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Consequences of Material Changes for EB-5 Projects

When adjudicating visa petitions filed under the EB-5 Program, United States Citizenship and Immigration Services (USCIS) allows for a degree of flexibility between project documents and actual outcomes. Though ideal circumstances would have the project proceed exactly as planned in the documents submitted with investors’ original I-526 petitions, commercial projects face the possibility of unforeseen events and contingencies that create discrepancies between any original documents and those submitted when filing the I-829 to remove the conditions of residence.

Such discrepancies become an issue when they materially affect a project and thus put at risk investors’ visa eligibility under the EB-5 Program. Material changes are those concerning significant aspects of a project, which therefore have the potential to affect adjudication decisions. These include changes made in an effort to remedy deficiencies in a petition between filing and adjudication and other changes affecting major aspects of a project, such as fund sourcing or elements of the business plan.

When do material changes create an issue?

Material changes are not in and of themselves a problem within EB-5 projects. For example, USCIS will not deny an I-829 petition simply because a project has strayed from the plan outlined in the I-526 documents if the investor can demonstrate that the original business plan and other project documents were submitted in good faith and that all efforts were made to comply with those conditions. Additionally, the investor must demonstrate that the material changes made during the conditional residence period have not affected his or her eligibility under the EB-5 Program, as would be the case if investment funds ceased to be at risk during that time, for example.

Material changes are also not an issue if made between approval of an exemplar I-526 petition and the actual filing of a petition by an investor afterward. However, in this scenario investors would not benefit from potentially shortened wait times resulting from the preapproval of the project, as USCIS would review the project documents a second time to verify continued eligibility.

A problem arises when changes affect information USCIS may use to adjudicate a visa petition, such as changes made between filing and adjudication. For example, if an investor files his or her I-526 petition based on the establishment of a new restaurant but later decides to instead establish a bed and breakfast using the investment amount before the petition is adjudicated, USCIS would likely deny the I-526 petition based on that significant change to the business plan.

Material versus Nonmaterial Changes

USCIS has followed fairly consistent patterns in deciding which changes are considered material versus nonmaterial for the purposes of visa petition adjudication:

  • Changes in the scope of the investment project, such as an investor switching projects entirely, are considered material. For example, if an investor files his or her petition for a project associated with one regional center but later decides to invest with a different center or with a different job-creating entity within the same regional center, the I-526 petition would be denied.
    • Changes to aspects of the investment project that do not affect its overall eligibility are not considered material. For example, if an investor files an I-526 petition with the intention to establish an Italian restaurant but then chooses to focus on Mediterranean cuisine in general, such a change would not affect the eligibility of the project or the adjudication of the I-526
  • Changes to the structure of an investment or affecting the actual investment of funds are considered material. For example, consider a case in which an investor has stipulated certain clauses in the investment agreement that guarantee the return of funds upon a certain date. USCIS determines that this arrangement means the funds are not at risk and issues a request for evidence with regard to the I-526 petition. If the investor nullifies those clauses of the agreement, this would be considered a material change.
    • Changes that simply clarify inconsistencies in loan agreements or otherwise do not depart substantially from the original documents are not considered material. For example, if an investor submits documents with the I-526 in which the loan agreement contains an unintentional inconsistency and later amends the agreement to rectify that error, the change would not be considered material.

In addition to the above, USCIS tends to be lenient in cases where investors anticipate potential changes when filing their I-526 petitions. For example, in a regional center project in which funds might be repaid early and then redeployed to another job-creating entity so as to ensure the investment amount remains at risk, the I-526 petition should account for this possibility so that when the time comes to file the I-829, USCIS will be aware of the reason for the change in fund deployment.

Strategies for Investors

Investors must take into consideration the potential consequences of material changes for the adjudication of their EB-5 visa petitions. To avoid hurdles brought about by such changes, investors should consider adopting the following three key strategies:

  • Vet projects carefully to verify that they will proceed according to the plans provided with the offering documents. A business’s activities during the conditional residence period are most relevant in this regard.
  • Work with regional centers that have demonstrated the ability to successfully complete EB-5 projects. These centers are at a lower risk of losing their designation, an event which would force associated investors to materially change their investment strategies.
  • Ensure that the I-526 petition is comprehensive in demonstrating how the investor has fulfilled or will fulfill the requirements of the program. If USCIS issues a request for evidence regarding a significant aspect of the petition, rectifying that oversight might require a material change. Any changes following a request for evidence should stress continuity between the new documents and the originals.

Material changes following approval of the I-526 petition and the granting of conditional permanent residence are of less concern. However, investors should notify USISC of any significant developments in preparation for filing the I-829, which must demonstrate how the project has attempted to adhere to the original project documents. If investors continually consider how USCIS might view any changes to a project, the various issues outlined above can be proactively avoided.