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What You May Have Missed in the New EB-5 Regulation
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</h3><h4><i>by <a href=”http://discuss.ilw.com/content.php?6254-Article-News-at-the-2016-AILA-Spring-Conference-on-US-v.-Texas-CSPA-I-601A-Proposed-Rule-and-H-1Bs.-By-Alan-Lee-Esq.#bio”>
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H. Ronald Klasko
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<p>
We all know what the new EB-5 regulation states about increased
investment amounts, TEAs, priority date retention, and some I-829
issues. However, how many of you reading this blog noticed the
following?
</p>
<p>
<u>Priority Date Retention</u>
</p>
<ol>
<li>
If the investor’s EB-5 petition is approved, but there is fraud
or misappropriation of funds by the regional center, NCE or
project, the investor retains his priority date. If there is
fraud by the investor that resulted in the approval of the EB-5
petition, the priority date is not retained. If there is a
material change after I-526 approval, which results in a
revocation of the approved I-526 petition, the investor can
still keep her priority date.
</li>
<li>
Priority date retention does not help an investor in the case
of a regional center termination or failed or fraudulent
project if the offending event occurred before the investor is
able to obtain approval of the I-526 petition.
</li>
<li>
The new priority date retention provision provides an
additional reason for an investor
<a
href=”https://www.klaskolaw.com/litigation/faqs-on-litigating-an-eb-5-petition-denial/”
target=”_blank”
rel=”noopener noreferrer”
>
to file a mandamus complaint
</a>
in federal court for delayed adjudication. Even if an investor
would have difficulty showing prejudice caused by USCIS delays
in adjudicating the petition because, for example, the investor
is subject to a quota backlog, the investor could now show
prejudice because of a desire to get an I-526 petition approved
in order to retain the priority date if he now wants to or has
to file a new EB-5 petition.
</li>
<li>
There is no priority date retention if USCIS decides that it
made a “material error” in approving the original I-526
petition. This is, as they say, a hole you can drive a truck
through. In other areas of immigration – – H-1B is a good
example – – USCIS has revoked large numbers of petitions
stating that it made a “gross error” in approving them. What
this really means is that USCIS has changed its position on
what qualifies for H-1B. If USCIS changes its position on any
issue involving EB-5, priority date retention could be
jeopardized.
</li>
<li>
The effective date of priority date retention is November 21,
2019. Unless USCIS advises to the contrary, an investor should
withhold filing a new petition until November 21 or after if
the investor hopes to avail himself of priority date retention.
</li>
<li>
Priority date retention only applies if the investor files a
new EB-5 petition. If, for example, an investor files a
subsequent EB-1 petition (which is happening frequently), the
priority date is not retained.
</li>
<li>
There is no provision in the regulation to allow the transfer
of a priority date to another family member.
</li>
<li>
If an I-829 petition is denied, and the result is that the
investor must file a new EB-5 petition, there is no priority
date retention.
</li>
</ol>
<p>
<u>Language in the preamble to the regulation</u>
</p>
<p>
There are some nuggets in the preamble to the regulation. The
preamble to the regulation is not “law”, but it may be more
authoritative than, for example, a policy memo. For that reason, it
is helpful to point out the following:
</p>
<ol>
<li>
The preamble contains the most definitive statement yet that
USCIS believes that the termination of a regional center
constitutes a material change for all investors in all projects
in the regional center. I have long believed this to be
incorrect, and I expect it will be subject to federal court
challenge in the appropriate case.
</li>
<li>
The investor’s investment money can remain in escrow until the
investor becomes a conditional resident. This is not new, but
it is helpful to know that USCIS still takes this position.
</li>
<li>
“By fiscal year 2018, the number of petitions filed have fallen
by more than half.” I certainly expect that I will be using
this language in the mandamus complaints that we file in
federal court since USCIS processing times have more than
doubled while petition receipts have precipitously declined.
</li>
<li>
USCIS reiterates that an investor only must sustain her
investment for the two-year period of conditional residence. I
have always believed that this was the law; USCIS only recently
adopted this position in a policy memo. The fact that it is now
published in the Federal Register may give some investors and
their counsel greater confidence in advising regarding whether
an investor can be repaid after the two years.
</li>
<li>
An investor has the “right” to appeal a denial to the AAO. This
is significant because it means that an appeal is a matter of
right, and not mandatory. If it were mandatory, it would not be
possible to file a declaratory judgment action in federal court
without pursuing an AAO appeal. A declaratory judgment action
in federal court is far more likely to obtain relief than an
AAO appeal and to do so much more quickly.
</li>
</ol>
<p>
One final thought. Many investors in China, and some in other
countries, have pursued third country citizenship in a country with
an investment treaty with the U.S. followed by an E-2 treaty
investor visa application in order to obtain a 5-year extendable
visa to the U.S. Some have done this to fill the gap until their
place in the EB-5 quota line has been reached, and others have done
it instead of EB-5. In the end, however, the combination of the
investment to obtain third-country citizenship and the E-2
investment often came close to equaling – – or sometimes equaled or
exceeded – – the $500,000 investment amount needed for EB-5.
</p>
<p>
After November 21, the gap between the investment required for E-2
purposes and the amount required for EB-5 purposes will be vastly
different. The result will likely be a significant increase in E-2
applications. The E-2 application would not preclude a subsequent
EB-5 application. In fact, the amount of investment for E-2
purposes can be credited against the amount needed for EB-5. Also,
the jobs created by the E-2 investment can be used for a subsequent
direct EB-5 application. If this is a subject of interest, I would
refer people
<a href=”https://agora.aila.org/conference/detail/1588″>
to a webinar that I moderated on this subject on August 6
</a>
. In addition, stay tuned for a webinar that our firm will be
providing on this subject.
</p>
<p>
Hopefully, the reader will be able to apply some of these thoughts
from outside of the four corners of the regulation in making
decisions regarding EB-5 applications.
</p>
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<p>This post originally appeared on <a href=”https://www.klaskolaw.com/hot-questions/eb-5-regulation-what-you-may-have-missed/?utm_medium=email&utm_campaign=What%20You%20May%20Have%20Missed%20in%20the%20New%20EB-5%20Regulation&utm_content=What%20You%20May%20Have%20Missed%20in%20the%20New%20EB-5%20Regulation+CID_93b781927cb4ba259a7d00604201b849&utm_source=EmailMarketing&utm_term=READ%20BLOG” target=”_blank”>Klasko Immigration Law Partners, LLP</a>. Reprinted with permission.</p>
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About The Author<br/>
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<b>H. Ronald Klasko</b> is one of the country’s leading lawyers representing EB-5 clients. Ron represents thousands of foreign investors from all around the world, over 50 approved regional centers and numerous U.S. developers and business owners who have sought his counsel in connection with using the EB-5 program to raise capital for investment projects.
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