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EB-5 Preapproval Process: A Bright Spot in Uncertain Times

by Carolyn Lee

Those who have followed my prior pieces on will raise a brow at this salvo: Cheers to USCIS! Read on - Cheers to USCIS for its preapproval process. It's good sense in action.

A "preapproval," in the vernacular, is USCIS's advance approval of a regional center affiliated project, rendered before any investor files an actual I-526 petition. The preapproval request is technically a regional center amendment and submitted along with an "exemplar" Form I-526 and project related materials. While USCIS has not yet enumerated all the elements of an exemplar I-526 filing, it is advisable that it contain at least the business plan, economic analysis, organizational documents, and offering materials.
The USCIS introduced this process in a December 11, 2009 memorandum [Editor's note: Date corrected on Nov 15, 2010][1], where it also introduced with less felicity, the "material change" concept.

Let's go back to pre-preapproval times for context. A regional center would put a project together, presumably in good faith conformity with the bounds of the designation approval. Issues would arise on the project side in the course of adjudicating an individual I-526 petition filed by an investor. USCIS issued requests for evidence (RFEs), sometimes to all affected investors, or just one or two, and the rest were informally held until USCIS adjudicated the reply, typically coordinated and drafted by the regional center. This was the best case scenario. Here was the worst: rather than issuing a uniform RFE for all related investors, adjudicators issued separate RFEs attacking different issues, some going to the core of whether or not the proposed project even fit within the scope of regional center designation. That last issue is not the kind that may be resolved by RFE reply. USCIS can cite Matter of Katigbak[2] to say that there is no cure for this failure to establish eligibility at the time of filing. This situation can kill a project by inches with multiple uncoordinated RFEs, denials, inability to reach anyone at USCIS to resolve consultatively -- all eventually resulting in investors defecting and entertaining breach actions if they don't get their money back. In short, there was potential for catastrophe in every regional center affiliated I-526.

Enter the USCIS Neufeld Memorandum dated December 11, 2009. I am on the record as not being a fan of the "material change" scheme, which I argue materially changes existing law[3]. But in the same memo, USCIS set forth the new preapproval framework. The purpose, according to USCIS, is to "assist in the streamlining of the adjudication of individual Form I-526 petitions." USCIS further states in the memo that obtaining a preapproval "should generally be given deference and not revisited in the adjudication of individual EB-5 petitions, as long as the underlying facts upon which the favorable decision was made remain unchanged."

Before preapprovals of specific projects, indirect job creation was a point of vulnerability. The regional center designation approval covers proposed indirect job creation model and industry multipliers. But as each project involves an application of the approved model and multipliers, there is the risk that USCIS may find fault in the application. This risk is among the most unsettling for immigration lawyers, as we lack subject matter competence to review indirect job creation methodology and its application to particular projects. Preapproval by USCIS greatly mitigates that risk. Through the preapproval process, USCIS accepts the economic analysis submitted for a specific project.

Does this mean USCIS is getting soft? Hardly. USCIS is not known for relaxed standards. Anyone who claims otherwise has not filed petitions with USCIS. So what's in the preapproval process for USCIS? Sanity. Reason. Turns out that inconsistent adjudication causes headaches for them, too. A dozen different adjudicators reaching different conclusions about the same project is inefficient use of limited agency resources funded by taxpayer dollars. The preapproval process gives USCIS authority to identify project-related problems in uniform fashion before multiple investors' I-526 petitions are filed, adjudicated by different examiners. Adjudicators can rely on the preapproval and focus on investor-related portions of the filing. The benefit to investors is predictability. It's collateral to the benefit to USCIS, but we'll take it.

The USCIS Preapproval process is indeed a bright spot in the EB-5 field, otherwise pock marked with springing standards and hidden traps. We know that beneath this mottled ground, there is the veldt of rational rules furthering the government's objective to prevent fraud while promoting investment in our economy. The preapproval process is a good start. With it, we have greater efficiency and predictability for USCIS, regional centers, and investors. All good. So let's drink a toast to USCIS! It deserves credit for doing something right.

1 Memorandum from D. Neufeld, Acting Assoc. Director, Domestic Operations, "Adjudication of EB-5 Regional Center Proposals and Affiliated Form I-526 and Form I-829 Petitions; Adjudicators Field Manual (AFM) Update to Chapters 22.4 and 25.2 (AD09-38)" (December 11, 2009). [Editor's note: Date corrected on Nov 15, 2010]

2 14 I&N Dec 45 (BIA 1971).

3 See Carolyn S. Lee, "'Material Change' in EB-5 Petitions: A Need to Return to the Drawing Board", 15 Bender's Immigr. Bull 1505 (Nov. 1, 2010).

About The Author

Carolyn Lee is a partner at Miller Mayer, LLP in Ithaca, NY. She graduated cum laude from Williams College and received her J.D. from Cornell Law School. She is a member of the American Immigration Lawyers' Association (AILA) EB-5 Committee and the AILA EB-5 Investor Conference Committee. Carolyn is the 2008 recipient of AILA's Joseph Minsky Young Lawyer Award and is also listed in the International Who's Who of Corporate Immigration Lawyers.

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.

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