On Sep 14 2021 by H. Ronald Klasko

EB-5 Program: Unprecedented Times, Uncertain Choices Part 1

Investors, regional centers, and project developers are in a state of suspended animation. Should they act based on the assumption that the regional center program will be continued? Should they act based on the assumption that they can invest at $500,000?  

There is no right or wrong answer; there are only educated guesses. If you read this blog, you will learn my educated guesses. Based on my educated guesses, I will share my thoughts on what EB-5 program investors and regional centers/project developers should do in this interim period.  

Regional Center Program Extension

Will the regional center program be extended? I believe it will be, but I am less certain than I was a month ago. No major figure wants the regional center program to die. However, a caveat to that is that Senator Grassley might prefer to see the program die rather than be extended without the reforms that he insists on.

The reason for my lower confidence level is that the EB-5 industry is not united. If the EB-5 industry cannot agree on a strategy, how can we expect Congress to agree? The possible good news is that the various factions within the EB-5 industry are attempting to find a compromise. The bad news is that the success of those efforts is highly speculative.  

From my perspective, there are only two points on which everyone agrees. The first is that the program needs to be extended. Realistically, given the divisive state of Congress and the dwindling number of legislative days before September 30, that may be the only strategy that really makes sense. The second point that everyone agrees on is that investors who have invested and filed I-526 petitions should be grandfathered no matter what happens now or in the future to the regional center program. Even if the program is extended, grandfathering is important for investors’ peace of mind now and in the future.  

Everything else – – investment amount; TEA definition; enhanced compliance; quota relief for Chinese investors; paroling investors; etc. – – is, unfortunately, likely to be unrealistic given the short time frame and disinclination of Congress to deal with immigration legislation. 

Why did I mention a short timeframe? In my opinion, September 30 is a critical date. It is the end of the government’s fiscal year. It is a deadline of sorts. If the program is extended to September 30, it gets matched up with three other immigration programs that are “must extend” programs every year. The EB-5 program was always on the same schedule as those programs until it was decoupled in 2020. If September 30 comes and goes without an extension, there is no deadline on the horizon; and the chances of an extension go down. 

$500,000 Investments  

Will the investment amount remain at $500,000? It is not going out on a limb to state that the investment amount will increase. The harder question is when and by what means. It is possible it will be extended by legislation, but I think that is unlikely given the divisions that revolve around TEA investments and how TEA is defined.

I believe that an increase by regulation is most likely. There are complicated questions regarding how and when this will happen. It is unclear if DHS could simply publish a regulation increasing the investment amount effective immediately. The argument that this can happen is that the APA notice and comment procedure was already completed in 2019 and does not have to be done again. USCIS could possibly attempt to issue a regulation effective immediately based upon the 2019 notice and comment. So why hasn’t it done so? It is possible that there are internal issues being raised within DHS as to whether a new notice and comment period is required. If that is the case, we would be many months away from an effective regulation.  

How does the USCIS appeal of the decision of the Northern District of California federal court factor into this discussion? This, too, is complicated. What are the possibilities? One possibility, which I think is very possible and even likely, is that USCIS will withdraw its appeal once it issues a new regulation so as not to risk a negative Court of Appeals precedent. If this scenario plays out, the regulation would have prospective effect only; and all investments prior to the effective date of the regulation would be approved at pre-November 2019 levels.  

The next most likely possibility, in my opinion, is that the 9th Circuit Court of Appeals will uphold the decision of the District Court. I believe the decision of the District Court regarding the improper appointment of the DHS Secretary and the violation of the Federal Vacancies Reform Act is correct; and it is supported by a multiplicity of federal court decisions. If that happens, all investments in TEAs at $500,000 would be approvable up until the effective date of any new regulation.  

The third possibility – – less likely in my opinion – – is that the Circuit Court reverses the decision of the District Court; and rules that the November 2019 regulation is valid. Presumably, this would mean that the regulation was always valid, which would result in any I-526 petition filed subsequent to November 2019 based on a $500,000 investment being denied.  

Is it possible that, if the Court of Appeals reverses the District Court, it could issue a decision that would provide some relief for investors who relied on the District Court decision? Possible, but in my opinion, unlikely. The Court of Appeals would have to engage in a fair degree of judicial activism in order to provide protection to investors who invested in reliance on the District Court decision. 

How about USCIS? Could USCIS take action that would protect investors who invested in reliance on the USCIS website, which has indicated that a $500,000 TEA investment is sufficient based on the court decision? It could do so, presumably, although its history of administering the EB-5 program would suggest otherwise.  

If it does not approve $500,000 investments despite the fact that its website advised investors that $500,000 investments were approvable, there is a possible middle ground. It could allow investors to increase their investments after the filing of the I-526 petitions to meet the higher level. The argument against that is the USCIS position that a petition must be approvable when filed. If a $500,000 investment is not approvable, allowing a subsequent investment might be considered contrary to USCIS policy and/or precedent. 

If USCIS does not take ameliorative action, federal court litigation on behalf of $500,000 investors may be possible. The basis for the litigation would be the good faith reliance of the investors on the published advice of USCIS. However, this type of litigation – – known as estoppel – – has traditionally been disfavored by the courts.  

In summary, assuming the regional center EB-5 program is reauthorized before the investment amount is increased, there may be a window of opportunity for $500,000 regional center investments. Investors would be taking the risk that the Ninth Circuit Court of Appeals could reverse the District Court decision and that neither the Court nor USCIS would grant relief to investors who invested $500,000. Such investors would not be at risk of a legislative or regulatory increase in the investment amount, since those actions would be prospective only. Only a court decision could have retroactive impact. 

Part 2 of this blog will address the options and strategies of EB-5 program investors and regional centers/project developers based on the educated guesses and possible scenarios spelled out above. 

 

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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