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What Was The Original INS View of Employment Creation Immigrants

by Joseph P. Whalen

The Legacy INS Final Rule implementing the then-new employment-based visa classifications and petitioning procedures created by § 121 of Public Law 101-649 of November 29, 1990 [IMMACT90] was published in 56 FR of November 29, 1991, the following lengthy excerpt appeared on pages 60901-60905. This is the discussion from the Supplementary Information and includes summaries of comments on the EB-5 visa classification and the agency's responses to them.

It should be noted that Legacy INS did use some language suggesting that it purposely left open the possibility of future fundamental changes. Congress quickly reacted to the low usage of this visa classification as well as INS' strict interpretations, and thus created the "Pilot Immigration Program" featuring a new investment infrastructure component which it christened as the "Regional Center" via § 610 of Public Law 102-395 of October 6, 1992 (the Appropriations Act of 1993). While Congress specifically cited to the INS regulations, in § 610(c), which had so recently been promulgated, it remains somewhat unclear exactly which regulatory language Congress objected to. Perhaps Congress' specific objections can be deduced through a close examination of the original language used in those original regulations and the thought processes that went into them. I find it logical to examine the Federal Register Final Rule with it discussion in the supplementary information section of the Notice. This also allows us to see what concepts USCIS has, will, or should re-examine.

In 1998, AAO issued four Precedent Decisions in order to clarifying INS' interpretations of certain specific issues within the context of EB-5. Additional experience has added to the agency's and the EB-5 community's understanding of how this program could come closer to functioning as initially envisioned nearly two decades ago. Currently, USCIS is attempting to revamp the EB-5 Program and the stakeholder community has offered opinions and suggested possible changes that could improve the overall processes and procedures as well as increase the economic benefits to the United States. We shall see what results in the near future. Now for the promised lengthy Federal Register excerpt.

Employment Creation Immigrants

"In an effort to effectuate the intent of Congress in enacting the employment creation provisions of the Immigration Act of 1990 and to respond positively where possible to the comments on the proposed rule, the Service has included a number of substantive changes in the final rule.

The Title of Form I-526 referred to at 8 CFR 204.6(a) has been changed from "Petition for Immigrant Entrepreneur," which is the title of the form as found in the proposed rulemaking to "Immigrant Petition by Alien Entrepreneur." Additionally, an internal inconsistency in the proposed rulemaking has been clarified. The proposed rule stated at § 204.6(a) that "the petition must be signed by the petitioner or by his or her authorized representative," and at § 204.6(c) that it could be filed only by the alien entrepreneur. Accordingly, the reference to authorized representatives has been removed from § 204.6(a).

The Service received suggestions that District Offices and sub-offices, rather than the Service Centers, should have jurisdiction to adjudicate immigrant petitions by alien entrepreneurs. The Service has considered this alternative but concluded that the final rule should remain as proposed. The Service is concerned with uniformity of adjudication and is concentrating its training in this area at the Service Centers. The need for consistent adjudication of the often highly technical proposals in these new petitions outweighs, for the time being, any benefit offered by permitting their filing in District Offices or sub-offices.[1]

The Service has decided, however, to assign jurisdiction for adjudication[2] of Form I-526 only to the Service Center having jurisdiction over the area in which the alien entrepreneur's new commercial enterprise is principally doing business[3] . Petitioners may not file with the Service Center having jurisdiction over the area in which the enterprise is established. This change is designed to facilitate a more even distribution of petitions among the jurisdictions of the four Service Centers.

Definitions

The definition of capital was limited in the proposed rule by excluding all types of intangible property, cash equivalents, and debt financing arrangements. Two commenters recommended that intangible properly count as capital; four recommended that cash equivalent count; and fifty-six recommended that indebtedness count. Two commenters, on the other hand, felt that it was both reasonable and commercially viable to exclude debt from the definition.

Under the final rule, the definition of capital includes cash equivalents-such as certificates of deposit, Treasury bonds, or other instruments that can be converted readily into cash-and indebtedness[4] . To qualify as capital, indebtedness must be secured by assets owned by the alien entrepreneur, provided that the alien entrepreneur is personally and primarily liable and that, the assets of the new commercial enterprise upon which the petition is based are not used to secure any of the indebtedness. This requirement is designed to ensure that, by investing capital, the alien entrepreneur has placed funds or other capital assets directly at risk[5].

The Service has expanded the definition or capitol for two reasons. First, the legislative history of the Act suggests that Congress intended the definition to be broad. Discussing the employment creation provision in the Senate Report l01-55, the Senate Committee on the judiciary endorsed the requirements set out for nonimmigrant "treaty investors" at 22 CFR 41.5t. In note 5.1-2 to 22 CFR 41.51, the Department of State has indicated that "investment" includes the investment of debt. Second, the overwhelming majority of those commenting on this issue supported such a change, believing that excluding debt from the definition of capital would ignore modern business practice and severely limit the number of investors eligible or willing to apply under the employment creation provision.

The definition has also been changed to exclude assets "directly or indirectly" acquired by unlawful means. These words were added to effectuate Congress's intent that the visa process be discontinued "if it becomes known to the Government that the money invested was obtained by the alien through other than legal means (such as money obtained through the sale of illegal drugs)." S. Rep. No. 101-55, 101st Cong., 1st Sess. 21 (1989).

Fifty-seven commenters objected to the proposed definition of invest, which required the net infusion of capital into the United States economy from abroad. This requirement has therefore been eliminated in the final rule. After further review, the Service agrees that Congress has not specifically required that capital come from abroad in the statute or during its discussion in the Senate Judiciary Committee. Imposing such a requirement would therefore exceed Congressional intent, ignore modern business practices, and create grave enforcement problems.

The definition of commercial enterprise was clarified and expanded to encompass wholly-owned subsidiaries of holding companies. Ten commenters stated that the definition should be expanded, and six commenters specifically called for the inclusion of the holding company/subsidiary example under the commercial enterprise definition. Two commenters called for the definition of commercial enterprise to encompass not-for-profit entities. Because not-for-profit entities[6] do not fundamentally "engage in commerce," the Service does not find the inclusion of such entities to be consistent with the statute.

Seventeen commenters suggested that independent contractors be included in the definition of employee. The final rule defines employee to include only those persons directly employed in a full-time position by the new enterprise. This section specifically excludes independent contractors. The Service recognizes that certain business enterprises rely heavily on independent contractors, and that the required investment of capital may result in creating opportunities for new and existing independent contracts. Yet the Service interprets the Act to require the creation of long-term, full-time employment by the enterprise. Accordingly, the Service has concluded that independent contractors, whose relationship with the enterprise is less than that of employer-employee and may often last only a short time, do not properly fall within the definition of employee[7].

In the proposed rule, the definition of full-time employment did not contain a specific reference to the concept of job-sharing. The Service has added a direct reference to job-sharing and a specific exclusion of part-time employment. Under the common job-sharing arrangement, two employees simply combine to fill what is clearly demonstrated as one full-time employment position. Therefore, the Service interprets the Act to require the creation of the requisite number of full-time employment positions, even if two employees combine to fill a single position. Several commenters sought the inclusion of part-time employment within the definition through the use of various formulae for combining hours worked to obtain the equivalent of a normal work week[8] . The Service cannot accept these suggestions. Even putting aside the complications that such formulae would invite, the Act precludes their use: Section 203(b)(5) of the Act requires that the new commercial enterprise must "create full-time employment." The service therefore cannot find that part-time employment is consistent with the clear language of the statue.

The final rule includes a definition of the term troubled business. In the proposed rule, the Service sought comments relating to the concept of job creation and its relationship to job retention within a failing business. Five commenters felt that job retention should count toward meeting the statutory requirement of employment creation. Additionally, the Service determined that job retention comports with Congressional intent. See S. Debate on Conf. Rep. S 358, 136 Cong. Rec. S17105-18 (Oct. 1989). Therefore, the term "troubled business" has been defined in the final rule, and the term is referenced within the final rule at 8 CFR 204.6(j)(3)(ii) relating evidentiary requirements of employment creation.

Required Amount of Capital

The proposed rule required a capital investment or one million dollars($1,000,000) for all areas. Eighty-two commenters called for lowering the amount of capital required to make a qualifying investment in a targeted employment area to live hundred thousand dollars ($500,000). The commenters felt that lowering the investment capital requirement would promote the purpose of the Act to stimulate investment in rural and high unemployment areas. They further felt that viable businesses could be maintained with the lower investment amount. The final rule contains the lowered investment amount of five hundred thousand dollars ($500,000) for rural and high unemployment areas. No other adjustments in qualifying investment amounts were made. Although the Act gives the Attorney General authority to raise the qualifying investment amount for high employment Areas, no commenters supported such a change and the Service does not wish to pursue any increase at the outset of the program[9].

Multiple Investors

Several commenters expressed concerns that employment positions created as a result of the establishment of new enterprises by multiple investors, some of whom may not be seeking visas under the provision, should be allocated only to those alien entrepreneurs seeking classification under section 203(b)(5) of the Act. The final rule contains language permits this practice and recognizes any reasonable agreement among alien entrepreneurs regarding identification and allocation of the created positions. The final rule also makes clear that in the case of multiple investors, all sources of capital invested in the enterprise must be identified and must have been acquired by lawful means. This includes capital invested by individuals who are [and are not] seeking visas under this section.

Establishment[10] of a New Commercial Enterprise

The proposed rule allowed for three methods by which an alien entrepreneur could establish a new commercial enterprise: The creation of an original business, the purchase of an existing business with subsequent changes to that business's organization and operation, and the infusion of capital into an existing business such that a substantial increase in its net worth or number of employees resulted. Substantial was defined as140 percent or the pre-investment figure.

Ten commenters felt that the 140 percent standard was too restrictive, and 18 commentors requested clarification of both the 140 percent standard and the change of operations language. Three commenters recommended clarification of the time at which net worth was measured.

The final rule restructures and clarifies the three establishment criteria. First, the language relating to the creation of an original business has been retained. Second, the provision relating lo purchase of an existing business has been simplified, and the operational change language has been removed. Instead, the fina1 rule now states that establishment may consist of the purchase of an existing business and the restructure or reorganization of that existing business into a new commercial enterprise. Third, the language regarding establishment through the expansion of an existing business, without bringing into existence a new commercial enterprise, has been clarified. Substantial change has been defined more precisely to mean a 40 percent increase either in the net worth or in the number of employees, so that the new net worth or number of employees amounts to at least140 percent of the business' pre-expansion net worth or number of employees. For example, a business with a pre-expansion net worth of $5 million dollars would meet this criterion following a capital infusion of $2 million dollars, resulting in a net worth of $7 million dollars (i.e. 140% of pre-expansion net worth of $5 million dollars).

It was suggested that the Service abandon the 40 percent increase requirement in favor of a sliding scale rule, under which larger businesses could expand by smaller percentages and still qualify. The 40 percent rule, it was argued, might discourage investment in larger existing enterprises, since expanding by a fixed percentage becomes more difficult the larger the existing enterprise is. Although the Service appreciates this concern, it has concluded that the simplicity of application offered by the standard 40 percent rule is preferable, at least at the outset of the program. The Service has therefore, retained the 40 percent standard but will consider, after assessing how the program operates under that standard, whether some modification is desirable.

The final rule has also been changed to clarify that the investor seeking to establish a new commercial enterprise through the expansion of an existing business is not exempt from the capital amount and employment creation requirements.

State Designation of a High Unemployment Area

The proposed rule did not contain any provision under which an area within a non-rural area-i.e., within either a metropolitan statistical area or a city or town with a population of 20,000 or would qualify ns an area of high unemployment, and thus as a targeted employment area. Twelve commenters called for the Service to change the definition targeted employment area and provide a method by which a component of a non-rural area could so qualify. The Service cannot, of course, alter the statutory definition of targeted employment area. The Service has concluded, however, that the designation of smaller geographic or political areas within metropolitan statistical areas or within cities or towns with a population of 20,000 or more as areas of high unemployment would comport with the intent of Congress regarding targeted employment areas.

This part of the rule contains a method for the designation of such geographic or political subdivisions as areas of high unemployment. Under the final rule, a state government may delegate to any agency, board, or other appropriate state governmental entity the authority to certify that geographic or political subdivisions of non-rural areas within the state qualify as areas of high unemployment. The delegation must be reported to the Immigration and Naturalization Service through the Associate Commissioner for Examinations prior to issuance of any area designation. The evidence of such area designations that a state provides to a prospective alien entrepreneur should include a description of the boundaries of the geographic or political subdivision and the method or methods by which the unemployment statistics were obtained.

This portion is not intended to place an unnecessary burden upon any state. With respect to geographic and political subdivisions of this size, however, the Service believes that the enterprise of assembling and evaluating the data necessary to select targeted areas, and particularly the enterprise of defining the boundaries of such areas, should not be conducted exclusively at the Federal level without providing some opportunity for participation from state or local government. This part of the rule is merely intended to afford the states a method whereby particular areas of high unemployment within their boundaries may qualify as "targeted," and to allow alien entrepreneurs the opportunity to invest in such areas under the targeted employment area guidelines, including lowered investment amounts.

Initial Evidence

Establishment

The proposed rule contained initial evidence requirements relating to establishment of a new commercial enterprise. The final rule contains additional examples of the types of legal agreements evidencing the establishment of a new commercial enterprise. The final rule also provides for the possibility that a new commercial enterprise may be located in a jurisdiction and yet be organized in such a manner that no evidence of lawful creation may be available within that jurisdiction.

Investment

The evidentiary showing necessary to establishment that the petitioner either has invested or is in the process of investing the required amount of capital is modeled after requirements used by the Department of State for nonimmigrant "treaty investors." As with that program, the concept of investment here connotes the placing of funds or other capital assets at risk for the purpose of generating a return on the funds placed at risk. Evidence of mere intent to invest, or of prospective investment arrangements entailing no present commitment, will not suffice to show that the petitioner is actively in the process of investing. The alien must show actual commitment of the required amount of capital. The final rule contains the evidentiary categories contained in the proposed rule, as well as an added category to accommodate the revised definitions of capital and invest.

Lawful Source of Capital

The final rule requires a petitioner to furnish additional evidence as part of the initial evidentiary showing. The petitioner must submit foreign business registration records, personal and commercial tax returns, evidence identifying any other sources of capital, and evidence of judicial or administrative actions involving money judgments against the petitioner. This additional evidentiary requirement carries out Congress's instruction that "processing of an individual visa not continue under this section if it becomes known to the Government that the money invested was obtained by the alien through other than legal means (such as money received through the sale of illegal drugs)." S. Rep. 101-55, p. 21.

Employment Creation

The initial evidence requirement relating to the creation of employment has been restructured and now encompasses the concept of job retention following the infusion of capital into a troubled business. In order to demonstrate that job retention meets the employment creation criteria, the alien entrepreneur's petition must be accompanied by evidence that the number of existing employees is being maintained or will be maintained at no less than the pre-investment level for a period or at least two years. This evidence shall be submitted using a copy of a comprehensive business plan and appropriate evidence of the required number of qualifying employees, such as the 1-9 form or relevant IRS forms.

Engaged in Management

The proposed rule required the submission of evidence that the alien entrepreneur participated either in the day-to-day management or the new commercial enterprise or in policy formulation. Eight commenters objected to this requirement. The Senate Committee on the Judiciary specifically endorsed a requirement of some degree of participation on the part of the alien entrepreneur beyond mere passive investment[11]. The final rule requires evidence of such participation and contains additional language to address restrictions placed on limited partners.

Targeted Employment Areas

The proposed rule required the petitioner to provide evidence that the new commercial enterprise has been established within a targeted employment area. The final rule carries over this requirement but also provides for the submission by the petitioner of a letter from an authorized body of a State government which certifies that a particular geographic or political subdivision within a non-rural area qualifies as an area of high unemployment. Under the proposed rule, the high unemployment criteria could only be applied to metropolitan statistical areas or to cities or towns with a population of 20,000 or more. The final rule at 8 CFR 204.6(i) allows for designation of smaller areas within metropolitan statistical areas or within cities or towns with a population of 20,000 or more to be designated as areas of high unemployment, and the evidentiary requirement or letter from a State government entity is contained therein. The final rule also relaxes requirements governing the source of data showing that an area is one of high unemployment and permits petitioners to submit evidence, without obtaining State certification that a county within a metropolitan statistical area is one of high unemployment.

Removal of Conditions

The Service will publish a separate rule establishing the procedures and criteria for removal of the conditional basis of residence for employment creation immigrants. These procedures and criteria will take into account the requirements set forth in this rule, experience gained through the operation of the employment creation program, the views of the Interagency Working Croup discussed below, and the Service's considerable experience in the process for removing conditions established by the Immigration Marriage Fraud Amendment of 1986.

Interagency Working Croup

The Office of Management and Budget (OMB) has determined that, because of the employment creation provisions of 8 CFR 204.6, this is a major rule within the meaning of section 1(b) of Executive Order 12291. Under section 8(b) of E.O. 12291, OMB 11 exempting INS from preparing for this specific rule the regulatory impact analysis ordinarily required for a major rule. However, in the interest of public policy analysis and in order to assess the economic impact of the employment creation visa program, the Department of Justice and the Service have established an interagency working group chaired by the Service and composed of representatives from the Departments of State, Commerce, Treasury, Agriculture, and Labor and the Small Business Administration. The Service is now developing, in consultation with OMB, the formula by which the working group will collect and analyze data over a two-year period on such economic and demographic aspects of the program as level of investment, size of business, type of industry, and impact on targeted employment areas. The working group will focus on indicators of the program's success, such as estimates of how the program has affected different economic sectors and whether program investments hove created long-term employment. As the Service devised the proposed and final rules, agencies within the working group contributed data on such issues as how to define targeted areas and where to set minimum investment levels.

Finally, this rule amends 8 CFR Part 103 to reflect that appellate jurisdiction over decisions on petitions for immigrant visa classification based on employment or as a special immigrant or entrepreneur under 8 CFR 204.5 and 8CFR 204.6 rests with the Associate Commissioner, Examinations, except when denial of the petition is based upon lack of labor certification. * * * * *

The original EB-5 regulations were written solely for the individual alien entrepreneurs because the Regional Center had not been created yet. In order to decipher Congressional intent for the "Pilot Immigration Program" (or as I prefer to think of it: the "Employment Creation Immigrant Visa Program"), as well as the primary component of said Program, specifically, the "Regional Center", we also have to look at the original EB-5 regulations. Here they are:

8 CFR § 204.6 (01-01-1993)

§ 204.6 Petitions for employment creation aliens.

(a) General A petition to classify an alien under section 203(b)(5) of theAct must be filed on Form I-526, Immigrant Petition by Alien Entrepreneur. The petition must be accompanied by the appropriate fee. Before a petition is considered properly filed, the petition must be signed by the petitioner, and the initial supporting documentation required by this section must be attached. Legible photocopies of supporting documents will ordinarily be acceptable for initial filing and approval. However, at the discretion of the director, original documents may be required.

(b) Jurisdiction. The petition must be filed with the Service Center having jurisdiction over the area in which the new commercial enterprise is or will be principally doing business.

(c) Eligibility to file. A petition for classification as an alien entrepreneur may only be filed by any alien on his or her own behalf.

(d) Priority date[12]. The priority date of a petition for classification as an alien entrepreneur is the date the petition is properly filed with the Service or, if filed prior to the effective date of these regulations, the date the Form I-526 was received at the appropriate Service Center.

(e) Definitions. As used in this section:

Capital means cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets owned by the alien entrepreneur, provided that the alien entrepreneur is personally and primarily liable and that the assets of the new commercial enterprise upon which the petition is based are not used to secure any of the indebtedness. All capital shall be valued at fair market value in United States dollars. Assets acquired, directly or indirectly, by unlawful means (such as criminal activities) shall not be considered capital for the purposes of section 203(b)(5) of the Act.

Commercial enterprise means any for-profit activity formed for the ongoing conduct of lawful business including, but not limited to, a sole proprietorship, partnership (whether limited or general), holding company, joint venture, corporation, business trust, or other entity which may be publicly or privately owned. This definition includes a commercial enterprise consisting of a holding company and its wholly-owned subsidiaries, provided that each such subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business. This definition shall not include a noncommercial activity such as owning and operating a personal residence.

Employee means an individual who provides services or labor for the new commercial enterprise and who receives wages or other remuneration directly from the new commercial enterprise. This definition shall not include independent contractors[13].

Full-time employment means employment of a qualifying employee by the new commercial enterprise in a position that requires a minimum of 35 working hours per week. A job-sharing arrangement whereby two or more qualifying employees share a full-time position shall count as full-time employment provided the hourly requirement per week is met. This definition shall not include combinations of part-time positions even if, when combined, such positions meet the hourly requirement per week[14].

High employment area means a part of a metropolitan statistical area that at the time of investment:

(i) Is not a targeted employment area; and

(ii) Is an area with an unemployment rate significantly below the national average unemployment rates.

Invest means to contribute capital. A contribution of capital in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement between the alien entrepreneur and the new commercial enterprise does not constitute a contribution of capital for the purposes of this part.

New means established after November 29, 1990.

Qualifying employee means a United States citizen, a lawfully admitted permanent resident, or other immigrant lawfully authorized to be employed in the United States including, but not limited to, a conditional resident, a temporary resident, an asylee, a refugee, or an alien remaining in the United States under suspension of deportation. This definition does not include the alien entrepreneur, the alien entrepreneur's spouse, sons, or daughters, or any nonimmigrant alien[15].

Rural area means any area not within either a metropolitan statistical area (as designated by the Office of Management and Budget) or the outer boundary of any city or town having a population of 20,000 or more.

Targeted employment area means an area which, at the time of investment, is a rural area or an area which has experienced unemployment of at least 150 percent of the national average rate.

Troubled business means a business that has been in existence for at least two years, has incurred a net loss for accounting purposes (determined on the basis of generally accepted accounting principles) during the twelve or twenty-four month period prior to the priority date on the alien entrepreneur's Form I-526, and the loss for such period is at least equal to twenty percent of the troubled business's net worth prior to such loss. For purposes of determining whether or not the troubled business has been in existence for two years, successors in interest to the troubled business will be deemed to have been in existence for the same period of time as the business they succeeded.

(f) Required amounts of capital

(1) General. Unless otherwise specified, the amount of capital necessary to make a qualifying investment in the United States is one million United States dollars ($1,000,000).

(2) Targeted employment area. The amount of capital necessary to make a qualifying investment in a targeted employment area within the United States is five hundred thousand United States dollars ($500,000).

(3) High employment area. The amount of capital necessary to make a qualifying investment in a high employment area within the United States, as defined in section 203(b)(5)(C)(iii) of the Act, is one million United States dollars ($1,000,000).

(g) Multiple investors-

(1) General. The establishment of a new commercial enterprise may be used as the basis of a petition for classification as an alien entrepreneur by more than one investor, provided each petitioning investor has invested or is actively in the process of investing the required amount for the area in which the new commercial enterprise is principally doing business, and provided each individual investment results in the creation of at least ten full-time positions for qualifying employees. The establishment of a new commercial enterprise may be used as the basis of a petition for classification as an alien entrepreneur even though there are several owners of the enterprise, including persons who are not seeking classification under section 203(b)(5) of the Act and non-natural persons, both foreign and domestic, provided that the source(s) of all capital invested is identified and all invested capital has been derived by lawful means.

(2) Employment creation allocation[16]. The total number of full-time positions created for qualifying employees shall be allocated solely to those alien entrepreneurs who have used the establishment of the new commercial enterprise as the basis of a petition on Form I-526. No allocation need be made among persons not seeking classification under section 203(b)(5) of the Act or among non-natural persons, either foreign or domestic. The Service shall recognize any reasonable agreement made among the alien entrepreneurs in regard to the identification and allocation of such qualifying positions.

(h) Establishment of a new commercial enterprise. The establishment of a new commercial enterprise may consist of:

(1) The creation of an original business;

(2) The purchase of an existing business and simultaneous or subsequent restructuring or reorganization such that a new commercial enterprise results; or

(3) The expansion of an existing business through the investment of the required amount, so that a substantial change in the net worth or number of employees results from the investment of capital. Substantial change means a 40 percent increase either in the net worth, or in the number of employees, so that the new net worth, or number of employees amounts to at least 140 percent of the pre-expansion net worth or number of employees. Establishment of a new commercial enterprise in this manner does not exempt the petitioner from the requirements of 8 CFR 204.6(j) (2) and (3) relating to the required amount of capital investment and the creation of full-time employment for ten qualifying employees. In the case of a capital investment in a troubled business, employment creation may meet the criteria set forth in 8 CFR 204.6(j)(4)(ii).

(i) State designation of a high unemployment area. The state government of any state of the United States may designate a particular geographic or political subdivision located within a metropolitan statistical area or within a city or town having a population of 20,000 or more within such state as an area of high unemployment (at least 150 percent of the national average rate). Evidence of such designation, including a description of the boundaries of the geographic or political subdivision and the method or methods by which the unemployment statistics were obtained, may be provided to a prospective alien entrepreneur for submission with Form I-526. Before any such designation is made, an official of the state must notify the Associate Commissioner for Examinations of the agency, board, or other appropriate governmental body of the state which shall be delegated the authority to certify that the geographic or political subdivision is a high unemployment area.

(j) Initial evidence to accompany petition. A petition submitted for classification as an alien entrepreneur must be accompanied by evidence that the alien has invested or is actively in the process of investing lawfully obtained capital in a new commercial enterprise in the United States which will create full-time positions for not fewer than 10 qualifying employees. The petitioner may be required to submit information or documentation that the Service deems appropriate in addition to that listed below.

(1) To show that a new commercial enterprise has been established by the petitioner in the United States, the petition must be accompanied by:

(i) As applicable, articles of incorporation, certificate of merger or consolidation, partnership agreement, certificate of limited partnership, joint venture agreement, business trust agreement, or other similar organizational document for the new commercial enterprise;

(ii) A certificate evidencing authority to do business in a state or municipality or, if the form of the business does not require any such certificate or the State or municipality does not issue such a certificate, a statement to that effect; or

(iii) Evidence that, as of a date certain after November 29, 1990, the required amount of capital for the area in which an enterprise is located has been transferred to an existing business, and that the investment has resulted in a substantial increase in the net worth or number of employees of the business to which the capital was transferred. This evidence must be in the form of stock purchase agreements, investment agreements, certified financial reports, payroll records, or any similar instruments, agreements, or documents evidencing the investment in the commercial enterprise and the resulting substantial change in the net worth, number of employees.

(2) To show that the petitioner has invested or is actively in the process of investing the required amount of capital, the petition must be accompanied by evidence that the petitioner has placed the required amount of capital at risk for the purpose of generating a return on the capital placed at risk. Evidence of mere intent to invest, or of prospective investment arrangements entailing no present commitment, will not suffice to show that the petitioner is actively in the process of investing[17]. The alien must show actual commitment of the required amount of capital. Such evidence may include, but need not be limited to:

(i) Bank statement(s) showing amount(s) deposited in United States business account(s) for the enterprise;

(ii) Evidence of assets which have been purchased for use in the United States enterprise, including invoices, sales receipts, and purchase contracts containing sufficient information to identify such assets, their purchase costs, date of purchase, and purchasing entity;

(iii) Evidence of property transferred from abroad for use in the United States enterprise, including United States Customs Service commercial entry documents, bills of lading, and transit insurance policies containing ownership information and sufficient information to identify the property and to indicate the fair market value of such property;

(iv) Evidence of monies transferred or committed to be transferred to the new commercial enterprise in exchange for shares of stock (voting or nonvoting, common or preferred). Such stock may not include terms requiring the new commercial enterprise to redeem it at the holder's request; or

(v) Evidence of any loan or mortgage agreement, promissory note, security agreement, or other evidence of borrowing which is secured by assets of the petitioner, other than those of the new commercial enterprise, and for which the petitioner is personally and primarily liable.

(3) To show that the petitioner has invested, or is actively in the process of investing, capital obtained through lawful means, the petition must be accompanied, as applicable, by:

(i) Foreign business registration records;

(ii) Corporate, partnership (or any other entity in any form which has filed in any country or subdivision thereof any return described in this subpart), and personal tax returns including income, franchise, property (whether real, personal, or intangible), or any other tax returns of any kind filed within five years, with any taxing jurisdiction in or outside the United States by or on behalf of the petitioner;

(iii) Evidence identifying any other source(s) of capital; or

(iv) Certified copies of any judgments or evidence of all pending governmental civil or criminal actions, governmental administrative proceedings, and any private civil actions (pending or otherwise) involving monetary judgments against the petitioner from any court in or outside the United States within the past fifteen years.

(4) Job creation-

(i) General. To show that a new commercial enterprise will create not fewer than ten (10) full-time positions for qualifying employees, the petition must be accompanied by:

(A) Documentation consisting of photocopies of relevant tax records, Form 1-9, or other similar documents for ten (10) qualifying employees, if such employees have already been hired following the establishment of the new commercial enterprise; or

(B) A copy of a comprehensive business plan showing that, due to the nature and projected size of the new commercial enterprise, the need for not fewer than ten (10) qualifying employees will result, including approximate dates, within the next two years, and when such employees will be hired.

(ii) Troubled business. To show that a new commercial enterprise which has been established through a capital investment in a troubled business meets the statutory employment creation requirement, the petition must be accompanied by evidence that the number of existing employees is being or will be-maintained at no less than the pre-investment level for a period of at least two years. Photocopies of tax records, Forms 1-9, or other relevant documents for the qualifying employees and a comprehensive business plan shall be submitted in support of the petition.

(5) To show that the petitioner is or will be engaged in the management of the new commercial enterprise, either through the exercise of day-to-day managerial control or through policy formulation, as opposed to maintaining a purely passive role in regard to the investment, the petition must be accompanied by:

(i) A statement of the position title that the petitioner has or will have in the new enterprise and a complete description of the position's duties;

(ii) Evidence that the petitioner is a corporate officer or a member of the corporate board of directors; or

(iii) If the new enterprise is a partnership, either limited or general, evidence that the petitioner is engaged in either direct management or policy making activities. For purposes of this section, if the petitioner is a limited partner and the limited partnership agreement provides the petitioner with certain rights, powers, and duties normally granted to limited partners under the Uniform Limited Partnership Act, the petitioner will be considered sufficiently engaged in the management of the new commercial enterprise[18].

(6) If applicable, to show that the new commercial enterprise has created or will create employment in a targeted employment area, the petition must be accompanied by:

(i) In the case of a rural area, evidence that the new commercial enterprise is principally doing business within a civil jurisdiction not located within any standard metropolitan statistical area as designated by the Office of Management and Budget, or within any city or town having a population of 20,000 or more as based on the most recent decennial census of the United States; or

(ii) In the case of a high unemployment area:

(A) Evidence that the metropolitan statistical area, the specific county within a metropolitan statistical area, or the county in which a city or town with a population of 20,000 or more is located, in which the new commercial enterprise is principally doing business has experienced an average unemployment rate of 150 percent of the national average rate; or

(B) A letter from an authorized body of the government of the state[19] in which the new commercial enterprise is located which certifies that the geographic or political subdivision of the metropolitan statistical area or of the city or town with a population of 20,000 or more in which the enterprise is principally doing business has been designated a high unemployment area. The letter must meet the requirements of 8 CFR 204.6(i).

(k) Decision. The petitioner will be notified of the decision, and, if the petition is denied, of the reasons for the denial and of the petitioner's right of appeal to the Associate Commissioner for Examinations in accordance with the provisions of part 103 of this chapter. The decision must specify whether or not the new commercial enterprise is principally doing business within a targeted employment area.

(l) Disposition of approved petition. The approved petition will be forwarded to the United States consulate selected by the petitioner and indicated on the petition. If a consulate has not been designated, the petition will be forwarded to the consulate having jurisdiction over the place of the petitioner's last residence abroad. If the petitioner is eligible for adjustment of status to conditional permanent residence, and if the petition indicates that the petitioner intends to apply for such adjustment, the approved petition will be retained by the Service for consideration in conjunction with the application for adjustment of status.

[56 FR 60910, Nov. 29, 1991, as amended at 57 FR 1860, Jan. 16, 1992]


So when Congress pushed through the first legislative change to the EB-5 category, it created the Regional Center within an undefined Pilot Program. The new statute stated that "[i]n determining compliance ...notwithstanding the requirements of 8 CFR 204.6, the Attorney General shall permit aliens .... to establish reasonable methodologies for determining the number of jobs created by the pilot program, including such jobs which are estimated to have been created indirectly .... resulting from the pilot program."

Original SEC. 610 PILOT IMMIGRATION PROGRAM-

(a) Of the visas otherwise available under section 203(b)(5) of the Immigration and Nationality Act (8 U.S.C. 1153(b)(5)), the Secretary of State, together with the Attorney General, shall set aside visas for a pilot program to implement the provisions of such section. Such pilot program shall involve a regional center in the United States for the promotion of economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment.

(b) For purposes of the pilot program established in subsection (a), beginning on October 1, 1992, but no later than October 1, 1993, the Secretary of State, together with the Attorney General, shall set aside 300 visas annually for five years to include such aliens as are eligible for admission under section 203(b)(5) of the Immigration and Nationality Act and this section, as well as spouses or children which are eligible, under the terms of the Immigration and Nationality Act, to accompany or follow to join such aliens.

(c) In determining compliance with section 203(b)(5)(A)(iii) of the Immigration and Nationality Act, and notwithstanding the requirements of 8 CFR 204.6, the Attorney General shall permit aliens admitted under the pilot program described in this section to establish reasonable methodologies for determining the number of jobs created by the pilot program, including such jobs which are estimated to have been created indirectly through revenues generated from increased exports resulting from the pilot program.


Although additional amendments would be made and the alien entrepreneur would affirmatively be alternatively redefined as a true "investor" who would not be required to actually "establish" a "new" "commercial enterprise", what was the initial regulatory verbiage that Congress disliked? Also, what specific discussion from the rule was also in Congress' sights? Lastly, which concepts from the initial rule did Congress seek to expand and which concepts that were discussed but discarded by INS in the rulemaking did Congress seek to revive? These are not easy questions to answer so this is only a "best guess" which does not include an in-depth dissection of the Congressional Record.

The first thing that jumps out at me is the issue of which jobs could be included for the purpose of determining compliance. Congress specifically stated that the agency "shall permit" "jobs which are estimated to have been created indirectly". Harkening back to what had actually transpired to that point in time:

  • INS had defined jobs that it would accept in terms of an actual employer-employee relationship; and
  • INS had discarded the inclusion of independent contractor or any full-time equivalents (FTEs) from the part-time employment as could be determined through the use of various formulae for combining hours worked to obtain the equivalent of a normal work week.

Was Congress tossing out all of INS' reasoning, arguments, and objections expressed as of that date? In the reactionary legislation creating the Pilot Program and Regional Centers, Congress stated that the agency "shall permit aliens admitted under the pilot program described in this section to establish reasonable methodologies for determining the number of jobs created by the pilot program".

Coupled with the discussion and rejection of the commenters suggestions in the 1991 rulemaking and I have to ask: Precisely how far was Congress opening this door? Has USCIS finally decided to unblock the door that INS struggled so hard to keep as tightly shut as possible? Please, look at the underlying FR discussions and the original EB-5 regulations and re-examine the things that Congress was tossing aside when it created the "Pilot Immigration Program" and its principal component, i.e., the "Regional Center". Which concepts need further development? Are there any gaps that still need to be filled? What are they and how should such gaps be filled? Are there any econometric concepts that need to be imported? Are there any such concepts that simply do not belong? What concepts emanating from the real-world of business have not been properly addressed? How should such oversights be addressed? These questions would best be answered through discussion, negotiation, and perhaps notice-and-comment rulemaking.

I believe that if these questions are allowed to linger and fester, they will be addressed by some Circuit Court Judges. For that to happen, it would likely be the apex of an already very bad situation being made worse through the imposition of even lousier and more impractical concepts and ideas than what the EB-5 stakeholder community and USCIS could come up with through sensible communication and cooperative efforts. What did USCIS ask for in the November 2011, Draft Memo? Let me remind you.

The Message from USCIS Director Alejandro Mayorkas included this blurb:

"Additional reforms are planned. Importantly, USCIS also has reviewed its various EB-5 policy memoranda and determined that they should be consolidated into a single overarching agency policy memorandum. This memorandum will incorporate constructive stakeholder input and reflect the lessons learned since the various memoranda were initially promulgated. Given the number and complexity of issues involved, USCIS will develop this single EB-5 policy memorandum in iterative fashion, seeking public comment as the draft policy memorandum progresses."

George Santayana[20] [Dec. 16, 1863 - Sept. 26, 1952] is known for various sayings from his philosophic writing. "Those who cannot remember the past are condemned to repeat it" and variants comes from Reason in Common Sense, volume 1 of The Life of Reason (1905). Please don't ignore lessons from history.



1This concept has been re-visited and resulted in further concentration of efforts to a single Service Center for all EB-5 adjudications. See 74 FR 912-913 January 9, 2009. http://www.justice.gov/eoir/vll/fedreg/2008_2009/fr09jan09.pdf
2Id.
3This consideration had a practical basis two decades ago when legal research was less easy. The technological advances brought about by the exponential growth of the internet has made legal research and even fact-checking into a business' standing easier. One can even see a building remotely via online satellite images or Google Map's street views.
4The infamous substandard promissory notes came from this but were affirmatively blocked by later AAO Precedents.
5The escrow agreement became an accepted mechanism to demonstrate that capital had been placed "at risk" that is, committed to the project. However, escrow is not an actual requirement and may be detrimental by tying up funds needlessly.
6There have been recent (2011 and 2012) suggestions that Regional Center applicants or principals should include not-for-profit entities. This also makes no sense for the same reasons. If this were allowed, then someone would attempt to turn Regional Centers into ethnic or cultural associations. I believe that they would then attempt to foster mom-n-pop businesses in ethnic enclaves alone without achieving the true regional economic growth envisioned by Congress.
7The issues of "independent contractors" and the true "employer-employee relationship" were almost defeated by creation of the Pilot Program. However, when INS won its the war of words in Spencer, USCIS was stuck for a while with the interpretation that the full-time employment requirement excluded jobs that are intermittent, temporary, seasonal or transient in nature. See, e.g., Spencer Enterprises v. U.S., 229 F.Supp.2d 1025 (E.D.Cal. 2001). For example, historically, construction jobs have not been counted toward job creation because they were seen as intermittent, temporary, seasonal and transient rather than permanent. USCIS, however, later re-interpreted such that direct and indirect construction jobs that are created by the petitioner's investment and that are expected to last at least 2 years, inclusive of when the petitioner's I-829 is filed, may now count as permanent jobs. Although employment in some industries such as construction or tourism can be intermittent, temporary, seasonal or transient, officers should not exclude jobs simply because they fall into such industries.
8With the inclusion of wording in § 610(c) directing the agency to permit aliens to establish reasonable methodologies for determining the number of jobs created by the Pilot Program coupled with what has been learned through the years about accepted input-output econometric modeling, USCIS needs to allow and accept FTEs that include multiple part-time jobs, independent contractors, and construction jobs.
9A million dollars is not what it used to be. The minimum amounts need to be adjusted upward.
10The "establishment" requirement was affirmatively quashed by a later amendment that specifically allows for virtually passive investment in a limited partnership.
11Id.
12The concept of a priority date has until now been basically an unaddressed concept because until now (2012) it has never even been a possibility that the full 10,000 annual maximum would ever be reached. Unfortunately, Congress made the Entrepreneur/Investor Immigrant Visa into a preference category visa rather than the "special immigrant" that it was originally. Congress made a mistake in doing it this way.
13Supra.
14Supra.
15This concept has been there for decades and comes from the earlier incarnation of the regulatory labor certification exemption.
16This concept is far too overlooked especially within Regional Center Project Plans that fail to strive for a mix of EB-5 and domestic funds.
17These concepts were well grounded in administrative case-law in connection with the earlier wholly regulatory immigrant investor labor certification exemption. See Matter of Liu, 15 I&N Dec. 206 (BIA 1975) Matter of Khan, 16 I&N Dec. 138 (BIA 1977) as later reinforced via Matter of Izummi, 22 I&N Dec. 169 (AAO 1998) and 8 CFR § 212.8 (b)....(4) an alien who establishes on Form I-526 that he has invested, or is actively in the process of investing, capital totaling at least $40,000 in an enterprise 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 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. ...... .
18This concept was adopted by Congress and made statutory by an amendment which also basically transformed the entrepreneur into the "passive investor" that the Senate initially did not want to encourage. The basic "voting rights" of a Limited Partner is now "good enough". At that time, the U.S. did not want to replicate the investor programs found elsewhere that allow visas for buying Government bonds or securities, or merely buying a home of a certain minimum value.
19AAO on behalf of USCIS has expressed its displeasure that this delegation of authority has been misused to gerrymander TEAs. I would not be surprised if this gets updated soon.
20Born Jorge Agustín Nicolás Ruiz de Santayana y Borrás in Madrid, Spain.


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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