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US green card waiting times lengthen for many

The US State Department predicts longer green card waiting times for many immigrants. Charlie Oppenheim, chief of the department’s Visa Control and Reporting Division, recently shared his analysis of current trends and future prospects with respect to immigrant visa supply and demand.

EB1—Extraordinary ability; outstanding professors/researchers; multinational managers/executives

The employment-based first preference category is not expected to become currently available again for any country of birth. While people born in most countries are predicted to see movement of up to three months per month, Indian-born can anticipate little if any movement. India and China both have waiting times that are years longer than other countries.

EB2—Advanced degree; exceptional ability

EB2 is expected to remain currently available for all countries of birth, except mainland China and India, but that could change, as it did in the current fiscal year. The demand for Indian-born is so great that the predicted movement is only up to one week per month, while China is predicted to move up to two months per month.

EB3—Professionals; skilled workers; unskilled/other workers

The prediction for EB3 is similar to EB2, but with slow and irregular forward movement likely for China and the Philippines. India is predicted to show little to no movement until January 2020. The more limited supply of the “other workers” category makes it likely that it will not remain currently available for the entire fiscal year.

EB4—Religious workers; special immigrant juveniles

The prediction is for EB4 to remain currently available for most countries of birth. El Salvador, Guatemala and Honduras are likely to see little if any movement because of the large demand in the special immigrant juvenile category. Mexico is predicted to see movement of up to four months.

EB5—Immigrant investors

The EB5 category is expected to remain currently available for most countries of birth; mainland China, Vietnam and India will continue to experience longer waiting periods. Mr. Oppenheim did not predict availability.

Note that the October 2019 Visa Bulletin’s EB5 Regional Center final action date is reported as unavailable because Congress and the administration have not yet extended that program. This program has always been temporary in nature and the government always has extended it, often after expiration. In contrast, traditional EB5 remains available.

Family-based preference categories

There are no limits on US citizens sponsoring their spouse, parents and unmarried children under age 21, so these are not reported in the Visa Bulletin.

For October, the F2A (family second preference) category for green card holders sponsoring their spouse and unmarried children under age 21 is reported as current across all countries of birth. Mr. Oppenheim predicted that demand will increase in late 2019 or early 2020, and the category can expect a Final Action Date by February 2020.

Background

The Department of State’s monthly online Visa Bulletin reports on the current wait times for the US immigrant visas (green cards) that are subject to numerical limits. The date the government receives an immigrant visa petition is considered the priority date. The immigrant’s country of birth is another factor impacting how long it takes to immigrate, although a married couple immigrating together can use either spouse’s country of birth for the entire family.

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US green card waiting times lengthen for many

Does USCIS interpret its regulations consistently and correctly?

Non-immigration case before SCOTUS could change immigration law

In December of last year, the US Supreme Court agreed to review Kisor v. Wilkie, a case that could have a major impact on immigration law. At issue is the degree of deference a court must accord an agency’s interpretation of its own ambiguous regulation.

How much deference courts should afford agencies in interpreting their own regulations is a central question in administrative law. It determines how much an agency is allowed to stray from the original wording of a regulation it promulgates before it becomes necessary to issue a new regulation.  

It is dangerous to grant agencies unfettered discretion based on the assumption that their personnel will wisely and fairly carry out their duties. Changing presidential administrations often result in new agency directors and the likelihood that political beliefs will change how existing regulations are interpreted.  

If an agency seeking to revise a regulation follows the legal requirements of the Administrative Procedure Act (APA), there will be notice of proposed rulemaking and a comment period to identify any issues. There’s also a published regulatory history from which to glean meaning and intent. Too often, however, federal agencies, rather than comply with the APA, seek to regulate through policy interpretation memoranda.

On its face, Kisor v. Wilkie has nothing to do with immigration law. In 2006, James Kisor a Vietnam War veteran reopened a claim for disability benefits, citing new evidence that supported a diagnosis of PTSD. While the Department of Veterans Affairs (VA) agreed with the diagnosis and approved the 2006 claim, it declined to grant him retroactive benefits based on his initial 1983 claim, asserting that he had failed to present “relevant” service records required under VA regulations governing reconsideration of benefits claims. The Court of Appeals for the Federal Circuit deferred to the VA’s interpretation of its own regulation and found in the agency’s favor.

In the context of immigration, the US Citizenship and Immigration Services (USCIS), a branch of the Department of Homeland Security (DHS), is the federal agency that oversees lawful immigration to the United States. Under current case law, significant deference is granted to USCIS’ interpretation of its own regulations. This deference has allowed the agency to change certain visa programs over time, often without issuing new regulations but instead relying on policy memoranda to implement what increasingly seems to be an agenda driven by White House politics rather than good policy.

For example, President Donald Trump’s “Buy American, Hire American” 2017 executive order, which, among other things, directed DHS, in coordination with other agencies, to review immigration-related policies, led to USCIS modifying many of its immigration policies in 2017 and in 2018, oftentimes by the mere publication of a memo or a press release rather than by going through the APA’s required process. Dentons’ immigration team covered several of these:

  • In October 2017, USCIS issued a policy memorandum reversing the burden of proof and eliminating the prior practice of deferring to previous approvals in the adjudication of petitions to renew H, L and other non-immigrant visas. The idea was that USCIS would accept the original determination as correct and would not review all the visa requirements again. With the elimination of this practice, visa holders merely petitioning for an extension now have to prove every criteria applicable to their visa category, even though USCIS already decided that they met such criteria. Effectively, extensions now require the same level of documentation as the original petition. This change has led to extensions being denied, thus creating confusion among alien workers.
  • In April 2018, USCIS updated its webpage for Optional Practical Training Extension for STEM Students (STEM OPT), providing that the training experience of STEM OPT workers may not be conducted at the place of business or worksite of the employer’s clients or customers.
  • In May 2018, the USCIS changed the way it calculates the accrual of unlawful presence for nonimmigrant students and exchange visitors (F, J and M visas, including F-2, J-2 and M-2 dependents). The changes increased the likelihood that individuals in these nonimmigrant visa categories would have problems with future immigration benefits. (See our previous posting “Stricter unlawful presence rules for foreign students and exchange visitors”).
  • In May 2018, USCIS revised its Policy Manual, announcing it would no longer count the jobs created for US workers through tenant occupancy of EB5 properties, which effectively reduced the amount of immigrant investor funds available to create jobs for US workers. (See our previous posting “No more EB5 job creation through tenant-occupancy models: New USCIS policy reduces availability of immigrant investor funds to create jobs for American”).
  • In November 2018, USCIS published a new policy memorandum explaining how to calculate the 12 months of employment abroad, a key requirement under the L-1 intracompany transfer visa program. (See our previous posting “How to count to 12: USCIS clarifies L1A visa requirements”).
  • In November 2018, DHS published its mid-year regulatory agenda, which included a proposed rule to revoke the H-4 employment authorization final rule. If adopted, the proposed rule is expected to become effective in the first half of 2019 and would impact all of the more than 100,000 individuals currently holding an H-4 employment authorization document. (See our previous posting “Proposed end of H-4 employment authorization likely to affect over 100,000 families”).

While USCIS’ frequent and often far-reaching policy changes created lots of business for lawyers in 2018, the agency’s unpredictability and inconsistent application of the law has created a tremendous burden on US employers and their foreign-national employees and families, as well as for US business developers seeking foreign investment and foreign investors and families.  

Critics of the deference principle have argued that it effectively allows agencies such as the USCIS to write overbroad and substantively vague rules with the expectation that they can fill in any gaps later using interpretive rules, unchecked by notice and comments. They are urging the Supreme Court to reverse the current precedent favoring judicial deference, which would force USCIS to issue clearer and more detailed regulations, thus providing  more agency transparency and accountability. The Supreme Court will hear Kisor v. Wilkie in the spring—oral arguments have not yet been scheduled—and will likely make a ruling later this year.

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Does USCIS interpret its regulations consistently and correctly?

Where’s my visa?

Continued immigrant visa quota backlogs predicted for FY 2019

Longer waiting times for many immigrant visa categories are predicted in fiscal year 2019, according to US State Department Visa Control and Reporting Division Chief Charles Oppenheim, who provided predictions of immigrant visa quota waiting times for fiscal year 2019, which starts on October 1, 2018. Here are highlights from the announcement:

EB1. This is the immigrant visa category for individuals of extraordinary ability, outstanding professors and researchers, and multinational managers and executives. From its creation in 1990 till last summer, this category never experienced waiting periods (with the recent exception of some individuals born in India and mainland China). However, in August and September 2018, the State Department reported a waiting time for all countries of birth. It now predicts the continuation of a waiting period, and not to expect much forward movement before December 2018 or the first quarter of 2019.

EB2. This is the immigrant visa category for professionals with an advanced degree and individuals with exceptional ability. Since its creation in 1990, this category had not experienced waiting periods, with the recent exception of some individuals born in India or mainland China. However, in September 2017, a waiting period was reported for all places of birth. Now, the State Department expects this visa to again become immediately available starting in October 2018 (with the exception of people born in India or mainland China, who will continue to experience lengthy wait times).

EB3. This is the immigrant visa category for professionals and skilled workers. It typically has a wait period of only a few months, except for individuals born in India or mainland China, who have experienced lengthier wait times. While the State Department predicts a wait period for all countries of birth for September 2018, it expects visas in this category to become immediately available again in October 2018 (with the exception of people born in India, mainland China and the Philippines, who will continue to experience lengthy wait times.

EB5. This is the immigrant visa category for immigrant investors. It will remain available to all individuals, regardless of country of birth, but with wait times for people from China and Vietnam. For the latter, visas will be more readily available after October 2018 until March or April 2019, when the wait time will be the same as that of Chinese investors.

The State Department reports immigrant visa waiting times in its monthly Visa Bulletin, which can be found here. The current month and links to past months are available.

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Where’s my visa?

No more EB5 job creation through tenant-occupancy models: New USCIS policy reduces availability of immigrant investor funds to create jobs for Americans

On May 15, 2018, USCIS revised its Policy Manual, effective immediately. The agency will no longer count the jobs created for US workers through tenant occupancy of EB5 properties. The result of this change is to reduce the amount of immigrant investor funds available to create jobs for US workers.

“EB5” refers to the US employment-based fifth preference immigrant visa. EB5 is a program (sometimes called “traditional EB5”) Congress created in 1990 to stimulate the US economy through job creation for US workers using investment by foreign investors. In 1992, Congress created the Immigrant Investor Pilot Program (regional center EB5), a temporary program that Congress has repeatedly extended, most recently through September 30, 2018. (See our previous posting “EB5 immigrant investor visas are available again”).

Both types of EB5s generally require that at least ten full-time equivalent new jobs for US workers be created by each immigrant’s investment. A key advantage of a regional center EB5 is that “indirect” and “induced” jobs are included in the job creation count (in addition to “direct” jobs), whereas a traditional EB5 counts only direct jobs.

Direct jobs refer to US workers employed directly by the business that received the EB5 investment. Payroll tax records show direct jobs. Indirect and induced jobs refer to employees of other business as a result of EB5 investment. The calculation of indirect and induced jobs is based on an economic analysis using models accepted by USCIS.

The “tenant-occupancy” model counts job creation by independent tenant businesses that lease space in buildings developed with EB5 funding. In the past, USCIS accepted the tenant-occupancy model.

USCIS’ skeptical attitude toward the tenant-occupancy model can be traced back to early 2012 when it rolled out a Request for Evidence (RFE) template for tenant occupancy seeking evidence that the projected jobs attributable to prospective tenants would represent only newly created jobs, and not jobs that had merely been related from another location. In December of that year, USCIS issued “Operational Guidance for EB-5 Cases Involving Tenant-Occupancy,” which clarified that to claim tenant jobs, the economic analysis must project the number of newly created jobs that would not have been created but for the economic activity of the EB5 commercial enterprise. In making that projection, the claimant must use economically and statistically valid forecasting tools. USCIS made determinations on a case-by-case basis and would generally require an evaluation of the verifiable details provided and the overall reasonableness of the methodology as presented.

The 2012 memo suggested two ways to demonstrate a causal relationship between the EB5 investment and tenant jobs:

  1. “[M]ap a specific amount of direct, imputed, or subsidized investment to such new jobs” (i.e., “show an equity or direct financial connection between the EB5 capital investment and the employees of the prospective tenants”); and
  2. Utilize a “facilitation-based approach,” seeking to “demonstrate that the economic benefits provided by a specific space/project will remove a significant market-based constraint” and “result in a specified prospective number of tenant jobs that will locate in that space.”

Beginning in 2013, USCIS modified its tenant-occupancy model position. The agency’s RFE template identified the following three distinct areas of concern:

  1. Will there be tenants to occupy the space once construction is completed?
  2. Will the tenant jobs be “new jobs” and not “merely relocated”?
  3. Are the job creation estimates based on a reasonable and transparent methodology?

Over the years, practitioners in the EB5 field have reported that in tenant-occupancy cases, USCIS, when issuing RFEs or Notices of Intent to Deny, tended to require EB5 immigrants to either (i) remove tenant jobs from the job creation calculation; or (ii) submit additional evidence that shows by the preponderance of evidence (more likely than not) that the tenants will be there to occupy the commercial space when the project is finished, that the tenant jobs are not merely relocated from another commercial space within the same geographical area, and that the estimated number of tenant jobs is a reasonable estimate.

Given the lengthy adjudication time, the capital at stake and the uncertainty involved, many EB5 immigrants gave up claiming tenant jobs. Subsequent formulations of EB5 projects largely steered away carefully from the tenant-occupancy methodology to avoid potential issues.

Now, USCIS has formally rescinded its previous guidance and will no longer consider tenant-occupancy methodology. The agency will continue to give deference to Form I-526 and Form I-829 petitions directly related to previous approved projects, absent material change, fraud or misrepresentation, or legal deficiency of the prior determination.

USCIS is accepting comments on the new policy until May 29, 2018.

Full text of the agency’s Policy Alert can be found here. Dentons represents regional centers, EB5 investment programs and individual investors on both traditional and regional center EB5 programs. Please contact your Dentons lawyer for more information.

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No more EB5 job creation through tenant-occupancy models: New USCIS policy reduces availability of immigrant investor funds to create jobs for Americans

EB5 immigrant investor visas are available again

EB5 immigrant visas of all types are once again available to investors who create job opportunities for American workers. The Omnibus Spending Bill signed by the president on March 23 included the extension of the US immigrant investor EB5 regional center program to the end of September 2018.

The US State Department’s April 2018 Visa Bulletin will be revised soon to show that EB5 regional center immigrant visas are immediately available for all countries of birth, except mainland China, which is expected to have the same waiting period as the EB5 non-regional center program.

Media around the world has been warning readers of the demise of the EB5 regional center program. The US Embassy at Hanoi, Vietnam, announced on March 20 that no EB5 regional center immigrant visas would be issued after March 23. Now that advisory is no longer effective and immigrant visa appointments will continue to be scheduled at US embassies and consulates.

EB5 refers to the US employment-based fifth preference immigrant visa category. EB5 allows an investor, spouse and unmarried children under the age of 21 to obtain resident status in return for creating at least 10 full-time equivalent jobs for American workers through a business investment. The EB5 non-regional center program considers only jobs for workers directly employed at the business investment, while the EB5 regional center program also counts the larger number of indirect and induced jobs created as calculated by government-approved economic models.

Both types of EB5 generally require a US$1,000,000 investment, but a US$500,000 investment can qualify if the business is located in a targeted employment area. Such areas either have an unemployment rate 150 percent above the national average or meet the legal definition of rural.

There are proposals to raise these EB5 target investment levels, which have not changed since being set in 1990. Most experts expect substantial increases, along with other changes to EB5 regulations, but no one knows when this will happen. As a result, immigrants may want to act quickly to invest and file their EB5 immigrant visa petition as soon as possible. They should especially be sure to do so before September 30, 2018, when the EB5 regional center program is next set to expire.

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EB5 immigrant investor visas are available again

US green card availability to increase beginning October 1

Effective October 1, 2016, green cards will become more readily available for most people immigrating to the United States on employment-based (EB) immigrant visa categories.

The US State Department announced in the October 2016 edition of its Visa Bulletin that the agency is processing requests under the EB1 category for all countries of birth, effective October 1. This category includes aliens of extraordinary ability, outstanding professors and researchers, and multinational managers and executives, regardless of place of birth. During the summer, the agency reported a lengthy backlog for EB1 immigrants born in mainland China and India.

The EB2 category—for professionals with an advanced degree and aliens of exceptional ability—is also immediately available, except for individuals born in mainland China and India, for whom the category is backlogged to February 15, 2012, and January 15, 2007, respectively.

The EB3 category—for professionals and skilled workers—has limited available for all places of birth. That said, the backlog for most places is to June 1, 2016, and it is not likely to slow the process of immigration, since the Department of Labor generally takes more than four months to grant the alien employment certification application, often referred to as PERM, longer and that is a prerequisite for EB3 immigration.

The EB5 category—for investors—is currently available for all places of birth except mainland China, which continues to be where the majority of EB5 immigrants are born. EB5 is unavailable for China-born investors in projects in Regional Centers, while EB5 is available to China-born investors in non-Regional Center projects who have I-526 immigrant petition receipt dates on or before February 22, 2014.

There is an annual limited supply of immigrant visas in all EB categories that is replenished effective October 1, the first day of the new fiscal year. In categories where the annual demand tends to be greater than the limited supply, the Visa Bulletins issued for October through April often show the most movement. There is often more movement in the dates for individuals born in mainland China and India during these months. The EB1 and EB5 dates that have improved so much since the September 2016 Visa Bulletin are likely to retrogress once again later in the fiscal year, but the State Department did not release a prediction as to when or by how much.

The full text of the October 2016 Visa Bulletin can be found here.

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US green card availability to increase beginning October 1

US government immigration fee increase proposed

On May 4, 2016, the US Citizenship and Immigration Service (USCIS) published notice of a proposal to increase certain government filing fees and create a new fee. The average increase is 21 percent, but the highest increases are for the visas used by American businesses to bring skilled workers to the United States, immigrant investors creating jobs for Americans and immigrants acknowledged to have extraordinary ability.

A 42 percent increase is proposed for the Form I-129 used for the most common work visas, including H-1B professional, O-1 extraordinary ability, and L-1 intracompany transfer visas, as well as E-1 treaty trader, E-2 treaty investor and E-3/FTA H-1B1/TN treaty professional visas processed in the United States rather than at an American consular post or Preflight Inspection Unit abroad. A 42 percent increase is also proposed for the Form I-140 used for EB1, EB2 and EB3 employment-based immigrant visas.

If 42 percent seems outrageous, the increase proposed for the Form I-526 required for an EB5 immigrant investor creating at least 10 jobs for American workers is 145 percent.

Family-based immigration fares better, with only a 27 percent increase proposed for the Form I-130 used by United States citizens and lawful permanent residents to sponsor certain close relatives to immigrate. The Form I-485 required for immigrants who process through the USCIS instead of an American consular post abroad is proposed to increase only 16 percent.

The USCIS explains that the fee increases are required to recover costs for their services and to maintain adequate service. Current service is far from adequate. Although Congress mandated USCIS processing timelines in the American Competitiveness of the 21st Century Act of 2000 (AC21), almost 16 years later the agency continues to consistently fail to meet the standards set by law.

AC21 set 30-day processing times for most employer-sponsored nonimmigrant visas and 180-day processing times for most employer-sponsored immigration. Processing times tend to be at least twice as long or worse. Instead of 30 days, five months is the processing time currently reported for Form I-129 H-1B visa extensions, for example, and the USCIS California Service Center reported that as of February 29, 2016, the agency was currently processing Form I-485 immigrant applications received before May 17, 2014!

The agency has not increased fees in many years. Proposed fee increases usually become final fee increases without significant, if any, change—most likely later this summer.

There is a 60-day comment period. Guidance on how to submit comments is in the notice. The full text of the USCIS notice can be found online at the Federal Register.

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US government immigration fee increase proposed

EB-5 China backlog

The United States State Department announced in the May 2015 Visa Bulletin that conditional resident status based on the EB-5 immigrant investor visa is currently available only to individuals born in China whose I-526 immigrant petitions were received on or before May 1, 2013.  EB-5 remains immediately available to immigrants born in all other countries.  Further, this backlog does not impact pending I-526 and I-829 petitions, regardless of country of birth.

The fiscal year begins on October 1.  According to the State Department’s Visa Control and Reporting Division Chief, 2,525 EB-5 visas remain available this fiscal year to people born in all countries other than China.  China has already used 6,819  or 88.56% of the EB-5 allotment for this fiscal year.  Vietnam is the second largest user this year, with a mere 244 EB-5 visas, followed by Taiwan, India and South Korea.  The State Department anticipates that the other countries will not use up all of the remaining EB-5 visas and estimates about 1,000 more EB-5 visas will be released to immigrants from China before the current fiscal year ends on September 30, 2015.

EB-5 immigrants from all countries can continue to file and obtain approval of I-526 immigrant petitions.  In fact, filing the I-526 as early as possible is more important than ever, since it is the I-526 receipt, also known as the priority date, that is ultimately used for quota purposes.  Approximately 10,000 new EB-5 visas will become available on October 1, 2015, when the new fiscal year begins.

For more information, check out the May 2015 Visa Bulletin.

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EB-5 China backlog

Much ado about nothing

On March 24, 2015, the Department of Homeland Security’s (DHS) Office of the Inspector General (OIG) issued a report critical of former Citizenship and Immigration Services (USCIS) Director and current DHS Assistant Secretary Alejandro Mayorkas’ handling of the EB5 immigrant investor visa program entitled “Investigation into Employee Complaints about Management of U.S. Citizenship and Immigration Services’ EB-5 Program. ”

One would be forgiven for thinking that a great problem with the EB5 program was revealed that needed immediate attention, from some politician press releases and reports from certain news services that seem to have only read these releases and not the 97 page report.

Not true.  Here is what the report concludes:

Mr. Mayorkas’ actions in these matters created a perception within the EB-5 program that certain individuals had special access and would receive special consideration. It also lowered the morale of those involved.

No finding of special access or special consideration, only “created a perception” of this to some USCIS staff who reported that “lowered the morale of those involved.”  I can already predict how John Oliver of Last Week Tonight will lampoon the government for these revelations.

To put this into context, former Director Mayorkas led the USCIS in 2013 when the DHS OIG issued an earlier report recommending that the agency and Congress make a number of changes to the way the EB5 program was handled.  That report is available at the DHS OIG web site.

Mr. Mayorkas led the implementation of those changes, which resulted in the creation of the Immigrant Investor Program Office (IPO) and major changes to the USCIS employees responsible for administering the program, including hiring new staff trained in securities law, fraud detection, and economics, and relocation of the office from California to Washington, which resulted in additional staff changes.  Further, he brought in Nicholas Colucci, then Associate Director at FinCEN – the Financial Crimes Enforcement Network, which is the anti-money laundering regulator for US financial institutions – to serve as IPO Chief instead of promoting from within.

That feathers were ruffled for a small group of 15 miffed USCIS employees comes as no surprise. As the President of the American Immigration Lawyers said in response to the report:

But when have you ever heard of a large organization in which everyone wholeheartedly embraced changes to the way things have “always been done”? Mr. Mayorkas was responsible for leading an agency with some 15,000 employees in 200 offices across the world. The EB-5 program was just one of dozens of programs led by Mayorkas, with many of them troubled by some of the problems that have plagued EB-5. All too often its decisions failed to meet the “fundamental threshold for rational decisionmaking,” in the words of one federal judge overruling a decision denying a visa petition.

The EB5 program creates jobs for American workers, most often in areas targeted for rates of unemployment 150 percent or more above the national average.  For every 10 fulltime-equivalent jobs for American citizens and lawful residents created, an EB5 immigrant makes a minimum $500,000 investment and sometimes more than twice that amount.

USCIS processing of EB-5 cases is slow, very slow.  Slower than any other immigrant visa petition handled by the agency.  While the USCIS processes most petitions within four to five months and even offers a 15-day premium processing service for many, EB-5 petitions on the average languish for three times as long or longer before an officer is assigned and begins work.  And that is just the first step of the multiyear process to obtain permanent resident status, with an immigrant’s invested funds committed to and at risk in the American investment during the entire period, often five years.  It is this slow agency processing that jeopardizes the EB-5 program more than anything else.  Leadership to improve the speed at which USCIS staff work should be encouraged even if it also lowers morale.

Congressional action is needed.  The pilot program portion of the EB-5 program expires September 30, 2015, as it has every three years since enactment.  Every three years, Congress waits until the last minute and then votes to renew the program for another three years, sometimes taking action only after the program expires.  Every three years this creates uncertainty for the American workers whose jobs are created by the EB-5 program, the American businesses that rely on the EB-5 immigrant investors for financing, and the immigrant investors themselves who rely on the EB-5 program to create a new home for their families in the United States.  Congress needs to act quickly to renew the program and not jeopardize this important tool for American job creation.

The full text of the report is available at the DHS OIG web site.

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Much ado about nothing

EB5 immigrant investors: Comparison of Traditional and Pilot Programs

Investors, their spouses and unmarried children under 21 can become US permanent residents by creating (or saving) jobs for US workers through investment. This is the employment-based fifth preference immigrant visa (EB5), of which there are two types.

The first type of EB5 was created by Congress in 1990, has no expiration, and is called the “Traditional” or “Basic Program.”

The second type was created in 1992 and is commonly referred to as the “Pilot Program” or “Regional Center.” The Pilot Program, as the name suggests, is only a temporary law that  expires. It has been regularly renewed every few years.  The current Pilot Program expires in 2015.

While some of the requirements for the Traditional and Pilot Program EB5 are the same, there are very important differences. The choice of what type is best often varies depending on the needs of the individual investor and the investment project.

Here is a comparison of the two EB5 programs:

Expiration.  The Pilot Program EB5 expires; Traditional EB5 does not. This is an advantage of the Traditional EB5.

In 2012, the Pilot Program was extended for three years. Since it became law in 1992, Congress has regularly extended the Pilot Program. Sometimes the extension becomes law before the Pilot Program expires and sometimes after. The 2012 extension happened almost on the expiration date.

The temporary nature of the Pilot Program is a concern for the government-designated regional centers authorized by the Pilot Program. Investors are often concerned by the uncertain nature of the Pilot Program as a temporary law. This concern is especially acute every time that the Pilot Program nears expiration. Unless the EB5 immigrant petition is granted before the Pilot Program expires, it will be denied and the chance to immigrate through the investment lost.

Many ask if Congress will permanently authorize the Pilot Program.  Although this proposal is often discussed, there is no pending proposal before Congress at this time to make the Pilot Program permanent. In contrast, the Traditional EB5 does not expire. Individual investor immigrant petitions can continue to be processed at all times.

Job creation.  EB5 is the employment creation visa, not the investment visa. Creating jobs is key to approval of the EB5, regardless of whether the investment realizes profit or loss. Both Traditional and Pilot Program EB5 require the creation (or preservation) of at least ten full-time equivalent jobs for US workers.

Direct jobs. Both the traditional and Pilot Program EB5 count direct employment with the company in which the EB5 investment is made. The government looks to the payroll tax W-2 records and other evidence of direct employment.

Indirect and induced jobs. Only the Pilot Program EB5 counts indirect and induced jobs at other companies that are considered to be created as a result of the investment.

A typical example of indirect or induced jobs are the construction jobs created as a result of an investment in a company developing residential property. The construction company is their employer. The EB5 investor invests in the company that hires the construction company, which in turn hires the construction workers.

There are many types of indirect and induced jobs. The possibility to include these in counting the job creation can result in much higher job creation numbers. This allows for more investors to be involved in a common project, which in turn means there is more investor money available to fund larger, more expensive projects.  These are the types of investment opportunities that benefit from the Pilot Program.

But it is harder to count indirect and induced jobs. The normal payroll record approach is not an option.

Pilot Programs must apply to the government to be designated for the specific types of jobs that they plan to create to obtain government permission to count indirect and induced jobs. Additional rules apply to constructions jobs, which the government considers to be temporary and not counted except where the construction work will last for at least two years. This prevents the count of any (direct, indirect or induced) construction jobs for any shorter construction projects. Traditional EB5 does not require any government preapproval for specific types of job creation. Pilot Programs must submit detailed business plans that provide a detailed explanation of how and when the jobs will be created. The government reviews business plans carefully. Requests for Further Evidence or Notices of Intent to Deny are not uncommon if the government believes the business plan is insufficiently detailed or unsupported with sufficient backup documentation. Industry expert opinion statements may be required to substantiate claims about revenue projections, occupancy levels, etc. Traditional EB5 also requires business plans, except if all of the jobs are created prior to filing the immigrant petition.

Pilot Programs must obtain an economic analysis that uses one of the government approved economic models to forecast indirect and induced job creation. There are a number of private economists working with Pilot Programs. The process to obtain the economic analysis can be expensive and slow. The government recently hired its own economists to review the privately prepared economic analysis. The government economists have raised new questions in areas seemingly long resolved by the government. Some of their work has resulted in much lower job count, which means less EB5 investment money to fund projects. This has detrimentally impacted many Pilot Programs. Traditional EB5 does not require economic analysis.

Finishing quickly.  EB5 projects involving a single investor or a very small group of investors generally move through the immigration process faster than projects that involve large or very large groups of investors.

This is because most projects need a specific amount of investment from EB5 immigrants in order to hire all of the US workers and do business, including construction, if any. Until the project receives enough investors to proceed, the success of the project is in jeopardy. Big projects that require large numbers of investors can be under intense pressure to attract a sufficient number of investors quickly enough too proceed with the project. Small projects that require only a single or small number of investors are more likely to be able to immediately proceed.

Even EB5 investors granted two-year conditional residence status remain at risk until the required number of jobs are created and the conditional basis of their residence can be removed. Job creation and business operations must be scheduled so that all investors have their funds committed to the project. Even after individual investors have the conditions removed from their resident status, the investment and business operations are likely to need to continue until the last investor’s conditions are removed.

Traditional EB5 projects usually involve an individual or a very small group of investors. Pilot Program EB5 projects usually involve large or very large groups of investors. Because of this, traditional EEB5 projects tend to start and end more quickly than Pilot Program projects.

Annual reporting. Pilot Programs are required to file annual reports with the government. Traditional EB5 does not.

Pilot Programs report annually on their amount of investment and job creation.  This information is also allocated by industry category and each investment opportunity at the designated Pilot Program. Pilot Programs also report on the status of immigrant investor petitions and removal of conditional resident petitions. These reports are filled with the government, not individual investors.

The time and money involved to prepare the annual reports depend on the complexity and number of ongoing projects within the Pilot Program. Failure to timely file can result in lose of the regional center designation required for the Pilot Program and the denial of all pending individual investor petitions. No equivalent annual reporting requirement is imposed on Traditional EB5.

Investment amount.  A $500,000 investment can qualify for both Traditional and Pilot Program EB5.  In general, all types of EB5 require a minimum $1,0000,000 investment. To encourage job creation in targeted employment areas ( TEA), Congress lowered the investment requirement to $500,000.  TEAs are generally either areas with higher than normal rates of unemployment or areas defined by the government as rural.

Both traditional and Pilot Program EB5s can be located in TEAs.

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EB5 immigrant investors: Comparison of Traditional and Pilot Programs