In June 2017, U.S. Citizenship and Immigration Services (“USCIS”) issued clarifying guidance on an EB-5 investor’s requirement to “sustain” the investment through the period of his or her status as a conditional permanent resident of the United States. USCIS’ EB-5 Policy Manual now states:
The sustainment period is the investor’s 2 years of conditional permanent resident status. USCIS reviews the investor’s evidence to ensure sustainment of the investment for 2 years from the date the investor obtained conditional permanent residence. An investor does not need to maintain his or her investment beyond the sustainment period.
Public comment on this guidance was due June 28, 2017, USCIS has not yet indicated it would change its guidance, and the EB-5 Policy Manual remains unchanged. It is a positive sign that USCIS continues to reform the EB-5 Program to meet the original intent of U.S. Congress and its own implementing regulations.
Prior to this announcement, many EB-5 investments were conservatively structured for the return of capital to an EB-5 investor only after approval of the Form I-829, Petition by Entrepreneur to Remove Conditions. Unfortunately, due to the growing EB-5 visa backlog for Chinese-mainland investors and lengthy Form I-829 adjudication processing times, EB-5 investors were unable (and are likely still unable, as discussed below) to get their capital investment back for much longer than Congress’ intent of a 2 year, “at risk” investment.
News of the policy change quickly spread throughout China, with EB-5 investors interpreting this guidance to allow EB-5 projects to be able to return the capital investment after the 2 year period of conditional permanent residency. However, EB-5 projects must first be allowed to use the capital to finish its job creation activities. More importantly, the return of EB-5 capital from a JCE to NCE, and from an NCE to an EB-5 investor, are governed under the terms and conditions in the project documents, which were (conceivably) drafted to meet USCIS’ prior adjudication policy on the “sustainment period”.
Even if project documents can be modified to allow for the return of capital, EB-5 projects must consider those investors who have yet to obtain conditional permanent residency to ensure entry into the U.S. is as smooth as possible. Consequently, it’s extremely important that USCIS answer the following question, which Wolfsdorf Rosenthal LLP intends to ask USCIS during tomorrow’s EB-5 Listening Session with USCIS:
Would changing project documentation to allow projects to repay EB-5 capital to investors consistent with USCIS’ new guidance rise to the level of “material change” which would require those who haven’t obtained conditional LPR to refile?
Likewise, with regards to the option of “redeployment” after EB-5 job creation has occurred, USCIS’ new guidance also states:
Once the job creation requirement has been met, the capital is properly at risk if it is used in a manner related to engagement in commerce (in other words, the exchange of goods or services) consistent with the scope of the new commercial enterprise’s ongoing business
This raises the following questions:
- Will USCIS provide better guidance on what “related to engagement in commerce” and “consistent with the scope of the new commercial enterprise’s ongoing business” means, so that EB-5 projects can contemplate appropriate “redeployment” options to withstand USCIS scrutiny?
- If “redeployment” language was not contemplated in the original EB-5 investment and project documents, would changing project documentation to for “redeployment” language consistent with USCIS’ new guidance rise to the level of “material change” which would require those who haven’t obtained conditional LPR to refile?
Wolfsdorf Rosenthal LLP is happy to see that USCIS is happy to see attempting to clarify critical issues for EB-5 investors. We hope are hopeful that USCIS goes one step further and resolve these outstanding questions.