Finally, the greatly
anticipated EB-5 Adjudications Policy Memorandum, PM-602-0083, was released by
USCIS on May 30, 2013. EB-5 practitioners across the board will welcome the significant
changes added, including more clear-cut guidance on: bridge financing, the usage
of EB-5 funds and the regional center amendment.
most drastic changes are located within the regional center petition and
amendments section. It is noted and appreciated that USCIS has made
considerable efforts to make the EB-5 program efficient, flexible and
predictable. The acknowledgement of the preponderance of evidence rule as
prevailing has also been long-awaited. It is also the authors' opinion that the
language used in the memorandum indicates that the program will be made
permanent in the forthcoming Immigration Reform legislation.
Below is an outline of some of
the more significant EB-5 policy changes contained in the final memorandum
compared to the draft policy memorandum.
Changes in the Regional Center Petition
USCIS differentiate three types
of projects submitted under regional center: the "actual project",
"hypothetical project" and "exemplar" project.
An "actual project" refers to a
specific project proposal that is supported by a Matter of Ho compliant business
plan. A "hypothetical project" refers to a project proposal that is not
supported by a Matter of Ho compliant business plan. The term "exemplar" refers
to a sample Form I-526 petition, filed with a Form I-924 actual project
If the regional center petition
with an "actual project" is approved, it will be accorded deference to subsequent
I-526 filings under the project involving the same material facts and issues. Within
the realms of marketing, an approval of an "actual project" will certainly rate
favorably with the potential investors and registered agents and will avoid the
long periods of uncertainty that presently exist.
The USCIS I-924 regional center
petition approval notice should contain a statement identifying which projects
have been approved as "actual projects" and will be accorded deference and
those projects that have been approved as "hypothetical projects" but will not
be accorded deference.
Clarification on the Usage of EB-5 Funds
The final policy memorandum
used the following example to illustrate the relationship between job creation
and usage of EB-5 funds.
"Ten immigrant investors seek
to establish a hotel as their new commercial enterprise.
The establishment of the new
hotel requires capital to pay financing costs to unrelated third parties, purchasing the land,
developing the plans, obtaining the licenses, building the structure, taking care of the grounds,
staffing the hotel, and the many other types of
expenses involved in the development and operation of a new hotel. The
immigrant's investments can go to pay part or all of any of these expenses.
Each immigrant's investment of the required amount of capital helps the new
commercial enterprise - the new hotel - create ten jobs. The ten immigrants'
investments must result in the new hotel's creation of 100 jobs for qualifying
employees (ten jobs resulting per each individual immigrant's capital
The said example clarifies that
in a Direct EB-5 context (which may be more appropriate for the project
concerned) the EB-5 funds are not necessarily invested in the new commercial
enterprise itself. It is permissible to use the funds to pay the costs to the
unrelated third parties, as long as the required amount of capital helps the
new commercial enterprise create jobs.
The final policy memorandum
gives more flexibility in issue of replacing bridge financing with EB-5
financing, recognizing that in the context of business, time is often of the
essence. It is now permissible to
replace bridge financing with EB-5 funds even if the EB-5 financing is not
contemplated prior to acquiring the bridge financing.
This change is significant
given that USCIS has terminated a regional center, namely Victorville Regional
Center in Victorville, California because of the bridge financing timing
issue. On May 24, 2011 USCIS issued a
final termination notice and ended the Victorville immigrant investor program.
On December 21, 2011, AAO affirmed the decision. See Matter of Regional Center of Victorville Development. Inc., RCW 103
1910251, Dec. 21, 2011. One of the reasons for the regional center
termination was: "the record does not
show that the applicant made a commitment to provide later-stage financing
at the outset of the project. Instead, the applicant appears to have decided to
commit capital toward later-stage financing only after the
initial stages of the project that created the jobs in question were already
The final memorandum clearly states
that "if the project commences based on the interim or bridge financing prior
to the receipt of the EB-5 capital and subsequently replaces it with EB-5
capital, the new commercial enterprise may still receive credit for the job creation
under the regulations."
Generally, the replacement of
bridge financing with EB-5 investor capital should have been contemplated prior
to acquiring the original non-EB-5 financing. However, even if the EB-5
financing was not contemplated prior to acquiring the temporary financing, as
long as the financing to be replaced was contemplated as short-term temporary
financing which would be subsequently replaced, the infusion of EB-5 financing
could still result in the creation of, and credit for, new jobs.
For example, the non EB-5
financing originally contemplated to replace the temporary financing may no
longer be available to the commercial enterprise as a result of changes in
availability of traditional financing. Developers should not be precluded from using
EB-5 capital as an alternative source to replace temporary financing simply
because it was not contemplated prior to obtaining the bridge or temporary
Regional Center Amendments
Within the final policy
memorandum, the authors believe the most drastic changes are evident in the
regional center amendments section. If the amendment is in the regional
center's industries of focus, its geographic boundaries, its business plans, or
its economic methodologies, the amendment is no longer required! This provision
will not only save time, but will allow existing regional centers to be
"rented" more easily.
"Of course, all regional
centers "must provide updated information
to demonstrate the center is continuing to promote economic growth, improved
regional productivity, job creation, or increased domestic capital investment
in the approved geographic area . . . on an annual basis," 8 C.F.R. § 204.6(m)(6),
through the filing of their annual Form
"To improve processing efficiencies and predictability in subsequent
filings (i.e. application of deference), many regional centers may choose to
amend the Form I-924 approval to reflect job creation in additional industries
not previously reviewed at the time of project approval, as well as the
resulting change in economic analysis and job creation estimates. Such
amendments, however, are not required in order for individual investors to
proceed with filing Forms I-526 or Forms I-829 based on the additional jobs
created, or to be created, in additional industries."
Thus, we welcome the changes
brought about by the new policy memorandum. It is hoped that this will actually
increase efficiency and ultimately profitability.
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