USCIS's EB-5 Regulations are invalidated (for now) by a federal court
As if there were not enough drama surrounding the EB-5 Immigrant Investor Program (the “regional center EB-5 program”), with the impending lapse of the program coming on June 30, 2021, then, on June 22, 2021, the U.S. District Court for the Northern District of California decided a lawsuit titled: Behring Regional Center LLC v. Wolf et. al., (3:20-cv-09263-JSC), by invalidating the USCIS’s “EB-5 Modernization Regulations” from July 24, 2019, which had had the effect of increasing the minimum required investment amount to $900,000, on November 21, 2019. (For further details on the changes to the EB-5 program that came out of those regulations, please click here to view my blog article on that topic.) This court decision has legal effect throughout the U.S.
The basis for this lawsuit and ruling was that USCIS, which falls under the U.S. Department of Homeland Security (“DHS”), placed these regulations into effect while the Secretary of DHS, Kevin McAleenan, was serving in that capacity as “Acting Secretary of DHS” without having been confirmed by the U.S. Senate. Since the DHS Secretary had not been properly confirmed by the U.S. Senate, the U.S. District Court for the Northern District of California ruled that the regulations placed into effect under his authority are not valid.
What is the effect of this decision?
Among other things, this invalidates USCIS’s increase in the minimum required investment amounts, in Targeted Employment Areas (“TEAs”) from $500,000 to $900,000, and in non-TEA areas from $1 million to $1.8 million. Moreover, this invalidates USCIS’s delegation to itself, from the state agency designated in each state by that state’s governor, of the authority to determine which geographic areas qualify as TEAs.
Can I file an I-526 petition in reliance on this decision?
I am advising clients not to file a I-526 petition in reliance on this decision, since there are multiple dangers in doing so.
- As it applies to the regional center EB-5 program, the program was about to lapse within 8 days of the ruling, which means that the investment would have to be made and the I-526 petition would have to be filed on or before June 30, 2021, in order to have a chance at qualifying based on an investment of $500,000, which was the requirement in effect prior to USCIS’s “Modernization Regulations”. As a result, the investor and attorney would have to have prepared all the source of funds documentation and been already on the verge of filing the I-526 petition with sufficient and proper documentation of the source of funds. Otherwise, if the investor and attorney would file without sufficient documentation of the source of funds, particularly in a so-called barebone/placeholder filing, USCIS could deny the case without even issuing a request for evidence or a notice of intent to deny, which would normally give investor and attorney the opportunity to submit source of funds evidence later.
- USCIS could respond by appealing the decision to the Ninth Circuit Federal Court of Appeals and obtaining an injunction against the District Court’s decision, which would have the effect of reimposing the regulations, while USCIS would cure the problem by simply going back through the public notice and comment process, which is required for implementation or reimplementation of federal regulations, with the same regulations, albeit now under the valid authority of Biden’s DHS Secretary, Alejandro Mayorkas, who has already been confirmed by the Senate.
- Congress can and will likely solve the problem by reimposing the changes imposed by USCIS’s regulations via its own extension legislation, since USCIS had imposed the regulations at the behest and with the approval of influential Members of Congress such as Senators Chuck Grassley and Patrick Leahy, who are the sponsors of the Senate Bill S.831, which is currently the only bill before the Senate for extension of the regional center EB-5 program. How influential these Senators are in the EB-5 context is confirmed by the fact that the only extension bill currently before the House of Representatives, HR.2901, is identical to S.831.
- Can any current project, which was set up as an offering of investment units requiring an investment of $900,000, validly offer investment units at $500,000 when other investors in the project have already filed I-526 petitions (or the regional center maybe filed an exemplar I-526 petition) based on the investment units requiring an investment of $900,000? USCIS could later deny the I-526 petition of the investor who invested $500,000, claiming that investor did not invest the full required investment of $900,000, under the terms of the investment project, and so the I-526 petition was not approvable when filed, which means that the investment amount could not be topped up to $900,000 in order to solve the problem.
It is important to note that the standard EB-5 program, based on investment in a business, not under a regional center, with direct job creation is a permanent program, which did not lapse on June 30, 2021. USCIS’s Modernization Regulations applied equally to the standard EB-5 program, and so their invalidation also applies to the standard EB-5 program. However, before you rush to qualify under the standard EB-5 program, you should consider that stand-alone businesses that qualify under the standard EB-5 program typically take months and even years to set up. Furthermore, USCIS is equally demanding with regard to the source of funds documentation in these cases as in the regional center EB-5 cases. The above-stated points 2-4 apply also to the standard EB-5 program, since USCIS and Congress will aim to reimpose the requirements that USCIS’s Modernization Regulations had imposed prior to the U.S. District Court for the Northern District of California’s decision. Therefore, an EB-5 investor would have to be in the final stages of setting up the business and gathering the source of funds documentation in order to file an I-526 petition in the brief period of time before the requirements under USCIS’s Modernization Regulations are reimposed by Congress through its legislation to extend the regional center EB-5 program.
In the end, the invalidation of USCIS’s “EB-5 Modernization Regulations” is more of an interesting historical note than a viable opportunity to avoid having to tie up an additional $400,000 to immigrate under the EB-5 program. One final observation from my experience with USCIS is that they are an agency that will look for every way possible to deny the case of someone who tries to get creative and sidestep USCIS’s rules, since USCIS is used to enforcing its rules and interpretations on applicants and having the final word.