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The regional center limited decision

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The regional center limited decision

  1. 1. A New Option for the Initial Regional Center Designation The Limited Decision By Joseph P. Whalen (July 22, 2013) Just last week on Thursday July 18, 2013, EB-5 Express Regional Center received its USCIS Regional Center Designation Letter. Congratulations to EB5 Express. Their Designation Letter contains new language and incorporates new concepts and treatment than I have ever seen before. They were issued a Limited Decision, whereby, the items that were approvable were affirmatively approved and the items that were not approvable as yet developed were “disallowed”. The mere notion of “disallowing” something does not preclude one from developing the concept further and proceeding with it in the future. Here is an excerpt explaining the concept of a Limited Decision. I. Regional Center Designation Limited Decision FN1 The applicant submitted its Form I-924 requesting specific industry categories, geographic regions, an actual project, and multiple hypothetical projects to be identified for the Regional Center's use. Upon review of the record, USCIS has determined that not all of the requested industry categories, and geographic regions provided in the Form I-924 represent an appropriate application of actual and hypothetical projects to support the industry categories, and geographic regions acceptable for use by the Regional Center. Further, the requested actual project does not contain a business plan that provides sufficient verifiable detail supported by economically or statistically sound forecasting tools to reasonably demonstrate that the requisite number of jobs will be created for qualifying employees within a reasonable period of time. As such, USCIS has concluded that a limited decision is necessary in this case. Therefore, requested and approved industry categories, geographic regions, and projects have been identified below followed by a decision to disallow any remaining industry categories, geographic regions, actual and hypothetical projects that do not meet requirements. _______________ FN1 USCIS issued a Policy Memorandum (PM-602-0083) on the subject of "EB-5 Adjudication Policy," dated May 30, 2013, stating that formal amendments to the regional center designation are no longer required when a regional center changes its industries of focus or geographic boundaries. A regional center may still elect to pursue a formal amendment by filing Form I-924 if it seeks certainty in advance that changes in the industries or the geographic area will be permissible prior to filing Form I-526 petitions.
  2. 2. Also within the “Limited Decision” we find a discussion of exactly how USCIS defines “Hypothetical Projects” and see an actual application of that to projects which have been submitted in a real I-924. 3. Hypothetical Projects A hypothetical project does not have the factual details necessary to be in compliance with the requirements described in Matter of Ho, 22 Dec. 206 (Assoc. Comm'r 1998). As such, USCIS’s approval of any hypothetical creation estimates presented in a Form I-924 is not accorded deference and may not be relied upon by an individual investor when filing the Form I-526. The business plan and job creation estimates will receive a de novo review by USCIS when an individual investor files Form I-526. Once an actual project is adjudicated upon the filing of the initial Form I-526 related to the I-924 hypothetical project approval, USCIS will give deference to subsequent Forms I-526 when the critical assumptions remain materially unchanged from the initially-approved Form I-526. When filing Form I-526, it is the responsibility of the individual investor to submit a comprehensive, detailed and credible business plan, showing by a preponderance of the evidence that his or her investment in the new commercial enterprise will create not fewer than 10 full-time positions. If prior to filing a form I-829, the job creation estimates in the business plan submitted by the individual investor materially changes or will not be realized, then it will be the responsibility of the investor to notify USCIS of an agreed upon methodology to allocate job creation among eligible investors. 4. Hypothetical Projects - Approved Effective the date of this notice, USCIS approves the applicant’s request to include the following hypothetical capital investment project. Project #1 - Hotel The proposed project involves the acquisition, renovation, and operation of a vacant hotel. This 36,607 square-foot building on 0.15 acres of land has 89 rooms and four ground floor commercial retail tenants. The hotel offers 28 rooms and 61 European-style rooms with shared bathrooms. Of these available rooms, 66 are dedicated as residential rooms and 23 are designated as tourist hotel rooms. The project is estimated that the project will cost $24.5 million, of which $1 million will be from two immigrant investors and generate approximately 35.5 jobs. Project #2 - Battery Manufacturing The proposed project involves the funding of a high-tech start-up company. The project is specifically for the establishment of a manufacturing plant for the lithium ion battery division of the company. The company is currently in the research and development (R&D) phase of creating new lithium ion battery technology and seeks EB-5 funds to establish a lull production line once the first
  3. 3. line of products have completed the R&D process. The applicant estimates that the project will cost $5 million, of which 551 million will be from 2 immigrant investors and generate approximately 101 .7 jobs. Project #3 - Solar Manufacturing The proposed project involves the funding of solar manufacturing to establish a full service' solar company once has been completed and the product line is ready to be marketed and manufactured. The solar company will be a vertically integrated solar products and services company that designs, manufactures, and delivers high-performance solar electric systems worldwide for residential, commercial, and utility scale customers. It is estimated that the project will cost $5 million, of which $2 million will be from two immigrant investors and generate approximately 99.7 jobs. In the case of EB5 Express, we see a new approach to “facilitation” as to job creation. Facilitation of Tenant Employment The project will be engaging in an entirely different methodology known as the LOOOM approach. The LOOOM approach, which stands for Landlord Owner- Operator Occupancy Methodology, where the landlord/owner teams up with various partners to engage in different businesses throughout all the leasable space in the mixed-use shopping center by investing in various businesses. The operator of the businesses and landlord shall co-own and co-operate in the running of these businesses. A sample LOOOM agreement has been submitted as evidence to support its change in methodology. However, no signed LOOOM agreements between the landlord and the prospective tenant businesses that will establish operations in the mixed-use shopping center have been submitted. [If such a project were to get started and actual agreements were signed, then this could be resurrected via the filing of the first investor’s I-526 petition.] USCIS has not quashed the methodology, they just wanted more evidence that it had been undertaken and that there is a need for the various products and/or services involved in the particular mix of businesses. The outstanding specific issues can be addressed in the first EB-5 investor’s I- 526 once the Regional Center gets the project further along in the process. Overall, the facilitation of tenant employment it is not sufficiently demonstrated because the following has not been shown: (1) unmet demand and/or limited supply for the leasable retail space, and (2) unmet demand and/or limited supply for the services to be offered by the specific tenant businesses. Specifically:
  4. 4.  The market analysis does not show evidence of unmet demand or lack of supply for retail/commercial space in and around Santa Clara County, California.  It has not been demonstrated the prospective tenant businesses will be new and not relocated from elsewhere. The preponderance of evidence showing that tenant occupancy issues have been resolved has not been satisfied. It seems clear that the currently “disallowed” portions of the proposal may be fleshed out and expanded upon in the future. USCIS also states that the current decision to disallow may be overcome in the future. USCIS is doing a favor of sorts by explaining deficiencies for its “disallowed” projects and affirmatively approving what can be approved as currently presented in the proposal. 5. Conclusion — Decision to Disallow Some aspects of the submitted proposal, as presently constituted, do not meet the regulatory requirements at 8 C.F.R. 204.6. Therefore the request to grant the specific geographic areas, industry categories and projects listed above cannot be approved. The decision to disallow the industry categories, geographic areas, and projects identified above does not preclude the filing of Form I-526 petitions related to a subsequent project using the disallowed industry categories, geographic areas, and/or actual project(s). Any future petitions will be adjudicated on their own merit. USCIS is backing off the in-depth review of organizational and transactional documents in the I-924 stage of the process and will only do so for an I-526 Exemplar filed for an actual project within an I-924 Application as either an amendment or initial filing. This should speed up the overall I-924 processing times. II. Job Creation USCIS approves the geographic area and industry categories noted below [above] based on the economic impact analysis presented and reviewed in conjunction with the adjudication of this regional center proposal. The approval of this Form I-924 application is based upon the economically and statistically valid assumptions and estimates provided in the business plan for job creation. The hypothetical project does not have the factual details necessary to be in compliance with the requirements described in Matter of Ho, 22 Dec. 206 (Assoc. Comm’r 1998), and therefore, USCIS's approval of hypothetical job creation estimates presented in the Form I-924 will not be accorded deference and may
  5. 5. not be relied upon by an individual investor when filing the Form I-526. The business plan and job creation estimates will receive a de novo review by USCIS when an individual investor files Form I-526. Once an actual project is adjudicated [and approved] upon the filing of the initial Form I-526 related to the I-924 hypothetical project approval, USCIS will give deference to subsequent Forms I-526 when the critical assumptions remain materially unchanged from the initially approved Form I-526. When filing Form I-526, it will be the responsibility of the individual investor to submit a comprehensive, detailed and credible business plan, showing by a preponderance of the evidence that his or her investment in the new commercial enterprise will create not fewer than 10 full-time positions. If prior to a form I- 829, the job creation estimated in the business plan submitted by the individual investor materially changes or will not be realized, then it will be the responsibility of the investor to notify USCIS of an agreed upon methodology to allocate job creation among eligible investors. III. Guidelines for Filing Form I-526 Petitions Each individual petition, in order to demonstrate that it is affiliated with the EB5 Express Regional Center, in conjunction with addressing all the requirements for an individual immigrant investor petition, shall also contain the following: 1. A copy of this regional center approval notice and designation letter including ail subsequent amendment approval letters (if applicable). 2. An economic impact analysis which a job creation methodology required at 8 CFR 294.6 (j) (4) (iii) and shows how capital investment by an individual immigrant investor will create A not fewer than (19) indirect jobs for each immigrant investor. 3. A comprehensive, detailed and credible business plan for an actual project that contains the factual details necessary to be in compliance with the requirements described in Matter of Ho, 22 Dec. 206 (Assoc. Comm’r 1998). 4. Legally executed organizational documents of the commercial enterprise. Note: The project reviewed with this Form I-924 application is a hypothetical project. Organizational and transactional documents associated with the new commercial enterprise (NCE) submitted with this Form I-924 have not been reviewed to determine compliance with program requirements since these documents will receive de novo review in subsequent filings (e.g., an amended Form I-924 application with a Form I-526 exemplar or the first Form I-526 petition filed by an investor under the regional center project).
  6. 6. One last item to take notice of is the clear advisory language informing the applicant that Regional Center Designation is non-transferrable. In short, one cannot buy or sell their Regional Center Designation. An I-924 Amendment is absolutely required for such an action. Here is an excerpt from the “Designee’s Responsibilities…” section of the standard decision notices now being issued: The regional center designation is non-transferable, as any changes in management of the regional center will require the approval of an amendment to the approved regional center designation. So, as I have stated countless times you cannot “buy” or “sell” a Regional Center on the open market. Any transfer demands USCIS approval of the “entity” taking over the running of a Regional Center. This should not be confused with mere employee turn-over within the same “entity”. So if, an employee, let’s call her Molly, is going on maternity leave or departing the employer, and another employee, let’s call him Desmond, is taking over her duties, this does not require an I-924 amendment. An amendment would be required if, for instance, Acme Co. wants to get out of the Regional Center business altogether and wants to turn over the reigns of the XXX Regional Center to Ajax Corp. The latter scenario demands that Ajax file an I-924 in order to prove its knowledge, skills, and abilities (KSAs or core competencies) to USCIS and obtain an updated Regional Center Designation Letter that changes the name of the principal(s) and sponsoring organization. What other changes will we see as USCIS’ policies, processes, and procedures continue to evolve? We shall just have to wait and see. That’s my two-cents, for now. e-mail me at: joseph.whalen774@gmail.com

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