Loan Proceeds
as Capital
Practice Advisory on USCIS “Indebtedness” Policy
by Susan Pilcher
On April 22, 2015, in the wake of persistent criticism during
recent prior public engagements with the EB-5 stakeholder
community, the USCIS Immigrant Investor Program Office
(“IPO”) issued a public statem ent outlining its interpretation of
the EB-5 regulation as it applies to the use of loan proceeds as
capital. The new policy represents a significant departure from
longstanding EB-5 practice. Many experienced practitioners
and scholars view the IPO’s interpretation as starkly inconsistent with the text of the regulations, applicable AAO precedent
decisions, binding USCIS adjudications policy guidance, and
the intent of the EB-5 statute. Most experienced EB-5 attorneys
view the policy as misguided and deserving of vigorous legal
challenge. However, this article is not intended to provide a
catalog of legal arguments for challenging its validity.1 Instead,
this article will review the likely practical impact of the new
policy on present and future EB-5 investors and projects, and it
will offer some practical guidance for moving forward. Finally,
because the use of loan proceeds as capital may also be affected
by legislation recently proposed by Senators Leahy and Grassley
(“S.1501”),2 the article offers an overview of relevant provisions
therein and comments on how the proposed changes may
further restrict investor options in this area.
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The New “Indebtedness” Policy
The new “indebtedness” policy, as articulated by IPO, is as
follows:
[P]roceeds from a loan may qualify as capital used for EB-5
investments, provided that the requirements placed upon indebtedness by 8 C.F.R. § 204.6(e) are satisfied. Under 8 C.F.R.
§ 204.6(e), “[c]apital means “cash, equipment, inventory, other
tangible property, cash equivalents, and indebtedness secured
by assets owned by the alien entrepreneur, provided that the
alien entrepreneur is personally and primarily liable and that
the assets of the new commercial enterprise upon which the
petition is based are not used to secure any of the indebtedness.”
In order to establish an investment of capital, 8 C.F.R. §
204.6(j)(2) allows a petitioner to submit as evidence, among
other items, the following:
Evidence of any loan or mortgage agreement, promissory
note, security agreement, or other evidence of borrowing which
is secured by assets of the petitioner, other than those of the
new commercial enterprise, and for which the petitioner is
personally and primarily liable.
EB5 INVESTORS MAGAZINE