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The Case To Reform EB-5

by Joseph P. Whalen

After doing more in-depth research into the creation and development of the Immigrant Investor path towards a green-card, I have come to the realization that it is misclassified or at the very least the statute is inadequate to the underlying desired outcome. The Immigrant Investor visa classification is codified as the fifth preference employment-based visa at INA 203(b)(5)[1]. Preference category visas are technically limited to specific proportions of all visas available annually and are allocated in accordance with a precise formula that takes into account the limited worldwide and per country levels as well as authorities and processes described in INA 201 through 205. It is for these underlying reasons that it has been necessary to be as fair as possible in issuing visas. The first step involves the filing of a petition for classification for the desired category of visa. It has evolved that this filing date will be used as a "priority date" which secures the "beneficiary" of the petition their place in a potentially very long line for a visa. Owing to the importance of the priority date, certain expectations have come into being and as have developed over time through the agency and court interpretations of the statutes and the statutory scheme. The realm of the "preference category visa petition" is a specific context. This particular context demands that the beneficiary shall be fully qualified and statutorily eligible for the visa classification at the time of filing and must remain so through time of adjudication and ultimately at time of visa issuance and in some cases beyond that for a specified period of time and with conditions attached to retention of status.

Immigrant Investors are initially granted a conditional status and will then be required to prove that they are deserving of the lifting of conditions at a later time. The only other immigrants who are initially granted a conditional status are those who gain status based on a recent marriage[2] to either a USC or LPR who petitions for them. There is however another employment-based visa that has conditions attached to the attainment of the LPR status. The second preference employment-based national interest waiver provisions for physicians have strings attached. These physicians are not provided with conditional status, rather than that they have to fulfill conditions first and then get the full unconditional LPR status green-card. The physician may file an I-140 for the EB-2 NIW concurrently with an I-485 and get an EAD in order to legally work and fulfill the minimum commitment of service in a specified geographic area, medical specialty, facility, or for a particular qualified employer. In the alternative, a physician who has already met the minimum service will be granted LPR status faster after filing. There is always a certain amount of time required just to process and adjudicate anything. Even though e-filing will speed things up, immigration and nationality benefits will never be available like a pack of gum from a vending machine.

What do "Priority Dates" entail and encumber?

In general, one must be fully qualified for the visa classification at the time of filing. For instance, if a petition is filed for a child, then the beneficiary must meet the INA definition of a child as applicable. As an example, a step-relationship is reliant on several factors. The existing biological or adoptive parent must qualify as the parent of the child and the new spouse may be deemed a step-parent. IF the marriage is valid and legal and takes place before the child reached age 18 years and while the child was unmarried then the step-relationship has been formed. The child will only remain a child as long a petition is filed before the child reaches age 21 years. Depending on other factors a child may remain classified as a child beyond age 21 based on the CSPA (Child Status Protection Act) for visa issuance or adjustment of status purposes. Family-based visas may be either "immediate relative" or "preference visas".

In the realm of employment-based visas, they are all "preference visas". The importance of the priority date is really lost on some of the employment-based visa classifications because they are so hard to qualify for that they have never been oversubscribed and therefore always "current" for visa issuance or adjustment of status purposes. The fifth-preference "employment creation" or immigrant investor visa has always been "current" from day one of its existence. Competition has always been fierce but never robust. The coveted visa has always been a challenge to attain not from competition against a large pool of applicants but rather a struggle to meet the eligibility requirements and qualifications.

Congress has set some high bars. Some were on purpose: the minimum amount of capital must be invested and the alien must create or preserve a minimum number of full-time jobs for qualifying U.S. workers. Some high bars were inadvertent. For example, Congress took the previously created immigrant investor labor certification exemption category defined by INS via regulation and codified it among the preference visa categories. In doing so, Congress placed the "eligible at time of filing" yoke around the neck of the immigrant investor petition without clearly limiting the bare minimum eligibility that should be required in order to be so classified.

What Should The Minimum Requirements Be For EB-5 Investor Classification Approval?

First, they need to have the required investment funds. Second, IF they have not yet created the required jobs THEN they need a plan to create the required jobs. So for the vast majority, the bare minimum is enough money and a plan. Through regulation and Precedent, INS through AAO and later USCIS and the courts have shaped the requirements for an investor's "plan" to mean a comprehensive, detailed, and credible plan. The added requirements do not end there. The investor and his plan have subsequently been saddled with a prohibition against making a substantive material change. This became necessary in order to combat scam artists and fraudsters seeking to buy a green-card with lousy investment schemes and scams put forth by Regional Center promoters. The precautions have gone too far and may inappropriately block investors even (at least in theory) when they achieve the desired results of full investment and enough jobs. This point of a bare minimum as long as results are achieved needs clarification.

Bare Minimum Amount of Investment.

When INS created the immigrant investor labor certification exemption in 1966, they stated that the alien was required to invest or be actively in the process of investing a "substantial amount" of capital. Then INS set an amount. Initially it was $10,000, then it was increased to $40,000 (and there was an earlier attempt to set it at $25,000 that failed[3] ). Then the whole program faltered because the non-preference visas were so scarce that the aliens stopped trying. Then there was almost no activity, then some visas were made available for those few who had actually made real investments. Finally, through IMMACT 90, Congress set the amounts at a significantly increased level to the current amounts of either one or one-half million dollars.

Job Creation.

The other fulfillment requirement of creating or preserving ten jobs was a later addition. Initially, there was no such requirement. Then INS stated that the alien would need to work in his business and be qualified to do so. Then a requirement was proposed to require the alien to create jobs for U.S. workers but the earliest proposal was fought and defeated. The job creation element eventually came back as a regulatory requirement that the alien investor "will employ a person or persons in the United States of which he will be a principal manager and that the enterprise will employ a person or persons in the United States who are United States citizens or aliens lawfully admitted for permanent residence, exclusive of the alien, his spouse and children."

The Investment Plan.

Rather than making an up-front showing of the two basic elements, most alien investors will submit a plan to achieve the job creation requirement and sometimes they include plans for completing the infusion of capital once first showing that they actually have it. It is the evidentiary weight assigned or ascribed to the up-front plans that needs further clarification and refinement. The current difficult economic realities involved in any investment are at the forefront of the minds of many investors and the general public at the present time but these realities have been and shall continue to be important considerations for all EB-5 investors. In all business-not merely EB-5, plans are made but are subject to change along the way. The artificial and arbitrary prohibition against substantive material change has grown beyond its limited usefulness and become onerous. The concept of material change and the prohibition against it as well as its application need further clarification and refinement.

Conflating "Eligibility At Time Of Filing" With Using An Impermissible "Material Change" In Order To Demonstrate One's "Basic Eligibility Qualifications".

Most importantly and above all else, the basic bare minimum eligibility qualifications required to secure a priority date under EB-5 needs clarification and refinement. The eligibility for securing a priority date is quite different from the fulfillment requirements that must be demonstrated for the lifting of conditions at the very end of the EB-5 process. Through the arduous path from the 1990 enactment through the scam period and reaction to that mess and finally 2011's current rethinking, some wires got crossed.

If you objectively look at EB-5, the requirements to secure a "priority date" are to:

1.) have enough clean money (lawful funds) available to invest, and
2.) have already started a business and created (or preserved) ten full-time jobs or be willing to take a stab at starting a business in which the alien will attempt to create (or preserve) ten full-time jobs, for legal U.S. workers.
As was mentioned,most will rely on "plans" to create jobs. Through a slow evolution and in the course of combating fraud, far too much emphasis has been placed on the initial plan advanced by the alien entrepreneur at the time of filing the I-526. The concept of impermissible material change cropped up in the Regional Center affiliated I-526 context as to financial arrangements. It has spread to the job creation aspect or "business plan" in the I-829 context. In the Regional Center affiliated investor context, the "business plans" form the basis for the "economic analyses" that predict indirect job creation. So in the RC context the plans take on a greater significance. Material Changes to the RC affiliated business plans have a direct effect on the job counts and therefore may indeed undermine the investors' ability to meet the requirements for the lifting of conditions on status. Through the use of previously USCIS-vetted and approved plans, a Regional Center sponsor and/or the affiliated I-562 filer (immigrant investor) is pretty much locked-in to the approved plan in order to reasonably rely on USCIS deference to the job predictions and thereby to lift conditions. This is a precarious position and when substantive material changes happen, all bets may be off. Through the use of transparent complexity, contingency plans can be put forth up-front, thereby putting USCIS "on notice" of the potential changes or shifting from one vetted plan to another vetted plan. Although the final analysis at the I-829 stage may be slightly more complicated than desired, if the results bear out the job counts needed, then conditions can still be lifted and the question of an impermissible material change drops from the mix.

The Time For Corrective Action Is At Hand.

USCIS is currently undergoing a metamorphosis as to the processing of the Alien Investor Program. Regulations and forms are being reviewed for the needed changes and are yet to be advanced for consideration through notice and comment rulemaking or Information Collections (ICs). As a small part of the government-wide retrospective review ordered by the President, ancillary matters are also under serious review simultaneously. AAO is still working on new regulations that are long overdue since the creation of USCIS as a part of DHS back on March 1, 2003. The form I-924 used in order to seek Regional Center Designation only came into use just under one year ago and is already up for revision. USCIS has already announced that further refinement to the I-526 and I-829 would take place in the near future. With so much up in the air at the same time, this is an excellent opportunity to address some fundamental underlying concepts and requirements and set the stage for successful expansion of the EB-5 Immigrant Investor Program for a long time to come. Above all other complaints from stakeholders, they want clear and consistent answers. They crave certainty. They desire reasonable reliance and have sought assurance of deference on settled points. Some shady characters seek to abuse any assurances as to deference and turn it into unreasonable reliance and would try to force USCIS to grant unworthy requests to lift conditions on the unfulfilled promises of failed businesses. Clearly, controversy can always be manufactured by anyone willing to devote some time to it. However, that is not a reason to be overly and unreasonably restrictive from the start. The inclusion of disclaimers and warnings should suffice to deflect the bogus claims of the unworthy when they come along in the future. A little additional background follows.

A Brief Synopsis of the History the Immigrant Investor Visa[4]

Congress did not create the concept of an immigrant investor classification, they merely codified it and modified it twenty-four years after the fact in the Immigration Act of 1990 (IMMACT90). Previously, in 1965, Congress made a major overhaul of the Immigration and Nationality Act. That 1965 amendment did not include an immigrant investor visa category. The 1965 amendment included an undefined category of "other qualified immigrants" among the "nonquota immigrants" newly renamed "special immigrants" in INA 101(a)(27).

INS Created the Immigrant Investor Classification

The "investor visa" was created originally in 1966, by INS through regulation utilizing the Attorney General's broad authority under INA 103 [8 USC 1103] by construing and interpreting INA 203 [8 USC 1153] (a)(8)'s "other qualified immigrants" who could demonstrate that they did not require a labor certification from the Secretary of Labor. It was not termed as a visa classification but rather as a "labor certification exemption". It seems that everybody needed some guidance on who the phrase "other qualified immigrants" actually applied to. Who exactly were these "other qualified immigrants" that did not need a labor certification?

These visas were allocated under INA 203 (a)(8) but issued as a "special immigrant" class found in INA 101(a)(27) [8 USC 1101 (a)(27)]. The Immigration and Nationality Act Amendments of 1965 (Public Law 89-236, Sec. 8 (a)) renamed nonquota immigrants as special immigrants in INA 101(a)(27). These special immigrants were eligible for visas and investors were among these immigrants but defined in the regulation, not the statute.

The original version of 8 CFR 212.8 stated, in pertinent part:

(b) Aliens not required to obtain labor certifications. The following members are not considered to be within the purview of section 212(a)(14) of the Act and do not require a labor certification: .......

(4) an alien who will engage in a commercial or agricultural enterprise in which he had invested or is actively in the process of investing a substantial amount of capital.

[31 FR 10021, July 23, 1966; 31 FR 10355, Aug. 22, 1966, as amended at 34 FR 5326, Mar. 18, 1969][A modified version of this extraneous regulation is still in 8 CFR but has been slated for repeal as obsolete in the recent USCIS Business Transformation Rule I.]


1 For a much more extensive review of the older and current Administrative Decisions and additional court cases on the Immigrant Investor Classification from 1966 through 2011, see:
2 Conditional status is given if the marriage is less than two years old at time of approval of I-485 or entry on an Immigrant Visa.
3 In an earlier version that was put forth in the rulemaking process, INS had wanted to make the minimum capital investment $25,000.00 and include a job creation element termed as a prospective economic benefit requirement. These additions did not make it into the final version codified.
4 For a much more extensive review of the history and development of the Immigrant Investor Visa see:

About The Author

Joseph P. Whalen is not an attorney. He is a former government employee who is familiar with the INA. His education is in Anthroplogy with a concentration in Archaeology and has both a BA (from SUNY Buffalo) and an MA (from San Francisco State University) in Anthroplogogy. He previously worked as an Archaeologist for the U.S. Forest Service before becoming an Adjudicator with INS which became USCIS.

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

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