Long Live Direct EB-5

© 2018 Matt Gordon

As of 12:01am on January 20th, the EB-5 Regional Center program ceased to be in existence. It is important to note that the non-Regional Center or Direct EB-5 program is completely unaffected. This is because the Regional Center program (initially a pilot program for the vast majority of its existence) was authorized in the Immigration Act of 1993, which put a three-year sunset on the program. The last full reauthorization of the Regional Center program was several years ago. Since then, the RC program has become a bit of a political football, with Congress kicking the can down the road with a series of short term reauthorizations that have become tied to the overall budget process as ‘continuing resolutions’. That process broke down Friday night without a new budget, new interim measure or anything else productive, thus leading to the shutting down of the Federal Government and with it the Regional Center program.

The overall EB-5 program, having come about via the Immigration Act of 1990 is unaffected by the budgetary political squabbles. If the impasse persists, it’s completely imaginable that direct (non-RC) based petitions might see a significant reduction in processing time as the EB-5 unit in USCIS is client (fee) funded, and therefore also not affected by the federal budget. With the vast majority of petitions from the RC program, there are now a significant amount of (human) resources available for processing direct petitions.

This is actually not the first time the Regional Center program took a legislative pause. All other times Congress reactivated it (retroactively), so no harm was done to the otherwise innocent petitioners. This most recent shutdown seems on the verge of ending, albeit until the next stopgap ends in February. It does being into the focus of the ultimate ‘what if’ question about the Regional Center program. What if it weren’t reauthorized? What would happen to all the people waiting for either the I-526 petitions or I-829 petitions to be adjudicated.

The lack of authorizing legislation for the Regional Center program seems that it would be fatal to each. A regional center afford a petitioner the ability to count both indirect and induced labor creation in the project into which he or she has made an investment. Without the Regional Center program, the counting of all but directly created labor is illegal. Its safe to estimate that no Regional Center based projects premised sufficient labor creation in the direct category to cover their investors (perhaps with the exception of a lucky few). Given the detailed nature of the labor calculations in I-526 submissions, the USCIS adjudicating officers would easily see that the plan did not, of its own terms, create a sufficient number of jobs to support approval.

The I-829 context is very similar. At that juncture, USCIS would not have the legal authorization to allow an investor to prove the job creation in his or her project based on the project’s compliance with its business plan as the plan’s job creation was premised on the econometrically calculated indirect and induced job creation. So again, the petition must fail.

This is of course a horrible outcome for the Petitioners and would create a huge outcry, but it is the conclusion of the legislative process that allowed for this very possibility. Congress could have put in savings language in 1993 to allow USICS to continue processing petitions once the overall process had started, but they did not.

It also gives rise to a flaw of the overall investment scheme involving regional centers. Every Regional Center based investment carries with it the ‘Legislative Risk’ that Congress will fail to reauthorize the program. The duration of an EB-5 petitioner’s immigration process was always greater than three years, given the processing times for the I-526 and I-829 petitions. These days, it’s probably closer to six. So even if Congress reauthorizes the program for a five-year period (as lobbied for by IIUSA and others), every single investor will face a moment when the entire legislative foundation underpinning their immigration hopes and dreams requires both Houses of the US Congress and the assent of the President in order to stay the course. That seems to be a rather significant risk, especially given how contentious all immigration related legislation is and is likely to remain for some time.

In contrast, the original (direct) EB-5 program is free of this type of risk. Investors in direct projects version of legislative risk is where both Houses of Congress and the President all decide to kill the program. In all things, and especially legislation, action is a much less likely outcome than inaction, which is almost always a sure thing. So in this regard, direct EB-5 investors and rest easier and we can expect the Direct EB-5 program to enjoy a long life.

About The Author

Matt Gordon is a noted policy expert in the visa-based investments field and is an authority on structuring visa-based investments. Mr. Gordon’s career spans business operations, finance and law. He is the editor of the EB-5 Book, the legal treatise on the EB-5 program and a frequent lecturer to immigration attorneys. Mr. Gordon has participated in policy events, including those hosted by the White House and Harvard University’s Kennedy School of Government. Prior to founding E3iG, Mr. Gordon was an investment banker for a decade and ran the US division of a Swiss multi-national corporation. Mr. Gordon is a licensed attorney, having practiced mergers and acquisitions law at the beginning of his career with the largest and most reputable Wall Street firms including Fried Frank and Sullivan & Cromwell. Mr. Gordon received his B.S. in Policy Analysis from Cornell University and his J.D., cum laude, from the University of Pennsylvania School of Law