Some of the most complex issues that we confront as EB-5 lawyers involve condition removal (I-829) applications. This blog discusses three issues that often arise and how we have successfully addressed these issues.
EB-5 Immigrant Investors are required to file Form I-829 (Petition by Investor to Remove Conditions on Permanent Resident Status) within the 90-day period immediately before the second anniversary of their conditional permanent resident status. In the I-829 petition filing, immigrant investors must submit the following evidence to demonstrate their eligibility for removal of conditions:
- The immigrant investor has sustained his or her investment capital throughout the applicable sustainment period; and
- The new commercial enterprise (NCE) created or can be expected to create, within a reasonable time, at least 10 full-time positions for qualifying employees.
Sustainment of Investment
The immigrant investors must provide evidence to show that they have sustained the investments throughout the sustainment period mandated by the applicable statutes and regulations. USCIS frequently relies on the Schedule K-1s issued to the investors by the NCEs to determine whether the immigrant investors have sustained their investments. Due to different accounting and cost allocation methods, the immigrant investors’ capital balance on the K-1s could sometimes drop below the minimum requisite amount, despite the fact that the NCEs have not returned the investment capital to the investors. This has been a frequent issue that results in a request for evidence (RFE).
Proving sustainment of investment is even more challenging in cases where the NCE takes the position that it is not required to issue K-1s to its investors for various reasons, or the project has ceased operations and its tax records are no longer available by the time of the I-829 filing.
In these cases, an analysis of the NCE’s investors’ paid-in capital on the NCE/JCE’s financial statements may help support the conclusion that the investors have not received a return on their investment capital. In the case of troubled projects, such as when a project has filed for bankruptcy, we may be able to use bankruptcy court records to demonstrate that it is not possible for the investors to have received a return on their investments, as there were no liquidation proceeds left after the senior lenders were paid off.
Evidence of Job Creation
In direct investment cases, the petitioner needs to demonstrate the NCE has created at least 10 full-time positions for qualifying employees. “Full-time positions” are defined as those that require a minimum of 35 hours per week, and are not intermittent, temporary, seasonal, or transient in nature. “Qualifying employees” are employees who are U.S. citizens, lawful permanent residents, or other immigrants lawfully authorized to be employed in the United States. Presenting evidence that clearly documents the project’s creation of direct jobs meeting the aforementioned requirements can be challenging, especially in cases where the business has ceased operation or is in an industry with a traditionally high turnover rate. In addition, businesses are typically required to retain payroll records for only a limited number of years. Due to the excessively long USCIS processing times and visa backlogs for investors from certain countries, these records may no longer be available by the time the investors need to file their I-829 petitions.
These types of cases usually require us to conduct an extensive audit of the NCE’s payroll records over the years to identify employees who have worked at least 35 hours a week for a certain period of time. Further, pursuant to Matter of Ho, 22 I&N Dec. 212, 213 (Assoc. Comm’r 1998), in making the determination as to whether or not the immigrant investor has created the requisite number of jobs, USCIS does not require that the jobs still be in existence at the time of the petition to remove conditions adjudication in order to be credited to the investor. Instead, the job creation requirement is met if the investor can show that at least 10 full-time jobs for qualifying employees were created by the new commercial enterprise as a result of his or her investment, and such jobs were considered to be permanent jobs when created. Therefore, even if some of the positions no longer exist by the time of I-829 filing, or did not last for 2 years or longer, a reasonable argument can still be made that the job creation requirements have been satisfied if the jobs, when created, were expected to last for at least 2 years and were not intermittent, temporary, seasonal, or transient in nature.
In cases where there is no payroll report to directly show the employees’ work hours, we may be able to take the total compensation paid to each employee during a given period, which is usually available on the entity’s tax filings, and divide it by the employee’s hourly rate or monthly wage indicated in the employee’s employment contract. This allows us to identify employees who more likely than not have worked at least 35 hours a week at the NCE. When necessary, we also work with forensic accountants to produce forensic accounting reports to support the petitioner’s job creation claim.
If a regional center investor seeks to demonstrate job creation through the use of an economic input-output model, the investor must demonstrate that the methodology is reasonable. Where the inputs into the model reflect jobs created by expenditures and/or revenue, the investor must submit documentation to substantiate these inputs. The standard of review for I-829 petitions is the preponderance of evidence. Therefore, theoretically, the petitioner need only show that it is more likely than not that all the expenditures have been spent, and/or the revenue has been generated. However, USCIS in some cases, requests projects to submit all the receipts and financial records to prove expenditures and/or revenues. This would require the project to submit thousands of pages of documents, which is burdensome and arguably unnecessary. We have successfully overcome RFEs in the past by submitting invoices and records just enough to substantiate input numbers sufficient for all investors to remove conditions. For instance, if a project is only required to create 200 jobs for all investors to remove conditions, but has in fact created 250 construction jobs and 50 revenue jobs, in response to USCIS’s RFE for proof of all construction expenditures and credible financial statements to support all the revenue numbers, we submitted proof of expenditures for the 200 construction jobs only. Our argument is that, with or without the additional jobs, the investors have established eligibility for removal of conditions. This significantly reduces the documentation burden on our project clients.
Redeployment
In reality, due to the lengthy processing times and visa backlog for investors from certain countries, projects are often complete (or even sold) before some investors reach the end of their sustainment periods. Projects in these cases may need to redeploy the investors’ investment capital to fulfill the sustainment requirements. The EB-5 Reform and Integrity Act of 2022 has set forth the parameters for redeployment of capital. We sometimes encounter RFEs questioning whether a project’s redeployment of capital meets program requirements—for example, whether the investors’ funds in the redeployment project continue to be maintained at-risk, or whether there is a clear paper trail tracing the investors’ funds from the original project to the redeployment project.
We respond to these types of RFEs by submitting reinvestment statements and offering documents to show that the investment in the redeployment project continues to be at risk. We usually also submit bank statements tracing the investors’ capital from the original JCE to the original NCE, and then to the redeployment project entities. If not all investors’ investment capital was redeployed—either because some of them have completed their sustainment periods or are no longer seeking EB-5 immigration benefits—it is important that we earmark the investors’ funds to clearly show whose capital was redeployed and whose was not. Additionally, existing USCIS policies generally require projects to redeploy the investment within one year. For projects that failed to redeploy within that time frame, we have successfully overcome RFEs by arguing that each redeployment should be evaluated on a case-by-case basis and that extenuating circumstances, such as the impact of COVID on commercial real estate, made it unrealistic for the project to identify a feasible redeployment opportunity within a year.
Although receiving an extensive RFE on an I-829 filing that has been pending for many years can be a stress-inducing event, we are often able to overcome these RFEs through a combination of detailed evidence gathering and creative legal arguments. As experienced EB-5 attorneys, we are adept at navigating this final step to remove conditions on an EB-5 green card and get investors their long-awaited 10-year green card.
The material contained in this alert 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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