Addressing USCIS Form I-924A Instructions

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Addressing USCIS Form I-924A Instructions

  1. 1. Addressing USCIS Form I-924A Instructions By Joseph P. Whalen (October 28, 2012)The pertinent portions of the instructions to the annual Regional Center reportingform I-924A are reproduced below. Some thoughts and comments have been added.Provide a detailed statement, which describes for the last fiscal year, (andprospectively if noted): A. The aggregate amount of EB-5 alien capital invested through your regional center [Form I-924A Supplement, Part 3, No. 1];I think Congress would like to know not only how much “EB-5 alien capital” hasbeen invested but also how much the Regional Center’s efforts have “increaseddomestic capital investment”. After all, “increased domestic capital investment” isspecifically stated in § 610(a) and would go a long way towards “improv[ing]regional productivity” as an overall sign of “economic growth” which are also calledfor as part of the “EB-5 Regional Center Program”. B. The aggregate number of new direct and/or indirect jobs created by EB-5 investors through your regional center [Form I-924A Supplement, Part 3, No. 1];In that, each EB-5 investor is connected to a particular Business Plan (BP) andEconomic Analysis (EA), but each and every investor will probably not enter thespecific project at the exact same time, most RCs will be keeping “running totals”.Now consider that some RCs will have multiple projects progressing simultaneouslybut perhaps at different rates and this task might be wide open and ripe for makinghonest mistakes. With that said, be cautious in reporting because eventually thenumbers claimed here will likely be compared to the actual investors’ I-829s at somepoint. You can bet on one thing when dealing with USCIS, they will double checkyour math and the veracity of the figures reported. C. The aggregate number of jobs "maintained" jobs by EB-5 capital investments into a "troubled business" through your regional center, if applicable [Form I-924A Supplement, Part 3, No. 1];The same caution addressed in B, above continues here and adds complexity. Page 1 of 10
  2. 2. D. The industry(s) that have been the focus ofEB-5 capital investments sponsored through the regional center, and the resulting aggregate EB-5 capital investment and job creation. (Note: Separately identify jobs maintained through investments in "troubled businesses") [Form I-924 Supplement, Part 3, No. 2];Now come the third and fourth layers of complexity in tracking and reporting“jobs”! USCIS may need to rethink the design of the form in order to allow forreporting “per project” which could be broken down further into “broader” groups or“clusters”. For example, a project will likely have a name such as the “whatever”development/complex/project/property. That “project” could be decidedly singularsuch a hospital, a school, a restaurant, a factory, etc... In that case, there might be oneprincipal employer or job-creating-enterprise (JCE) with a limited variety of types ofjobs in a single sector. On the other hand, a particular “project” could be acommercial “mixed-use development”, such as a shopping center with retail plus avariety of service businesses and perhaps some “professional offices”. In such acase, there will be multiple JCEs across several broad sectors. Remember that eachRC sponsored or affiliated “project” was put forth based on different needs and waspresented and adjudicated (evaluated) on a case-by-case basis in the first place. It isbecause of the wide array of possibilities that collating and reporting the results isdifficult. These highly variable results are not easy to pigeon-hole. E. The names, addresses, and industry category title of each job creating commercial enterprise located within the geographic scope of your regional center that has received alien investor capital. Also, provide the aggregate amount of EB-5 capital investment, the aggregate number of new direct and/or indirect jobs created by EB-5 investors, and if applicable, the aggregate number of jobs that have been "maintained" through EB-5 capital investments into a "troubled business," for each commercial enterprise located within the geographic scope of your regional center [Form I-924A Supplement, Part 3, No. 3];It will be most efficient to keep “running totals” per “project” and subdivided perJCE which may then be “grouped” as applicable to the RCs overall results. F. If the EB-5 commercial enterprise(s) serve as a vehicle for investment into other business entities that have or will create or maintain jobs for EB-5 purposes, then please identify the names, addresses, amount of EB-5 capital investment, and the number of jobs created or maintained by the actual job creating businesses through EB-5 investments [Form I-924A Supplement, Part 3, No. 3]; Page 2 of 10
  3. 3. Now we are getting to the heart of what a Regional Center “Program” is really allabout. Big projects need to raise lots of capital. EB-5 funds should not be the solesource of project funds in the first place so by accepting that the EB-5 investors’efforts as but a part of the whole and it is more rewarding to report that EB-5 fundshave served in a “supporting role” to the greater good for the region or nation. G. The total number of approved, denied, or revoked Form 1-526 petitions filed by EB-5 alien investors, for capital investments sponsored through your regional center [Form I-924A Supplement, Part 3, No.4];The bean-counters, stakeholders, and Congress want to know this stuffand quite frankly, each RC wants to know so would track this even if notrequired to do so. H. The total number of approved, denied, or revoked Form 1-829 petitions filed by EB-5 alien investors, for capital investments sponsored through your regional center [Form I-924A Supplement, Part 3, No. 5];Ditto. See G, above.NOTE: USCIS may require case-specific data relating to individual EB-5petitions and the job creation determination and allocation methodologies utilizedby a regional center in certain instances in order to verify the aggregate dataprovided A-H on Page 1. NAICS Codes Selections for YOUR Regional Center’s I-924ADoes YOUR RC itself facilitate the formation of EB-5 investor Limited Partnerships (LPs)? HasYOUR RC taken on the primary role of matching those EB-5 LPs’ funds to others?Is it the case that those others with whom YOUR RC partners are found among the following? 1.) an intermediary lender who will in turn make loans to project developers who in turn will construct facilities for use by the owners/operators of job-creating commercial enterprises; or 2.) an intermediary lender who will make loans directly to owners/operators of job-creating commercial enterprises; or 3.) the project developers who construct, expand, or remodel/refurbish a facility for the owners/operators of job-creating commercial enterprises; or 4.) the owners of job-creating commercial enterprises directly. Page 3 of 10
  4. 4. No matter how it happens, ultimately what USCIS really wants/needs to know about are the actualjob-creating commercial enterprises who actually report back their successes for the EB-5investors to prove EB-5 job creation to USCIS. This is the information that USCIS should seek tocollect via the I-924A reporting mechanism. There is an extra question to consider for pre-I-924Regional Centers that did not previously identify any NAICS Codes. Which of YOUR RegionalCenter’s approved “target industries/categories” gained or are in the process of gaining new jobsand how do your approved “target industries/categories” translate into NAICS Codes? IncorrectNAICS code selections may cause unwanted, pointless, & costly problems.So, like a great many RCs, you think of yourself as being in the business of Construction Lending.Wrong answer! The crux of the matter is what is being constructed such as to cause the RC projectfinanced by EB-5 investors to be closely associated with new jobs created in an approved “targetindustries/categories” as listed on the RC’s Approval Notice? Pay attention.NAICS Code 522292 Real Estate Credit (& does include Construction Lending) • “This U.S. industry comprises establishments primarily engaged in lending funds with real estate as collateral.” The EB-5 LPs may not be described by this code.8 CFR § 204.6 Petitions for employment creation aliens.(e) Definitions. As used in this section: Capital means cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets owned by the alien entrepreneur, provided that the alien entrepreneur is personally and primarily liable and that the assets of the new commercial enterprise upon which the petition is based are not used to secure any of the indebtedness. All capital shall be valued at fair market value in United States dollars. Assets acquired, directly or indirectly, by unlawful means (such as criminal activities) shall not be considered capital for the purposes of section 203(b)(5) of the Act. ********** Invest means to contribute capital. ......[Disqualify Circumstance:] A contribution of capital in exchange for a note, bond, convertibledebt, obligation, or any other debt arrangement between the alien entrepreneur and the newcommercial enterprise does not constitute a contribution of capital for the purposes of this part.The prohibited debt arrangements included as disqualifiers in the definition of Invest might bebest understood by comparative examples. • Suppose the EB-5 alien loans money to a delivery service in order to increase its delivery vehicle fleet with the proviso that: if the commercial enterprise who borrowed the money fails to make payments, then the alien reserves the right to take possession of the vehicles Page 4 of 10
  5. 5. (or anything else owned by the commercial enterprise). That debt arrangement does not qualify because the debt is secured with the assets of the commercial enterprise. • On the other hand, if the alien merely loans the money to, or even accepts an ownership interest in, the commercial enterprise, and said commercial enterprise happens to use the invested capital to expand its fleet and the alien has no direct claim on the vehicles then that’s OK.Additional disqualifying instruments include: a note, bond, convertible debt, or some otherobligation. The underlying concern here is the requirement that the alien’s “capital investment” isreally an “at-risk” investment and not some bogus arrangement merely pretending to be aninvestment in order to get a green-card. • For instance, an alien might own a large piece of very expensive heavy industrial equipment (a crane, a combine, a cement truck, an aircraft or ocean-going vessel) which the commercial enterprise needs to do or expand business. Suppose that the alien provides that “equipment” to the new commercial enterprise as an “investment”. If the alien retains exclusive ownership of the equipment, is in a position to repossess the equipment, or obtains a “promissory note” in exchange for it (even if the note is not due well into the future after conditions are lifted from LPR status), then that is not a qualifying investment. Such an arrangement hidden in terms to make it part of an “exit strategy” will not cure the underlying disqualifying nature of the debt arrangement. • Another situation might involve an alien purchasing property (real estate) which he contributes as his investment. If he hands over title to the commercial enterprise in exchange for a proportional ownership interest in the commercial enterprise, then it can serve as his valid EB-5 investment. If, on the other hand, he retains title to the property (real estate) in exchange for a mortgage from that commercial enterprise (upon which he could foreclose in the future), then it cannot serve as his valid EB-5 investment. • Lastly, the EB-5 investors infuse their funds into a developer or lending institution who turns around and finances a project that will lead to new jobs in one of the Regional Center’s approved targets. This is OK and appears to apply. Report it correctly in order to avoid a hassle from USCIS.NAICS Code 522292 Real Estate Credit (& does include Construction Lending) • This U.S. industry comprises establishments primarily engaged in lending funds with real estate as collateral. The EB-5 LPs may not be described by this code. Page 5 of 10
  6. 6. Project I, L.P.; Project II, L.P.; and Project III, L.P. each needs a NAICS Code that reflects thefact that it does not merely make loans that are secured with the property and/or assets of the jobcreating projects. 522292 is not suitable to EB-5 purposes no matter how much is seems correct.When USCIS sees the words “lending funds with real estate as collateral” it will cause YOUR RCno end of nightmarish pain and suffering.On the other hand, if the EB-5 LP’s funds are handed over to “Intermediary Lender, Inc.” who isin the business of lending funds with real estate as collateral, then it could be described on theForm I-924A by NAICS Code 522292. More on that follows below.Instead I suggest that YOUR RC consider using one of the following NAICS Codes to describe itsEB-5 LP. The actual critical information that USCIS needs in order to satisfy Congress and themedia are the target industries in Part 3, item 2, even if item 3, as to the individual businesses, isleft blank or marked unknown or TBD (to be determined). USCIS needs to know about theMedical Offices in this example but has no need to find out about Doctors Smith, Jones, Singh,Nguyen, and Kwon or their: orthopedics, urology, radiology, or general medical practices.5222 Nondepository Credit Intermediation • This industry group comprises establishments, both public (government-sponsored enterprises) and private, primarily engaged in extending credit or lending funds raised by credit market borrowing, such as issuing commercial paper or other debt instruments or by borrowing from other financial intermediaries. Within this group, industries are defined on the basis of the type of credit being extended.5223 Activities Related to Credit Intermediation • This industry group comprises establishments primarily engaged in facilitating credit intermediation by performing activities, such as arranging loans by bringing borrowers and lenders together and clearing checks and credit card transactions.Not having seen the Limited Partnership Agreements, it is still likely that YOUR RC is theGeneral Partner and the EB-5 investors are the Limited Partners in these LPs.It is likely that YOUR RC’s EB-5 money is being invested into (loaned to) “Intermediary Lender,Inc.” This only gets YOUR RC part way through I-924A EB-5 Compliance Reporting. It isinsufficient information. This tells USCIS only the beginning of the EB-5 money’s journey thatwill result eventually result in jobs.USCIS wants to know where the jobs have been or will be created in accordance with the RC’sparameters (within the scope of the Regional Center) as identified in your approval notice.Supposing that YOUR RC’s Approval Notice predates the Form I-924 and as such, inclusion ofNAICS codes was not mandated and nor were they voluntarily identified already. However, a Page 6 of 10
  7. 7. certain number, perhaps nine (9), specific target industries were identified. Of those nine targetindustries, some could most probably be covered by more than one broadly selected NAICS Codecategory.USCIS issued some small amount of guidance in which it has settled for a NAICS Code consistingof only four (4) digits. I agree that this level is sufficient for the dual purposes of putting USCIS onnotice of intended areas of investment, i.e., the “kinds of commercial enterprises” to receive alien’sfunds (at the point of the I-924A, this was accomplished previously), yet still allows the desiredflexibility to react to the market conditions, flexibility or wiggle room. The previously submitted“general proposal” based on “general predictions” allowed by the statute [8 USC § 1153 Note]must have been presented with sufficiently detailed information “concerning the kinds ofcommercial enterprises that will receive capital from aliens” as allowed and envisioned all inthat controlling statute in order to attain approval. There is no need to be more specific than thefour digit NAICS Code at this time. That said, USCIS has also approved RCs with two (2) digits!The question remains, what is actually being built? In which category does it belong?Suppose, for example that the pre-I-924 USCIS Approval Notice states: “The Regional Center for EB-5 Immigrant purposes shall focus investments into new commercial enterprises in the following nine (9) target industry economic clusters: 1. Medical Offices 2. Hotel 3. Restaurant 4. Commercial Offices 5. Retail 6. Residential 7. Entertainment and Recreation Facilities 8. Light Industrial/Warehouse Facilities 9. Conference and Exhibition Center Facilities”Which of the nine target industries will see new jobs created? The answer to this questionwill guide the answers needed on the I-924A.IF at this time, only ONE of THREE EB-5 LP has actually invested anything yet, YOUR RC onlyneeds to report on that ONE LP on the current I-924A. It would be quite promising if two moreLPs have actually formed but if none of their funds have been handed over to anyone yet, savethem for later as that will demonstrate a pattern of growth and will serve to soften the blow thatany future “dry spell” may have. Page 7 of 10
  8. 8. As for Intermediary Lender, Inc., if that entity is the actual builder or developer, what is it buildingor developing that falls into one of YOUR RC’s nine approved target industries? The NAICS codeselected is somewhat vague and the mere category of “Construction of Buildings” is not on theApproval Notice in this example.In addition, the example pre-I-924 USCIS Approval Notice includes: “LightIndustrial/Warehouse Facilities”. How would this approved target industry category betranslated into NAICS Codes?236 Construction of Buildings • The Construction of Buildings subsector comprises establishments primarily responsible for the construction of buildings. The work performed may include new work, additions, alterations, or maintenance and repairs. The on-site assembly of precut, panelized, and prefabricated buildings and construction of temporary buildings are included in this subsector. Part or all of the production work for which the establishments in this subsector have responsibility may be subcontracted to other construction establishments-usually specialty trade contractors. Establishments in this subsector are classified based on the types of buildings they construct. This classification reflects variations in the requirements of the underlying production processes.2362 Nonresidential Building Construction • This industry group comprises establishments primarily responsible for the construction (including new work, additions, alterations, maintenance, and repairs) of nonresidential buildings. This industry group includes nonresidential general contractors, nonresidential operative builders, nonresidential design-build firms, and nonresidential project construction management firms.23621 Industrial Building Construction • See industry description for 236210. For example: “Assembly plant construction”On the other hand: • 236220 Warehouse construction (e.g., commercial, industrial, manufacturing, private) • 236220 Warehouse, commercial and institutional, construction • 236220 Warehouse, industrial, construction Page 8 of 10
  9. 9. 236220 Commercial and Institutional Building Construction • This industry comprises establishments primarily responsible for the construction (including new work, additions, alterations, maintenance, and repairs) of commercial and institutional buildings and related structures, such as stadiums, grain elevators, and indoor swimming facilities. This industry includes establishments responsible for the on-site assembly of modular or prefabricated commercial and institutional buildings. Included in this industry are commercial and institutional building general contractors, commercial and institutional building operative builders, commercial and institutional building design-build firms, and commercial and institutional building project construction management firms. SAMPLE CROSS-REFERENCES. Establishments primarily engaged in-- • Constructing structures that are integral parts of utility systems (e.g., storage tanks, pumping stations) or are used to produce products for these systems (e.g., power plants, refineries)--are classified in Industry Group 2371, Utility System Construction, based on type of construction project; These can be suitable for EB-5with proper nexus. • Performing specialized construction work on commercial and institutional buildings, generally on a subcontract basis--are classified in Subsector 238, Specialty Trade Contractors; and These can also be suitable for EB-5with proper nexus. • Constructing buildings on their own account for rent or lease--are classified in Industry Group 5311, Lessors of Real Estate. This is unsuitable for EB-5 investors and RCs,The example Approval Notice also lists the rather vague category of “Medical Offices”. How willthat translate into NAICS Codes?2007 NAICS Key Word Search at:http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart=2007 [Note: NAICS Updated in 2012]Search results for: medical officeNumber of records found: 6 541611 Medical office management consulting services or consultants 561110 Medical office management services 621111 MDs (medical doctors, except mental health) offices (e.g., centers, clinics) 621111 Medical doctors (MDs, except mental health) offices (e.g., centers, clinics) 621112 MDs (medical doctors), mental health, offices (e.g., centers, clinics) 621112 Medical doctors (MDs), mental health, offices (e.g. centers, clinics) Page 9 of 10
  10. 10. In conclusion, a major underlying consideration is demonstrating asufficient NEXUS between the EB-5 money & activities and thejobs being claimed as resulting from the EB-5 Regional Centeraffiliated and/or coordinated investments. Please keep in mindthat while “increased domestic capital investment” and “improvedregional productivity” are part of what Congress sought andspecifically stated in the statute, a PROPER NEXUS (palpable andpalatable connectivity) MUST EXIST and be sufficientlyexplained. In making your claim to jobs of third-parties be carefulto only include those jobs made possibly by the EB-5 funds andactivities. Partners’ jobs are an easy sell, the jobs of certain tenantswhom the project has supported and facilitated in their efforts mayalso be included in the mix when the proper nexus is explained (i.e.,built to suit, created specialized space, filled a void as to suitablelocations with appropriate facilities, and/or provided incentives toexpand or take a chance on a new business or additional location).Staking the claim to third-party jobs starts long before the I-924Astage. NEXUS is something begun with in an I-924, demonstratedat the I-526 stage, proven in the I-829 stage, and finally reportedin an I-924A! Call me I can help!Joseph P. Whalen Phone: (e-mail for further contact info)(e-mail for the address) Fax:Greater Buffalo, NY area. Independent EB-5 Business Consultant & AdvisorE-mail: joseph.whalen774@gmail.com or Silver.SurferEB5@gmail.comhttp://www.slideshare.net/BigJoe5 http://eb5info.com/eb5-advisors/34-silver-surfer Offering Articles & Comments on the above websites for free. Available for specific or general consultation & research. Individual and/or group training materials and presentations made to order.Payments by accepted: EFT, Cashier’s Check or Money Order (Company Checks possible in future).DISCLAIMER: Work is performed by a non-attorney who may be considered an independent legal assistant orparalegal. Consultant brings years of experience as an adjudicator making decisions on a wide range of issuesunder the Immigration and Nationality Act. As a NY based consultant, be aware that NY has no licensurerequirements for paralegals or legal assistants. It is the clients responsibility to have any and all non-attorney work products checked by an attorney. Page 10 of 10

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