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On matters pertaining to regional center affiliation


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On matters pertaining to regional center affiliation

  1. 1. On Matters Pertaining to Regional Center Affiliation By Joseph P. Whalen (October 21, 2012)There are multiple advantages to the EB-5 investor through affiliation withan approved Regional Center. The most obvious is the ability to include“indirect jobs” in order to meet the statutory job creation requirement.That is the primary advantage drawn directly from the statute but there areadditional yet less obvious, advantages plus a few restrictions in RegionalCenter affiliation. There will be time enough to discuss the substance ofthose advantages and restrictions later. It is important to understand“affiliation” and what that actually entails. I feel it is important tounderstand some EB-5 history and trace the critical issues underlying thepractical application of the concept of Regional Center “affiliation”.Back when Congress first codified the immigrant investor as an immigrantvisa classification through the Immigration Act of 1990 (IMMACT90) therewas no such thing as a Regional Center. The later creation of the “PilotProgram” and the simultaneous introduction of the “Regional Center” werereactionary developments to the severe underwhelming number of EB-5investors. INS issued strict regulations for the initial stand-alone or “basic”EB-5 visa category. Congress sought to loosen them and specificallyreferred to the initial EB-5 regulations in the statutory provision thatcreated the Pilot Program and Regional Center. Keep in mind that thesubsequent statute necessitated additional regulations that specificallyaddressed the Pilot Program and Regional Center. INS focused on theRegional Center’s requirements for a Proposal and did not meaningfullyaddress any other part of the Pilot Program. Anything that we have todaywhich helps us to understand how to operate as a Regional Center, theduties owed by a Regional Center to its investors, or the broader aspects ofthe undefined “Program” has been through trial and error or word ofmouth.In the initial promulgation of the Regional Center regulations, INS includedsome specific dates. The first date upon which anyone could submit aproposal to become a Regional Center and participate in the Program wasAugust 24, 1993, and then the first EB-5 investors seeking to be affiliatedwith an approved Regional Center could start filing on October 1, 1993.While these points seem to be old and outdated, they are still informative.These old dates in the original regulations tell us that an investor seekingthe benefits associated with Regional Center affiliation may only file his or Page 1 of 5
  2. 2. her I-526 after the Regional Center has been approved for participation.The regulations also place the burden of proof on the EB-5 investor todemonstrate that (s)he has invested or is actively in the process ofinvesting in an approved Regional Center.Showing affiliation will usually be relatively easy. The Regional CenterApproval Notice instructs the Regional Center on what documentation itneeds to provide to its EB-5 investors to submit with their I-526s. The alieninvestor will also need to supplement the evidence supplied by the RegionalCenter. The most obvious item to be added will be the proof of sufficientlawful funds which will vary from one investor to the next. It seems to havebecome an industry standard (but it is NOT a legal requirement) that EB-5investors will place funds in escrow to be released to the Regional Center orto the “Project” upon I-526 approval. Escrow has been accepted by USCISas an easy way of showing that the alien has placed qualifying investmentfunds “at risk”. This is so because the escrow funds WILL be handed over tothe project (Regional Center or developer) upon approval of the I-526 asper the escrow agreement. Denial of the I-526 will usually mean that themoney will be handed back to the alien, no harm-no foul as far as USCISand EB-5 law are concerned.That said, not everyone uses escrow in their Regional Center affiliatedprojects. In those cases, the evidence will vary depending upon the specificarrangements made between the parties involved in the project andindividual transactions. Another category of evidence that the individualalien investor is legally responsible for it the proof that the investmenthappened or is set to happen in an area that qualified either “then” or which“now” qualifies for the reduced TEA rate. There are situations where it ismore advantageous to skip escrow in order to lock in the TEA rate byactually handing over funds to be freely spent as needed for the project.There are two distinct points in time at which the area in which the projecthappens MAY qualify as a TEA. Either will suffice but one MUST be provenby the evidence submitted. If escrow is used then that will suffice todemonstrate a “commitment of funds” to the project “at time of filing” theI-526. If it would be more advantageous to immediately sink money intothe project prior to filing anything with USCIS in order to “lock in” thelower rate “at time of initial investment” then the actual documentationwill be significantly more and quite different than a mere escrowagreement and wire transfer or cancelled check. All of these factors need tobe carefully considered up-front and the appropriate documents will needto be tracked for use as evidence later. Page 2 of 5
  3. 3. 8 CFR § 204.6Petitions for employment creation aliens.(m) Immigrant Investor Pilot Program— (1) Scope. The Immigrant Investor Pilot Program is established solely pursuant to the provisions of section 610 of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriation Act, and subject to all conditions and restrictions stipulated in that section. Except as provided herein, aliens seeking to obtain immigration benefits under this paragraph continue to be subject to all conditions and restrictions set forth in section 203(b)(5) of the Act and this section. (2) Number of immigrant visas allocated. The annual allocation of the visas available under the Immigrant Investor Pilot Program is set at 300 for each of the five fiscal years commencing on October 1, 1993. (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 Page 3 of 5
  4. 4. (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.(4) Submission of proposals to participate in the Immigrant InvestorPilot Program. On August 24, 1993, the Service will accept proposalsfrom regional centers seeking approval to participate in theImmigrant Investor Pilot Program. Regional centers that have beenapproved by the Assistant Commissioner for Adjudications will beeligible to participate in the Immigrant Investor Pilot Program.(5) Decision to participate in the Immigrant Investor PilotProgram. The Assistant Commissioner for Adjudications shall notifythe regional center of his or her decision on the request for approvalto participate in the Immigrant Investor Pilot Program, and, if thepetition is denied, of the reasons for the denial and of the regionalcenters right of appeal to the Associate Commissioner forExaminations. Notification of denial and appeal rights, and theprocedure for appeal shall be the same as those contained in 8 CFR103.3.(6) Termination of participation of regional centers. To ensure thatregional centers continue to meet the requirements of section 610(a)of the Appropriations Act, a regional center must provide USCIS withupdated information to demonstrate the regional center is continuingto promote economic growth, improved regional productivity, jobcreation, or increased domestic capital investment in the approvedgeographic area. Such information must be submitted to USCIS on anannual basis, on a cumulative basis, and/or as otherwise requested byUSCIS, using a form designated for this purpose. USCIS will issue anotice of intent to terminate the participation of a regional center inthe pilot program if a regional center fails to submit the requiredinformation or upon a determination that the regional center nolonger serves the purpose of promoting economic growth, includingincreased export sales, improved regional productivity, job creation,and increased domestic capital investment. The notice of intent toterminate shall be made upon notice to the regional center and shallset forth the reasons for termination. The regional center must beprovided 30 days from receipt of the notice of intent to terminate tooffer evidence in opposition to the ground or grounds alleged in thenotice of intent to terminate. If USCIS determines that the regional Page 4 of 5
  5. 5. centers participation in the Pilot Program should be terminated, USCIS shall notify the regional center of the decision and of the reasons for termination. As provided in 8 CFR 103.3, the regional center may appeal the decision to USCIS within 30 days after the service of notice. (7) Requirements for alien entrepreneurs. An alien seeking an immigrant visa as an alien entrepreneur under the Immigrant Investor Pilot Program must demonstrate that his or her qualifying investment is within a regional center approved pursuant to paragraph (m)(4) of this section and that such investment will create jobs indirectly through revenues generated from increased exports resulting from the new commercial enterprise. (i) Exports. For purposes of paragraph (m) of this section, the term “exports” means services or goods which are produced directly or indirectly through revenues generated from a new commercial enterprise and which are transported out of the United States; (ii) Indirect job creation. To show that 10 or more jobs are actually created indirectly by the business, reasonable methodologies may be used. Such methodologies may include multiplier tables, feasibility studies, analyses of foreign and domestic markets for the goods or services to be exported, and other economically or statistically valid forecasting devices which indicate the likelihood that the business will result in increased employment. (8) Time for submission of petitions for classification as an alien entrepreneur under the Immigrant Investor Pilot Program. Commencing on October 1, 1993, petitions will be accepted for filing and adjudicated in accordance with the provisions of this section if the alien entrepreneur has invested or is actively in the process of investing within a regional center which has been approved by the Service for participation in the Pilot Program.Of course, there are more regulations and Precedents that add to the bodyof EB-5 knowledge but these should be enough to consider for the moment.One last point, even if a “project” is located inside the boundary and is“within the scope” of the Regional Center, an investor cannot demand,usurp, or claim affiliation, the Regional Center must grant it explicitly. Page 5 of 5