25 Feb Adjudications Trends After the May 30, 2013 EB-5 Policy Memorandum
By Ignacio Donoso
February 4, 2014
The USCIS EB-5 Adjudications Policy Memorandum issued on May 30, 2013 (PM-602-0083) (“EB-5 Policy Memorandum”) has had a positive impact in I-924 adjudications which have alleviated bottlenecks in the operation of EB-5 regional centers and begun improving processing of I-526 visa petitions. In this practice pointer, we examine the impact of the EB-5 Policy Memorandum in practice since May, 2013 and current trends in strategies for I-924 adjudications.
1. Prior to the EB-5 Policy Memorandum
Prior to the EB-5 Policy Memorandum, USCIS guidance and policy demanded a high degree of specificity and supporting evidence in I-924 regional center applications and amendments to overcome the regulatory requirements of 8 CFR § 204.6(m)(3). This practice was concisely analyzed in the 2012 AILA Practice Pointer entitled “EB-5 Regional Centers”, which concluded: “USCIS currently requires a tremendously high level of specificity in initial proposals, converging with the level of detail required for actual project documents submitted with Forms I-526, including documents in final form.” Essentially, all I-924 applications for new regional centers or for amendments were held to the standards of a business plan that fully complied with all requirements set out in Matter of Ho, 22 I&N Dec. 206 (Assoc. Comm’r 1998).
Additionally, USCIS required that approved EB-5 regional centers file an amendment on Form I-924 before sponsoring projects that were outside its approved industries, approved geographic service area, or which used a different econometric methodology. USCIS regional center approval letters and the Form I-924 Instructions confirmed this policy. For example, USCIS approval letters specifically included statements such as: “[I]f any investment opportunities arise that are beyond the scope of the approved industry categories then an amendment would be required to add that category”; “[a]n amendment request is required if investment opportunities arise outside the approved geographic area.”
While these practices offered USCIS great specificity in I-924 applications and strict control of the future development of an approved regional center, they generated several problems that ballooned as EB-5 regional centers increased in number and expanded their operations.
The large volume of documentation required for I-924 applications caused processing times for new regional center approvals and amendments to increase significantly.
At the same time, applicants were faced with providing highly detailed information that was likely to become outdated as projects evolved and parties negotiated over project terms during the time the I-924 application was pending.
Approved EB-5 regional centers were frequently saddled with having to forego capital investment projects that were outside their territory or approved industries because of the expense and delay of obtaining an I-924 amendment.
The result was a cumbersome system that caused an administrative burden on USCIS, while at the same time constraining approved EB-5 regional centers from engaging in new projects and pursuing new investment opportunities.
2. Guidance From the EB-5 Policy Memorandum
The EB-5 Policy Memorandum significantly improved upon these practices.
First, the EB-5 Policy Memorandum alleviated the level of detail required in Form I-924 applications for original regional center designation and for amendments. This was achieved by clearly defining three types of projects that could be described in an I-924 application: hypothetical projects; actual projects, and, finally, I-924 Exemplar projects that offered pre-approval for the project elements of future I-526 visa petitions filed pursuant to the Exemplar. These definitions came with instructions on a scaled evidentiary burden that progressed with increasing specificity depending on whether the project set out in the I-924 application was hypothetical, actual or Exemplar. Thus, even though the evidentiary requirements set forth in 8 CFR § 204.6(m)(3) must be satisfied in all cases regardless of the project type, the level of specificity and detail required in a Form I-924 application was tailored by the EB-5 Policy Memorandum to the level of specificity of the type of project.
Actual projects and Exemplar applications submitted in Form I-924 applicants are generally held to a level of verifiable detail similar to the one applied in the past. Actual projects are distinguished from I-924 Exemplar projects in two ways. First, actual projects do not require the submission of final form organizational and transactional documents. Second, actual projects will be afforded deference by USCIS adjudicators analyzing I-526 visa petitions relating to the business plan, but will not be afforded deference in relation to the project’s organizational and transactional documents. By comparison, an I-924 Exemplar must include a sample Form I-526 visa petition supported by detailed evidence of the project that complies with Matter of Ho, as well as final form organizational and transactional documents. Projects approved in a Form I-924 Exemplar are afforded deference by USCIS in I-526 adjudications with respect to the business plan and all organizational and transactional documents.
The concept of a hypothetical projects was significantly clarified by the EB-5 Policy Memorandum. If the Form I-924 project is a hypothetical project, the EB-5 Policy Memorandum confirms that general proposals and general predictions should be sufficient to obtain USCIS approval. USCIS further instructed that I-924 applicants seeking approval of hypothetical projects were not required to submit organizational and transactional documents for the new commercial enterprise because they will not be reviewed and evaluated until an I-526 visa petition is filed under the project. Determinations based on hypothetical projects, however, will not receive any deference at the time that Form I-526 visa petitions are filed, causing USCIS to undertake de novo review of the project and its details. This means that petitioners should especially be aware of the pitfalls presented by the general rule that a petitioner must establish eligibility at the time of filing, and that USCIS cannot consider facts that come into being subsequent to the filing of a petition (see Matter of Katigbak, 14 I&N Dec. 45, 49 (Reg’l Comm’r 1971), and also Matter of Izummi, 22 I&N Dec. 169, 175 (Comm’r 1998) Matter of Bardouille, 18 I&N Dec. 114 (BIA 1981)).
Second, the EB-5 Policy Memorandum also eliminated the strict requirement for an approved regional center to submit a Form I-924 application to obtain an amendment of its industries, geographic service area, business plans or econometric methodologies. The succinct instructions in the EB-5 Policy Memorandum read: “[s]uch formal amendments to the regional center designation, however, are not required when a regional center changes its industries of focus, its geographic boundaries, its business plans, or its economic methodologies.” According to the EB-5 Policy Memorandum, regional centers were permitted to forego the I-924 amendment application and to simply report such changes annually with the I-924A Annual Reporting Supplement. Alternatively, regional centers were free to continue filing such Form I-924 amendment applications to obtain greater certainty before I-526 adjudication.
3. Practice After the EB-5 Policy Memorandum
Recent USCIS trends demonstrate that the EB-5 Policy Memorandum is being adhered to in practice, with improved outcomes for applicants.
Practitioners have reported that a wave of I-924 approvals for new regional centers was experienced in the fall of 2013, some of which had been long-delayed at USCIS. Similarly, some projects are seeing that I-526 decisions are being issued relatively promptly (e.g., within 6 to 8 months) after the project’s initial I-526 visa petitions have been approved.
The Administrative Appeals Office (“AAO”) has relied on the EB-5 Policy Memorandum in several 2013 decisions to approve I-924 applications that had initially been denied by USCIS because of deficient evidence. The AAO decisions were non-precedent cases and were released to the public shortly following the publication of the EB-5 Policy Memorandum, presumably with the intent of showing the its practical implications.
Two AAO non-precedent decisions on I-924 applications, dated June 12, 2013 and July 19, 2013, are instructive. In both decisions, the AAO withdrew the USCIS denial of an I-924 application and approved the case as a hypothetical project, specifically citing the terms of the EB-5 Policy Memorandum.
In the decision dated June 12, 2013, the AAO withdrew the denial of an I-924 application and approved an I-924 amendment to expand the territory of the regional center to encompass five states. The USCIS initially denied the amendment to obtain a multi-state geographic area citing lack of evidence of how the amended proposal will promote economic growth within the proposed five-state geographic area. Citing the EB-5 Policy Memorandum, the AAO overturned the USCIS decision and approved the new five-state territory of the regional center. The AAO determined that the amendment application could be approved because the evidentiary requirements had been satisfied as a hypothetical project with a “general proposal based on general predictions”.
In the decision dated July 19, 2013, the AAO withdrew the denial of an I-924 application because the business plan, economic analysis and related evidence was found to be sufficient to qualify the application as a hypothetical project with a “general proposal based on general predictions”. The USCIS had initially denied the application because of lack of evidence of commitment letters from banks and other third party financing sources, and lack of evidence of the ultimate feasibility of the project. The AAO took the position that such evidence was not necessary in the context of a hypothetical project. The decision cited specifically the EB-5 Policy Memorandum’s statement at page 14 that [t]he level of verifiable detail required for a [regional center] to be approved and provided deference may vary depending on the nature of the [regional center proposal].”
The EB-5 Policy Memorandum has also resulted in a clear trend away from submitting I-924 amendment application for a large number situations common to a regional center’s operations. Expanded geographic territories, additional industries of focus, and new economic methodologies have all be adjudicated in practice through notice included in the filing of a Form I-526 visa petition for a new project, and then reported in the regional center’s annual Form I-924A Supplement filing. In fact, the AAO decision of June 12, 2013 essentially stated that the I-924 amendment application in that case, which sought an expanded regional center service territory over 5 states, was not required pursuant to the EB-5 Policy Memorandum.
Further examples of this change are found in USCIS approval letters for new regional centers issued after the EB-5 Policy Memorandum. Regional center approval letters now specifically cite the EB-5 Policy Memorandum and state that “an amendment request is not required if investment opportunities arise outside the geographic area referenced above. USCIS will evaluate eligibility upon the filing of an initial Form I-526 related to that new investment opportunity.” A similar statement is set out for industry categories.
Finally, on the specific issue of deference, a recent AAO non-precedent decision dated September 23, 2013, disagreed with a decision by USCIS to reopen and deny an approved I-526 visa petition. In that case, the AAO found that a “comprehensive business plan” (which is presumably equivalent to an actual project) was approved in an I-924 amendment application caused I-526 visa petitions filed pursuant to such approval to be eligible for USCIS deference. Additionally, citing the EB-5 Policy Memorandum, the AAO found that “if the plan submitted in support of the present Form I-526 is the same plan submitted in support of [previous] approved Forms I-526 …, the plan is also due deference”. In the result, the AAO remanded the case for further adjudication by USCIS to determine whether previous Form I-526 approvals relating to the same project involved an objective mistake of fact or an objective mistake of law evidencing ineligibility for the benefit sought (which is referenced in the EB-5 Policy Memorandum as one of the reasons why USCIS could refuse to grant deference to I-526 cases in the same project).
The EB-5 Policy Memorandum has made material improvements to the functioning of the EB-5 program that afford greater predictability to regional centers and EB-5 investors. It has contributed to a reduction in red-tape that was hindering the growth of the EB-5 industry. While the USCIS’s implementation of the EB-5 Policy Memorandum aiding it to reduce the persistent backlog pending I-924 applications and I-526 visa petitions, the volume of delayed I-924 applications and I-526 visa petitions appears sufficiently large that it will require a large part of 2014 for the full effects of the EB-5 Policy Memorandum to ripple throughout the EB-5 system.