USCIS Interpretation of Immigration Law and Regulations Varies
The EB-5 Immigrant Investor Program was created by Congress in 1990 in order to generate job-creating foreign investment in the United States. The program was enacted through the Immigration and Nationality Act, sections 203(b)(5) and 216A, and pertinent EB-5 regulations are located within the Code of Federal Regulations (C.F.R.) in Title 8, sections 204.6 and 216.6.
In general, this law and its related regulations are vague. As a result, what the law seems to say can differ from how United States Citizenship and Immigration Services (USCIS) implements EB-5 law.
Following are several elements of the EB-5 program, each of which is explained both through the lens of the law and through a practical examination of how USCIS actually implements these provisions.
Establishing a New Commercial Enterprise
New commercial enterprise (NCE) is defined in 8 CFR 204.6 as a “for-profit activity formed for the ongoing conduct of lawful business” after November 29, 1990. This may entail (a) creating an “original business” or (b) purchasing a business and then restructuring it “such that a new commercial enterprise results.” This can also mean (c) expanding an existing business “so that a substantial change [40% increase] in the net worth or number of employees results.”
While a business established after November 29, 1990, is clearly an NCE, the regulation is less clear concerning restructured and expanded businesses. How USCIS interprets these provisions is also unclear, and as a result, they are rarely used.
Investing the Required Capital
According to 8 CFR 204.6, each EB-5 investor must invest $1,000,000 unless the job-creating entity is located in a targeted employment area (TEA), in which case the required investment is $500,000. According to the regulation, a TEA is “an area which, at the time of investment, is a rural area [population less than 20,000] or an area which has experienced unemployment of at least 150 percent of the national average.”
In practice, USCIS typically expects state-issued TEA designation letters with rational support for the designation.
Furthermore, 8 CFR 204.6 requires each investor to invest or be “actively in the process of investing” the appropriate amount of capital.
USCIS requires that investors make their entire investment upfront or that their capital be irrevocably committed to the NCE.
Proving Lawful Source of Funds for EB-5
According to 8 CFR 204.6, the capital invested must be “obtained through lawful means.”
USCIS requires extensive documentation regarding source of funds. Rather than requiring the standard preponderance of the evidence, USCIS expects investors to prove beyond reasonable doubt that their capital was obtained lawfully.
This expectation requires investors to trace their capital from its source to the EB-5 project, and in some cases, it may require them to demonstrate multiple layers of lawful source of funds. For example, if invested capital was obtained as a gift, USCIS requires documentation that proves the money given to the investor was obtained lawfully.
According to 8 C.F.R. 204.6, an EB-5 investment must create “full-time positions for not fewer than 10 persons either directly or indirectly.” This employment creation must be demonstrated by “reasonable methodologies” that include “economically or statistically valid forecasting tools.”
Over time, what USCIS has accepted as “reasonable methodologies” has changed. For example, USCIS originally accepted the tenant occupancy model. Then, for a time, this model was not accepted. Now, USCIS may accept it with sufficient evidence.
Title 8 section 204.6 also calls for investors to submit a “comprehensive business plan showing . . . the need for not fewer than ten (10) qualifying employees.”
USCIS requires the comprehensive business plan to be credible and feasible and treats it as more than just a prediction—the likelihood that the business plan will successfully result in the creation of the necessary number of jobs must be clearly demonstrated.
An EB-5 investment may also be made in a troubled business (i.e., one which has incurred a net loss of 20% or more in the past 12 or 24 months), and in such cases, the regulation stipulates that the number of existing employees must “be maintained at no less than the pre-investment level for a period of at least two years.”
In practice, because EB-5 investments in troubled businesses are rare, little information is available regarding how USCIS addresses such petitions.
Managing the Enterprise
According to 8 C.F.R. 204.6, an EB-5 investor must be engaged in managing the NCE, either through “day-to-day managerial control or through policy formulation.” The investor cannot maintain a “purely passive role.” For NCEs structured as limited partnerships, if the investor is a limited partner with all the rights, duties, and powers typical of that role, such an investor will be regarded as “sufficiently engaged” in managing the NCE.
This section of the regulation is fairly clear, and USCIS adheres to it closely.
Removing the Conditions to Resident Status
The requirements that must be met to remove the conditional basis of the EB-5 investor’s permanent resident status are outlined in 8 C.F.R. 216.6. Form I-829 must be filed within the last 90 days of the two-year conditional status, and supporting documents must demonstrate the following:
- An NCE was created
- The required capital was invested in the NCE
- The NCE and investment were sustained for the two-year conditional period
- The employment creation requirement was met
USCIS will not approve Form I-829 if it is materially different from Form I-526.