Free EB-5 Project Evaluation Strategies for RCs Facing a Notice of Intent to Terminate

Each EB-5 regional center is required to submit an annual Form I-924A to United States Citizenship and Immigration Services (USCIS) to justify its designation as a regional center by demonstrating that it has fulfilled the goals of the EB-5 Program, such as job creation and economic growth in targeted employment areas (TEAs). While filing the I-924A has historically been a required but fairly inconsequential event for regional centers, USCIS has recently adopted a stricter stance in ensuring regional centers achieve their purpose.

Previously, termination was only a possibility for regional centers involved in illegal acts such as fraud or misrepresentation to investors. However, with the number of regional centers now nearing 800, USCIS has begun seriously monitoring information provided with the I-924A and has terminated regional centers unable to uphold their EB-5 commitments. In these cases, USCIS will issue a notice of intent to terminate (NOIT) to the regional center in question, which gives the center the opportunity to respond to any concerns and reinforce its economic necessity under the EB-5 Program.

As of June 17, 2016, USCIS has terminated 54 regional centers, and over one quarter of these terminations have occurred in 2016. These statistics illustrate the recent trend of increased enforcement with regard to regional centers and their ability to perform as required under the EB-5 Program. Regional centers will typically be issued a NOIT for any of the following three reasons relating to the previous few fiscal years:

  • The regional center has been unable to attract capital investment or prove any job creation.
  • No investors under the EB-5 Program have filed I-526 or I-829 petitions proving investment in that regional center.
  • The regional center has not conducted any activity to serve the purposes of the EB-5 Program.

This article discusses each of these reasons in detail and outlines strategies each regional center can use to proactively avoid a NOIT or to reaffirm its status as a regional center upon receipt of a NOIT from USCIS.

Lack of Capital Investment or Job Creation

Regional centers unable to demonstrate capital investment or job creation should endeavor to prove to USCIS their ongoing efforts to achieve those objectives. A regional center can do so by proving that it has provided investment opportunities for EB-5 investors or that capital investments are planned to be made after the I-924A reporting period.

A regional center that has previously prepared project documents for EB-5 investors and conducted due diligence on a project only to discover that the project would not be viable because of unforeseeable market circumstances should be able to prove these actions to USCIS. Such responsible planning and caution in not moving forward with a potentially risky project that may otherwise have failed to generate the necessary funds for completion or create the required number of jobs speaks well of the regional center, and USCIS will take these factors into consideration.

Similarly, a regional center that has refunded EB-5 investors after being unable to acquire any necessary permits or licenses or agree upon project terms with developers has exercised reasonable fiscal caution and should provide records of these actions to USCIS. The aim is to demonstrate that the regional center has taken valuable actions over the previous fiscal years that, while not resulting in a viable project to generate capital and jobs, have nonetheless supported the goals of the EB-5 Program.

A regional center in the process of planning for an upcoming project, for example, one in the process of preparing an I-924 Exemplar Application, can use this fact to affirm its continued dedication to the program. In its response to the NOIT, the regional center should include a detailed description of the upcoming project and a breakdown of how investor funds will result in job creation in the TEA. Although commencement of the project will fall outside the I-924A reporting period, the planning stage demonstrates that the regional center is capable of taking action to create capital and jobs.

Lack of Pending I-526 or I-829 Petitions

The same rationale applies to a regional center not associated with any pending I-526 or I-829 petitions from EB-5 investors. Any upcoming projects for which investors will need to file I-526 petitions should be detailed in the response to the NOIT regardless of whether the project will commence outside the I-924A reporting period. Any activity to market projects to investors or otherwise promote economic growth as required by the EB-5 Program should also be discussed.

For example, a regional center working with marketers to promote a project among foreign investors should present those marketing efforts and explain how the project in question will fulfill the EB-5 goals. Any I-526 petitions to be filed in connection with that project should be mentioned, as should how the investment capital from those investors will create economic growth and the required number of new jobs in the United States. USCIS wants to see evidence of a regional center serving its purpose, and active marketing efforts and ongoing project planning demonstrate this.

Lack of Activity Serving the Purposes of the EB-5 Program

This category encompasses a broad variety of concerns. Aside from the strategies outlined above, which demonstrate active steps the regional center is taking to commence a project, the regional center can also demonstrate its purpose in the context of the EB-5 Program by providing documentation such as financial statements and contracts to prove that it has commissioned services to get projects off the ground and thereby fulfill its role.

For example, the regional center may have hired business consultants, financial experts, foreign marketing firms, and immigration and securities attorneys to explore the viability of certain projects and to market them to foreign investors. Consistent expenditures for these sorts of activities alone prove that the regional center has been serving the purposes of the EB-5 Program in that it has actively been investigating projects and preparing to market them to potential investors abroad.

Regional centers can use the above strategies to respond to a NOIT and demonstrate the necessary roles they play in promoting the EB-5 Program. After responding to a NOIT, a regional center will generally remain in contact with USCIS as it conducts additional investigations to assess the regional center’s progress and determine whether the facts indeed justify its continued existence. To avoid the risk of a NOIT and when responding to one, regional centers must be diligent in providing detailed information to USCIS through the I-924A and additional documentation. In applying these strategies and continuously working to fulfill the goals of the EB-5 Program, regional centers will remain a key resource for investors and the success of the program overall.