ofthese EB-5 conditional residents in their I-829 petitions. I-829, Petition by Entrepreneur to Remove Conditions Stand-Alone Entrepreneur Regional Center Affiliated Investor INA § 216A [8 U.S.C. 1186b] * * * * *(d) Details of Petition and Interview.- (1) Contents of petition.--Each petition under subsection (c)(1)(A) shall contain facts and information demonstrating that the alien (A) (i) invested, or is actively in the process of investing, the requisite capital; and (ii) sustained the actions described in clause (i) throughout the period of the aliens residence in the United States; and (B) is otherwise conforming to the requirements of section 203(b)(5) Page 2 of 10
  6. 6. INA § 203(b)(5) [8 U.S.C. 11853(b)(5)] * * * * *(5) Employment creation. - (A) In general. - Visas shall be made available, in a number not to exceed 7.1 percent of such worldwide level, to qualified immigrants seeking to enter the United States for the purpose of engaging in a new commercial enterprise (including a limited partnership)-- (i) in which such alien has invested (after the date of the enactment of the Immigration Act of 1990) or, is actively in the process of investing, capital in an amount not less than the amount specified in subparagraph (C), and (ii) which will benefit the United States economy and create full-time employment for not fewer than 10 United States citizens or aliens lawfully admitted for permanent residence or other immigrants lawfully authorized to be employed in the United States (other than the immigrant and the immigrants spouse, sons, or daughters). * * * * * (D) Full-time employment defined.--In this paragraph, the term `full-time employment means employment in a position that requires at least 35 hours of service per week at any time, regardless of who fills the position. 8 CFR § 204.6 Petitions for employment creation aliens.(e) Definitions. As used in this section: §610 P. L. 102-395 [8 USC 1153 Note]Employee means an individual who (c) In determining compliance withprovides services or labor for the new section 203(b)(5)(A)(iii)[(ii)] of thecommercial enterprise and who receives Immigration and Nationality Act [8wages or other remuneration directly U.S.C. 1153(b)(5)(A)(iii)[(ii)]], andfrom the new commercial enterprise. In notwithstanding the requirements of 8the case of the Immigrant Investor Pilot CFR 204.6, the Secretary of HomelandProgram, “employee” also means an Security shall permit aliens admittedindividual who provides services or under the pilot program described inlabor in a job which has been created this section to establish reasonableindirectly through investment in the new methodologies for determining thecommercial enterprise. This definition number of jobs created by the pilotshall not include independent program, including such jobs whichcontractors. are estimated to have been created Page 3 of 10
  7. 7. Full-time employment means indirectly through revenues generatedemployment of a qualifying employee from increased exports, improvedby the new commercial enterprise in a regional productivity, job creation, orposition that requires a minimum of 35 increased domestic capital investmentworking hours per week. In the case of resulting from the pilot program.the Immigrant Investor Pilot Program,“full-time employment” also meansemployment of a qualifying employee ina position that has been createdindirectly through revenues generatedfrom increased exports resulting fromthe Pilot Program that requires aminimum of 35 working hours perweek. A job-sharing arrangementwhereby two or more qualifyingemployees share a full-time positionshall count as full-time employmentprovided the hourly requirement perweek is met. This definition shall notinclude combinations of part-timepositions even if, when combined, suchpositions meet the hourly requirementper week.Qualifying employee means a UnitedStates citizen, a lawfully admittedpermanent resident, or other immigrantlawfully authorized to be employed inthe United States including, but notlimited to, a conditional resident, atemporary resident, an asylee, a refugee,or an alien remaining in the UnitedStates under suspension of deportation.This definition does not include thealien entrepreneur, the alienentrepreneurs spouse, sons, ordaughters, or any nonimmigrant alien. Page 4 of 10
  8. 8. (j) Initial evidence to accompany petition. A petition submitted for classification asan alien entrepreneur must be accompanied by evidence that the alien has investedor is actively in the process of investing lawfully obtained capital in a newcommercial enterprise in the United States which will create full-time positions fornot fewer than 10 qualifying employees. In the case of petitions submitted underthe Immigrant Investor Pilot Program, a petition must be accompanied byevidence that the alien has invested, or is actively in the process of investing,capital obtained through lawful means within a regional center designated bythe Service in accordance with paragraph (m)(4) of this section. The petitionermay be required to submit information or documentation that the Service deemsappropriate in addition to that listed below.(j) (4) Job creation — (j) (4) Job creation —(i) General. To show that a new (iii) Immigrant Investor Pilotcommercial enterprise will create not Program. To show that the newfewer than ten (10) full-time positions commercial enterprise located within afor qualifying employees, the petition regional center approved formust be accompanied by: participation in the Immigrant Investor Pilot Program meets the statutory(A) Documentation consisting of employment creation requirement, thephotocopies of relevant tax records, petition must be accompanied byForm I–9, or other similar documents evidence that the investment will createfor ten (10) qualifying employees, if full-time positions for not fewer thansuch employees have already been 10 persons either directly or indirectlyhired following the establishment of the through revenues generated fromnew commercial enterprise; or increased exports resulting from the Pilot Program. Such evidence may be(B) A copy of a comprehensive demonstrated by reasonablebusiness plan showing that, due to the methodologies including those setnature and projected size of the new forth in paragraph (m)(3) of thiscommercial enterprise, the need for not section.fewer than ten (10) qualifyingemployees will result, includingapproximate dates, within the next twoyears, and when such employees will behired. Page 5 of 10
  9. 9. (m) Immigrant Investor Pilot Program — * * * * * (3) Requirements for regional centers. Each regional center wishing to participate in the Immigrant Investor Pilot Program shall submit a proposal to the Assistant Commissioner for Adjudications, which: (i) Clearly describes how the regional center focuses on a geographical region of the United States, and how it will promote economic growth through increased export sales, improved regional productivity, job creation, and increased domestic capital investment; (ii) Provides in verifiable detail how jobs will be created indirectly through increased exports; (iii) Provides a detailed statement regarding the amount and source of capital which has been committed to the regional center, as well as a description of the promotional efforts taken and planned by the sponsors of the regional center; (iv) Contains a detailed prediction regarding the manner in which the regional center will have a positive impact on the regional or national economy in general as reflected by such factors as increased household earnings, greater demand for business services, utilities, maintenance and repair, and construction both within and without the regional center; andPage 6 of 10
  10. 10. (v) Is supported by economically or statistically valid forecasting tools, including, but not limited to, feasibility studies, analyses of foreign and domestic markets for the goods or services to be exported, and/or multiplier tables.8 CFR § 216.6 Petition by entrepreneur to remove conditional basis of lawfulpermanent resident status.(a) Filing the petition —(1) General procedures. A petition to remove the conditional basis of thepermanent resident status of an alien accorded conditional permanent residencepursuant to section 203(b)(5) of the Act must be filed by the alien entrepreneuron Form I–829, Petition by Entrepreneur to Remove Conditions. The alienentrepreneur must file Form I–829 within the 90-day period preceding thesecond anniversary of his or her admission to the United States as a conditionalpermanent resident. ....with fee.......(a) (4) Documentation. The petition for removal of conditions must beaccompanied by the following evidence:(i) Evidence that a commercial enterprise was established by the alien. Suchevidence may include, but is not limited to, Federal income tax returns;(ii) Evidence that the alien invested or was actively in the process of investing therequisite capital. Such evidence may include, but is not limited to, an auditedfinancial statement or other probative evidence; and(iii) Evidence that the alien sustained the actions described in paragraph(a)(4)(i) and (a)(4)(ii) of this section throughout the period of the aliens residencein the United States. The alien will be considered to have sustained the actionsrequired for removal of conditions if he or she has, in good faith, substantially metthe capital investment requirement of the statute and continuously maintained hisor her capital investment over the two years of conditional residence. Such Page 7 of 10
  11. 11. evidence may include, but is not limited to, bank statements, invoices, receipts,contracts, business licenses, Federal or State income tax returns, and Federal orState quarterly tax statements.(iv) Evidence that the alien created or can be expected to create within areasonable time ten full-time jobs for qualifying employees. In the case of a“troubled business” as defined in 8 CFR 204.6(j)(4)(ii), the alien entrepreneur mustsubmit evidence that the commercial enterprise maintained the number of existingemployees at no less than the pre-investment level for the period following his orher admission as a conditional permanent resident. Such evidence may includepayroll records, relevant tax documents, and Forms I–9. Stand-Alone Entrepreneur Regional Center Affiliated InvestorThis “entrepreneur” is limited to the This “investor” must submit “other”items listed in the regulations and/or evidence if NOT doing exactly as thestatute. In short, this petitioner must stand-alone “entrepreneur” is doing.support the I-829 with hard evidence of Also such evidence must be deemedhaving created 10 full-time permanent appropriate for the purpose submitted.jobs. This means payroll records. Such “other evidence” may take manyThe individuals employees must be different forms and/or styles, as well asidentified. more varied document possibilities.USCIS will verify each employees work “Reasonable Methodologies” were puteligibility. USCIS runs E-Verify, so just forth up-front. In order to lift conditions,expect that all your employees’ the “assumptions” supporting indirectinformation will be run in E-verify. It is job creation must be substantiated withsafest if you use E-Verify. corroborating documentary evidence. Since “specific evidence” is spelled out, To determines what documents willthat is what you must submit. work means isolating the “facts” that need to be “proven”. Therefore you must determine what documents support that particular “finding-of-fact” and submit it. Page 8 of 10
  12. 12. Many indirect job creation projections are based on stated assumptions.Assumptions in this context may later morph into conditions precedent that aredeemed necessary for the fulfillment of obligations and supportive of a finding thatdue to the completion of one stated objective or the meeting of a benchmark ordeadline for completion of some identified condition that another stated result isreasonably also deemed true and/or accomplished. If X is proven true, then Y isaccepted as true. Say what? Let me give an example.Suppose the BP says that the project will entail building a factory. This factory willhave three assembly lines. The BP says that upon completion of line two, line onewill be up and running while construction commences on line three. The EA statesthat there will be X number of people employed at the factory. In the EA they wereused as input described for EA purposes only as direct employees of the factory,not the aliens who are just supplying financing. For EB-5 purposes, the factoryworkers are indirect in relation to the aliens who provided financing only.Based on the new employment at the factory, Y number of indirect and inducedjobs will be created as a result. The EA breaks down this additional peripheral butdependent job creation into two categories (indirect and induced ) but for EB-5purposes, all three job categories in the EA will be utilized as indirect jobs. Thevarious crucial and pivotal activities were predicted to begin and end within statedtemporal parameters (construction schedules). In this simple example, thecompletion of line two signals various things. Completion of line two was acondition precedent to line one being up and running and fully staffed. It istherefore indicative of job creation for the workers on line one. Let’s just acceptthe fact that the workers could NOT start reporting to work on line one until theconstruction activities on line two ended. However, if it makes you feel better, let’ssay it was due to worker safety concerns coupled with workers having to attendand complete mandatory new employee orientation training which included safetyissues such as emergency procedures, hazardous materials handling precautions,disaster drills, and first aid, including Red Cross CPR Certification Classes. OK?Fulfillment of certain stated assumptions permits presumptions to be foundreadily acceptable. In this example, the job creation projections were presumed tobe valid upon the fulfillment of the condition precedent of the completion of theconstruction of line two. This presumption was something that the parties agreedto accept as true unless proven otherwise. USCIS approved it, now you merelyneed to follow through with it; and then prove that you did via the documentation! Page 9 of 10
  13. 13. Reasonable Methodologies consist of a wide variety of possibilities. In order to bedeemed “reasonable” the “methods” used for EB-5 Regional Center Programpurposes must contain plausible explanations. In general, those will be based uponvarious widely accepted Econometric or Economic Models. Economists workingwith these models will generally utilize the data categories found in or inspired bythe “comprehensive, detailed and credible” Business Plan to guide selection of datafor input into the model. Sometimes the specific details and actual figures found inthe BP might also be used as input in the model. The result of all that modelingwill be an EA that the applicant hopes will be accepted by USCIS as reasonable,plausible, probable, and credible.The information discussed in the assembly line example represented informationfrom a BP used to produce an EA. In that EA, assumptions were stated thatsupported predictions. As those assumptions came true, the presumptions as toindirect jobs became probable. They would have been accepted as true uponcorroboration of fulfillment of the conditions precedent as stated up-front. Thequestion then remains; “What will constitute the corroborating evidence offulfillment of the conditions precedent”? On this point, remember that you aredealing with a government bureaucracy so the simple answer is “paperwork”. Theharder part of the equation and process is figuring out which papers to submit.In order to determine which papers to present, you must identify the precise factsyou need to prove to support fulfillment of the specific condition precedent. Howwould you prove that the construction of assembly line two has been completed? Idon’t know because I have never built a factory that contained assembly lines.However, I do know that many factories with multiple assembly lines have beenbuilt. That tells me that someone somewhere must know the answer. How aboutyou start with the very construction company that built it for you? They likelyknow what paperwork they produce that could serve as evidence. Perhaps theyhave to answer to local, state, or federal agencies about their activities? That is sureto produce paperwork! How was this construction activity paid for? Monetarytransactions usually leave a paper trail. The bigger the expenditures, the bigger thattrail becomes. There is no need to reinvent the wheel over these matters. You justhave to do your legwork and homework on the subject matter in order to find theanswers.That’s my two-cents, for now.e-mail me at: joseph.whalen774@gmail.com Page 10 of 10

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