By: Wolfsdorf Rosenthal LLP
Invest in the USA (“IIUSA), the national EB-5 Regional Center trade organization, announced today that the EB-5 Immigrant Investor Visa and Regional Center Program Comprehensive Reform Act (the “EB-5 Reform Act”) will not be included in the omnibus appropriations legislation this week. The legislation does however, include an extension of the current EB-5 Regional Center Program through September 30, 2018 with no changes in the minimum investment amount.
Wolfsdorf Rosenthal LLP is a strong proponent for reform and predictability to the EB-5 Regional Center Program, but only if it provides a fair deal to current EB-5 investors who are waiting their turn to immigrate. We also support future reform attempts which include meaningful provisions to increase the number of immigrant visas to EB-5 investors and reduce the backlog for Chinese and Vietnamese investors (and possibly in the future, for Indian and South Korean investors too) who are presently subject to the 7% per country allocation of only 696 visas per year, or 58 visas per month limitation for each country.
In our prior blog making predictions about the EB-5 program we stated: “Most likely we will get another short Continuing Resolution extension, followed by regulations designed to reform the program, or new legislation, or possibly even both.”
This appears to be accurate with a likely extension to September 30, 2018, and likely regulations in the next few months with a chance of legislation also.
The good news from USCIS that affects applicants for EB-5 from China, Vietnam and possibly other countries that may be backlogged in the next 1-2 years is there appears to be an option for relief to parents with children who would “age out” as derivative beneficiaries.
The USCIS has begun to approve the Form I-526 petitions of principal applicants who were minors at the time of signing the relevant EB-5 investment agreements. These cases have to be structured in a way to ensure they conform to USCIS guidelines for minors.
Here are four things to know about this important update.
- Significance of Approvals for Chinese Investors. By allowing Chinese minors to be the principal EB-5 applicant, the USCIS has opened the door for more opportunities to invest in U.S. companies and create jobs for qualifying U.S. workers through the EB-5 Program. The significance of these Form I-526 approvals cannot be understated. The USCIS Ombudsman estimated in its 2017 Annual Report that an EB-5 investor from China may need to wait 10 years to obtain a visa to enter the U.S. after making the investment in a U.S. company, though reform to the EB-5 Program can modify this. For many Chinese nationals, the purpose of EB-5 investment is to provide their children with educational opportunities in the U.S. that are not available in China. While we are hopeful Congress may fix this, the long EB-5 visa backlog could prevent some derivative children from obtaining an immigrant visa. This is because a derivative child must obtain a green card before turning 21 years of age. There is likelihood that many of these children will “age-out” and will not be issued green cards. The Child Status Protection Act (“CSPA”) only allows a derivative child to subtract the time the immigrant visa petition (Form I-526) was pending from his or her age, but this cannot be done until a visa is available based on the Filing Date. Wolfsdorf Rosenthal has now had approvals for people age 15 at the time of filing but the legal theory for this success applies equally to children even younger at the time of filing. USCIS’ approval of these cases will increase demand for EB-5 investments in China where the minor is filing as the principal applicant.
- What does USCIS Question? USCIS is questioning whether a minor may file as the principal EB-5 applicant, as opposed to being listed as a derivative beneficiary on a parent’s application. USCIS has previously confirmed that there is no minimum age requirement in the EB-5 regulations and that a minor principal applicant can sign the Form I-526 without a parent’s or guardian’s signature required. USCIS has publicly stated that a minor must show adequate legal capacity to enter into contracts such that the investment contract is irrevocable and thus a “committed investment” within the meaning of regulations. USCIS has issued Requests for Evidence (“RFEs”) to minor petitioners, questioning whether the minor’s age renders the contract unenforceable (and thus, the capital not “at risk”) due to the availability of a “guaranteed return.” USCIS’ wants to make sure the minor cannot repudiate the investment and avoid liability under the relevant EB-5 investment agreements. The RFEs invite minors to submit additional evidence to persuasively argue compliance under their facts and under the applicable law.
- Uniform Transfer to Minors Act. USCIS has approved Form I-526 petitions in which a minor’s parent, acting as a custodian for the minor under a state’s Uniform Transfers to Minors Act (“UTMA”), transfers funds to the new commercial enterprise and signs the relevant EB-5 investment agreements on behalf of the minor. The custodial relationship between the parent and minor is created when the parent signs the subscription agreement and other relevant investment agreements using a form mandated by the state UTMA, which for a security is designated as “_________ (name of parent) as custodian for _________________ (name of minor) under the _____________ (name of state) Uniform Transfers to Minors” During the period of custodianship, the parent acts as a fiduciary for, and has control over, the investment in the new commercial enterprise, but the actual title in (ownership of) the investment is irrevocably vested in the minor. By using the correct UTMA language when signing the applicable investment contracts, the parent creates a binding, non-voidable commitment to investment on behalf of the minor that is enforceable under applicable state laws of the United States.
- Minors Traveling to or Living in the United States Without Their Parents. Despite the like waiting line for China-born EB-5 applicants, USCIS may still have concerns with minor EB-5 investors travelling alone to live in the United States without their parents. The minors will likely be over 18 by the time they are lawful permanent residents but in the interim, the waiting line issue could be resolved sooner resulting in the child principal becoming eligible eve earlier. The U.S. Customs and Border Protection (“CBP”) generally requires notarized written consent letter from both the minor’s parents. The parents may also appoint a U.S. resident or citizen as legal guardian for the minor when he/she receives the permanent residence.
USCIS’ acceptance that a minor may file as the principal EB-5 applicant is a huge relief to current and future investors. It is important that sound legal arguments responding to RFEs specific questions are used. Obtaining independent legal opinions from respected U.S. and Chinese contract and securities attorneys are essential in convincing USCIS of the legal basis behind contractual capacity, formation, and enforceability.