My thoughts on the DRAFT EB-5 Memo of 11-09-2011


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My thoughts on the DRAFT EB-5 Memo of 11-09-2011

  1. 1. Comments on the Draft EB-5 Policy Memo of 11-09-2011Statutory and Regulatory DisparityThe bulk of the implementing regulations were written based on the originalstatutory language and have not been updated to include all subsequent statutorychanges and precedential interpretations. Some of the ideas expressed inregulations were later incorporated into statutory revisions and even cited directly.The bottom line is that the statutes and regulations are not currently synchronized.One function of the new Policy Memo (Draft PM) could be to fill some gaps leftbetween the current states of the regulations and statutes. This would best beaccomplished by tracking the changes against each other. When a change wasmade as a knee-jerk reaction, what EXACTLY was it a reaction to? On the otherhand, what changes were merely overlooked, or simply left for another day?A “regional center” is defined in the Draft PM per regulation as follows: Regional center means any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment. 8 C.F.R. § 204.6(e)However, a regulation is subordinate to the actual statute which it purports toimplement and/or clarify. The Regional Center only exists within the PilotProgram. The Pilot Program was created by Pub. L. 102-395 (The JudiciaryAppropriations Act of 1993), title VI, Sec. 610, Oct. 6, 1992, 106 Stat. 1874, asamended. It must be noted that § 610 is not included as a part of the Immigrationand Nationality Act (INA). Instead § 610 is codified as 8 USC § 1153 Note: PilotImmigration Program.§ 610 (a) originally read, in total: (a) Of the visas otherwise available under section 203(b)(5) of the Immigration and Nationality Act (8 U.S.C. 1153(b)(5)), the Secretary of State, together with the Attorney General, shall set aside visas for a pilot Page 1 of 20
  2. 2. program to implement the provisions of such section. Such pilot program shall involve a regional center in the United States for the promotion of economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment.§ 610(a) was changed by Pub. L. 107-273, div. C, title I, Sec. 11037(a), Nov. 2,2002, 116 Stat. 1847 as follows: SEC. 11037. AMENDMENTS TO PILOT IMMIGRATION PROGRAM FOR REGIONAL CENTERS TO PROMOTE ECONOMIC GROWTH. (a) Purpose of Program.--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), is amended— (1) by inserting after “regional center in the United States” the following: “, designated by the Attorney General on the basis of a general proposal,”; (2) by striking “and increased domestic” and inserting “or increased domestic”; and (3) by adding at the end the following: “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. The establishment of a regional center may be based on general predictions, contained in the proposal, concerning the kinds of commercial enterprises that will receive capital from aliens, the jobs that will be created directly or indirectly as a result of such capital investments, and the other positive economic effects such capital investments will have.”.§ 610 (a) currently includes additional verbiage and a small but significant changeto otherwise identical language, this section now reads: Page 2 of 20
  3. 3. (a) Of the visas otherwise available under section 203(b)(5) of the Immigration and Nationality Act (8 U.S.C. 1153(b)(5)), the Secretary of State, together with the Secretary of Homeland Security, shall set aside visas for a pilot program to implement the provisions of such section. Such pilot program shall involve a regional center in the United States, designated by the Secretary of Homeland Security on the basis of a general proposal, for the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment. 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. The establishment of a regional center may be based on general predictions, contained in the proposal, concerning the kinds of commercial enterprises that will receive capital from aliens, the jobs that will be created directly or indirectly as a result of such capital investments, and the other positive economic effects such capital investments will have.”Congress changed a very important “and” into an “or” in order to downgrade theexport component from an absolute requirement to merely one of the variousaspects considered. This major change has not been changed in the correspondingregulation that is quoted verbatim and cited in the PM. The very next additionalsentence in § 610(a) introduced the aspect of limiting the size of the RegionalCenter and expanded the purpose to include concentrating pooled investment.The general statutory revisions also gave a vague loose framework for therequirements for designation of a Regional Center. Some of that added language isreflected in the corresponding implementing regulations. Was the concept ofsubmitting a Proposal for Designation as a Regional Center a creation of LegacyINS through its implementing regulations? I do not have all of the FR Notices1 orthe specific pages of the Congressional Record handy in order to track all thevarious incremental changes on these precise minute developments but I hopeUSCIS is checking on these issues.1 Promulgation history of 8 CFR § 204.6: 56 FR 60910, Nov. 29, 1991, as amended at 57 FR1860, Jan. 16, 1992; 58 FR 44608, 44609, Aug. 24, 1993; 74 FR 26937, June 5, 2009; 75 FR58990, Sept. 24, 2010, plus the most recent items currently in process. Page 3 of 20
  4. 4. Paragraph (c) of § 610 actually cites to the regulations. The following small 8 CFRexcerpt specifically speaks to the Regional Center Proposal requirements.8 CFR § 204.6 Petitions for employment creation aliens.(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; and (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. Page 4 of 20
  5. 5. The highlighted parts above show items out of sync with the statute.The original version of § 610, included: (c) In determining compliance with section 203(b)(5)(A)(iii) of the Immigration and Nationality Act, and notwithstanding the requirements of 8 CFR 204.6, the Attorney General shall permit aliens admitted under the pilot program described in this section to establish reasonable methodologies for determining the number of jobs created by the pilot program, including such jobs which are estimated to have been created indirectly through revenues generated from increased exports resulting from the pilot program.At that time, 8 CFR § 204.6 did not address the requirements for the RegionalCenters because they had not been created yet. The amendment was speaking tothe original job creation evidence criteria still applicable to the stand-aloneinvestors or non-Regional Center Affiliated investor groups.Pub. L. 106-396, Sec. 402, Oct. 30, 2000, 114 Stat. 1647 made this change: SEC. 402. THE IMMIGRANT INVESTOR PILOT PROGRAM. ***** (b) DETERMINATIONS OF JOB CREATION- Section 610(c) of such Act is amended by inserting “, improved regional productivity, job creation, or increased domestic capital investment” after “increased exports”.Pub. L. 107-273, div. C, title I, Sec. 11037(a), Nov. 2, 2002, 116 Stat. 1847provided the special consideration for that small group of alien entrepreneurswhose petitions were approved by the Attorney General (INS) after January 1,1995, and before August 31, 1998. See 76 FR 59927- 59950, September 28, 2011.Pub. L. 108-156, Sec. 4, Dec. 3, 2003, 117 Stat. 1945, added the processingpriority provisions as new paragraph (d) in § 610 and made technical andconforming amendments as follows: Page 5 of 20
  6. 6. SEC. 4. PILOT IMMIGRATION PROGRAM . (a) PROCESSING PRIORITY UNDER PILOT IMMIGRATION PROGRAM FOR REGIONAL CENTERS TO PROMOTE ECONOMIC GROWTH- Section 610 of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note) is amended-- (1) by striking “Attorney General” each place such term appears and inserting “Secretary of Homeland Security”; and (2) by adding at the end the following: “(d) In processing petitions under section 204(a)(1)(H) of the Immigration and Nationality Act (8 U.S.C. 1154(a)(1)(H)) for classification under section 203(b)(5) of such Act (8 U.S.C. 1153(b)(5)), the Secretary of Homeland Security may give priority to petitions filed by aliens seeking admission under the pilot program described in this section. Notwithstanding section 203(e) of such Act (8 U.S.C. 1153(e)), immigrant visas made available under such section 203(b)(5) may be issued to such aliens in an order that takes into account any priority accorded under the preceding sentence.”. ....Full-time employment is statutorily defined. The Draft PM does not cite to thatdefinition. INA § 203(b)(5) (D) 4/ 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. From FN4: Subparagraph (D) added by section 11035 of the 21st Century Department of Justice Appropriations Authorization Act, Public Law 107- 273, dated November 2, 2002. Page 6 of 20
  7. 7. The full regulatory definition is found within 8 CFR § 204.6(e) as follows: Full-time employment means employment of a qualifying employee by the new commercial enterprise in a position that requires a minimum of 35 working hours per week. In the case of the Immigrant Investor Pilot Program, “full-time employment” also means employment of a qualifying employee in a position that has been created indirectly through revenues generated from increased exports resulting from the Pilot Program that requires a minimum of 35 working hours per week. A job-sharing arrangement whereby two or more qualifying employees share a full-time position shall count as full-time employment provided the hourly requirement per week is met. This definition shall not include combinations of part-time positions even if, when combined, such positions meet the hourly requirement per week2.Eligibility at Time of Filing: Clarifying Actual Statutory RequirementsThe Draft PM states in IV.B: “It is well established that in visa petition proceedings, a petitioner must establish eligibility at the time of filing and that a petition cannot be approved if, after filing, the petitioner becomes eligible under a new set of facts or circumstances. Matter of Katigbak, 14 I&N Dec. 45, 49 (Comm. 1971); Matter of Izummi, 22 I&N Dec. at 1753 (“a petitioner may not make material changes to a petition that has already been filed in an effort to make an apparently deficient petition conform to Service requirements”).” At pp. 19-20 (but untended to be pp. 17-18)I agree that the visa petition (I-526) is stuck with the requirement to establisheligibility at time of filing. That said, what does the actual statute require in orderto entitle the alien entrepreneur to capture and secure the filing date as a prioritydate? I put it to USCIS, that in order to be entitled to the priority date, the alienentrepreneur need only 1.) show the money and 2.) put forth evidence of jobs2 It would probably be in USCIS’ best interest to revisit these considerations throughconsultation with an economist or panel of economists. The concept of an FTE (full timeequivalent) as used in econometric models may necessitate a change to this regulatory definition.3 Page 7 of 20
  8. 8. already created OR a plan to create the required jobs. The plan is usually all that isinitially put forth. That minimal step alone will not assure petition approval and issubject to modification until such time as USCIS approves it. However, that initialsubmission should be enough to lock-in the priority date.A weak initial submission will cause a delay to final petition approval, or couldresult in a denial. However, any self-caused delays are a fair trade-off betweenattaining a priority date and the ability to perfect the business plan after initialsubmission. See Matter of Al Wazzan, 25 I&N Dec. 359 (AAO 2010) (holding inpart: “(2) To be considered “valid” in harmony with related provisions and withthe statute as a whole, the petition must have been filed for an alien who is“entitled” to the requested classification and that petition must have been“approved” by a U.S. Citizenship and Immigration Services (“USCIS”) officerpursuant to his or her authority under the Act.”) (See also Matter of Ho, 19 I&NDec. 582 (BIA 1988)4 which held, in pertinent part: “ (2) Approval of a visapetition vests no rights in the beneficiary of the petition but is only a preliminarystep in the visa or adjustment of status application process, and the beneficiary isnot, by mere approval of the petition, entitled to an immigrant visa or toadjustment of status.”)The I-924 is not a visa petition and therefore is not similarly situated to an I-526.An I-924 applicant is required to show very little at time of filing. This point hasbeen addressed in numerous other comments and articles already. Hopefully,USCIS will actually address this issue in upcoming form revisions and/orregulatory changes in the near future.Material ChangeThe situation that the Draft PM addresses next is reached by leaping a proceduralchasm. USCIS needs to bridge that gap. An amendment filed with a new form andadditional fee is a request for a new adjudication rather than a continuance of thesame adjudication covered by the same fee. My comment addresses the initialadjudication of an application or petition.4 Page 8 of 20
  9. 9. That same section (IV.B) of the Draft PM continues next with: “1. Regional Center Applications (Forms I-924) In recognition of the fact that the regional center developer might in good faith have to implement material changes after submission of the initial Form I-924 petition to USCIS, the instructions to Form I-924 provide that a regional center may amend a previously-approved designation. The Form I- 924 provides a list of acceptable amendments, including to geographic area, organization structure, capital investment projects (including changes in the economic analysis and underlying business plan used to estimate job creation for previously-approved investment opportunities), and an affiliated commercial enterprise’s organization structure. The approval of an amended Form I-924 does not cure or amend the I-526 petition an individual investor filed prior to the approval of the regional center amendment. The amendment alters the scope of the regional center to include the new commercial activity being conducted so that petitions filed after the amendment’s approval fall within the scope of the regional center’s approved activities.” At p. 20 (but intended to be p. 18)The initial situation as described by the highlighted wording above “implementmaterial changes after submission of the initial Form I-924 petition to USCIS” isnot adequately addressed by this Draft PM. The bulk of the lingering lack ofclarity comes from the fact that the term “material change” is not solidly definedby USCIS in the various EB-5 contexts.I-526 Context:Overarching all of the forgoing discussion is the mental disconnect that USCIS hasshown it its refusal to accept the fact that the minimal statutory requirements tosecure a priority date by the I-526 petitioner boils down to having money and aplan, or a dream, or desire, or just a pulse. I addressed this concept in greater detailin my October 14, 2011, article in Immigration Daily5.5,1014-whalen.shtm The Case To Reform EB-5 Page 9 of 20
  10. 10. The plan that is initially offered need not be 100% complete or even feasible as isupon the filing date. As with any adjudication, RFEs or NOIDS, or eveninterviews can add to the ROP for use in rendering a final decision. There areactually multiple distinct subsets of I-526s. There is the stand-alone petitioner whohas no partners at all and then there are varieties of groups of investors.So in an attempt to spell out the variety of possibilities, we have the: 1. Stand-alone petitioner who is a sole investor6 (the true entrepreneur); 2. Stand-alone petitioner with partners who might be: a. Other EB-5 investors, b. Other EB-5 investors, and non-EB-5 investors who might be: i. Foreign investors not seeking EB-5 visas, ii. Domestic investors, or iii. A combination of any or all of the above; or 3. Regional Center Affiliated EB-5 investors might be partnered with: a. Other EB-5 investors, b. Domestic investors, and/or c. Foreign investors not seeking EB-5 visas.The Regional Center investor who files an affiliated I-526 vicariously receives theadditional benefits of the I-924 Applicant. The stand-alone I-526 petitioner shouldbe afforded the same consideration as the I-924 Applicant as to the ability toperfect the “plan” for creating the required jobs. The stand-alone I-526 investordoes not receive the added benefit of including “indirect” jobs but should not bedisproportionately and inadvertently penalized for attempting to create the morevaluable and desirable “direct” jobs.6 This includes family collectives of spouses and qualified children in which one spouse will bethe petitioner and the other will be a dependent along with the children. Spouses and childrenhave always had survivor rights for the investment if the petitioner dies before conditions havebeen lifted or at any point after filing the I-526. Page 10 of 20
  11. 11. I-924 Context:The Regional Center applicant does not require a priority date and is only requiredto meet very little upon filing, i.e. they must legally exist as the entity that applies.Everything else is open to modification until such time as USCIS designates theapplicant as a Regional Center. Another reality that USCIS needs to embrace isthat USCIS’ Designation as a Regional Center is actually a form of licensure asdescribed in the Administrative Procedures Act (APA is a portion of 5 USC).Future rulemaking and form revisions need to take this into account. 5 USC § 551. Definitions For the purpose of this subchapter— ***** (6) ``order means the whole or a part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rule making but including licensing; ***** (8) ``license includes the whole or a part of an agency permit, certificate, approval, registration, charter, membership, statutory exemption or other form of permission; (9) ``licensing includes agency process respecting the grant, renewal, denial, revocation, suspension, annulment, withdrawal, limitation, amendment, modification, or conditioning of a license;I-829 Context:This Draft PM does address the material change issue with respect to the I-829aspect of the EB-5 program better than USCIS had ever done previously. Pickingup from the last excerpt, section IV.B continues with: “2. Investors Who Have Obtained Conditional Lawful Permanent Resident Status Historically, USCIS has required a direct connection between the business plan the investor has provided and the subsequent removal of conditions. USCIS would not approve a Form I-829 petition if the investor had made an investment and created jobs in the United States if the jobs were not created Page 11 of 20
  12. 12. according to the plan presented in the Form I-526. While that position is a permissible construction of the governing statute, USCIS also notes that the statute does not require that direct connection. In order to provide flexibility to meet the realities of the business world, USCIS will permit an alien who has been admitted to the United States on a conditional basis to remove those conditions when circumstances have changed. An individual investor can, at the prescribed time, proceed with his or her Form I-829 petition to remove conditions and present documentary evidence demonstrating that, notwithstanding the business plan contained in the Form I-526, the requirements for the removal of conditions have been satisfied. USCIS notes, however, that it is more beneficial for an immigrant investor to utilize the business plan contained in the Form I-526. As the Ninth Circuit Court of Appeals has recognized, if the alien investor is seeking to have the conditions removed from his or her status based on the business plan contained in the Form I-526, USCIS may not revisit certain aspects of the business plan, including issues related to the economic analysis supporting job creation. Chang v. U.S., 327 F.3d 911, 927 (9th Cir. 2003). If, however, the immigrant investor is seeking to have his or her conditions removed based on a business plan not consistent with the approved I-526, the Chang decision does not foreclose USCIS from requiring or requesting evidence to prove the element of job creation. This may include revisiting issues previously adjudicated in the Form I-526, such as the economic analysis underlying the new job creation. USCIS also notes that, in the case of a petition affiliated with a regional center, the petitioner will only be able to claim indirect job creation if the new business plan falls within the scope of the regional center.” At pp. 20-21 (intended to be pp. 18-19)I agree with the approach put forth in the Draft PM as to requirements that a “standalone” or non-Regional Center Affiliated petitioner may have conditions liftedregardless of variance from the I-526 approved plan as long as they have met thefull capital investment and job creation requirements. I also agree with USCIS thata Regional Center Affiliated petitioner may also proceed to have conditions liftedbut there are additional strings attached. Page 12 of 20
  13. 13. I read the Draft PM as indicating that the Regional Center Affiliated petitioner maysucceed in lifting conditions after a change in plans in one of two ways, either: 1. In the same fashion as a stand-alone, unaffiliated petitioner by demonstrating full investment and “direct jobs”, OR 2. In order to claim “indirect jobs” the new or materially changed business plan must fall within the scope of the Regional Center.An additional question is raised by the Draft PM which is not answered in it. Whatdoes the phrase “within the scope of the Regional Center” mean in practicalapplication? I have addressed this question in my May 25, 2011, article inImmigration Daily7. In that article, I stressed the importance of, and advocated forthe use of, Transparent Complexity to Achieve Desired Flexibility. In advocatingthis approach, I have urged Regional Centers to present contingency plans andpossible alternatives to USCIS up-front for the express purpose of asserting aflexible investment approach and building such flexibility into its writtensupporting documentation with a certain amount of specificity sufficient to putUSCIS on notice. I have urged Regional Centers to build libraries of “USCIS-vetted” exemplar business plans and economic analyses in order to allow forsupplementing the investment portfolios of its EB-5 investors or even shifting to anew project when the original one is failing. It was envisioned that if this weredone then shifting from one vetted "actual" project to another project based on a"previously vetted exemplar" project would remain a viable and easier possibility.It was hoped that this advance planning would be viewed by USCIS as apermissible way for an entrepreneur to avoid a finding that such a shift in directionwould be, as AAO has done already, viewed as “a project that USCIS has neverreviewed in any respect”.While USCIS will likely need to set certain limits to such flexibility it would havebeen to the detriment of the success and survival of the EB-5 Immigrant Investor7,0525-whalen.shtm The Application For A Regional CenterInvites Material Change To Perfect That I-924: The Role Of Transparent Complexity InPreserving Investment Flexibility. Also found (slightly edited) at: Page 13 of 20
  14. 14. Program to have cut off any possibility of flexibility or choke it too much. I amgratified that USCIS has addressed this concept in the Draft PM. I hope thatUSCIS will also keep this concept in mind when it makes the anticipated changesto the I-924, I-526, and I-829 form instructions and any forthcoming regulatoryupdates. It should also be kept in mind that limits need not merely be restrictive,limits can also be expansive and inclusive.Demonstrating a Clear Nexus Between EB-5 Money and Newly Created JobsUSCIS would be well served to address the concept of nexus between the EB-5money and the jobs with which the entrepreneurs may be credited and/orattributed. Those jobs attributable to a Regional Center project as “direct” but onlyin terms of input into an econometric model will often include jobs such as mall oroffice building tenants’ employees or factory workers whose employment wasmade possible by Regional Center investors who directly built a facility or loanedfunds for its construction. Those jobs are really “indirect” in EB-5 parlance. This isacceptable when there is a clearly palpable8 connectivity between the EB-5 fundsand the newly created jobs. In short, this can be termed as clearly demonstrating asufficient nexus.The AAO has already expressed this concept in Matter of Izummi, 22 I&N Dec.169 (AAO 1998) but did not spend much time on it. Izummi did involve a RegionalCenter investor as denoted in prong (2) of the holding which indicated that it wasan investment under the Immigrant Investor Pilot Program. Prong (4) tells us thatthe EB-5 investors’ money “must be made available to the business(es) mostclosely responsible for creating the employment on which the petition is based”. “It could perhaps be argued that, when the owner of a corporation pays a million dollars for shares in his business and earmarks the money for equipment, inventory, and working capital, some of the working capital will in fact be spent on initial salaries and expenses. In the partnership scenario, the new commercial enterprise is the partnership, and it too will need to spend money on initial salaries and expenses. The Service distinguishes these two situations in that, in the former example, the employment-creating entity is spending the money. In the latter example, the employment-creating entity never receives the money spent on the partnership’s expenses.8 Able to be touched or felt : tangible. Easily perceptible by the mind : manifestSee: Page 14 of 20
  15. 15. Especially where indirect employment creation is being claimed, and the nexus between the money and the jobs is already tenuous, the Service has an interest in examining, to a degree, the manner in which funds are being applied. The full amount of money must be made available to the business(es) most closely responsible for creating the employment upon 7 which the petition is based. The Service does not wish to encourage the creation of layer upon layer of “holding companies” or “parent companies,” with each business taking its cut and the ultimate employer seeing very little of the aliens’ money.” [bold in original] Highlight added. Izummi at 179 ___________________ Footnote in Original: 7 Whether or not $500,000 must be made available for the loans to export companies or whether $500,000 must merely be made available to the credit corporation extending the loans, it is clear that making $500,000 available to AELP is not sufficient. AELP’s primary purpose is apparently to locate potential alien investors. AELP does not extend the loans to the export companies and is not the entity most closely engaged in employment creation, indirect or otherwise.One primary principle expressed in Izummi is now a major fundamental buildingblock for today’s rather ubiquitous Limited Partnerships with separate“subscription fees” or “management fees” completely distinct and apart from therequired minimum investment amount. However, another currently topicalprinciple as to the importance of showing a sufficient nexus comes from the samedecision. Interestingly, the entire Izummi decision uses the word “nexus” only onceas shown in the excerpt above. The Draft PM does not use it even once. Thecurrent effort in this Draft PM is an opportunity for USCIS to further clarify theconcept of nexus in EB-5.Successors-In-InterestThe concept of successors-in-interest is best known from the I-140 or I-129employer as petitioner context. In this day and age, it is not uncommon forcompanies to buy one another out, consolidate, or merge. In this known context,petitions and employees pass from the old employers to the new employers as thesuccessors-in-interest. Page 15 of 20
  16. 16. In the EB-5 context, different concerns come into play. Assets acquired may havea bearing on capital investment amount calculations, determining if the business is“new”, or being “reorganized or restructured”, and there is the concern as to any“debt arrangements”. Aside from the finances and organizational issues are theemployees acquired when one business buys up or joins with an existing business.The Draft PM should cover employee-related questions/concerns in terms of thesuccessors-in-interest concept as applied to the EB-5context to at least include: 1. Were any jobs previously counted forEB-5 job creation? 2. Are the positions “full-time”? 3. Are jobs being “preserved” or “created” or simply don’t count for EB-5? 4. Will a new EB-5 employer have to show a 140% net increase? 5. Are all the newly acquired employees legally authorized to work and “qualifying” employees (no non-qualifying relatives of the EB-5, or H1- Bs, L’s etc...)? 6. Will part-time employees be have to be upgraded to full-time? 7. Can an EB-5 investor take over from and replace an EB-5 investor who withdrew, died (without interested survivors), or had their I-526 denied? 8. Can an EB-5 investor join a Regional Center project by buying out the interest of a domestic or other non-EB-5 investor? 9. Can an EB-5 investor join a Regional Center project by paying down bridge loans/financing?The November 9, 2011, Draft PM indicates that USCIS will be pulling togetherinformation from the rest of the EB-5 memos. Those are listed on the website as:Adjudication of EB 5 Regional Center Proposals and Affiliated Form I 526 andForm I 829 Petitions; Adjudicators Field Manual (AFM) Update to Chapters 22.4and 25.2 (AD09-38) ( PDF)Donald Neufeld, Acting Associate Director, Domestic Operations 12/11/2009  I have previously submitted comments on the above but will stress some good points that need to be retained and emphasized in the new guidance. Page 16 of 20
  17. 17.  Note: Direct jobs are those jobs that establish an employer-employee relationship between the newly established commercial enterprise and the persons that they employ. Indirect jobs are the jobs held by persons who work outside the newly established commercial enterprise. For example, indirect jobs include employees of the producers of materials, equipment, and services that are used by the commercial enterprise. There is also 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. [I would change references from “economic models” to “econometric models” in order to distinguish the underlying methodologies from the economic analyses that are produced by using them. This was a point of confusion to me until it was made clear through more in-depth research.] This Memo also has a very useful footnote (#1) but it can stand updating, the remaining footnotes leave much to be desired due to vast changes that have already taken place and are in the works. Footnote #1 reads: The statutory framework for the EB-5 program can be found at INA sections 203(b)(5) and 216A, which were modified by: • Section 610 of Pub. L. 102-395, as amended by section 116(a)(l) of Pub. L. 105-119 and section 402(a) of Pub. L. 106-396; • Section 4 of Pub. L. 108-156, relating to the Regional Center Pilot Program; and • Sections 11031-11034 of the 21st Century Department of Justice Appropriations Authorization Act, Pub. L. 107-273, relating to certain aliens with conditional resident status who filed I-829 petitions before November 2, 2002. The regulatory framework for the EB-5 program can be found at 8 CFR 204.6 and 8 CFR 216.6. There are also four EB-5 precedent decisions: • Matter of Soffici, 22 I&N Dec. 158 (BIA 1998); • Matter of Izummi, 22 I&N Dec. 169 (BIA 1998). Note: Pub. L. 107-273 eliminated the requirement set forth in Izummi that, in order for a Page 17 of 20
  18. 18. petitioner to be considered to have “created” an original business, he or she must have had a hand in its actual creation. Under the new law, an alien may invest in an existing business at any time following its creation, provided he or she meets all other requirements of the regulations; • Matter of Hsiung, 22 I&N, Dec. 201 (BIA 1998); and • Matter of Ho, 22 I&N Dec. 206 (BIA 1998).  However, footnote #1 is missing any mention of the interpretive value of older Administrative Decisions emanating from the prior incarnation of the Immigrant Investor labor certification exemption provided by former 8 CFR § 212.8 (b)(4) which was first promulgated in 1966, changed several times and repealed via 76 FR 53787 (08/29/2011), effective 11/28/2011.  See: An Independent Study entitled: “A Survey of the Immigrant Investor Visa: Regulations, Decisions, & Law-- From 1966 through 2011” by Joseph P. Whalen, 6/27/2011; posted at: 1966-2011-june-27-2011-jwEB-5 Alien Entrepreneurs - Job Creation and Full-Time Positions (AFM UpdateAD 09-04) (79KB PDF)Donald Neufeld, Acting Associate Director, Domestic Operations 06/17/2009  I participated in writing the above memo. My initial interpretations on some issues were overruled by OCC.  I still feel that the more realistic time period to be considered when adjudicating an I-526 is at least 2.5 years as stated in the memo but could realistically stretch even further to the point of actual I-829 approval. That final adjudication and lifting of conditions could be as much as 3.5 years from the I-526 filing date. It is only one opinion but I believe that it is reasonable and fair to at least consider plans that call for such a timeframe for full job creation because that would still be within the flexibility already built into the I-829 adjudication regulations and statute.  My main remaining contributions are on page four (4) in discussing the use of assumptions in econometric models to the benefit of the RC affiliated Page 18 of 20
  19. 19. investors; and the interpretation of full-time jobs that count as discussed on page five (5) as shown below: “.... USCIS has interpreted the full-time employment requirement to exclude jobs that are intermittent, temporary, seasonal or transient in nature. See, e.g., Spencer Enterprises v. U.S., 229 F.Supp.2d 1025 (E.D.Cal. 2001). For example, historically, construction jobs have not been counted toward job creation because they are seen as intermittent, temporary, seasonal and transient rather than permanent. [The citation needs correction because that decision was affirmed in the 9th Circuit on appeal.] USCIS, however, now interprets that direct and indirect construction jobs that are created by the petitioner’s investment and that are expected to last at least 2 years, inclusive of when the petitioner’s I-829 is filed, may now count as permanent jobs. Although employment in some industries such as construction or tourism can be intermittent, temporary, seasonal or transient, officers should not exclude jobs simply because they fall into such industries. Rather, the focus of the adjudication should be on whether the position, as described in the petition, is continuous full-time employment rather than intermittent, temporary, seasonal or transient. ......”Delegation of Authority to Service Center Directors to Adjudicate Form I-829,Petition by Entrepreneur to Remove Conditions; Adjudication of Form N-400,Application for Naturalization when a Form I-829 is Still Pending; AFM Update:Chapter 25.2 (127KB PDF)Michael Aytes Associate Director, Operations 12/21/2006  The above was written when authority was shared between TSC and CSC, when basic principles are incorporated in new guidance, that will need revision. In light of the most recent EB-5 rule this aspect of the program needs further study and probably some revision.Establishment of an Investor and Regional Center Unit ( PDF)William R. Yates HQOPS 01/19/2005  The above was already rescinded in its entirety by the December 2009, Memo. Page 19 of 20
  20. 20. AFM Update - Immigrant Investor Petitions ( PDF)Michael A. Pearson /s/ Dominica Guiterrez HQOPS (EB-5 Immigrant Investor)03/03/2000  This Memo included reference to the Notice in the Federal Register at 63Fed. Reg. 67135, published on, and in effect since, December 4, 1998, which contained some rather useful Supplementary Information as follows: “By consolidating these applications and petitions at the Texas and California Service Centers, the Service will ensure that the procedures related to the adjudication of these highly technical requests for immigration benefits are more uniform, consistent, and streamlined. Quality control and other necessary program oversight functions may be more readily undertaken as necessary. The Service can more easily ensure that the officers adjudicating these cases are appropriately trained and experienced in the relevant areas of regulatory trade, investment, financial, and economic policy and analysis, and that they have access to the additional expertise necessary in particularly complex matters.”  The underlying sentiments expressed in 1998, still hold true today. Joseph P. Whalen November 11, 2011 Page 20 of 20