For the EB-5 community, it's "that time" again.
With the USCIS June 2011 Stakeholder Meeting now over, EB-5 practitioners and experts are already talking about the agency's responses to EB-5-related questions and about just how helpful ? or unhelpful ? those responses were.
This stakeholder meeting was also the first since AILA's EB-5 Investors Committee called on USCIS to make job creation through the EB-5 program a priority. Many at last month's AILA conference lamented the high rates of I-829 denials and challenges to state's TEA designations.
For the moment, the Q&A notes seem to be missing from the USCIS website (Suzanne Lazicki suspects the agency wants to make some corrections before re-releasing them), but the Law Offices of Rajiv S. Khanna have made them available.
Although the entire document is 20 pages long with 25 questions and answers, the following three "insights" stand apart from the rest:
1. Comingled Funds
Issues involving the source of funds for an EB-5 visa project have become increasingly troublesome of late.
By law, all EB-5 investors must be able to prove that the funds they invest in a particular project were derived from lawful sources. Due to varying factors ? be they local customs or a cultural aversion to documenting how money arrived in a particular bank account ? proving the lawful acquisition of an investor's funds can be a truly arduous process.
Related to the source of investor funds is also the notion of "comingled" funds: money that won't actually be contributing to the EB-5 investment itself but that is sitting in an account with an investor's EB-5 funds.
A questioner wanted to confirm that investors did not need to prove the source of funds for any money "comingling" with the actual EB-5 investment dollars. Here is the USCIS response:
The source of comingled funds in an investor?s account may need to be documented in order to demonstrate compliance with 8 CFR 204.6(e) and 8 CFR 204.6(j)(3) in certain circumstances. Oftentimes, the transfer of investment funds involves multiple transactions from different sources. It may not be apparent from the initial record which funds are for the EB-5 investment and which funds are to be used for other purposes. In addition, 8 CFR 204.6(g)(1) requires that the source of all of the EB-5 and non-EB-5 capital in the EB-5 capital investment project must be identified and shown to have been derived from lawful means.
So if USCIS determines that it isn't "apparent from the initial record" that a particular block of funds isn't specifically designated for the EB-5 project, investors will still need to provide source documentation for those funds.
How to ensure such a distinction really is "apparent from the initial record" may be a good question for the next stakeholder meeting.
2. "Saved" Jobs?
For this item, the USCIS response is perhaps less interesting than the question itself:
It is our understanding that when EB-5 investor money provides some of the funds for a business, the EB-5 investors get credit for all the jobs saved or created. Is this true?
Saved or created? Unfortunately, in answering the question, the agency omitted the issue of saved jobs. Acknowledging that "creation of at least 10 full-time positions" is sufficient, USCIS failed to discuss whether projects can use EB-5 funds to rescue employees who otherwise would have lost their positions.
A lot of regional center principals would love to know whether saved jobs "count."
3. Expenditure models, TEA's, and documentation
Another questioner asked what kind of documentation is required at the I-829 stage to demonstrate indirect job creation with an expenditure model and whether it mattered if some of the foundational facts stated in the economic report actually occurred or not.
USCIS' response was vague. While noting that the "investor's I-829 petition [?] needs to be supported by evidence showing that the funds were expended in the job-creating activities outlined within the Form I-526," the agency's answer to the second part of that question seems a bit inscrutable:
The impacts on the ultimate outcome of a given I-829 in the event that some of the foundation facts on which the economic report was based have occurred and others have not are dependent on the specific fact pattern of the case.
In other words, it depends.
A similarly obscure response accompanied a question about why EB-5 investors in a TEA would be asked to prove the source of funds for amounts in excess of their $500,000 EB-5 investment. After all, if the investor is investing the minimum $500,000, why would he or she need to prove the source of funds for any amount greater than that?
The USCIS response:
8 CFR 204.6(j)(3) Capital Obtained through Lawful Means: is concerned with 'capital' as opposed to 'required capital.' As such the EB-5 petitioner should submit evidence of the lawful source of any capital invested into an EB-5 investment project. In addition, 8 CFR 204.6(g)(1) requires that the source of all of the EB-5 and non-EB-5 capital must be identified and shown to have been derived from lawful means.
That sounds fine, but why is the EB-5 investor being asked to show the source of funds for any amount in excess of his or her actual investment? The initial question even began with a request for clarification on the minimum investment amount for a TEA investor ? an indication that adjudicators were requesting that an investor prove the lawful source of funds for amounts beyond what the investor was actually putting into the project.
If these vague responses are any indicator, the biggest insight from the June 2011 Stakeholder Meeting may not be anything EB-5 visa experts can glean from the Q&A document alone.
It may be that common criticisms of USCIS' evasiveness are, in fact, legitimate.