USCIS classifies proceeds of a loan that are used for EB-5 investment as indebtedness governed by these regulatory requirements. When using loan proceeds as EB-5 capital, a petitioner
must demonstrate first that they are personally and primarily
liable for the indebtedness. That is, they must demonstrate that
they bear primary responsibility under the loan documents for
repaying the debt that is being used to satisfy the petitioner’s
minimum required investment amount.
the June 2, 2013 USCIS Policy Memorandum, PM-602-0085,
outlining the circumstances under which a NOID, as opposed
to an RFE, is an appropriate agency action. As an initial matter,
the likelihood of a NOID underscores the need for proactive
evaluation where possible.
In addition, the petitioner must demonstrate that the indebtedness is secured by assets the petitioner owns and that the value
of such collateral is sufficient to secure the amount of indebtedness that is being used to satisfy the petitioner’s minimum
required investment amount. Put another way, indebtedness
secured by assets owned by the petitioner qualifies as “capital”
only up to the value of such collateralized assets.3
How USCIS is Applying the New
Policy in I-526 Adjudications
USCIS is applying the new policy retroactively by denying or
declaring an intent to deny I-526 petitions, which, in view of
14-month USCIS processing times, means denial of cases that
were filed more than one year ago in reliance on long-settled
interpretation of the law. Additionally, for those cases that have
had the opportunity to respond with substantive arguments to
a notice of intent to deny, to date we have not seen the agency
engage in thoughtful or meaningful adjudication responding
to the points raised. Instead, we see a pattern of denial that is
no more meaningful than “because we said so.” In its April 22
stakeholder engagement, the IPO underscored its unwillingness
to engage in substantive discussion of the merits of the policy,
declaring that it was simply a clarification of existing law because its own adjudications have been inconsistent.
The bottom line for projects is that they should expect
a spike in denial rates that may last a year or more. Because
the new policy is so prejudicial and so clearly at odds with the
existing precedent decisions and published USCIS guidance, it
is likely that many petitioners will pursue appeals and federal
court litigation. Some investors will seek immediate exit from
the project. Depending on the terms of the offering, this could
result in projects being obligated to provide refunds, or it could
necessitate the sourcing of replacement investors. In either event,
for the project this means delay. Projects with Chinese investors
are already anticipating significant delays in acquisition of
conditional residence due to visa unavailability. This additional
source of delay will push those dates out still further into the
future. The consequences to projects of the spike in denials and
resulting delays, whether they relate to availability of funds for
job creation, insufficient liquidity for refunds, or long-extended
conditional residence periods, will vary from project to project.
Based on USCIS actions to date, it is clear that USCIS has
decided to stay the course on enforcing the new policy, notwithstanding widespread criticism and the likelihood of litigation.
So, for stakeholders in the EB-5 community, the questions
become where we go from here, and what does this new policy
mean in practice.
Which Investors Are Affected?
The affected classes of investors are those whose source of
investment funds is as follows:
What Stakeholders Should Expect
The bottom line for inves