USCIS issued a Draft Policy Memorandum today, August 10, 2015, in anticipation of continuing issues regarding visa availability in the wake of the August 2014 retrogression of EB-5 visas for nationals of mainland China, which marked the first time in the history of the EB-5 Program that demand for visas exceeded availability. Because EB-5 China retrogression is anticipated to extend into the foreseeable future, the Draft Memo provides additional guidance for two EB-5 eligibility grounds that may be affected by visa retrogression, namely, (1) the job creation requirement and (2) the requirement to sustain the investment during the conditional residence period. While doing little to change the actual policies in place regarding job creation and the sustained, at risk investment requirements, the Draft Memo does provide some examples of how investors may comply with these requirements even in the face of visa retrogression.
1. The Job Creation Requirement
One of the core requirements of the EB-5 program is that the investor must demonstrate that their individual capital investment in a new commercial enterprise (NCE) resulted in the creation of at least 10 full-time jobs for U.S. workers during the conditional permanent residence (CPR) period or within a reasonable time thereafter. The investor must file a petition to lift the conditional basis of their permanent resident status in the 90 days preceding the expiration of the 2-year conditional residence period and this filing (the I-829 Petition by Entrepreneur to Remove Conditions) must be accompanied by documentation of the required job creation.
The 2-year period for job creation was initially created to best approximate the two-year conditional residence period. Thus, current USCIS policy provides that the 2-year job creation period begins 6 months after the adjudication of the I-526 petition (the Immigrant Petition by Alien Entrepreneur), which was reflective of the amount of time required to complete the adjustment of status process or consular immigrant visa processing. The Policy Memo acknowledges that, with visa retrogression in the EB-5 visa category, the adjustment of status and consular processing times for many investors will vary widely. However, because the Service cannot predict the extent of visa retrogression and the significance of the potential adverse impact on affected immigrant investors, the Draft Memo states that USCIS will not change its current policy regarding the 2-year job creation period currently outlined in the regulations.
Instead, the Draft Memo indicates that USCIS, when determining whether sufficient job creation has occurred in adjudicating the I-829 Petition, will not require the 2-year job creation period to coincide with the 2-year conditional residence period such that the job creation requirement can still be met if "the petitioner can show” presumably prior to the start of the conditional residence period “that at least ten full-time jobs for qualifying employees were created by the new commercial enterprise as a result of his or her investment, and such jobs were considered to be permanent jobs when created."
Thus, while reluctant to change the 2-year time period during which job creation must be shown, USCIS attempts to mitigate issues caused by visa retrogression by not requiring the 2-year job creation period to correspond directly to the immigrant investor's conditional residence period such that the job creation period may, in fact, precede the period of conditional residence.
The Draft Memo reiterates that the types of jobs that will be counted towards the requisite 10 full time jobs remains consistent with prior agency guidance (excluding jobs that are intermittent, temporary, seasonal, or transient in nature) and provides some additional clarity on the types of positions would meet the full-time employment requirement (deeming laborers working 35 hours per week on a long term construction project full-time employment, while electrical workers providing services during a small number of fixed periods over the course of the project intermittent). The Draft Memo also confirms that adjudicators will focus on the position rather than the employee such that a full-time position may be filled by more than one employee without excluding it from consideration as full-time employment.
Finally, the Draft Memo confirms that USCIS will continue to consider 3 years from the date the immigrant investor was admitted in CPR status as the reasonable period of time in which jobs must be created (excepting extreme circumstances, such as force majeure).
2. The Sustained, "At Risk" Investment Requirement
A second core requirement of the EB-5 program is that the immigrant investor must demonstrate that their investment of capital into the new commercial enterprise was continuously sustained throughout their period of conditional residence in the United States and that their investment capital remained "at risk" for the purposes of generating a return. In order to address some of the issues that could impact an immigrant investor's ability to meet the sustained, at risk investment requirement in the face of visa retrogression, the Draft Memo provides clarification on several issues.
First, the memo confirms that, consistent with prior policy, the investment must be sustained in a single new commercial enterprise, but that the NCE may deploy the capital into other wholly-owned subsidiaries or job creating enterprises (JCE).
Second, the Draft Memo confirms that "at risk" continues to mean the investor's capital must be subject to a risk of loss and a chance of gain. However, it clarifies that in cases where invested funds were lost as a result of the investment, the investor may still meet the "at risk" requirement if they can demonstrate that the full amount of capital was invested into the new commercial enterprise and establish that the loss of funds was a direct result of the investment. The Draft Memo provides examples of scenarios in which this could be demonstrated, such as when the NCE loans the investment funds to a JCE, and the JCE becomes insolvent and files for bankruptcy during the sustainment period. The Draft Memo notes, however, that if all or a portion of the the NCE's claim against the JCE is repaid during the sustainment period, the NCE must re-deploy those funds into an "at risk" activity for the remainder of the sustainment period.
3. Material Change
Finally, the Draft Memo addresses how retrogression will impact investors who invest in projects that subsequently undergo a "material change" (defined as "changed circumstances [that] would have a natural tendency to influence or are predictably capable of affecting the decision"). Under current USCIS policy, the impact of a material change is determined relative to the investor's status in the U.S. As such, retrogression can significantly affect when investors are able to assume CPR status and, thus, how a material change will impact their EB-5 eligibility. The Draft Memo reaffirms USCIS's current position on when a material change will necessitate the filing of a new I-526 petition, which is as follows:
- Material Change Occurs before I-526 Approval - Investor must file a new I-526 petition
- Material Change Occurs following I-526 Approval but before Assumption of CPR status - Investor must present evidence demonstrating that the change is not material or file a new I-526 petition
- Material Change Occurs Follow Assumption of CPR status - Investor need not file a new I-526 provided the initial I-526 petition was filed in good faith and they can demonstrate at the I-829 phase that the investment was sustained in the NCE and the requisite 10 full time jobs were created.
The Draft Memo clarifies, however, the circumstances under which a change would not be considered "material" and would allow for a longer deployment of capital to cover the protracted period of visa retrogression.
Until the guidance is finalized, USCIS notes that this draft memorandum does not constitute agency policy in any way or for any purpose. The comment period on the memo ends September 8, 2015.