Free EB-5 Project Evaluation Application Challenges for EB-5 Investors

Applicants to the EB-5 Program face certain challenges associated with the application process and the program itself. This article outlines the challenges investors may face at each step of the application process as well as some more general obstacles investors may wish to consider when doing their due diligence to determine whether the EB-5 Program suits their immigration and investment goals.

Step 1: Form I-526

The first step in applying for the EB-5 Program is to file an I-526 petition, the two main components of which are the project documents and the proof of a lawful source of funds. United States Citizenship and Immigration Services (USCIS) adjudicators will scrutinize these documents to ensure they comply with the requirements of the EB-5 Program and U.S. law in general and will determine the investor’s eligibility for approval based on a preponderance of evidence.

Project documents must be thorough in laying out how investment funds will be used and how the project will meet the program requirements as a new commercial enterprise capable of creating ten fulltime jobs per investor. These documents will generally include a business plan and economic impact report outlining the objectives of the enterprise, its marketing plan, and its financial projections. These should be reviewed thoroughly by both the investors themselves and the project developers as well as immigration attorneys, securities attorneys, and other counsel to ensure the project is legally sound.

The investor also must be able to prove that the investment funds have been sourced legally. For investors from countries such as China, where tracing the path of funds can be problematic because of banks’ reluctance to issue statements, proving the source of investment funds is a significant hurdle. Some countries, such as India, also impose strict limits on how much currency can be transferred abroad, which means investors may need to work through banks in other countries to transfer the EB-5 investment. Regardless, investors must be able to fully account for the sources of the investment funds to pass a USCIS review.

Government agencies may also conduct due diligence investigations during this stage of the application. For example, USCIS may visit the site of the commercial enterprise to evaluate its financial and job creation prospects, and the Securities and Exchange Commission (SEC) will investigate suspected cases of fraud in the program if tipped off by USCIS or by concerned investors themselves. It is therefore crucial that both investors and project developers work with experienced counsel and research the program requirements to ensure full compliance.

Step 2: Consular Processing or Adjustment of Status

Investors successful in their I-526 petitions proceed to the next step, which is either consular processing for investors residing abroad or adjustment of status for investors holding nonimmigrant status in the United States. As part of these applications, investors must submit any required legal or medical documents to prove their eligibility to immigrate to the United States.

Investors undergoing consular processing will face a thorough review of their supporting documents by the National Visa Center (NVC) as well as an interview with the U.S. consulate in their country of origin. Investors applying for an adjustment of status will undergo a further USCIS review. In either case, inconsistencies in previously submitted documents may delay processing of the application.

Step 3: Form I-829

The final stage of application to the EB-5 Program is for the investor to submit an I-829 petition to remove the conditions of permanent residence. This requires the investor to prove that the EB-5 investment has created the required ten fulltime jobs in the two years following approval of the I-526 petition, which should be supported by the initial financial report and proved using payroll records and other proofs of employment.

Additionally, because the EB-5 Program requires that the investment funds be at risk throughout the application process, the investor must prove that none of the original EB-5 investment has been repaid to him or her. The financial records provided should be consistent with those filed along with the I-526 in that they account for the investment funds entirely and show how those same funds were required to create the requisite ten jobs. USCIS may conduct additional site visits while adjudicating the I-829 petition to verify these claims.

Challenges of the EB-5 Program

Aside from the challenges inherent to each step of the application process, the nature of the EB-5 Program itself can create obstacles for investors. The most significant of these are outlined below to assist investors in making informed decisions.

Changes in Policy

The EB-5 Program is a permanent law, but changes in legislation can affect different aspects of the program, such as the minimum investment amount and fund sourcing requirements. An example of recent changes in this area is the regional center program, which was recently set to expire on September 30, 2015, but was renewed by Congress for an additional year. Investors whose current petitions are contingent upon aspects of the regional center program could be affected by any changes in this regard and should be aware of this possibility.

Denials and Requests for Evidence

If USCIS believes not enough evidence exists to justify approval of a petition, it may issue a request for evidence (RFE) to collect further information. There is also the chance that USCIS may issue a notice of intent to deny (NOID), which signifies that the adjudicator believes the petition should be denied but wishes to present the investor the opportunity to clear up any areas of concern. Both of these notices may delay an investor’s petition and involve additional costs to revise the petition materials, for example, to consult with counsel.

An investor has the option of requesting an administrative review if his or her petition is denied, but this involves a significant waiting period. Luckily, the approximate approval rates for I-526 and I-829 petitions are 85% and 90%, respectively.

Fraud

Despite the efforts of USCIS, the SEC, and other government agencies to enforce the legal aspects of the EB-5 Program, cases like the recent SEC v. A Chicago Convention Center illustrate the risk of fraud when developers and other agents misrepresent elements of the program or individual projects to investors. However, such cases are relatively rare.

Investors applying to the EB-5 Program face unique challenges and opportunities. By providing thorough application materials and exercising due diligence, as with any other investment, investors can increase the likelihood of a smooth petition process.