Changes in United States Citizenship and Immigration Services (USCIS) policy over the previous few years have resulted in increased scrutiny of EB-5 business plans in an effort to ensure projects fulfill the goals of the program and protect investors from potentially fraudulent actors working within it. A significant example of these changes is the memorandum published on May 30, 2013, highlighting the intention for USCIS adjudicators to review business plans more thoroughly according to the standard of a “preponderance of evidence.”
Whereas regional centers and investors previously considered business plans an afterthought when filing I-526 petitions, the May 30 memo brought about sweeping changes in the way business plans were structured and the strategies project developers used to verify the economic and job creation potential of new commercial enterprises funded by foreign investors as part of the EB-5 Program. Much of these changes were based on guidelines provided by USCIS in requests for evidence (RFEs) following the publication of the memo.
As such, RFEs can prove a valuable resource for investors and regional centers developing business plans to support new projects. This article discusses recent trends in RFEs as well as strategies regional centers and other practitioners can take to proactively address any concerns USCIS adjudicators might pinpoint during the evaluation of investors’ I-526 petitions for conditional permanent residence.
Trends Following the May 30 Memo
Immediately following the publication of the May 30 memo, USCIS adjudicators began scrutinizing the calculations used to determine the job creation potential of new commercial enterprises, namely with regard to construction and tenant occupancy jobs. Additional areas of focus were a lack of market analyses and the use of accurate and industry-relevant data to support projects’ financial projections. In response, many regional centers abandoned the practice of relying on tenant occupancy jobs to meet the EB-5 job creation requirement and began commissioning third parties to provide credible data based on each project’s unique regional and industry outlook.
The following year brought further intense oversight of financial projections and hiring timelines as well as the need for projects to provide proof of proper licensing and permits. As a result, practitioners continued to make use of third-party data to support the claims in their business plans and began providing USCIS with sufficient documentation of all permits and licenses associated with their projects.
More recently, in an effort to increase transparency and protect investors, USCIS has issued RFEs focusing on the ability of new commercial enterprises to compete with existing businesses in the United States. Business plans now must include a comprehensive marketing strategy, and developers have begun conducting SWOT analyses to better identify areas in which improvements can be made before submitting the I-526 materials.
These trends illustrate increased demands on investors and regional centers to demonstrate how their projects meet the EB-5 requirements. However, they have also resulted in a more robust adjudication process meant to strengthen the ability of the program to create jobs in the United States and thereby fulfill its original purpose.
Third-Party Data and RFEs
Recent RFEs have indicated that USCIS adjudicators are now reviewing financial projections more carefully in an effort to further protect investors by allowing only legitimately viable businesses to proceed in the EB-5 Program. This increased level of oversight has encouraged projects to make more diligent use of third-party data to support their financial and job creation claims.
EB-5 project developers must ensure new commercial enterprises are built on a solid foundation by incorporating relevant and accurate data during the planning stages. In this regard, regional centers have begun commissioning feasibility studies to illustrate projects’ economic prospects based on credible regional and industry data. This data can serve as a valuable basis for financial projections and any calculations used to determine the job creation prospects of an enterprise.
In addition to proactively preventing the need for an RFE by providing USCIS adjudicators with all the information they will need to make informed decisions, EB-5 investors and regional centers can use third-party data to successfully combat an RFE if necessary. Such was the case with regional centers making use of tenant occupancy jobs following the publication of the May 30 memo and the change in USCIS adjudication standards. With reliable data backed by historical trends and current industry projections, regional centers were able to illustrate to USCIS the legitimacy of such tenant jobs and therefore the ability of their projects to meet the EB-5 job creation requirement.
RFEs as a Resource for EB-5 Practitioners
Any changes introduced to USCIS adjudication criteria will result in RFEs that can serve as a valuable resource for practitioners aiming to develop strategies to move forward and better address concerns with the program. Changes in the requirements for business plans illustrate this principle, as investors and regional centers have adapted to new requirements by overhauling their documentation strategies.
The current rash of regional center closures serves as a reminder that the primary goal of the EB-5 Program is to create jobs, and actors not fulfilling that goal risk not only investors’ funds and U.S. residence prospects but also the future of the EB-5 Program itself. Practitioners have an obligation to learn from RFEs and apply those guidelines in their own business plans, as better use of data allows developers to identify problem areas and rectify them during the planning stages rather than once the project is underway and funds are at risk.
USCIS has provided significant guidelines over the years through memos and other publications, but RFEs serve to illustrate these guidelines more practically. To prepare for potential changes to the program and to create better business plans and more accountable projects in the present, EB-5 practitioners can learn from USCIS decisions and develop proactive strategies for their own enterprises. RFEs provide a continuing view into the adjudication process and a significant learning tool within the EB-5 market.