In this episode of Statutes of Liberty: An Immigration Podcast, Klasko EB-5 attorneys discuss the latest updates on a court ordered nationwide preliminary injunction and how that effects the EB-5 regional center program. Read and listen in as they discuss what this means for investors, developers, and regional centers. Here is a transcription of the discussion between Ron Klasko, Dan Lundy, and Alison Li.
Alison Li: Thank you for joining us today. I’m Alison Li, an associate here at Klasko Immigration Law Partners. Today, we’re talking with partners Ron Klasko and Dan Lundy about the latest updates to the EB-5 regional center program and what that means for investors, developers, and regional centers.
So, Ron. I understand that the EB-5 Reform and Integrity Act that reauthorized the regional center program was effective on May 15, 2020, but there’s some delay in the implementation of certain provisions under the new law. My question is what caused the delay?
Ron Klasko: Yeah Alison. When the new law passed, we all assumed that the regional center program was up and running, but we didn’t expect is that the immigration service would post a notice on its website stating that its interpretation of the new law was that all of the 630 regional centers that were authorized all of a sudden had lost their authorization. And as a result, there were no regional centers and every regional center had to file a new application to become a regional center, and that would have probably taken years for the immigration service to adjudicate over 600 Regional Center applications. So, the delay was caused by the fact that the immigration service decertified all the regional centers and all of a sudden there were no regional centers to file applications. We’re going to talk on his podcast about how we as a law firm and we as an EB-5 industry were able to react to that and get us back to the point whereas we talk today where the EB-5 Regional Center program is back in business.
Alison: Thank you, Ron, for the information. So, Dan, is the regional center program fully operational now and how did that happen?
Dan Lundy: So, as a result of litigation in California and Washington D.C. by similar clients and IIUSA, we were able to get a preliminary injunction reversing the policy of USCIS terminating all regional centers. All existing regional centers that were certified as of the expiration of the program are now- it continued to be certified. In order to file a 526 petition in order for investors to file their petitions for their green card, a regional center has to file a 956F project exemplar application with USCIS and get a receipt at which point investors can make their investments and file their I-526 petitions. So, as far as regional centers that either were not designated or regional centers that want to change their territory or make other changes, those changes are not approved yet. So, if you were not a regional center you’re still not a regional center you have to apply and be approved. If you were regional center you are a regional center that is approved for the same territory as you were approved when the program lapsed.
Alison: Thank you, Dan. Now let me switch back to Ron. So, Ron, did our firm play a role in the litigation that you just mentioned and Dan just mentioned?
Ron: Yeah, we sure did Alison. So, our law firm was retained as co-counsel by IIUSA which is the regional center trade group which was what’s called amicus curiae in the federal court litigation in the Northern District of California that produced the injunction. In addition, we are co-counsel to the 5 Regional Center plaintiffs who filed a lawsuit in the District of Columbia which was ultimately consolidated with the litigation in California. So, we have played a role in representing 5 Regional Center plaintiffs and in representing the regional center trade group in the litigation.
Alison: Thank you, Ron. So, Dan, relating to this litigation. What does the Judge’s decision actually state?
Dan: So, the decision says that USCIS took the position that the new law forced them to deregister all Regional Centers. According to USCIS they didn’t think they had an option and the only possibility was that all regional centers had to be terminated and everybody had to start over. The judge said that this interpretation was clearly erroneous or most likely clearly erroneous. Right, that there were other possibilities that USCIS failed to consider, and because this concludes this action of USCIS, the termination of all the all of the existing regional centers was based on an erroneous interpretation of the law, it had to be undone. So, the judge said put us back to the position where all regional centers that were existing continue to exist, they can continue to file investor petitions that are consistent with the rest of the new law. So we have a decision on a preliminary injunction we don’t have a final decision yet, but the preliminary injunction is in fact until either there is a final decision or USCIS engages in reasoning and comes up with a reason explanation and a reason basis for taking action either to require regional centers to get redesignated or some other action. They have to interpret the statute, consider all the possibilities, and come up with a reason the plan of action. That’s what the decision actually says. So that impact of that is that the regional center program is currently re-designated, they are no longer terminated. As we said, they can file 956F project exemplars after which investors can file I-526 petitions. Now it’s an open question whether ultimately they will also have to file an I-956 and get recertified or they’ll just have to file annual compliance and or the I-956F. We don’t know what the end game is going to be and what the ultimate requirement is going to be, but right now we’re back in business.
Alison: Thank you, Dan. So, we shall see. So, Ron, what Dan just said, does this mean that regional centers can just file project approval applications, what we call the exemplar applications, now?
Ron: Yeah, so as we do this podcast here in July 2022, the big thing right now is now that all the regional centers know that they’re a designated regional center again, they can put the project applications together. So what used to be called an exemplar petition under the old law, we now call project approval applications on form I-956F. So, we are busy work now working with the regional centers and the project developers in putting together the economic reports in the business plans and the securities documents and everything needed to file a project application and that is moving full speed ahead right now. And one of the good things in new law is that it is not necessary for the project approval applications to be adjudicated before investors can proceed to file. It’s only necessary that they be filed. One of the issues we’re going to be dealing with is whether investors and regional centers want to wait for receipt notices for the filings of the I-956F project applications. Because we do not know how long it’s going to take the immigration service to issue a formal receipt notices. So, I do know that some of our clients are going to be prepared to proceed with I-526s based on proof of filing even if it’s not a receipt notice. So for example, if we have proof that FedEx delivered the application to the immigration service and we have proof that the immigration service cashed the check, we know that the application was filed even though we don’t have a receipt and it’s the filing of the application that allows investors to proceed with I-526s. So, Dan, anything you want to add on when it’s a good idea for investors to proceed with 526s?
Dan: You know, hopefully they will get organized and find a way to issue those receipt notices in a timely fashion to mitigate some of the uncertainty. But yeah, as Ron said, as soon as that I-956F is filed investors should be able to file petitions.
Alison: Thank you Ron. So, the next question is still to you Ron. So, what were the legal arguments that led the Judge to decide that the USICS’ action in decertifying the regional centers was not legal?
Ron: Yeah Alison. Mostly what we were arguing is what we call the language of the statue, the language of the new law to us was clear that Congress intended to allow the regional center program to start up in 60 days after the effective date of the new law. The immigration service said no no no, what happened was congress repealed the old law and because congress repealed the old law everything under the old law including the regional centers go away. And the legal position we took which the judge seemed to agree with, is that this was what’s called a repeal and authorization. So, Congress didn’t say we’re starting from scratch. Congress said we’re taking the old program and re-authorizing, that that’s the language of the law and one of the points was that a reauthorization doesn’t mean we’re starting from Ground Zero it means we’re continuing an old program. Another key legal point was the new law, what’s called reformative integrity act, stated that the exemplar petitions filed on the I-924 form filed before June 30, 2021. When those were approved, they’re still binding on the immigration service going forward under the new law. Well, the I-924 exemplars were regional center amendments filed by regional centers. So, we argued and the judge agreed that how can you have a regional center amendment that is binding under the new law but somehow the regional center doesn’t even exist. It didn’t make sense to us and happily it didn’t make sense to the judge. We also talked about the fact that the language of the law discussed the fact that regional centers that quote have been designated under the law have certain responsibilities. Well, all of the 630 regional centers meet the requirement of having been designated just under the language of the law. So those are some of the what we call statutory construction arguments that we made to the judge and that the judge accepted.
Alison: Thank you Ron. So, Dan, what is the next step in this litigation?
Dan: So, the judge issued a preliminary injunction which is not the final decision. The next step will be for the parties to file motions for summary judgments to get a final decision of the judge. The final order will assess whether the action of USCIS was lawful and what the permanent relief will be. Meanwhile, of course, we’re hopeful that USCIS will engage in discussions with us and hopefully we can come to a settlement that, you know, is a rational and reasonable approach for all regional centers to continue their activity, but we have to wait and see. Meanwhile, the 5 Regional Centers that originally filed in D.C. are being joined into the litigation in California, so they’ll get a chance to file their motions for summary judgment IIUSA should get a chance to file a motion for summary judgment. The other regional center will be able to file is there a motion for summary judgment and the government will file probably across motion for summary judgement. after some briefing back-and-forth we’ll get a decision with the judge, but honestly that could take six months to a year from now.
Ron: And in the meantime, we still have the injunctions which is fine.
Alison: Thank you, thank you both. Next question is to Ron. What advise does our firm have for regional centers and developers now?
Ron: We are suggesting to our regional center developer clients that if they have projects that they’re seeking EB-5 capital for and are ready to go, they should be moving forward as quickly as possible. There is a great pent-up demand for EB-5. It’s been a long time since investors have been able to invest. So, investors and agents are looking for good projects. An investor can invest in a project, or you know, can’t file a 526 until the project approval application is filed. So the sooner that developers and regional centers can put together the project information and file the project applications, the sooner they’ll be on the market and the sooner they’ll be available for the investors who have been looking for projects to invest in. This is particularly true for projects in rural areas, which are particularly attractive right now especially for Chinese investors. So, we all know and most people listening to the podcast know that Chinese investors because of the huge number of applications that were filed have had a very long waiting list estimated as around 15 years under the old law. The new law, the Reform and Integrity Act, provided what’s called set-asides only available for rural area projects. This is likely to be a brand-new category under the quota and therefore there’s no waiting list in the category because it’s brand new. So, all of a sudden Chinese investors who thought that if they invested in EB-5 they would have a 15 year wait, if they invest in a rural project may have no wait. And so, there’s a huge demand now, especially in China, for rural area projects. So especially for our clients who are developing projects in rural areas, there’s a premium on being one of the first to market because they’re such a demand for those projects.
Alison: Thank you, Ron. So, how about advice for investors. So, Dan, do you have any advice for investors now?
Dan: Yeah. If you’re waiting to make an investment to hoping that the reasonable center program would be reauthorized it’s now been re-authorized and you can file a 526 petition once that 956F is filed. So now would be the time if you’re interested in a rural project or a high unemployment project. There will eventually be quotas again, right, because these are brand new categories but they’re only a certain number of visas a year for these categories. So, these categories will develop their own queue, the sooner you get in line the better off you’re going to be.
Alison: Thank you, Dan. So, Ron relating to what Dan just said, do you think there are any risks for investors who file I-526 petitions now?
Ron: Well Alison, let’s talk about the risks that always exist and the specific risks that were involved in now with the implementation of the new program. So, we represent many EB-5 investors successfully and in every case we want to make sure that the investor is aware of two different risks. Number one is the risk that the petition will not result in getting a green card. And one of the things we do for our clients is we do diligence on the project they invest in to make sure we’re satisfied that the chances of getting a green card through an investment in this project are good. That’s immigration due diligence. If you invest in a project that is not EB-5 compliant you have the risk you won’t get the green card. The other risk that investors always have is the financial risk. So, every time you are investing in a project, in any project, whether it’s EB-5 or otherwise there is a risk and in fact an EB-5 project must be at risk or else it will be petition will be denied. It is not our roles as immigration counsel to evaluate the financial risk of a project and we always suggest or investors have financial advisors to do that because in addition to getting the green card our clients generally are wanting to get their money back hopefully with some return. And if you invest in a project you could end up getting your green card because the necessary jobs are created but you could lose your money. Those are the normal risks that are always involved in EB-5. The additional risks right now are related to the litigation that’s going on. So, one risk is that the immigration service could appeal the judge’s decision. As we do this podcast today in July 2022 we don’t know if the immigration service is going to appeal. My own personal opinion is that if they appeal they will not be successful, but if they appeal and if they’re successful it could overturn the judges injunction. If that happens, there’s a separate issue of whether the overturning of the injunction would have retroactive impact. In other words, would that have any impact on investors who filed their applications at a time when the injunction was in effect. In my opinion, it is unlikely there would have retroactive impact, but that’s a risk. So I would say there are some risks, but I believe it’s highly unlikely that any of those risks would result in investors properly filed petitions being denied but certainly each investor should discuss those risks with his or her immigration counsel. And, you know, again anything I’m saying could be changed as a result of future steps in the litigation.
Alison: Thank you Ron, thank you for your very helpful advice. My next and final question is to Dan. So, Dan, what if an existing regional center wants to change or extend its geographic territory?
Dan: So, USIS policy in the past has been that in order for investor to file on I-526 petition and be approved the investment has to be within the regional centers territory at the time of file. So, if the regional Center wants to expand its territory, it has to file an amendment to its designation to expand its territory until that amendment is approved there’s a very big risk that an investor who files an I-526 petition will not have filed in the approved territory at the time of filing. So, you know, there’s some debate in the industry on this not everybody agrees but we think the safest thing to do is, if you want to do a project outside your existing territory file that amendment and wait for it to get approved and then have investors file their petitions.
Alison: Thank you. Thank you, Dan, and thank you Ron for talking with me today. And thank you everyone for listening. We’ll see you next time.
To learn more about what this EB-5 immigration update means for you, schedule a consultation with one of our dedicated EB-5 immigration attorneys.
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