The EB-5 Investor’s Survival Guide: Navigating the Complexities of the New USCIS Regulations

Lulu Gordon
Hingham

Haya Farrag
Cairo

On July 16, 2024, US Citizenship and Immigration Services (USCIS) unveiled new policy guidance addressing noncompliance and sanctions under the EB-5 Program.

The updated policies in Volume 6 of the USCIS Policy Manual incorporate statutory reforms included in the EB-5 Reform and Integrity Act of 2022 (RIA), which took effect on March 15, 2022.

The policy alert explains that “the reforms add new authority for USCIS to sanction Regional Centers at various levels for noncompliance with statutory requirements, such as paying the EB-5 Integrity Fund fee.”

The new guidelines interpret these provisions related to sanctions, including terminations, debarments, and suspensions, for noncompliant Regional Centers, new commercial enterprises (NCEs), job-creating entities (JCEs), investors, and others.

Unsurprisingly, this new update has raised many questions, and many investors may wonder what it means for them. In this article, we address the four most crucial questions regarding the new guidelines.

Why did the new legislation implement stricter sanctions and penalties, and will these measures have a chilling effect on legitimate EB-5 investment?

Prior to the new legislation, Regional Center terminations were rare. Most terminations were due to a Regional Center’s lack of economic activity in its geographic region.

Regional Centers were also terminated when fraud was exposed, usually through litigation – often too little and too late, leaving investors at risk of losing their funds and immigration benefits.

While investors, their backgrounds, and their sources of funds have always received the utmost scrutiny, the same was not true for Regional Centers, NCEs, JCEs, or referral agents.

The EB-5 Reform and Integrity Act of 2022 (“RIA”) introduced much-needed integrity measures and provided USCIS with a critical framework to oversee all aspects and participants in the EB-5 Regional Center Program. To ensure the new framework’s effectiveness, Congress gave it some “teeth” to enforce compliance.

The RIA outlines circumstances in which USCIS shall or may sanction, penalize, or terminate a Regional Center or debar a NCE or JCE from participating in the program.

The basis for termination can range from administrative issues, such as failing to pay the mandated integrity fee, to more serious infractions, such as fraud, misuse of funds, or noncompliance with required integrity certifications or program filings.

Thanks to valuable input from the industry, Congress also included language in the RIA to protect innocent investors in the event of such terminations or debarments.

However, the RIA was unclear about how these protections should be implemented or whether they would extend to pre-RIA investors. As part of the September 2022 settlement agreement in the Behring/EB5 Capital et al. v. USCIS litigation, EB5 Capital and other plaintiffs ensured that the RIA’s good faith investor protections would apply to both pre-RIA and post-RIA investors.

USCIS’s new guidelines further clarify how these protections work and demonstrate USCIS’s intention to protect innocent investors to the fullest extent possible.

Thus, these new integrity measures, the potential penalties, and good faith investor protections should make investors feel more comfortable and secure about investing in the EB-5 Regional Center Program than ever before.

If the USCIS terminates a Regional Center or debars an NCE or JCE, is the immigration process for good faith investors protected by the RIA?

Generally speaking, yes. If the investor has met the EB-5 eligibility requirements – by investing the requisite funds, sustaining that investment through the required period (which differs for pre- and post-RIA investors), and creating the necessary jobs.

According to the USCIS:

Pre-RIA investors may remain eligible if:

• Their project is complete or will be completed as per the comprehensive business plan.
• Sufficient job creation for all investors must be achieved.
• The investor’s capital is sustained through the required two-year conditional residency period.
• In such cases, USCIS officers may determine that the investor is still eligible, even without reassociating with another approved Regional Center or investing in an NCE.
• The termination of the Regional Center is generally not considered a material change affecting continued eligibility.

Post-RIA investors may continue to be eligible if:

• Their capital remains invested for at least two years after being placed at risk.
• The investment must have satisfied the job creation requirement before the Regional Center’s termination or debarment.
• In such cases, USCIS officers may determine that the investor remains eligible, even without reassociating with another approved Regional Center or investing in an NCE.

How will investors learn that their Regional Center, NCE, or JCE has been terminated or debarred? What steps must investors take to avail themselves of the good faith investor protections?

USCIS will provide each investor with written notice, and each investor will have 180 days to respond. The steps investors must take will depend on the facts and circumstances of their particular situation and whether the investor is pre- or post-RIA.

If the investor has already met all eligibility requirements, the only required action might be to notify USCIS that the investor remains eligible despite the termination or debarment. However, in some instances, the investors must amend their petitions.

The USCIS guidelines address situations where investors may face significant challenges, stating that “if their Regional Center is terminated or their NCE or JCE is debarred and their capital investment project has failed or will only create less than the requisite number of jobs, they generally will not remain eligible.”

However, the guidelines offer a potential solution, noting that in such cases, investors “may use the protections under INA 203(b)(5)(M) to amend their petition to retain eligibility.”

This applies to both pre-and post-RIA investors, allowing them to maintain their eligibility despite the difficulties they may encounter with their Regional Center, NCE, or JCE.

According to the USCIS guidelines, even if an investor’s Regional Center is terminated and their project has failed, they may still have options to retain their eligibility.

The guidelines state that in such cases, investors “may amend their petition to retain eligibility through their NCE reassociating with an approved Regional Center or by making a qualifying investment in another NCE.”

This allows investors to ensure they continue to meet the necessary requirements, such as job creation, despite the setbacks they may have faced with their original Regional Center and project.

Crucially, investors may be able to retain their filing priority date, even if an amendment is required.

Investors who receive notice of a terminated Regional Center or debarred NCE should immediately contact their immigration counsel for legal advice on how to proceed with their specific case.

Does the RIA provide good faith investors protections in circumstances where their project has failed financially or to create sufficient jobs, but the Regional Center and NCE remain in good standing?

In short, no.

The USCIS guidelines clarify that “an immigrant investor can only retain eligibility under section 203(b)(5)(M) of the INA if we terminate their Regional Center or debar their NCE or JCE.”

This means that project failure alone does not provide a basis for retaining eligibility under this specific section of the INA.

If an investor wishes to reassociate their NCE with another Regional Center or make a qualifying investment in a new NCE due to project failure, and this failure is separate from the termination or debarment of their Regional Center or entities, they must follow a different path.

In such cases, the guidelines state that investors “must file a new petition for classification based on post-RIA eligibility requirements.”

The good faith investor provisions were not intended to serve as a catch-all for investors. A key eligibility requirement is that an investor’s capital is “at risk.”

The RIA good faith protections are not designed to eliminate investment risk, but rather to protect investors from bad or noncompliant EB-5 actors. They do not protect investors from bad choices.

Therefore, it remains absolutely critical for investors to conduct thorough due diligence and to select experienced Regional Centers with stellar track records, including excellent project selection, project management, and project repayments.

Disclaimer: The article’s content is for informational purposes only and should not be considered legal advice. Please contact an attorney for specific legal advice.