EB5 Investors Magazine "Top 25 issue" Volume 9 Issue 1 - Page 17

be placed “ at risk for the purpose of generating a return on the capital placed at risk .” The precedent decision , Matter of Izummi , 22 I & N Dec . 169 ( 1998 ), also addresses the “ at risk ” requirement . Taken together , the law ( regulations and precedent decisions ) prevents the deployment or redeployment of invested funds into any investment that guarantees returns or has no chance for gain or loss .
In the Policy Manual 1 , updated as of July 24 , 2020 , USCIS stated that , among other requirements , before the job creation requirement has been met , the investment must also involve a “ sufficient relationship to commercial activity ( namely engagement in commerce , that is , the exchange of goods and services ) exists such that the enterprise is and remains commercial .” After the job creation requirement has already been satisfied , the Policy
Manual 2 sets forth additional standards to meet the “ at risk ” requirement , providing that further deployment must occur “ within a reasonable time 3 ” into “ any commercial activity that is consistent with the purpose of the new commercial enterprise to engage in the ongoing conduct of lawful business .” On July 24 , 2020 , USCIS updated the Policy Manual 4 to also provide that further deployment must occur through the same new commercial enterprise and within the same regional center , including the regional center ’ s geographic territory . codified the redeployment requirement . In particular , the Integrity Act provides that investor capital can be further deployed if the NCE has satisfied the job creation requirements for all investors ; deployed the investor capital and carried out the proposed project in good faith and in keeping with the Matter of Ho compliant business plan ; and the capital is redeployed in a manner that maintains the investment “ at risk ” in a project or investment that is not “ passive ,” including bonds . The Integrity Act directly contracts previous USCIS policy in one important area -- the provisions of the Integrity Act provides that redeployment can occur outside the territory of the previously designated regional center , a source of contention between USCIS and EB-5 industry stakeholders and the subject of litigation . The Integrity Act also makes it clear that the original project must have been completed without a material change and all of the required jobs must have been created .
Although the Integrity Act clearly displaces USCIS Policy as to any geographic restrictions for redeployment , it also mandates that USCIS promulgate regulations to implement the Integrity Act ’ s provisions , creating some ambiguity as to the application of the new rule . As of April 2022 , the USCIS website states that USCIS ’ previous geographic restrictions will not apply to previously filed petitions , 5 but the USCIS website is certainly subject to change .
WHERE CAN EB-5 FUNDS BE REDEPLOYED ?
USCIS explained that “ engagement in commerce ” is “ the exchange of goods or services .” Although it is nowhere defined in any immigration statute , regulation or policy memo , further deployment of the capital into a project that involves the development of existing real property , a common use of EB-5 funds that satisfies the requirements of the EB-5 Program upon initial deployment of capital , would presumably qualify .
The requirement that the redeployment be “ consistent with the purpose of the new commercial enterprise to engage in lawful business ” is also not entirely clear . However , USCIS gives one example of an NCE that makes an initial investment in a loan for the construction of a residential building , and states that the NCE may make reinvestments in one or more similar loans . There seems to be an implied requirement that the NCE ’ s company agreement or operating agreement authorizes a redeployment .
For the first time , the EB-5 Reform and Integrity Act of 2022 , which repealed the existing EB-5 law and authorized the availability of EB-5 visas for Regional Center investors through September 20 , 2027 ( the “ Integrity Act ”) has
" The Integrity Act also notably provides that redeployment in violation of the Integrity Act will result in the termination of the Regional Center ."
The Integrity Act also notably provides that redeployment in violation of the Integrity Act will result in the termination of the Regional Center . USCIS previously stated that the termination of a regional center constitutes a material change that could render an investor ineligible for a green card , making compliance with the reemployment requirement more important than ever .
The Integrity Act does not address USCIS ’ position that the redeployment must take place within a certain time frame , nor does it provide further clarification on the type of business that would qualify for an appropriate “ at risk ” investment , leaving the EB-5 Industry with lingering questions and the hope for additional clarification sooner rather than later particularly given the harsh new consequences for noncompliance .
REDEPLOYMENT IMPLICATIONS FROM A SECURITIES PERSPECTIVE
Because the new sustainment period under the Reform Act does not appear to apply to pre-Reform Act investors , redeployment requires careful consideration . Redeployment is a complex matter , mainly because it creates tension in the investor relationship and poses legal risk for those principals charged with steering a redeployment solution . As such ,
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