Answering the Most Pressing EB-5 Questions

The EB-5 program has had a tumultuous history. However, there has never been a period where so many core, significant issues have been up in the air. Based on advice we have been and are giving to our EB-5 clients, the following are the most pressing questions, and our thoughts on the answers as of the date of this article:

Has the EB-5 Program Expired?

No. EB-5 investors who invest in a non-regional center project can continue to file I-526 petitions, have them approved, and get their conditional- and later unconditional- green cards. Only the EB-5 regional center program has lapsed. However, as roughly 90-95% of EB-5 investments in the last 10 years have been through the regional center program, the lapse of the program on June 30, 2021, affects many, many people.

Will the EB-5 regional center program be reauthorized and when? 

No one can answer this question definitively. I feel confident in stating that a standalone bill to reauthorize the EB-5 regional center program is highly unlikely. This means that there must be some must-pass legislation to which EB-5 regional center program reauthorization can be added. As of this date, the most likely vehicle is the continuing resolution to fund the government, the date for which has been extended from December 3 to February 18. There is no certainty that the continuing resolution will be passed by February 18, and it is entirely possible that there will be another short-term extension for another 2 -3 months. In addition, there is no certainty that EB-5 regional center program reauthorization will be included in the continuing resolution.

I take some solace in the fact that there is no serious effort in Congress to end the EB-5 regional center program. Some in Congress, led by Senator Grassley, would condition support for an extension of the regional center program on a comprehensive EB-5 bill that greatly increases compliance and antifraud provisions. The EB-5 industry has been working with key leaders in Congress and has developed a consensus comprehensive EB-5 bill that would include a long-term extension of the regional center program and includes various compliance and antifraud provisions.

So, in conclusion, where are we? Although it is uncertain if the EB-5 regional center program will be reauthorized, most believe it will, including this author. There is no certainty when it will be authorized, although somewhere between February and June is likely. There is no certainty whether the reauthorization will include substantial changes to the EB-5 program, although this author believes that is also likely.

What will happen with pending regional center I-526 petitions? 

The next big development in EB-5 could be a decision of USCIS to take action with respect to pending regional center I-526 petitions and approved petitions where the investor has not yet become a conditional permanent resident. USCIS has indicated on its website that it may make a decision regarding these petitions in the near future. Given that the regional center program may be reauthorized as soon as February, this author believes it is unlikely that USCIS will take action to deny pending petitions at this time. Unfortunately, that is not at all certain.

If USCIS does decide to deny pending petitions or revoke approved petitions, it would probably first issue a Notice of Intent to Deny or Revoke based on the expiration of the regional center program. If it ultimately were to deny the pending petitions or revoke approved petitions, litigation would be rampant with a number of legal causes of action possible.

Another possibility is that USCIS decides to allow I-526 petitions to remain pending but decides to deny pending I-485 adjustment of status applications or to deny the ancillary benefits that go with an I-485 application (employment authorization and advance parole travel document). Again, litigation could be expected if USCIS takes that position.

Finally, either as part of comprehensive EB-5 legislation or as a separate bill, there could be legislation grandfathering all investors who filed petitions prior to the expiration of the regional center program. In this observer’s view, the chances of “grandfathering legislation” are good if the regional center program is not extended. If the regional center program is extended, it is, at this time, very speculative whether a grandfathering provision will be included in the legislation. The inclusion of a grandfathering provision would give future investors greater assurance of not having to deal with the adverse effects of any future expiration of the regional center program.

What is/will be the minimum investment amount? 

As of this writing, the minimum investment amount is $500,000 in a targeted employment area (TEA) and $1 million in other areas. The pre-November 2019 definition of a TEA is in effect, including census tract aggregation. The investment amount in effect on the date of filing the I-526 petition should apply (with the exception noted below), not the date the investment is made.

There is much unknown. The key issue that is unknown is if and when the minimum investment amount will be increased. To this writer, the “if” is very clear – – it will be increased. The “when” and “how” are unclear. This author believes there is a good chance that there will be no increase until legislation authorizing the extension of the regional center program is passed. If the reauthorization legislation is a comprehensive reform of the EB-5 program, it will probably include new and increased investment amounts. Those investment amounts are likely to be greater than the present amounts and less than the $900,000/$1.8 million amounts set forth in the November 2019 regulation that was overturned by a federal court. The new amount would be effective prospectively.

If the program is not reauthorized, or if the reauthorization legislation does not include a change in investment amount, at some point USCIS would likely issue a regulation to accomplish that goal, which would be effective prospectively. In this author’s opinion that is not likely to happen at least during the first half of 2022.

So, is it appropriate to counsel potential EB-5 clients that a $500,000 TEA I-526 filing will be approvable? Unfortunately, it’s not that straightforward. USCIS has appealed the court decision overturning the November 2019 EB-5 regulation, which appeal is presently pending in the Ninth Circuit Court of Appeals. If USCIS withdraws the appeal, or if the Ninth Circuit upholds the district court decision, I-526 petitions based on $500,000 investments in a TEA should be approvable.

The complication is: What happens if the Ninth Circuit overturns the district court decision? Here are the possibilities:

• The appellate court decision could specify that EB-5 petitions filed during the pendency of the appeal and before the Circuit Court decision will continue to be subject to the pre-November 2019 investment amounts. In that case, investors filing now with $500,000 investments in a TEA should be safe.
• If the Court of Appeals overturns the district court decision and does not make any provisions for pending investors, USCIS would have to determine whether it will, on its own, determine that the Court of Appeals decision will be applied prospectively only (in which case pending $500,000 investors should be saved), or whether USCIS will take the position that the increased investment amount contained in the November 2019 regulation will apply to all post-November 2019 filings (in which case pending $500,000 investors are not safe).
• If USCIS decides that the $500,000 investment is not qualifying, there is another remaining issue: Will USICS allow pending I-526 petitioners to increase their investment amount to the higher level without such increase being considered a material change? The USCIS position on this issue is presently unknown.

In conclusion, although there is a good chance that investors who file at the $500,000 amount in a TEA will be protected, it is not certain. There will almost certainly be litigation challenging any USCIS decision that would result in pending investors being subject to an investment amount that is higher than the amount that was in effect on the date that they filed their petitions.

What definition of TEA will be applied to an investor’s petition? 

Everything stated above with regard to minimum investment applies to TEAs. The November 2019 regulation that was found invalid by the federal court included the more restrictive definition of a TEA. Any comprehensive EB-5 legislation will virtually certainly include a definition of TEA that is more restrictive than the pre-November 2019 definition.

Therefore, just as with investment amount, the following is the state of affairs:

• I-526s filed today are subject to the pre-November 2019 definition of TEA;
• That definition could be changed by legislation, in which case the change would be prospective only;
• The definition could be changed by regulation, in which case the change would be prospective only;
• That definition could be changed by judicial action. In that case, just as with the investment amount, the impact could be prospective or retroactive as discussed above.

How does the regional center program expiration affect quota dates? 

There is a major impact on direct EB-5 applicants. Since all regional center applicants are taken out of the line unless or until the regional center program is reauthorized, and since there have been relatively few direct EB-5 applications in past years, all direct EB-5 applications from all countries, including China, are current. They should remain current if the regional center program is not reauthorized. If the regional center program is reauthorized, all of the regional center applications filed before new direct EB-5 applications will have priority dates for quota purposes before new direct applicants. In that case, the long quota waits for Chinese nationals will reappear.

In summary, the main issue relates to Chinese direct EB-5 applicants. The bottom line is that they will have no quota backlog if the regional center program is not reauthorized. They will have a lengthy quota backlog if it is reauthorized.

What is the impact of the expiration of the regional center program on processing times for direct EB-5 petitions? 

It appears that USCIS has opted to reassign most EB-5 adjudicators to other types of applications rather than have them work on direct EB-5 petitions and long-pending I-829 petitions. In this author’s opinion, that decision is improper given the fact that those petitions incur the highest filing fees from USCIS and have the longest processing times of any applications with USCIS.

The other processing delay issues relate to I-765 (employment authorization) applications and I‑131 (advance parole travel) applications. After a period during which USCIS equivocated as to whether it was continuing to process these applications for adjustment of status applicants based on approved regional center EB-5 petitions, the agency now agrees that it will process these applications. However, the processing times are egregiously often in excess of 1 year, and sometimes in excess of the processing time for the entire adjustment of the status process, meaning that the applications are never adjudicated. I should note that this problem is not specific to EB‑5; EAD and AP applications for all types of permanent resident applications are pending long beyond any reasonable period of time.

There is some hope that there will be improvement resulting from a class-action lawsuit filed on behalf of EAD applicants with pending adjustment of status applications and an anticipated class action lawsuit to be filed on behalf of AP applicants with pending adjustment of status applications. In the meantime, adjustment of status applicants needs to maintain an underlying nonimmigrant visa status that allows them to continue to work without an EAD (such as E-2, L-1, or H-1B status). They also need to maintain valid H or L status in order to travel with a pending adjustment of status application until they receive their advance parole travel documents.

These are certain times of unprecedented uncertainty in the EB-5 sphere. Hopefully, this blog will assist both potential new EB-5 investors and pending EB-5 investors to make decisions until the issues raised are resolved.

The material contained in this article does not constitute direct legal advice and is for informational purposes only.  An attorney-client relationship is not presumed or intended by receipt or review of this presentation.  The information provided should never replace informed counsel when specific immigration-related guidance is needed.

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