U.S. Department of State (DOS) Chief of Visa Control and Reporting Division Charles Oppenheim held a virtual keynote address on EB-5 visa availability in mid-November 2020. This webinar followed the opening of the new fiscal year for the EB-5 Immigrant Investor Program, at which time United States Citizenship and Immigration Services (USCIS) allocates its annual visas. Usually, about 10,000 visas go to the EB-5 program.

Generally, these are enough for around 3,000 EB5 investment participants, considering most apply for EB-5 visas for themselves, their spouse, and their eligible dependent children. That said, an unprecedented 2020 has left the EB-5 program holding nearly double its annual allotment. Oppenheim’s robust presentation provided a detailed outlook on where consular processing stands and on how EB-5 visas may be distributed throughout the remainder of FY2021. It held particularly relevant information for EB-5 investment participants from Asian countries, including China, Vietnam, and India.

Especially notable were his thoughts on how consulate activity slowdown is likely to affect FY2021. He also addressed how adjustment of status could be a solution to the bottlenecking of EB-5 visas this year and clues as to why that solution is not likely to be implemented. He discussed several other contributing factors to how he sees the year’s EB-5 Visa Bulletins taking shape as well.

Normal Consulate Activity on EB-5 Investment Visas Yet to Resume

U.S. consulates and embassies the world over experienced temporary closures in the wake of the global pandemic, and in August 2020, reports began to surface of these offices beginning a process of phased reopening. However, Oppenheim has “no idea” when consulates will actually return to a normal level of EB-5 processing activities. Why is this important? Because, as we saw in 2020, EB-5 investment visa distribution hinges on normal consular processing of visa applications.

General EB-5 industry consensus has been that the halt in visa issuance throughout much of FY2020 would naturally result in an influx of available EB-5 visas in this fiscal year. Yet, as the first quarter of FY2021 ends, it seems professional opinions on that prediction are shifting. A continuation of slowed consular operations, for instance, has left Oppenheim estimating that actual EB5 investment visa distribution will be far less than the number of visas theoretically available to EB-5 investors in this fiscal year.

Oppenheim Compares EB-5 Visa Availability to Issuance

Charles Oppenheim provided a number of charts related to EB-5 investment visa issuance data over the last few years to demonstrate how EB-5 visas were distributed over the last fiscal year and this one.

Here are some of the key communications that can be gleaned from his commentary and the data from these slides:

• Due to consular slowdown since March 2020, only 3,602 of 11,112 available EB-5 investment visas were issued in FY2020.
• After the appropriate rollover of various immigration visas took place, the FY2021 quota set for EB-5 visas was 18,600.
• Without the full resumption of consular visa issuance activities having taken place, however, Oppenheim offered an informal estimate that for the remainder of the year, only a small percentage of those could logistically be issued.

Based on the snail’s pace of operations resumption to date, the EB-5 program may see another year before backlogs and delays caused by the pandemic will self-correct through the redistribution of visas across immigration programs. Thus, it is quite possible another mass rollover of visas will occur at the end of this fiscal year, and Oppenheim seems to suggest through his estimates that the EB-5 quota may be raised to 14,200 or more in FY2022.

Oppenheim Opines on Adjustment of Status as a Solution for Consular Slowdown

One solution to getting more visas into the hands of qualified immigrant investors has been floating through the EB-5 community: a shift in focus to adjustment-of-status applications. But is the government willing (or even able) to get the ball rolling in a truly meaningful way in FY2021? Could their efforts genuinely compensate for the ongoing limitations of consular processing? Oppenheim and plenty of other industry experts don’t seem to be holding their breath.

Reasons Adjustment-of-Status Applications Aren’t Likely to Advance

The published presentation reflects a total of 1,117 EB-5 investment visas being issued in FY2020 via an adjustment of status. This is fewer than average in a normal year, and it wasn’t for a lack of available EB-5 visas. Only about a third of available visas were issued through the EB-5 program in FY2020, in fact.

The low figure isn’t due to a lack of demand, either. Oppenheim pointed to the 2,500 I-485 petitions awaiting USCIS adjudication for Chinese EB-5 investors alone. That leaves two possible obstacles:

• The DOS specifically chose not to shift visa bulletin dates in a way that would allow advances of adjustment-of-status applications over consular processing applicants.
• USCIS’s delayed pace simply blocked this pathway to greater visa issuance (which is entirely possible).

Frankly, either or both is possible based on a historical understanding of these processes. Combine that with Oppenheim’s informal (and rather bleak) estimates sprinkled throughout his presentation, and it makes sense that one might hold limited expectations that adjustment-of-status applications might effectively loosen the noose on visa availability—at least for now.

What we do know is that things are likely to be different after the U.S. election. The incoming administration is interested in repairing and strengthening global relations and is far more immigration friendly than the last. We may just see several politically motivated roadblocks moved away from the EB-5 path to U.S. permanent residency sooner than we think.

Expectations for the EB-5 Visa Bulletin in FY2021

An important topic in the EB5 investment community, Oppenheim addressed standing speculations on changes to the relationship between Hong Kong and Mainland China. On the question of whether applicants from the region are considered a part of Mainland China, he stated, “Hong Kong is still at this point treated as a separate foreign state, for IV purposes, going forward.” Furthermore, seemingly low demand for the EB-5 investment program from outside of China, Vietnam, and India indicates little expectation from Oppenheim of any other country reaching its EB-5 visa limits throughout the remainder of the fiscal year.

What kind of movement can we expect in coming issues of the 2021 EB-5 Visa Bulletin based on Oppenheim’s presentation?

China’s Holding Pattern Is Likely to Continue through FY2021

Oppenheim predicts Chart B will not advance for Chinese investors for the foreseeable future due to its nearly 8,000 applicants at the ready. He informally predicted that only about 3,000 visas could reasonably be issued in the remainder of FY2021, and only between 3,500 and 4,000 could go out in FY2022. Based on those estimations, China’s dates for filing found in Chart B would not need to be adjusted until late into 2022.

Two key factors could change this expected holding pattern:

• If DOS were somehow able to shift into high gear and actually issue the estimated 11,300 EB-5 visas available to Chinese EB5 investment participants in the next nine months.
• If USCIS elected to maximize Chinese adjustment-of-status processing for investors already in the queue while outside consulates remain inoperable.

Vietnamese Dates Could Shift Again Before FY2021 Ends

The movement shown in the December 2020 Visa Bulletin for Vietnam informed Oppenheim’s report of nearly 500 Vietnamese EB5 investment applications being ready for processing. Because he also offered up an estimate of DOS being able to reasonably issue at least 600 EB-5 visas of the 1,302 technically available to Vietnam in FY2021, it makes sense that dates will shift again for this country before the year is out.

India Expected to Stay Current, Omitted from List of Countries “At Limit”

Oppenheim did not specifically predict that India will remain current in FY2021. However, he did omit the country from his slide indicating countries “at limit.” This is likely due in large part to India’s 87% backlog on I-526 processing. Unless the number of India-born EB-5 investment participants begins approaching 1,300 (total estimated Indian EB-5 visas available in FY2021), its visa bulletin limits will not change this year.

Overall, this can be mixed news for Indian EB-5 investors. On one hand, EB-5 applicants from India who are at the head of the line and who manage to hurdle the I-526 approval process will be able to proceed unhampered in filings toward final action. On the other, those left at the end of the line may see little movement as (i) the I-526 train chugs forward ever so slowly and (ii) reduced consular activity has seemingly destined far fewer visas to be issued this year.

Starting November 10, 2020, Sarah Kendall and the Immigrant Investor Program Office (IPO) took two weeks out of their not-so-busy adjudication time to disappoint the EB-5 investment industry and avoid questions during their virtual industry forum. Although the event has now ended, interested EB-5 industry participants can access the material from the first day in PDF form, as a YouTube video, or as a presentation to Invest in the USA (IIUSA).

Tidbits of Positive News

To be fair to the IPO, the presentation included a few positive updates alongside the disappointment. The IPO acknowledged two problems plaguing the EB-5 program in November 2020 and affirmed its dedication to solving them: different days scheduled for I-829 biometrics appointments for EB-5 investors and their family members, and the delayed transmission of approved I-526 petitions to the National Visa Center. According to the IPO, the biometrics scheduling issues are due to a bug in the system, and the delayed I-526 transmission is the result of temporary understaffing.

The IPO also revealed the number of dedicated staff working on EB-5 petitions—232 people. The figure is down 13 people from March 2020, but fortunately for those involved with EB5 investments, there hasn’t been a lot of attrition. Considering that United States Citizenship and Immigration Services (USCIS) was threatening to furlough around 70% of its staff in August 2020, EB-5 participants should be relieved to see most IPO staff have retained their jobs. Due to the COVID-19 pandemic, most of them have been completing their work from home since March 2020.

Most Questions Sidestepped

Unfortunately, the rest of the conference generally consisted of at best unfavorable news for EB-5 investors and other program stakeholders and at worst no news. The IPO masterfully sidestepped various pertinent issues and questions, rendering the presentation of little use to those with EB-5 investments.

Prior to the engagement, IIUSA drafted a list of questions to pose at the IPO conference, but the IPO’s response hardly inspired confidence. Ignoring the majority of the questions, the IPO offered little insight on the key EB-5 investment concerns of stakeholders during the turbulent times of 2020. In particular, the IPO ignored questions pertaining to the policy manual, changes to policy on the source and path of EB5 investment capital, country-based I-526 processing data, and changes to the redeployment policy.

Often, the questions the IPO did answer weren’t of much use to those in the EB-5 industry, either. Adopting a trick straight out of the “uncaring bureaucrat” playbook, the IPO regurgitated vague, publicly available information already published elsewhere instead of engaging with the questions presented. In this way, the IPO was able to avoid clarifying stakeholders’ uncertainties on such issues as the visa availability approach adopted in April 2020, processing times, and updates to the redeployment policy.

Finally, the IPO did not permit any interaction during the conference, leaving EB-5 stakeholders to stew in their disappointment without any opportunity to ask their pressing questions. Sarah Kendall made a live appearance during the IIUSA meeting, but there was no reason for it—given that she simply read off her talking points from the PDF and did not allow for questions, a prerecorded video would have made no difference.

Faster Processing Times for Previously Reviewed Projects

Though indirectly, the IPO did answer one question in the minds of many individuals with active EB5 investments: whether, under the visa availability approach, I-526 petitions from countries with available visas are assigned for adjudication on a first-in, first-out basis. It seems the most important factor after visa availability is whether USCIS has previously reviewed the EB-5 project, either via an exemplar I-924 petition or a previous EB-5 investor’s I-526 petition. This is in line with anecdotal accounts and creates an additional layer of inequality in the EB-5 process.

Processing Productivity Remains Low

I-526 and I-829 processing has remained low since Sarah Kendall took over at the IPO, a stark contrast from the record-high productivity in FY2018 under her predecessor Julia Harrison. Updates from the IPO on processing data from March to August 2020 show this trend has been maintained well into 2020, with the IPO adjudicating a dismal average of 304 I-526 petitions and 265 I-829 petitions per month.

Not only did Kendall fail to increase productivity throughout FY2020, but she also failed to apologize for the astoundingly poor performance of the IPO under her watch, which is causing significant harm to the EB-5 industry. Furthermore, instead of predicting future increases in productivity, she highlighted the figures as favorable by comparing them to those of mid-2019, which recorded her lowest processing productivity figures. At this adjudication rate, foreign nationals who have made an EB-5 investment from a low-demand country will be waiting upwards of three years for adjudication, while investors from high-demand countries such as China or Vietnam could expect to wait more than five years.

The below graphs illustrate the effects of Sarah Kendall’s leadership of the IPO. It is evident that she is prioritizing I-829 petitions at the expense of I-526 petitions, stifling new interest in the program and impacting the ability of EB-5 project developers to reliably obtain EB-5 capital for their projects. The EB-5 industry can only hope productivity increases in FY2021.

Immigration industry experts around the globe are taking time to hash out the myriad of challenges faced in recent years, how they impact this sector, and how they will likely continue to do so. In particular, the United States’ residency-by-investment initiative, the EB-5 Immigrant Investor Program, is expected to face its own unique set of challenges.

Regulatory updates rolled out in late 2019 coupled with the COVID-19 outbreak in early 2020 were some of the most significant catalysts for what have emerged as 2020 industry trends. Learn seven emerging EB-5 investment activity trends around the globe and understand the virus’s role in shaping them. Review the regulation changes implemented before the health and economic crises that ensued. Finally, take a look at how various actors participating in the program are following through.

All told, while it may seem like a volatile time for the EB-5 program, industry experts are holding on for the ride. They are confident that the shifts the industry makes in compensating for the challenges the program faced in FY2020 and will continue to face will only strengthen the program in the end.

Seven Global Trends Among EB-5 Investor Activities

There are a number of key observations from around the globe that industry experts have made in FY2020 that are likely to have significant impacts on immigration to the United States on the whole and specifically to the EB-5 Immigrant Investor Program going forward.

• Latin America’s pandemic and currency issues have deflated EB-5 stakeholders’ hopes for the market.
• Due to political strife between China and Hong Kong, investment activity wasn’t as strong from the special administrative region (SAR).
• Recent years have shown Vietnam as a rising star in the EB-5 immigration sphere behind China’s waning EB-5 investment activity.
• Although Vietnamese EB5 investment activities have generally begun to increase, the pandemic has curtailed much of the country’s investor undertakings (as to be expected).
• South Korea is garnering a lot of industry attention for the activities of a handful of key migration agents and their work with a number of sub-agents, which haven’t appeared to be hampered by the pandemic.
• Investors from Russia and others in the Commonwealth of Independent States in the region have shown a significant amount of interest in U.S. immigration programs
• South Africa has been acknowledged as a likely up-and-coming EB5 investment player to keep an eye on.

COVID-19’s Role in 2020 EB-5 Industry Trends for the U.S.

The fact of the matter is, the COVID-19 pandemic led to a liquidity crisis to which very few people are immune. Naturally, this has drastically reduced the number of eligible EB-5 applicants who can readily allocate capital to an EB5 investment project.

Even the highest-net-worth candidates are re-evaluating their desires for residency in the United States. Ultimately, the impact the virus has had on EB-5 investors really depends on the market. Some foreign nationals are looking at the challenges the pandemic has caused within U.S. borders. Others are realizing they would prefer to have a place to go in times of crisis in their country of origin.

Another shift that may appear insignificant on its surface is that EB-5 program issuers have found it necessary to adjust their day-to-day business dealings to the digital space in a bigger way in the wake of the pandemic. A good example is marketing. Where program marketers used to be able to bring a project to market in a traditional way – person-to-person meetings, etc. – they’ve had to shift to a more digitized approach – think video conferencing, for instance. That said, there may be a long-term benefit to maintaining some of the digital shifts meant to temporarily aid in the continuation of their efforts.

By and large, public health and political issues seem to have propelled much of the EB-5 participant activity in 2020. However, these two catalysts aren’t the only ones impacting the industry.

Three Impacts of EB-5 Regulation Updates from November 2019

Enough time has passed since the EB-5 program regulation updates were implemented in November 2019 that several impacts have revealed themselves, including an increase in the amount of EB5 investment capital required to participate and stricter guidelines on targeted employment area (TEA) requirements, which have shifted the EB-5 investor pool in some notable ways.

Fewer, More Affluent EB-5 Investors

Sheer mathematics has led to fewer, more affluent investors. The minimum investment required to participate in the EB-5 investment program nearly doubled from $1 million to $1.8 million (or from $500,000 to $900,000 when investing in a TEA). Furthermore, some experts believe that fewer investors in the EB-5 program also means the necessary strengthening of the safeguards that protect them.

Greater Levels of Sophistication

Increased minimum EB5 investment amounts and increased safety measures have also yielded a seemingly more sophisticated group of participants. On the investor side, participants have paid greater attention to due diligence and investment safeguarding than in past years. As for stakeholders, there are fewer of them managing more of the business, which has heightened their stakes, bringing out higher levels of sophistication there as well.

Expansion of EB-5 Investments into Rural Areas

Stricter target employment area (TEA) requirements have disqualified most EB-5 projects that previously maintained TEA designation, while new geographical areas eligible for TEA status have opened up. Overall, these shifts have led to a greater percentage of investors infusing EB-5 capital into program-approved rural projects. Under new rules, EB-5 professionals are also getting creative with how to gain new TEA designation.

How EB-5 Project Developers Are Reacting to Regulation Changes

Advisors on the project development side are likely to begin counseling developers on effectively observing the market and rising to meet potential investors’ needs as opposed to simply putting together a project that works best for themselves. Some of the advice already surfacing on what a savvier EB-5 investment participant might be looking for when selecting a program-approved project includes topics such as:

• Being able to meet tighter investment requirements like job creation and TEA designation
• Guaranteeing I-526 completion and shoring up odds of approval
• Having a clear understanding of the impact of COVID-19 on development in specific sectors like hospitality, travel, and retail

Over the long haul, experienced professionals in the residency-by-investment space around the globe will be eyeing individual markets and the shifting socioeconomic conditions investors face. This widening lens among investors and their counterparts is likely to result in increased competition against the United States from other strong residency candidates, like their neighbor to the north, Canada, or New Zealand.

President of LCR Capital Partners Joseph Haggenmiller made an important note to consider as well. He said that due to current political administration and rhetoric, the appeal among affluent families around the world of moving to the United States has waned. He believes the United States may not be a number one destination choice any longer. Changes are happening politically, however, and time will tell. The hope remains that a shift back to a more welcoming attitude toward immigration by the U.S. government would help repair the damage to the nation’s reputation as a dream destination to work, live, and raise a family.

What EB-5 Program Facilitators Can Expect in the Near Future

Ultimately, what is crystal clear for all of us working in the EB5 investment space is that the markets with economic stability are going to fare better sooner if they aren’t doing well already. Markets have never advanced on the same timeline in the history of the EB-5 investment program, and that fact remains the same now. Industry professionals are, however, saying that emerging and underdeveloped markets will likely face greater challenges in recovering from the impacts of the global pandemic. This means larger, better-developed foreign markets with more stable economies will be better target markets for EB-5 program participation in the interim.

In fact, many EB-5 professionals are already beginning to hedge their bets and batten down the hatches for a winter wave of the COVID-19 pandemic. Despite the challenges that seem to keep coming – global health and economic crises, tightened EB-5 investment requirements, the waning reputation of the United States in general – industry players remain hopeful. Stakeholders would do best to follow their lead as we in the industry continue to navigate ourselves to recovery.

The EB-5 Immigrant Investor Program is the pathway of choice to U.S. permanent resident status for foreign investors around the world, and while it is among the easiest and quickest routes to U.S. immigration, it still encompasses a myriad of requirements, such as the “at risk” requirement. EB-5 applicants must maintain their EB-5 investment capital at risk throughout the entire investment period to be considered for a green card. This does not mean that an EB5 investment must be risky—just that it must incur the possibility for gains as well as the risk for loss.

Given the “at risk” requirement, guaranteed redemptions are typically prohibited, and United States Citizenship and Immigration Services (USCIS) has denied numerous I-526 petitions for precisely that reason. However, not all guaranteed redemptions are actually free from risk—those that depend on the cash flow of the new commercial enterprise (NCE) still incur the risk for loss. Adopting this argumentation, Klasko Immigration Law Partners took USCIS to court over the denial of I-526 petitions that involved “put options”—the investor’s right to sell their EB5 investment back in the future.

The case was successful, with the court ruling in Klasko Law’s favor. The decision is monumental in that it effectively nullifies a portion of USCIS’s regulations regarding the “at risk” requirement. As the first such federal court decision, the ruling could spur a wave of appeals from similarly denied EB-5 investment participants and trigger a change to the official USCIS regulations.

What Was the Case?

Klasko represented five Chinese investors who had made EB5 investments in a senior living facility called Mirror Lake Village in rural Washington. As the petitions had included put options, USCIS had denied them on the grounds that the “investments did not qualify,” but the federal court ruled that the immigration body had failed to provide a reasonable justification for the denials and was operating under an unreasonable interpretation of “at risk.”

According to the Court of Appeals, the put options depended entirely on the cash flow of the project, and if the NCE failed to generate sufficient revenue, the investors would lose out. Similarly, if the NCE flourished, the investors would make gains on their EB5 investments—thus, the investments included both the opportunity of profit and the risk of loss.

USCIS’s Judgment Dubbed an Error

U.S. Circuit Judge Merrick Garland considered USCIS to have erred in its interpretation of its own definition of “at risk.” USCIS requires an EB-5 investment to include the possibility for both gain and loss, but in the denials of these Chinese investors, the adjudicators seem to have judged the possibility for gain as a negation of the possibility of loss. Garland noted how the interpretation directly contradicts USCIS’s own definition of “at risk,” adding that if the possibility of success always negated the possibility of failure, no stock investment would ever be considered “at risk” because there is always the possibility of a business succeeding.

USCIS defended its decision by citing Matter of Izummi, which stipulates that redemption agreements are prohibited. The federal court overturned the immigration agency’s overly broad interpretation of the matter by ruling that the prohibition can only apply to redemption agreements that incur no risk of loss. Redemption agreements contingent on the NCE’s success are, by definition, subject to risk, as a business is never guaranteed to succeed.

The USCIS Policy Manual directly states that redemptions need not be guaranteed to constitute an impermissible EB-5 investment by EB-5 regulations. Instead, the mere fact of the investor having a right to demand a repurchase is, according to the USCIS Policy Manual, impermissible. This passage sheds light on the adjudicators’ decisions, but ultimately, the federal court’s decision overpowers that of USCIS. In this way, the court ruling essentially voids much of USCIS’s regulations regarding redemptions.

In light of the court decision, changes to the regulations could be coming in the future, as USCIS faces the possibility of further appeals from EB-5 investors rejected in similar circumstances. The court decision reignites hopes for a life in the United States of numerous investors who believe their dreams have been dashed unjustly.

While the industry saw significant delays in the publishing of the November 2020 Visa Bulletin, a closer-to-timely release of December’s bulletin indicates the State Department’s efforts to play catch-up. That said, apart from most countries in the EB-5 program maintaining current final action cut off dates, the news still isn’t as promising as the EB-5 industry had hoped.

Chart A: Final Action Dates Remain Relatively Unchanged

The December 2020 Visa Bulletin is the third bulletin issued in FY2021, and the industry has yet to see the advances anticipated following the influx of visas in the wake of a challenging 2020. Instead, Chinese EB-5 investment participants are still caught in a holding pattern as final action dates for the country remain static at August 15, 2015. EB-5 investors from Vietnam inch forward as that final action date has advanced by a mere two weeks to September 1, 2017.

Chart B: Dates for Filing EB-5 Applications Stand Static

Again this month, Chinese participants are the only EB-5 investors who haven’t seen any forward shift in application filing dates. China’s date for filing applications stands static according to Chart B in the Visa Bulletin. For affected investors, this chart reflects which foreign EB5 investment participants seeking their green cards are allowed to submit applications with the National Visa Center (NVC). It generally addresses those EB-5 investors who will apply from outside of the U.S. And for the last few months, China’s date hasn’t budged from mid-December of 2015.

EB-5 Regional Center Program Set to Expire December 11

Furthermore, the EB-5 Regional Center Program carries an expiration date of December 11, 2020. If Congress is unable to successfully reauthorize the program (or pass a temporary expenditure measure at least), immigration visas will become unavailable through the program as of 12 a.m. on that date. EB-5 investment participants who applied through regional centers and hope to continue down that path must be admitted into the U.S. before the clock strikes midnight. Note that EB5 investments outside the Regional Center Program will remain unchanged. If the program is saved, direct investment cut-off dates are expected to mirror current bulletin data.

Overall, there’s been no outpouring of extra visas issued and no influx of applications being processed…yet. This month’s Visa Bulletin brings another report on the lack of movement for the EB-5 investment category. Perhaps a wind-down period for a very different year is what United States Citizenship and Immigration Services (USCIS) needs to launch refreshed and in full force into a new calendar year in 2021? Only time will tell.

The 2020 U.S. presidential election has been one of the most contentious in recent history, with growing polarization fueling animosity on both sides of the political spectrum. After four tense days of Americans’ eyes glued to the results as they rolled out, Joe Biden was finally declared the projected winner of the election. It’s clear that the Biden administration will bring significant changes to the United States, but how will the EB-5 Immigrant Investor Program look in Biden’s America?

Changes to the program are inevitable, regardless of the election outcome, declared Aaron Grau, executive director of Invest in the USA (IIUSA), prior to the election. With the EB-5 regional center program set to expire on December 11, 2020, he expects the government to take a closer look at the program for its reauthorization. President Trump will still be in office during this review and could introduce changes, but subsequent reviews by president-to-be Biden may usher in even more changes in the future.

Trump vs. Biden: Who’s Better for EB-5?

In 1990, when the EB-5 program was enacted, it was approved in the House of Representatives by a whopping 423 to 3, clearly marking it as a nonpartisan program. Despite the broad approval from all both political parties, however, both Trump and Biden tread lightly when it comes to the controversial investment immigration program. Although the EB-5 program was passed to foster economy stimulation, the immigration aspect renders it a controversial program that can be politically dangerous to get too involved with.

Trump is known for being harsh on immigration, but he’s clearly not an enemy of the EB-5 program: EB-5 investors were spared from his April 22, 2020, executive order temporarily suspending immigration in light of the COVID-19 pandemic. When the executive order was extended to the end of 2020, it was expanded to include even more classes of immigrants, but once again, EB-5 investors were given the go-ahead to immigrate. Trump clearly recognizes the economic benefits of the EB-5 investment program.

Biden, conversely, is more supportive of immigration in aggregate, but a Biden presidency isn’t necessarily good news for EB-5 investors. Given the contentious nature of the program, he may prefer to sidestep it and focus on other areas of immigration. A Biden government may also improve the United States’ global image as a country that welcomes immigrants, as many foreign nationals have felt that the United States under Trump is not friendly to immigrants. However, with Biden yet to assume political office in the White House, it’s too early to know exactly what treatment the EB-5 program will receive from his administration.

Senate Control Matters

While most of the attention in U.S. politics is focused on the president, one mustn’t forget that the president isn’t the be-all and end-all. As of November 9, 2020, the Senate and House results have not yet been called, and even though the Democrats have won the federal election, the Senate and the House could still be dominated by Republicans, which would limit the changes the Biden administration could make to the EB-5 program.

The Senate oversees Homeland Security, which manages United States Citizenship and Immigration Services (USCIS), meaning the party that controls the Senate can exercise a lot of power over the EB-5 program. However, support for the EB-5 program isn’t that simple to calculate—as a nonpartisan program, it has support and opposition from both parties. Generally, support for the program is determined more by urban versus rural interests rather than Democratic versus Republican affiliations. The program is often preferred by those in rural areas or somewhat impoverished urban areas due to the targeted employment area (TEA) rules, which changed in November 2019 when the Modernization Rule came into force to more heavily favor EB5 investment in more in-need areas.

The Push for Reform

A further element in the political atmosphere surrounding the EB-5 program is the push for reform, particularly regarding integrity issues. Republican Senator Chuck Grassley of Iowa and Democratic Senator Patrick Leahy of Vermont have collaborated for years to bring about EB-5 reform and tighten its integrity measures. These two senators not only serve as a shining example of the EB-5 program’s ability to cross party lines but also as a real possibility for considerable change to the EB-5 program requirements.

An EB-5 program reform to improve integrity would broadly be welcomed by the EB-5 community, per Grau. Both the staff at USCIS and the Judiciary Committee staff in the House agree that any EB-5 program reform must involve integrity measures. However, when this reform will come, and what precisely it will entail, is still up in the air.

United States Citizenship and Immigration Services (USCIS) regularly releases comprehensive processing data on the different types of petitions it works with on its Immigration and Citizenship Data page, albeit with a several-month-long delay. In November 2020, the immigration body finally published the processing data for FY2020 Q3 (April to June 2020), and it doesn’t paint an overly welcoming picture for those involved in EB-5 investments. Low adjudication rates, high denial rates, and a shift from I-526 petitions to I-829 petitions characterize USCIS’s processing activity throughout spring 2020.

EB-5 Petition Processing Data for FY2020 Q3 in Numbers

The figures for EB-5 petition processing from April to June 2020 show an astonishingly low number of adjudications carried out over the three months. Particularly noteworthy is the high rate of I-526 denials, with denials accounting for a whopping 37% of all I-526 adjudications during the period. The focus on I-829 petitions over I-526 petitions is also clear, with the number of I-526 adjudications only moderately higher despite the far higher supply of pending I-526 petitions.

I-526 Petition Processing Data
Receipts: 40
Approvals: 576
Denials: 346
Pending: 15,955

I-829 Petition Processing Data
Receipts: 739
Approvals: 725
Denials: 23
Pending: 10,332

What do these figures mean for foreign nationals pursuing an EB5 investment? Read on for an in-depth analysis.

High Rate of Denials under Sarah Kendall

Since FY2019, when Sarah Kendall was appointed chief of the Immigrant Investor Program Office (IPO), processing volumes have taken a nosedive. But denial rates haven’t—the IPO has been issuing denials steadily under Kendall’s watch, with the dramatic decrease affecting only I-526 approvals. Kendall claims she’s strengthening program integrity, which is resulting in both lower processing volumes and lower approval rates. It may be that EB-5 investment petition processing volumes won’t improve until the IPO has a new leader.

Increased EB-5 Investment Amounts Result in Lower I-526 Receipts

With only 40 I-526 receipts from April to June 2020, USCIS is reeling from the consequences of its own policies. In November 2019, the Modernization Rule went into effect, nearly doubling the minimum required EB5 investment amounts from $1 million (or $500,000 for projects in targeted employment areas, or TEAs) to $1.8 million (or $900,000 for TEA projects).

USCIS proposed the increases as a method to raise more funds to sustain the agency, but without the foresight to consider the law of demand, the immigration body has failed to draw in the EB5 investment capital it was hoping for. In fact, the poorly executed policy changes resulted in 45 times less EB-5 investment funds per quarter in FY2020 than in the previous six years and likely contributed to USCIS’s budget crisis in August 2020 that almost resulted in a massive furlough. The COVID-19 pandemic ravaging the globe and the excessive EB-5 demand in countries such as China and Vietnam are also likely factors contributing to the low rate of I-526 receipts.

A Preference for I-829 Petitions

Even though I-526 petitions account for a larger portion of backlogged petitions, the FY2020 Q3 processing data make clear that USCIS has been prioritizing I-829 petitions. I-829 adjudication has remained steady, with no obvious trends either upward or downward, and the rate of approval is as high as ever. The number of adjudicated I-829 petitions during the quarter indicate that the IPO is prioritizing I-829 adjudication over I-526 adjudication.

Current Processing Volumes Are Unreasonably Low

If productivity at the IPO doesn’t improve, it will be 4.3 years before all I-526 petitions that were pending at the end of June 2020 are adjudicated. Similarly, it will take 3.5 years to clear up the I-829 backlog up to June 2020 at this processing rate. If indeed processing volumes continue at this rate, the EB-5 investment process will take about seven times longer than Congress had intended. While such a scenario would truly highlight USCIS’s ineptitude, productivity will likely improve.

Low processing volumes don’t only affect processing times, either—they also impact the number of EB-5 visas claimed. Every fiscal year, the EB-5 program is allotted approximately 10,000 visas to grant to EB-5 investors and their families, but at the FY2020 Q3 rate, barely 20% of available EB5 investment visas will be claimed. The unused visas would then be recycled through the EB-1 program in the following fiscal year, spelling a slow death for the EB-5 program.

When foreign nationals commit to making an EB-5 investment in the EB-5 Immigrant Investor Program, it isn’t clear when exactly they will receive their conditional permanent resident status in the United States. An investor and their immediate family members are eligible for conditional U.S. green cards following approval of the investor’s I-526 petition, but processing times can be impacted by a myriad of factors, from a global pandemic temporarily shutting down most of public life to waning finances at United States Citizenship and Immigration Services (USCIS).

2020 has been a difficult year for everyone, and USCIS and EB-5 investors are no exception. The temporary suspension of routine visa services at U.S. consulates and embassies the world over has left thousands of EB5 investment participants in limbo, unable to complete their visa interview and obtain their U.S. conditional permanent resident status. At the same time, the COVID-19 pandemic has benefited the program in certain ways, including by freeing up time for staff at the Immigrant Investor Program Office (IPO) to adjudicate I-526 and I-829 petitions through the forced cessation of other activities.

The beneficial effects of the pandemic on I-526 petition processing is evident with the release of USCIS’s historical national average processing times data up to August 31, 2020. At just 14.1 months, the average I-526 processing time for the first three quarters of FY2020 is the lowest it’s been in five years and certainly lower than FY2019’s figure of 19.8 months.

The EB-5 community has long lamented the IPO’s sluggishness since the appointment of Sarah Kendall as chief. While the number of adjudicated petitions has fallen dramatically (accompanied by, notably, a much lower approvals-to-denials ratio) under Kendall’s watch, this drop is not reflected in the historical average processing times. This could indicate that the IPO is primarily adjudicating newer petitions, casting older applications into seemingly perpetual limbo.

The updated historical national average processing time is also incongruent with USCIS’s posted estimated processing time range, which, as of November 19, 2020, lists the estimated processing time range for I-526 petitions at 30–49.5 months (47–76.5 months for EB-5 investment participants from China). Discrepancies between these two figures is normal, considering that the historical national average processing times reflect processing averages from two months prior. Furthermore, interpreting the estimated processing time range is not as straightforward as one may assume—the lower number in the range represents the number of months by which 50% of applications are estimated to have been processed. Regardless, with a historical national average processing time figure of less than half of the lower figure in the estimated processing time range, the utility of the estimated processing time range may be questioned.

Time will tell whether the processing times remain low, but the trend is certainly a positive movement for those involved with EB5 investments. The lower processing times, combined with various other factors, may make the COVID-19 pandemic the ideal time to initiate the process of obtaining permanent residency in the United States through the EB-5 program.

1. What is an EB-5 visa?

An EB-5 visa is an immigration visa for U.S. permanent residency, also known as a green card. An EB-5 visa is an employment-based green card that is based on U.S. job creation and investment. Most other immigration visas are derived from either family-based relationships or employment-based sponsorships.

2. What are the requirements for an EB-5 visa?

EB-5 visas are initially issued on a conditional basis. Each petitioner must invest at least $1.8 million (or $900,000 if you are investing in a targeted employment area, or TEA) to receive conditional permanent resident status, and to remove the conditions and receive permanent resident status, an investor must prove that their funds have created 10 U.S. jobs for qualifying U.S. workers by the end of the two-year conditional period.

3. How long is the process to receive an EB-5 visa?

It depends. There are many variables that impact how long it takes to receive an EB-5 visa. An investor’s filing preparation, USCIS processing times for filing or removing conditions, visa wait times once approved, and the time it takes an investor and their family members to actually enter the United States can all change the amount of time it takes to move through the EB-5 process.

4. Can an EB-5 investor get a return on their investment?

Yes. An EB-5 investment is like any other capital investment insomuch as the goal is to grow the principal. However, as an EB5 investment is required to be “at risk”, there can be no promises attached to an EB-5 investment that an investor will definitively see a return or gain on it.

5. Does the whole family apply for an EB-5 visa?

The EB-5 application is for an individual investor, and their spouse and children under 21 years of age are included in this single application. To qualify, any children must still be under 21 when the visa becomes available, although their age is “frozen” during the I-526 processing time, giving families more leeway.

6. What is the visa backlog?

In the EB-5 program, only about 10,000 visas are made available each year. U.S. immigration is a quota-based system, so the number of visas allotted each year is limited. Visa backlogs happen when demand for a particular visa exceeds supply. As of November 2020, EB-5 visas are backlogged for applicants from China and Vietnam. Visa backlogs have long been common for other immigration visas but have only impacted the EB-5 program since 2015. A 2019 visa backlog for nationals from India recently ended in July 2020, when India’s status became “current.” It is expected to remain current.

7. What happens if my country is in an EB-5 visa backlog?

If an investor’s nation has a visa backlog, they still cannot obtain their EB-5 visas even after their I-526 petition is approved. Wait times are impacted by the number of visa applicants in the queue ahead of each particular investor. Investors with children under 21 should discuss the visa backlog with immigration advisors before investing, as their children may age out of eligibility for the EB-5 program by the time their parent moves to the front of the queue.

8. What is the EB-5 regional center program?

EB-5 regional centers allow EB-5 investors to merge their capital for greater economic impact in a particular region. Created in 1993, the regional center program must frequently be renewed, as it is not a permanent fixture of U.S. immigration law.

9. What is the difference between the regional center and non-regional center programs?

With a normal EB5 investment, the 10 U.S. jobs required must be directly created by the same business as your investment. With the EB-5 regional center program, those 10 U.S. jobs do not have to be directly created—they can be created indirectly by businesses simply using or receiving EB-5 capital. Indirect job creation is measured with conventional job creation techniques.

10. How is job creation measured in the regional center program?

USCIS typically measures indirect job creation through input–output models, which estimate the economic impact and job creation of a particular capital investment or other stimulus in the economy. These input–output models are accepted and used by entities around the world, including the U.S. government.

Despite the EB-5 Immigrant Investor Program being among the quickest ways to obtain U.S. residency, the wait time can be long—often two years and sometimes longer. For EB-5 investors from countries not listed as “current” in the monthly Visa Bulletins, the wait is longer: five to 15 years. The benefits of living in the United States, including a high-quality public education system, state-of-the-art medical facilities, and political and economic stability, are worth the wait, but the years spent in limbo at the mercy of U.S. Citizenship and Immigration Services (USCIS) can cause undue stress and increase the likelihood of challenges arising.

For EB-5 investors with an urgent need for a green card, there exists another option: expedited EB-5 projects. Expedited status can reduce an investor’s wait time for I-526 processing from approximately two years to between four and ten months. Most EB-5 projects do not qualify for expedited status, so any investors considering this path must carefully conduct their research to find a qualifying expedited project. Expedited status exists simply as a way for a project to gain quick access to the funds of its EB-5 investors and begin construction and is available only to projects that USCIS has deemed to represent urgent humanitarian needs or be of compelling interest to the U.S. government.

The Process of Obtaining Expedited Status

To have an EB-5 project designated as an expedited project, the project’s owner must obtain a substantive letter from a high-ranking government official, such as a cabinet officer or agency head, outlining the benefits the project promises to the United States. This letter alone does not suffice, however. The letter must be accompanied by detailed information about the project and evidence of why the project is of compelling interest to the U.S. government, and elucidating the urgent need for the swift release of EB-5 capital into the project’s pool of funds. Included with the submission should be a convincing cover letter arguing the case, credible evidence supporting the arguments, and a completed sample I-526 petition to secure exemplar status. The request should be submitted as an I-924 petition. USCIS will have 90 days to respond.

Considerations for EB-5 Investors

With the potential for considerably quicker I-526 approval that expedited EB-5 projects offer, one might question why EB-5 investors do not clamor after the very few expedited projects that exist. One important caveat to bear in mind is that expedited status does not free up additional EB-5 visas, meaning investors from backlogged countries may still be subject to long wait times to apply for and obtain their U.S. green card, effectively rendering the benefits of expedited projects pointless for such investors. Furthermore, while the advantage of faster adjudication is certainly beneficial, expedited projects often have significant downsides, including higher financial risk and higher immigration risk to EB-5 investors.

USCIS applies the same scrutiny to the I-526 petitions of investors in expedited projects as it does to those of investors in non-expedited projects. Having expedited status does not make it easier for I-526 petitions to be approved and, importantly, does not lessen the risk to EB-5 investors. In fact, the opposite may be true. This means careful EB-5 due diligence is more important than ever for applicants investing in expedited projects.

Evaluating Financial Risk

When evaluating an EB-5 project for financial risk, a prospective investor should look at the additional sources of financing in the project. The lower the percentage of overall funding that EB-5 investment capital occupies, the safer the project. The safest EB-5 projects are those that use EB-5 capital to replace expensive debt or equity, not fund essential construction and operational activities.

Expedited EB-5 projects are granted expedited status precisely due to the essential role EB-5 capital plays in the successful construction and operation of the project, meaning the risk is generally elevated in these projects. In these cases, investors should also consider whether their EB-5 investment is secured by tangible assets, such as real estate, which would offer an extra layer of protection.

Another important aspect in financial risk calculation is the exit strategy. Investors should make themselves acutely aware of when and how they can expect their EB5 investment capital to be repaid. Investigating the project’s cash flow can shed light on the riskiness of the project. Guaranties should be a further consideration: Is there a completion guaranty? If so, who is offering it? Perhaps most importantly, investors should also confirm that their EB-5 investment capital will be returned if their I-526 petition is denied—any project that does not offer such a guaranty in writing is inherently risky.

Evaluating Immigration Risk

Generally, EB-5 investors are more concerned with immigration risk than financial risk, so conducting thorough due diligence to ascertain the immigration risk of an EB-5 project is vital. Whether an EB-5 project is expedited or not, the requirement for each participating EB-5 investor to prove the creation of at least 10 new full-time jobs for U.S. workers remains, so it’s crucial for an investor to evaluate the nature and timetable of the projected job creation of the new commercial enterprise (NCE).

When evaluating the job-creation potential of an EB-5 project, investors should look at where the jobs are coming from—construction work versus operational activities—as well as the number of projected jobs per EB-5 investor. If the estimated figure is close to 10, it’s risky. The lowest-risk projects plan for higher job creation than is necessary to cover each EB-5 investor.

Determining the project’s viability is also a critical part of EB-5 due diligence: Has the project obtained the required licenses and approvals? Does the developer have access to sufficient funding to construct the project? Does the project company own the land? The wrong answer to these questions could automatically negate all of the project’s advantages.

Finally, an investor should find out more about the project’s developer and sponsor, and if an investor is working with an EB-5 regional center, they must not overlook the regional center in the due diligence process. EB-5 investors are advised to determine the experience and expertise of each key person involved in the project and their success records with previous projects. In the case of regional centers, an investor should investigate the percentage of previously approved I-526 and I-829 petitions for projects sponsored by the regional center.

When conducting due diligence, an investor should carefully read as much project documentation as possible and ask as many questions as they can. Working with an experienced EB-5 immigration attorney can be invaluable in helping the investor determine what to look for and what to ask. A consultation with an EB-5 attorney can also help the investor decide whether investing in an expedited EB-5 project is the right choice for them in the first place. Ultimately, expedited EB-5 projects can be an ideal option for EB-5 investors on short timelines, such as those already residing in the United States on a different visa that is set to expire, but the disadvantages can outweigh the quick adjudication process.