Jennifer Hermansky, Greenberg Traurig, LLP Mona Shah, Mona Shah and Associates Genevieve Roman, Extell New York Regional Center NY AILA 2013 EB-5 101 ©

Jennifer Hermansky, Greenberg Traurig, LLPMona Shah, Mona Shah and Associates

Genevieve Roman, Extell New York Regional Center

NY AILA 2013 EB-5 101© 2013 American Immigration Lawyers Association

What is the Eb-5 Program? I-526 Petitions for Alien Investors

◦ Direct Investments (Non-Regional Center)◦ Regional Center Investments

What is a Regional Center? ◦ Why become a Regional Center◦ Regional Center Investment Vehicles◦ Indirect job creation

I-829 Petitions to Remove Conditions◦ Direct and Indirect Job Creation◦ Material Change Issues◦ I-829 Denials – Litigation and Removal

ProceedingsNY AILA 2013 EB-5 101© 2013 American Immigration Lawyers Association

• EB-5 category created in 1990 for foreign nationals who invest in a new commercial enterprise that will benefit the U.S. economy and create at least 10 full-time jobs.

• Congress set aside 10,000 immigrant visas annually for investors and their immediate family members.

• Immigrant Investor Pilot Program enacted in 1993, providing for regional centers – due to sunset on September 30, 2012. Job creation may be estimated using “reasonable methodologies.”

Foreign nationals can get a green card if: Invest $500,000 or $1,000,000 (depending on geographical

area); and Investment creates full-time jobs for 10 U.S. workers

Green cards conditional for 2 yearsConditions removed if investment sustained and jobs created


Individual Eb-5 Petition◦ Investor buys business or starts new business◦ Must be 10 direct full-time, W-2 employees who are

USCs or LPRs◦ Few applications

Regional Center Eb-5 Petition◦ Investment into a business associated with a USCIS

Approved Regional Center◦ 95% of all applications◦ Main advantage

Indirect employment counts through the use of an economist report to predict project job creation.


General requirements – INA § 203(b)(5) and 8 CFR § 204.6◦New commercial enterprise ◦$500,000 or $1 million from a lawful

source◦At risk investment◦Investment will create at least 10 full-

time jobs◦Investor must be engaged in the

management of the enterprise


New Commercial Enterprise◦Created after November 29, 1990 Matter of Soffici, 22 I & N Dec. 158,

165-166 (1998), Matter of Hsiung, 22 I & N Dec. 201 (1998);

◦OR◦Substantial change from investment -

40% expansion of net worth or number of employees


Actively in the process of investing $1 million or $500,000 if the investment is in a targeted employment area

Targeted employment area◦ A rural area of less than 20,000 in population; or◦ An area which as unemployment of at least 150% of the

national average◦ Evidenced by submitting a letter from the state’s agency

confirming that the area has high unemployment and defining the statistical area USCIS may disagree with the state’s calculation, but generally

will defer to the geographic area◦ Matter if Izummi 22 I & N Dec. 169 (1998) and USCIS

Revised Draft Policy Memo on EB-5 Adjudications (January 11, 2012)


Investment must be at risk ◦Matter of Soffici, Matter of Izummi,

Matter of Hsiung, 22 I & N Dec. 201 (1998) , Matter of Ho 22 I & N Dec. 206 (1998)

Must be an equity investment◦Debt instrument prohibited/no

guaranteed repayment◦Personal funds or loan secured by

personal assets


Lawful source of Investment Funds◦Matter of Soffici and Matter of Izummi◦Examples business earnings, salary, gifts, loan, etc.

◦Evidenced by personal tax returns, financial statements, etc.

◦Office of foreign assets control (OFAC) must be consulted if investor is from Iran or other country against which the U.S. has sanctions


Tracing◦ USCIS requires the petitioner to demonstrate

that the personal funds derived from the lawful source and were ultimately invested in the EB-5 enterprise

◦ Numerous transactions between investor and the EB-5 enterprise investment would require the investor to provide documentation from each transaction

EB-5 Investor$$$ $$$$$$

EB-5 Enterprise


Job creation◦ The investment must result in the enterprise

creating or saving 10 full time jobs (35 hours per week) for US workers (USC citizen, LPR, work authorized immigrant)

◦ Must be direct job creation, i.e. W-2 employees evidence by submitting I-9 forms of employees and for US workers (supporting docs copy of passport, I-551 card with the I-9 forms)


Job creation◦ Defined in terms of the position, not the person. The

position must be created and filled by a US worker◦ Investor and family members do not count

Troubled business◦ Where investment sustains current employees (saves

jobs), the investor must show that the enterprise is a troubled business which experienced a net loss for one or two years exceeding 20% of net worth

◦ Must save all jobs, and must be at least 10 per immigrant investor.


Engage in business on day to day basis or through policy formation◦Title of description of job duties◦Evidence of corporate officer or director

position◦Board position (policy formation)◦Purely passive investor not permitted


Entity that: Focuses on a geographic region Promotes economic growth through increased exports,

regional productivity, domestic investment, and job creation

Applies to USCIS for designation approval Oversees capital investment projects for alien

investment Markets for investors Due diligence on investors Prepares I-526 package templates


Oversight of I-526 filings Tracks infusion of capital into job-creating

enterprise Monitors compliance with business plan and

foundation facts in economic report Ongoing administration and compliance

responsibilities Allocates jobs between investors Prepares I-829 package templates Decides on new projects


Provide I-526 templates to investors Provide I-829 templates to investors Coordinate with immigration attorneys Track, monitor and report on Form I-924A May provide investor/project updates May screen investors for securities and

immigration issues May review investor source of funds

Not the same thing, but affiliated

Project developers may create their own regional center

Project developers may have a project sponsored by a non-affiliated regional center

Oversight/compliance obligations independent of the project


Can count indirect and induced employment opportunities, and not just direct jobs, in meeting the ten jobs per investor requirement. notwithstanding the requirements of 8 CFR 204.6, the

Attorney General shall permit aliens admitted under the pilot program . . . to establish reasonable methodologies for determining the number of jobs created by the pilot program, including such jobs which are estimated to have been created indirectly (Section 610, 1993 Act)

A particular project within the regional center may be pre-approved by USCIS.


Jobs created in the regional economy as the result of the economic stimulus of the investment

To be demonstrated via “reasonable methodologies” (economic forecasting tools):

◦ multiplier tables◦ feasibility studies◦ market analyses◦ other economically or statistically valid forecasting

devices


Forecasting tools to predict increased employment resulting from defined changes in the economy:

◦ Employment◦ Revenues◦ Expenditures

Types of Models – RIMS II, IMPLAN, REDYN


Approved for certain industries – NAICS codes

Approved for a certain geographic area Approved for a certain economic

methodology What should an attorney look for in a RC

designation when representing an investor?◦ All of the above PLUS◦ Project Pre-Approval?◦ Job Allocation between investors?


New commercial enterprise – LP or LLC $500,000 (TEA) or $1 million from a lawful

source At risk investment – No guaranteed

redemptions NCE loans funds or makes equity investment

into Job Creating Enterprise◦ Job Creating Enterprise must be in the TEA

Investment will create at least 10 full-time jobs in the Job Creating Enterprise◦ Indirect Job Creation – use of economist report

Investor must be engaged in the management of the enterprise – through LP or LLC policy formation


Eb-5 Structure Alternatives for the NCE:

Direct equity modelInvestors receive equity in existing company in

exchange for investing capital to be used for the company’s job creating project

Fund modelInvestors receive equity in new investment fund in

exchange for investing capital to be used to invest in debt or equity of the job creating project company

Choice of entity (e.g., LP vs. LLC)


Choosing a Regional Center – Due Diligence◦ Immigration Track Record?◦ Number and type of Amendments?◦ Loan or Equity projects?◦ RFEs or NOIRs for job creation or business plan issues?◦ How is job creation tracked? How is it allocated

between investors?◦ TEA designation?◦ Escrow or Refund policy if I-526 is denied?◦ Reporting on status of investment to investors?◦ Other successful capital raises?◦ Affiliated with any government entity?◦ Complied with I-924A?


Lack of 5 years of tax returns Sale of Property as SOF

◦ Purchased more than 7 years ago◦ Purchased less than 7 years ago

Home Equity Loans as SOF◦ Proof Investor can make payments on loan from a lawful source

Loans from Petitioner’s Business◦ Proof of payments on loan◦ Approval by Board

Salary as SOF◦ Lack of Accurate Records of ongoing salary◦ Proof of yearly expenses and savings

Retained Earnings from Investor’s Business◦ Proof that Investor was allowed to access the funds and distribute them

to himself Gift Issues

◦ Same issues, but with Giftor’s source of funds◦ Proof of payment of applicable gift tax◦ Intent to repay the gift?


Chinese currency laws restrict exchange of Chinese Yuan Renminbi to $50,000 per year

“Friends and Family” tactic Use of a 3rd Party in Hong Kong What is the investor’s burden of proof in

tracing?◦ Trace each transaction to 10 friends and family

members◦ Trace each transaction from 10 friends and family

members◦ Trace from Investor to the new commercial

enterprise


Guaranteed Interest Payments◦ Does it negate the “at risk” requirement?

Guaranteed rates of return for preferred equity investments◦ Where can the return come from? Operating/Investing

profits Guaranteed Redemptions of Capital

◦ No guarantee to repurchase at a predetermined rate if I-829 petition denied

◦ Fair market rate acceptable provision Involvement of the Investor

◦ LP Agreement or LLC Operating Agreement should give the investor all the rights and responsibility under the ULPA or the Uniform LLC Act.


Consistency between business plan and economic report – facts should be the same◦ All inputs in the econ report must be found in the

business plan Adequate job creation “cushion” – 20-30% Be concerned with overly aggressive inputs

◦ Revenues, expenditures, direct jobs Timelines should be realistic Reliance on direct jobs should be minimized

to avoid I-829 issues◦ Easier inputs: expenditures and revenues


• Within 90-day period preceding CLPR expiration, investor must file Form I-829 and supporting documentation with USCIS —California Service Center to remove conditions from status. Filing fee is $3,750 (plus $85 per dependent for biometrics).• Spouse and children included if CPR

• Failure to file I-829 petition timely may result in termination of conditional resident status and initiation of removal proceedings.• Late petitions may be accepted with “good cause and

extenuating circumstances”

• If I-829 petition denied, investor may not appeal decision. However, if placed in removal proceedings, investor-petitioner may seek review of USCIS’s decision before an immigration judge. Government bears burden of proof that decision was correctly made.


• INA §216A and 8 CFR §216.6

• Requirement of regulations

• Petitioner invested or is in process of investing required capital;

• Investment and commercial enterprise have been sustained throughout two-year conditional residence period; and

• Investor created —or can be expected to create within a reasonable period of time – 10 full-time jobs.


• 8 CFR § 216.6(a)(4): May include but not limited to: • Federal, State annual or quarterly tax filings• Audited financial statements• Bank statements• Invoices, receipts, contracts, business

licenses• Payroll records, Forms I-9• Also, evidence of execution of business plan

found in I-526 petition


12/11/2009 Neufeld Memorandum amending Adjudicator’s Field Manual:“generally give deference to … I-526 approval… if the facts presented in the earlier proceedings remain unchanged to include:”

Capital investment structure Whether enterprise is “new” Direct and indirect job creation methodology Whether lawful source of capital Whether within TEA


Sustaining the Investment◦ Return of Investment

v. Return on Investment

◦ Distributions on Schedule K-1s

◦ Operating Losses on Schedule K-1s

Job Creation Issues◦ Documenting

Foundation facts in the economic report

◦ Documenting Direct Jobs

◦ Material changes to the business plan


W-2 employees of NCE Payroll Records (35+ hours per week) Forms I-9 Proof of LPR or citizenship status (beyond

the I-9)◦ Discrimination Issues in the Hiring Process◦ DOJ Office of Special Counsel Opinion◦ How to protect against discrimination in the hiring

process


• What is the burden? Show the underlying facts in the econ report came true and the jobs are “deemed created”

• Documentary Evidence - Verification of underlying facts found in the economic report:

• Proof of construction expenditures (auditor’s report, invoices, proof of payments, expenditure reports)

• Revenues – Audited Financial Statements of job creating entity

• Tenant occupancy – Proof of tenants/leases and # of employees

• Direct employees – USCIS position to prove W-2, payroll records, I-9s and immigration status

• Visitor occupancy – hotel cases using visitor spending


Material Change Policy- December 2009 Neufeld Memorandum◦ No material change to business plan in between I-526

and I-829◦ What is considered material?◦ If material change, file new I-526, I-407, I-485 or CP◦ New 2 year period of conditional residence◦ Age out issues

Material Change Policy – Draft Eb-5 Memo January 2012 and its iterations◦ Changes prior policy, if made final◦ Conditions can be removed if investment sustained

and jobs created Material Change v. “Reasonable Time”


USCIS Issues NTA with the I-829 denial decision Investor appears before an IJ Investor renews I-829 petition before IJ Government has the burden in proceedings to

prove that the I-829 was correctly denied - INA § 216A(c)(3)(D) [except late filed petitions]

Government has the burden to produce the immigration record

Investor can put on any additional evidence necessary

Appeals of denial to BIA and then to Circuit Court


If I-829 denied, but no NTA served on Investor, then there is a chance to litigate in U.S. District Court

Jurisdictional Issues◦ Stripped of jurisdiction if NTA is issued◦ Hinges on getting into Federal Court prior to NTA

service◦ See Kyu Seock Lee et al. v. USCIS et al., 10-cv-1423,

document 22, Order and Opinion Denying Motion to Dismiss for Lack of Jurisdiction, (CDCA June 2, 2011).

Allegations:◦ Declaratory judgment◦ APA (arbitrary and capricious)◦ Retroactivity◦ Ultra vires◦ Due process


This presentation outline and the presentation itself are for general educational purposes only and are not intended to provide specific guidance or legal advice about what to do or not to do in any particular case. You should not rely on this general information to make decisions about specific immigration matters. If you are not yourself a lawyer, you should seek the assistance of an immigration lawyer to help you resolve these issues. Thank you.


Jennifer Hermansky, Greenberg Traurig, LLP Mona Shah, Mona Shah and Associates Genevieve Roman, Extell New York Regional Center NY AILA 2013 EB-5 101 ©

Documents

individual eb

enterprise ny aila

risk investment investment

regional centers

petition investment

rural area

geographical area

number of employees