What are the most important immigration legal aspects of regional centers to consider when selecting a regional center?
What are the most important immigration legal aspects of regional center that you need to consider when deciding in which regional center to invest? First and foremost, the EB-5 investor needs to look forward to the I-829 petition stage to think about whether the regional center and its project will enable the EB-5 investor to remove conditions, since it comes down mainly to whether the project satisfies the requirements. For the I-829 removal of conditions petition, the investor mainly just has to maintain the investment, stay out of trouble with the law, and spend enough time living in the U.S. so as not to lose the conditional permanent residence through abandonment (which is an issue generally raised by the Customs and Border Protection officer at the point of entry to the U.S. when the conditional permanent resident is returning from a long absence from the U.S.).
The job creation requirement
The job creation methodology is the single most important aspect to consider when examining regional center programs. In order for an investor to qualify for removal of the conditions from his or her conditional permanent residence, USCIS must be convinced, based on calculations presented by an economist using a reasonable methodology that sufficient jobs have been created, that is, 10 jobs per investor in the program.
Different regional center programs use different methodologies for calculating the number of jobs created. The simplest and most reliable method is by showing indirect job creation calculated based on expenditures on construction work. An example of this would be a regional center that makes loans to project developers, who use the funds, together with other loans and equity capital, to carry out construction of large-scale projects like hotels, corporate headquarters, and warehousing facilities for large companies, just to name a few types of projects. The job creation figure is then calculated based on the total amount of money spent on construction and/or renovation, including not only the regional center project’s loan funds but also loans from banks used to fund the project. The advantage of this approach is that it suffices for the construction work to be completed and paid for, regardless of when or whether the business that will occupy the developed premises opens for business or ever reaches the level of income and business activity that is anticipated.
It should be noted that some regional centers, in the interest of placing more investors into a project, do not stop with just the above-mentioned indirect jobs creation from expenditures on construction work, but also rely on the business occupying the premises reaching certain income targets. Also, in the case of hotel projects, some portion of the job creation might depend on the expenditures of guests staying at the hotel, which means that the job creation calculation can depend on the hotel reaching a certain occupancy rate. These approaches to job creation can leave EB-5 investors more vulnerable to denial for not achieving the full job creation figure of 10 jobs per investor.
At this juncture, I would hasten to add that there is also a provision in the regulations pertaining to the I-829 petition to remove conditions, which allows for approval of the I-829 petition, even where all 10 jobs per investor have not yet been created, but will still be created within “a reasonable time”. To benefit from this flexibility provision, it generally needs to be shown that all reasonable care and diligence has been taken to bring about the job creation prior to the removal of conditions, but that due to factors beyond the control of the project developer and the regional center, the project was delayed. USCIS is currently interpreting “a reasonable time” as 2 years.
I would also point out that the sufficiency of jobs is measured based on the number of other EB-5 investors who have already gone through the I-829 petition process and those who are in the I-829 petition process at the same time as the given EB-5 investor. It is not necessary to prove that there are already enough jobs created in order to cover all investors who will file the I-829 petition in the future. This situation is advantageous for those EB-5 investors who are the earliest to file the I-829 petition, but is no help to those who are among the last to file the I-829 petition in the project. In the example given above, of the project relying on a mixture of jobs, some from construction, some from operating income, and some from guest expenditures, the earliest EB-5 investors to file the I-829 petition get to claim the jobs created from construction expenditures, whereas the later investors to file the I-829 petition depend on the less reliable job creation from operating income and guest expenditures.
Consider factors that could keep the project from fulfilling the job creation requirement
I raise this point not as a discussion of which regional center and project keeps the investment safest, but rather in considering which regional center and project will best enable the investor to cross the finish line of obtaining approval of the petition to remove the conditions from the conditional permanent residence. People often ask, “What if the business fails? Will I still be able to remove the condition from my conditional permanent residence?” This is an outcome that no one wants to face or even contemplate, but in these uncertain economic times, one must consider all possible outcomes. If the regional center project accomplished the job creation prior to the failure of the business, i.e., it took all steps that were the basis for the calculation of the job creation, then the investor will have a strong case for obtaining approval of the petition for removal of conditions. The obvious downside is that the investor’s investment would have to go down with the ship, so to speak, in order to succeed under such a scenario.
What if, on the other hand, the business is still operating, but has not yet completed all steps, or only recently completed all steps, for the creation of jobs? Can the petition for removal of conditions be approved in that case? As mentioned previously, USCIS regulations do provide that where the job creation has not yet occurred at the time of filing for removal of the conditions, but certain evidence is submitted indicating that the job creation will occur within a reasonable time -- particularly where it can be shown that the delay was beyond the control of the project management -- then that can be an approvable case.
The best way to avoid these adverse consequences is to conduct a careful due diligence in the beginning stage, when you are selecting the business that is the basis for the regional center’s project. There are Regional Centers whose investors have already obtained the permanent green card, and others are presently starting the Removal of Condition process for their investors, and there is little concern that the permanent green card will not be approved for those Centers. The main point is: the investor should consider only those regional centers that can prove that they have a successful track record of obtaining I-829 petition approvals in past projects based on having proven to USCIS that their job creation methodology and their projects have produced the 10 new jobs per investor. While this is not a guaranty that the regional center's future projects will also succeed in obtaining the I-829 approval, but if the regional center is consistent in using the same job creation methodology and in structuring projects in a consistent manner, then it increases the likelihood of continued success.
Exit strategy
An important aspect of investing in a regional center program is that the investor should have a well-defined exit strategy. However, the exit strategy cannot run afoul of the legal requirement under the EB-5 program that the investment be placed at risk without a guarantee; that there be no disguised redemption option to cash out before the conditions have been removed from the investor’s conditional permanent residence; and that the investment not be a loan disguised as an investment. The investor generally wants the fastest and easiest possible exit from the investment. It is important to note that, about 2 years ago, USCIS changed it long-standing policy that the EB-5 investment must remain in place until the EB-5 investor's I-829 petition is approved. USCIS now accepts that it suffices that the EB-5 investor keep the investment in place only through the end of the two-year conditional residence period.
How experienced is the regional center’s management and what is their track record in helping EB-5 investors to clear all stages of the immigration process?
Nowadays, there are more than 800+ approved regional centers. This large number of regional centers is more of a distracting statistic than a realistic selection of viable options. The vast majority of these regional centers have ben approved within the last 2-3 years, and have no projects or no approved projects. In practice, the EB-5 investor should be considering only those approximately 15-20 regional centers that have at least one project that has received approval of the I-829 removal of conditions petition. Having had approved I-829 petitions for past projects proves several important points:
- The regional center’s management has proven that it can organize a project that actually meets USCIS’s requirements.
- The regional center’s management has proven that it can pull together the documentation to satisfy USCIS’s demanding review of its project, and that it has probably surmounted several requests for evidence from USCIS that can challenge the regional center’s management to defend and vindicate its project.
- The regional center’s management has proven that its regional center is not a complete scam designed to bilk investors out of their money, since scam regional centers are unmasked as such already with their first project because they do not actually carry out even the first project. Approximately 5 such projects have been unmasked by USCIS in recent years.
It is also important to consider whether the regional center has had any previous denials at the I-526 or I-829 petition stages. If so, then it is important to consider what the regional center did that prompted USCIS to deny the petition, i.e., what USCIS justified or unjustified in denying? Was the regional center taking unnecessary risks, typically with its job creation methodology or with changes to the project business activity that prompted USCIS to deny the petition? How did the regional center’s management react to the denial? Did the regional center litigate the denial in federal court and fight the case through to approval of the investors’ cases? Did the regional center just let the matter go and not defend the interests of its investors and not vindicate the validity of the regional center’s approach in the project? Does the regional center’s management have sufficient capital from which to litigate against USCIS in federal court, which would typically take hundreds of thousands of dollars? Is the regional center committed to standing behind its projects? One final point, in connection with considering the regional center management’s ethics and commitment to stand behind their project, it would be advisable to look into whether any of the leaders in the management of the regional center have any history of criminal offenses, sanctions from the Securities and Exchange Commission (the securities regulation agency in the U.S.), loss of any professional license for malfeasance, and so forth. These are important questions to ask in order to determine whether you are working with the best and safest regional center.
In selecting a regional center, it is important to judge the likelihood that that regional center and its management are able and are on track with the project that they are offering you to succeed at both the I-526 and the I-829 petition stages. Also, it is important to determine whether the regional center’s management team have the experience and track record of having safely ushered EB-5 investors all the way through the EB-5 immigration process. Beware, though, that a successful track record does not guarantee that the current project will be approved if the current project is not well designed to qualify—consistent use of careful strategies for qualifying the project is crucial. Finally, you need to evaluate whether the regional center’s management team, based on their past history, have the ethics and gumption to stand behind their project if “push comes to shove” with USCIS.