“ inde b te dness” unde r 8 C F R 20 4.6 (e). 3 T his p olicy
eventually made its way into the USCIS Policy Manual,
where it currently resides today. 4
THE ORIGINAL ERROR
The AAO case referenced above claimed that because the
AAO had previously 5 precluded cash obtained from a loan
taken out in the name of the new commercial enterprise
on the basis of the definition of “capital” at 8 CFR
204.6(e), 6 that all cash proceeds derived from a loan must
be evaluated as indebtedness. This was an extraordinary
leap from the facts of the precedent decision Matter of
Soffici, where the cash proceeds of the loan obtained by
the investor in that case were actually the proceeds of a
loan obtained by the new commercial enterprise, not the
investor. 7
T h u s , b e c a u s e M a t te r of S of f i c i t r e a te d t h e c as h
investment of a loan obtained by the new commercial
enterprise as “indebtedness 8 ” and not “cash,” therefore all
cash proceeds of a loan invested in an new commercial
enterprise, regardless of who actually took out the loan,
must be evaluated as “indebtedness.” An investment of
“indebtedness” is subject to additional regulatory scrutiny
in accordance with 8 CFR 204.6(e), which was further
interpreted by the precedent decisions Matter of Izummi
and Matter of Hsuing. 9
(a) collateralized by assets of the investor and (b) such
collateral was equal to or greater than the cash investment
(i.e. the collateral had a value of $500,000 or more). Likely
one of the first publicly available decisions applying this
policy was issued by the Administrative Appeals Office
(AAO) on May 29, 2014, wherein the AAO upheld the denial
of an I-526 petition based on this policy. 1
While this decision initially
esc ap e d wid es p read notic e ,
the issue bubbled into the open
o n a F e b r u a r y 2 0 15 U S C I S
stakeholder engagement 2
wherein four separate attorneys,
including this author, challenged
USCIS’ assertion that an investor
who obtains a loan using a third
par ty ’s collateral and invests
that loan has not met the
definition of “capital” under 8
CFR 204.6(e). This stakeholder
engagement was followed by
the first written announcement
of USCIS ’ policy on April 22,
2015, which, at that point, only
existed through adjudications.
This announcement laid out that
proceeds of a loan used for EB-5
i nve s tm e n ts a re c o nsi d e re d
THE AAO CONFUSES THE
REGULATIONS
The AAO’s decision dated May 29, 2014, and the USCIS
policy which flowed from it, was badly flawed. For starters,
“indebtedness” is another way of describing an amount
of money owed. 10 As Matter of Izummi characterized it,
being indebted is the same as owing a promissory note. 11
A promissory note is a promise to pay in the future, not a
present investment of cash. Thus, equating an investment
of cash in a new commercial
enterprise to a promise to pay in
the future does not comport.
"In 2014 USCIS began
issuing denials of certain
I-526 petitions based
on the claim that cash
investments in new
commercial enterprises
were not actually cash
investments, but rather
were investments of
indebtedness"
This plain language review of 8
C.F.R. § 204.6(e) makes clear
t h e e r r o r of U S C I S . 12 U n d e r
the Last Antecedent Rule
of statutor y and regulator y
i n t e r p r e t a t i o n , “A l i m i t i n g
clause or phrase ... should
ordinarily be read as modifying
only the noun or phrase that it
immediately follows.” 13 Applying
this rule to the text of 8 C.F.R.
§ 2 0 4 . 6 (e) , t h e r e q u i r e m e n t
that a capital contribution to a
new commercial enterprise be
secured is only applicable to
contributions of indebtedness
(e .g . a p r o m i s s o r y n o te). I n
o t h e r wo r d s , i n c r af ti n g t h e
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