Free EB-5 Project Evaluation Trends in Regional Center Terminations

The role of regional centers has undergone continual adjustment over the past few years as United States Citizenship and Immigration Services (USCIS) has reevaluated the goals of the EB-5 Program. The Administrative Appeals Office (AAO) has recently begun to challenge the inconsistent standards applied by USCIS to approve and deny regional center designations, and the uncertainties surrounding requirements for regional centers have been further highlighted by a rash of regional center terminations, 61 in total as of the beginning of August 2016.

Regional centers have the option to appeal these termination decisions, and one such appeal has illustrated the changing way USCIS views regional center designations. The decision in Matter of A-L-V- LLC reviewed the termination of a regional center based on its failure to promote economic growth under the EB-5 Program. Although the center had attempted to get multiple projects off the ground over the years and had filed its I-924A annually as required, USCIS made the decision to terminate the center, and this decision was upheld by the AAO.

A-L-V, which had been designated a regional center in 2008, countered that it had been unsuccessful in launching projects because of local economic conditions. Despite the fact that USCIS has not stated that regional centers must initiate projects within a certain timeframe or risk termination, the center had been pursuing projects throughout it designation but had prudently chosen not to move forward with projects considered unviable. This challenge was unsuccessful, and the AAO agreed with the points from the USCIS decision, namely that A-L-V had not raised any investment funds nor created any jobs, and therefore it had not promoted economic growth as required for continued designation under the EB-5 Program.

USCIS highlighted several points in its termination decision, and these are paraphrased below:

  • A regional center is defined in 8 C.F.R. § 204.6(e) as an economic unit promoting economic growth through increased exports, job creation, capital investment, etc. To demonstrate that it has continued to promote such growth, a regional center must annually provide USCIS with updated information to that effect by filing its I-924A form.
  • The regional center thus must have previously promoted economic growth and continue to do so to maintain its designation. USCIS considers several factors in deciding this element: the amount of capital raised, the number of jobs created or preserved, the number of industries affected, the number of enterprises established, and the quality of I-526 and I-829 petitions filed by investors working with the regional center.
  • USCIS allows for flexibility in maintaining regional center designations such that regional centers can raise varying amounts of capital and invest in different types of commercial enterprises. This is meant to account for different conditions across regions and industries, and USCIS applies flexibility at its discretion based on the unique circumstances faced by each center. For example, USCIS might show leniency in maintaining the designation of a recent regional center as opposed to an older center demonstrating no promotion of economic growth.
  • USCIS additionally takes into account any progress a regional center has made in pursuing and developing projects, and a decision to terminate may be affected by the likelihood that such projects will soon promote economic growth. USCIS also takes into consideration reasonable or unforeseeable delays in project development. However, these allowances are not meant to encourage regional centers to remain inactive while exploring potential projects hypothetically.

How does USCIS define a regional center?

The A-L-V termination decision has somewhat clarified the stance USCIS means to take regarding regional center designations and terminations as the EB-5 Program evolves. It implies that a regional center must be actively engaged in raising capital and promoting projects, meaning centers with ongoing projects and those promoting projects to investors should be able to maintain their designations if they properly document those activities in their annual filing of the I-924A.

Centers which may be affected by this change are those that have applied for designation so as to be able to offer EB-5 projects to investors among other developments and have yet made no progress in doing so. It appears USCIS means for regional centers to demonstrate successful project development within a certain timeframe following designation, though this timeframe has not been made clear.

The popularity of the regional center model and subsequent expansion of the program to encompass hundreds of regional centers has created risks for investors in that USCIS is unable to directly oversee the activities of each center or verify its actors, as illustrated by recent Securities and Exchange Commission investigations into regional center projects. The aim to cut down on inactive regional centers demonstrates that USCIS is committed to maintaining the role of regional centers within the EB-5 Program, but practitioners must remain diligent in ensuring centers verifiably fulfill the program’s economic goals.