There may be a time during an EB-5 investment that redeployment of the original funds is required. If fund redeployment occurs, investors should understand why it happened and how it should be managed to stay within the EB-5 guidelines as outlined by the USCIS. Because this process is complicated and operates differently depending upon the situation of the foreign investor, gaining a better understanding of redeployment is advised for existing EB-5 investors and for those investigating the value of an EB-5 investment for their own benefit.
Why Are Funds Redeployed?
Many EB-5 investments employ a similar process for managing the money received: funds are first placed into a new commercial enterprise (NCE), which in turn loans the money to a job creating entity (JCE). It is not uncommon for these funds to be returned prior to the due date if the JCE accomplishes its job creation goal earlier than anticipated. Another situation that often occurs is that the due date of the loan is reached before finalizing the conditional legal permanent resident (CLPR) status of the investor.
Because the USCIS requires EB-5 funds to remain at risk during the period the foreign national holds CLPR status, the NCE will redeploy the funds to remain in compliance with the USCIS. Since investors may be in different phases of their CLPR status, redeployment requirements will vary depending upon each situation.
Understanding Redeployment Requirements for EB-5 Investors
The major requirement for any funds that are redeployed is that those funds remain at risk, just as they were subject to normal risks and rewards in the original investment. Another element that will determine the proper deployment procedures is based upon the CLPR status of the foreign investor.
For investors who have neither received their CLPR status nor have met their requirement of creating 10 new jobs through their EB-5 investment, funds must be redeployed to a qualified commercial entity that is actively engaged in commerce, with standard risks and rewards common to “at risk” investments. In addition, the redeployed funds must pass through to the JCE that was named in the original I-526 petition. Finally, the application of that money must remain consistent with the I-526 business plan.
Investors who have not received their CLPR status but whose EB-5 investment has already created the required 10 new jobs can redeploy their funds to another commercial enterprise that is participating in a business that is in accord with the I-526 business plan. As before, the funds must be subject to the same degree of risk as the original investment, but since the job creation requirements were met, they do not have to be channeled to the same JCE as before.
Investors who have already received their CLPR status and met their job creation requirement will find redeployment to be an easier process with greater leniency in their choices. As in the previous two instances, the funds must still be redeployed to an enterprise currently in operation and exposed to normal market risks leading to gains or losses. The major difference in this situation is that funds can be directed to a new business activity not considered or proposed in the original I-526 petition.
For any of the above circumstances, the USCIS requires that redeployment occur “within a commercially reasonable period of time.” Even though the USCIS has not defined what period they deem to be reasonable, experts generally agree that three months is an acceptable timeframe in which to accomplish redeployment.
Redeploying Funds for Investors with Pending I-526 Petitions
One situation commonly faced by immigrant investors is the case whereby the JCE is returning funds to the NCE, yet the investor still has an I-526 petition pending with the USCIS. In this case, the NCE is required to redeploy all the investor’s money within a “commercially reasonable period of time” into another business activity and under the same “at risk” conditions as before. If the funds have not met the requirement of creating 10 jobs , the money must be directed to the JCE designated in the I-526 petition.
The funds must be used in the same way as originally intended in the I-526 petition. Once the investor is granted CLPR status, the USCIS allows the funds to be redeployed into other business activities not originally detailed in the I-526 petition, but the “at risk” requirements remain the same.
Waiting Lists and CLPR Statuses
Another issue some EB-5 investors face that triggers the need for redeployment is if their country is on a waiting list for their CLPR visa. In such a situation, redeployment is almost certain, as investment funds must keep their “at risk” status in place until two years after investors receive their CLPR status. Only through redeploying funds can investors remain eligible during this waiting period.
If investors still need to meet their job creation requirement, funds will be redeployed to the same JCE named in the I-526 petition. If the job creation requirement has been fulfilled, funds do not need to be redeployed to the original JCE. In either case, all other terms of the I-526 petition must be followed to remain in compliance with USCIS regulations.
Maintaining “At Risk” Status
According to the USCIS Policy Manual, investors are required to keep funds at risk until two years have passed from the date the CLPR was issued. Technically, once this stage is passed, funds may be withdrawn, but experts recommend caution rather than a hasty exit. As there are many forms and petitions to be processed and approved, early removal of investment funds could prove problematic.
Investors are better advised to wait until their I-829 petition has completed the adjudication process. It is during this final and crucial procedure that the USCIS gives the all clear signal. There have been instances where the agency questioned the job creation requirements and demanded further documentation; knowing that funds are still accessible gives the NCE flexibility in proving their job creation requirements or using that money to make up the shortfall. Investors who have already withdrawn their funds may find their I-829 approval delayed until funds are returned to the NCE and requirements met to the satisfaction of the USCIS.
Redeployment and Agency Interviews
It is imperative that immigrant investors be knowledgeable and conversant concerning their EB-5 investments; this includes being prepared to provide thorough details of any redeployment of funds. Both the USCIS and Department of State (DOS) will ask questions pertaining to the EB-5 Visa, with special focus on the use of investment funds to ensure the investor is complying with all regulations and maintaining eligibility. The DOS operates outside the US and oversees consular processing interviews that initiate the visa application process, while the USCIS works within the US and is engaged in managing all stages of the EB-5 immigration process, with emphasis on and close attention paid to the investment component of the procedure.
Much of the information the investor needs to provide can be obtained from their legal advisors and regional center operators in the form of commercial, financial, and legal documents. Specific items on their checklist should include
• Bank records supplied from the NCE
• Financial summaries generated from the regional center
• Loan records tracking the transfer of funds between the NCE and JCE
• If funds were redeployed, full documentation and tracking of funds from the NCE to approved business activities
Even the most experienced investors have learned that having adequate counsel conversant with all matters pertaining to EB-5 immigration is of the utmost value. Since a lot of effort and money goes into the EB-5 process, having experts on their side providing advice and information to bring about the desired conclusion swiftly and smoothly will make that result more likely.