Foreign nationals making EB-5 investments to obtain U.S. green cards for themselves, their spouse, and their unmarried children below the age of 21 have enough to worry about between the long wait times for I-526 petition adjudication, the rampant EB-5 regional center terminations in 2019 and 2020, and the financial instability of United States Citizenship and Immigration Services (USCIS). So, unclear instructions for adjudicators that leave room for broad interpretations that could further delay I-526 approval, posing an additional hurdle for EB-5 investors to overcome, is hardly welcomed by the EB-5 world.
In May 2019, USCIS released new training materials for I-526 petition adjudicators. Believing that EB-5 stakeholders, such as those with an active EB5 investment or those operating an EB-5 regional center, should be privy to such information, Invest in the USA (IIUSA), an EB-5 industry trade association, filed a lawsuit against USCIS to publish the documents. Ultimately, USCIS released the documents only to IIUSA, who elected to offer them only to their own members as a member benefit.
The documents provide insights into the EB-5 adjudication process and can shed light on the decisions adjudicators make. In some cases, however, the adjudication instructions are not cut and dry, which can lead to confusion and inconsistent actions taken by the Immigrant Investor Program Office (IPO).
Confusion Around the Source-of-Funds Requirement
In 8 CFR 204.6 (g)(1) of the May 2019 EB-5 adjudicator training material, one can find the following paragraph:
“The establishment of a new commercial enterprise may be used as the basis of a petition for classification as an alien entrepreneur even though there are several owners of the enterprise, including persons who are not seeking classification under section 203 (b) (5) of the Act and non-natural persons, both foreign and domestic, provided that the source(s) of all capital invested is identified and all invested capital has been derived by lawful means.”
The wording of the clause is unclear: what does “all capital invested” mean? Commonly, it’s understood to mean all EB-5 capital invested by the applicant investor, and indeed, this is how most investors carry out their EB5 investment process. Nevertheless, some adjudicators interpret this cause as requiring all capital invested in the EB-5 project, including that of other EB-5 investors as well as non-EB-5 investors, to be documentarily derived from lawful sources.
Common sense dictates that any given EB-5 investor should not be responsible for the EB-5 investment capital of another EB-5 investor in the same project. Each investor is required to document the lawful source of funds for their own EB-5 capital, so USCIS can still uncover illegitimately acquired capital even if each investor does not document the sources of all capital invested in the project. No EB-5 investor should be penalized for the wrongdoings of separate, unrelated investors who happen to be involved in the same project. Similarly, the source of funds of non-EB-5 capital is outside of an individual EB-5 investor’s purview.
Nonetheless, this has not stopped some EB-5 investors from receiving requests for evidence (RFEs) based on broad interpretations of the above paragraph. In December 2019, one EB-5 investor received an RFE requesting government ID or business registration documentation for each other NCE owner, another investor was sent an RFE asking for ID and filed income tax returns for each other NCE owner, and another investor yet was the recipient of an RFE seeking ID and a comprehensive description of the business activities and bank statements of each other NCE owner.
EB-5 investors are not officially required to submit documentation and source-of-funds evidence pertaining to the EB5 investments of other NCE owners, but a broad interpretation of this paragraph by an adjudicator could mean significant stress and processing delays for investors. This unclear instruction opens the door to inconsistency and unfairness in the EB-5 process, leaving each EB-5 investor’s fate up to the interpretation of the particular USCIS adjudicator their petition lands with. With more attention called to this unfair practice, USCIS may clarify their instructions, but until then, EB-5 investors beware.