The EB-5 Immigrant Investor Program, established in 1990, has long been a top choice among foreign investors looking to migrate permanently to the United States. The program was forged by Congress to introduce foreign capital to in-need regions in the United States, fostering economic growth and spurring new job creation. Foreign investors are more than willing to inject their hard-earned capital into qualifying EB-5 projects due to the promise of U.S. green cards for themselves and their immediate family members as long as their EB-5 investment satisfies the program requirements. With the United States gaining billions in foreign capital and hundreds of thousands of new jobs and foreign investors attaining a better, brighter future for their families, the EB-5 program represents a lucrative win-win situation.
But all is not rosy in the EB-5 world—in fact, EB5 investment participants must contend with the inefficiency and, seemingly, the incompetence and ill will of the very agency that oversees the EB-5 program. Over the years, United States Citizenship and Immigration Services (USCIS) has thrown obstacle after obstacle at EB-5 investors, from drawing out the adjudication process to introducing retroactive policy changes. In 2020, wait times for I-526 processing have been unthinkably long, particularly for those who have made their EB-5 investment from China, in light of the massive backlogs for Chinese investors. But while inefficient processing could just be a result of incompetence, it’s hard to paint retroactively applied rule changes as anything but malicious.
Surprise Denial Throws EB-5 Investor for a Loop
Back in 2014, a simpler time, when the well-oiled wheels of the EB-5 program turned smoothly and the explosive growth of the Chinese backlog was only in its beginning stages, Laura (name changed for privacy purposes) had made the major decision to relocate her life and family to the United States under the EB-5 program. She loved her home country, South Africa, but she knew the United States offered significantly better education and career opportunities for her children, and her family ties to the United States only sweetened the deal. She dove into an EB5 investment thanks to an unsecured loan gifted by her father and filed her I-526 in May 2014, excited about the prospects of her future in the United States.
She received her adjudication in November 2015, and it wasn’t the answer she was hoping for. She was devastated to find her I-526 petition had been denied because USCIS had ruled her EB5 investment using capital loaned by her father constituted “indebtedness” instead of cash. As Laura watched her family’s bright future in the United States crumble before her eyes, she felt as if she’d been blindsided, with her immigration counsel never tipping her off to such a possibility. However, her immigration lawyers were just as stumped: the policy that formed the grounds for her denial hadn’t existed when she filed her I-526 petition.
Retroactive Policy Changes Disguised as “Clarifications”
Laura fell victim to a USCIS “clarification” that, in reality, constituted far more than a simple clarification. In April 2015, USCIS released a memo stating that third-party loans were unviable as EB-5 investment capital unless the investor proved their personal liability for the indebtedness by securing the full amount of the loan with their personal assets. As the EB-5 community had long believed unsecured loans to fulfill EB-5 requirements, countless investors had made their EB5 investment through such means, dooming scores of I-526 petitions filed in good faith to undeserved rejection.
USCIS’s disingenuous classification of the rule change as a “clarification” rather than a proper rule change allowed the immigration body to apply the new interpretations to previously filed I-526 petitions, whose unwitting applicants had followed the rules as laid out at the time of submission. The release of the information as a “clarification” furthermore allowed USCIS to bypass the notice and comment requirements of the Administrative Procedures Act (APA), rendering unnecessary a general notice of the new interpretations and offering the opportunity for stakeholders to submit feedback, opinions, and suggestions for policy change.
Court Rules USCIS’s “Clarification” Not Suitable Grounds for Denial
Fortunately, while those who make EB5 investments may have to battle against USCIS, the courts usually serve as allies. Laura was not the only EB-5 investor whose dreams were retroactively crushed by the policy shift, and two such other investors filed suit against USCIS a few months after the release of the memo. The long-awaited ruling finally came on November 30, 2018, with the courts annulling all I-526 denials issued due to the policy change and ordering USCIS to readjudicate the petitions.
The ruling was a blow to USCIS and its dishonest practices, with the court further declaring that third-party cash loans clearly constitute capital and not indebtedness and that USCIS was acting capriciously in rejecting some I-526 petitions on that basis. More devastating for USCIS was the determination that the “clarification” constituted unlawful rule-making that violated the regulations of the APA. According to the court, the clarification was clearly a policy shift, introducing sweeping changes to EB-5 program requirements without the due notices and stakeholder input. The U.S. Court of Appeals for the District of Columbia echoed this determination in October 2020, ruling that USCIS’s interpretation “violated the regulation.”
Court Decision Too Slow for Many Investors
Laura was delighted when the courts ruled in favor of her and the numerous other EB-5 investors whose perfectly viable EB5 investment capital had been unfairly deemed unacceptable by USCIS. However, the decision came too late: the original decision was declared in 2018, but an appeal elongated the waiting period to late 2020. With the political and economic outlook for South Africa deteriorating faster and faster, Laura opted to make a new EB-5 investment rather than wait for the court decision. It paid off and afforded her family a cozy life in an idyllic Southern U.S. town, but Laura has been forced to face the financial consequences that come with effectively doubling her EB5 investment. Not all EB-5 investors in her situation have been as fortunate, with some lacking the means to dive into a new EB5 investment and others having their children age out of eligibility due to the prolonged wait times.
The EB-5 program remains one of the simplest and fastest ways to permanently immigrate to the United States, but investors must be wary of USCIS and the curveballs it can throw. While the courts will always be there to back investors up should USCIS introduce unlawful policy changes or denial decisions, court proceedings are notoriously lengthy, and investors could nonetheless lose their chance for a better, more stable life in the United States.
