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Congress Helps Stranded Immigrant Investors
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By Stephen Yale-Loehr* After three years of lobbying, Congress has finally passed a law helping certain stranded immigrant investors. The provisions, enacted as part of a Justice Department authorization law, correct a serious injustice that has befallen several hundred immigrant investors due to actions taken by the Immigration and Naturalization Service (INS). As background, in 1990 Congress created the employment-based fifth preference (EB-5) immigrant investor program, which allows people who make a substantial investment creating jobs in the United States to apply for legal immigrant status. Between 1990 and 1998 many people made the required initial investments, created the required number of jobs, and otherwise complied with the applicable requirements. The INS approved their applications for conditional permanent resident status. They and their families moved to the United States, enrolled their children in schools, purchased homes, and began their new lives in the United States. Consistent with the terms of the program, after two years the investors applied to the INS to begin the process of becoming unconditional legal immigrants. That process is set forth in Immigration and Nationality Act (INA) § 216A. In 1998, without notice or opportunity to comment, the INS changed the requirements for the EB-5 program, making it extremely difficult for new investors to qualify. The INS also applied the new, more restrictive requirements retroactively to EB-5 investors who had applied in good faith under the old interpretations. The INS terminated some investors’ lawful status and began actions to deport them and their families. As a consequence of the INS’s actions, immigrant investors and their families were losing their houses, their jobs, their right to be in the United States, and the millions of dollars of investments they poured into the U.S. economy. These harsh effects are irreparable and would have continued to worsen unless legislation was passed. The new law gives investors caught by the retroactive application of the INS’ changes an opportunity to re-establish EB-5 eligibility. In essence, the new law replaces the normal procedures of INA § 216A with new procedures for investors who fit the parameters of the new law. Those deemed to have met those requirements will be granted unconditional permanent resident status. Those who have not yet met these requirements will have two years to complete their investments and to demonstrate the requisite job creation/saving, receiving credit for amounts invested and jobs created or saved to date. The law also makes some modest changes to the general EB-5 program. This article first summarizes the EB-5 provisions. It then addresses ambiguities in the law. It concludes by cautioning that the new law is not a panacea for immigrant investors. Summary of the EB-5 Fix Law To qualify under the law, an investor must have filed a petition for EB-5 classification (INS form I-526) and had it approved by the INS between January 1, 1995 and August 31, 1998. What happens next depends on what fact pattern the investor falls into.
Section 11031(c) of the new law sets forth procedures to determine whether investors can have their conditions removed. The INS has 180 days after enactment to decide three things: whether (1) the I-829 petition contains any material misrepresentations; (2) the investment created or saved 10 jobs; and (3) the investor has substantially complied with the investment requirement ($1 million or $500,000). Investments in regional centers or in troubled businesses count. The law gives investors a choice of three dates by which to measure their compliance: (1) the date the I-829 petition is filed; (2) six months after the I-829 petition is filed; or (3) the date the INS makes its determination under the new law. This choice of dates will help investors. If they originally met the capital investment and jobs creation requirements when they filed their I-829 petitions or shortly thereafter, they should not be penalized if the investment no longer exists. If they did not meet the capital investment and jobs creation requirements originally, they still may have time to do so before the INS makes its determination. If the investor meets the jobs and investment requirements and has not made a material misrepresentation, the INS will remove the conditional resident status and the investor and family members will become real permanent residents as of the second anniversary of the date they became conditional residents. If the INS finds against an investor on any of the three grounds, the Service must notify the investor, and the investor receives a chance to rebut the adverse facts. If the investor loses on the jobs or investment requirement, the INS will continue the investor's conditional resident status for two years. During that time the investor can try to meet those requirements (see below). If the INS finds that the investor made a material misrepresentation, the INS will terminate the investor's conditional resident status. The investor can appeal to the Board of Immigration Appeals and then seek judicial review. During administrative or judicial review proceedings the investor and his or her family members remain in conditional resident status. Most investors are unlikely to persuade the INS that they fully met the capital investment and jobs creation requirement. The new law gives them an additional two years to make another investment. During that time they can combine investments made earlier with new investments to show that altogether they invested the total amount required. This includes investments in limited partnerships. An investor must file another I-829 during the 90 days preceding the two-year anniversary. Failure to file will normally terminate a conditional resident's status. There is a good cause exception. Assuming an investor files another I-829 petition, the INS has 90 days to decide three things: whether (1) the I-829 petition has any material misrepresentations; (2) the investment created or saved 10 jobs; and (3) the investor has substantially complied with the investment requirement ($1 million or $500,000). The investor can aggregate money invested before and jobs created or saved from the initial investment. Investments in regional centers or in troubled businesses count. If the investor meets the job creation and investment requirements and has not made a material misrepresentation, the INS will remove the conditional resident status of the investor and family members. They will become real permanent residents as of the second anniversary of the date their conditional resident status was continued. If the INS finds against an investor on any of the three grounds, the Service must notify the investor, who may attempt to rebut the adverse facts. If the investor loses, the INS will terminate the investor's conditional resident status. An investor whose conditional resident status is terminated can have an immigration judge review that decision. The INS has the burden of proof in such proceedings. Section 11032 of the new law provides similar procedures for EB-5 investors whose I-526 petitions were approved, but who never became conditional residents because the INS never acted on their adjustment of status applications or because they remained overseas. This section defines an eligible individual as an investor who filed an I-526 petition that was approved by the INS between January 1, 1995 and August 31, 1998, and who then timely filed an adjustment of status application or applied for an immigrant visa overseas. Investors are not eligible if they are inadmissible or deportable on any ground. If the INS revoked the I-526 petition on the ground that the investor failed to meet the capital investment requirement, that revocation is to be disregarded. If the adjustment of status application or immigrant visa application overseas is not pending on the date of enactment, it is to be treated as reopened if (i) it is not pending because the INS claims the investor never complied with the capital investment requirement or (ii) the investor left the United States without advance parole. If an investor applied for adjustment of status in the United States but is now overseas, the INS will establish a process to let them return to the United States if necessary to obtain adjustment. The INS must approve adjustment of status applications for eligible investors within 180 days after enactment. The investors will then be in conditional resident status. Such investors must file an I-829 petition within two years of becoming a conditional resident. The determinations and process are similar for both § 11031 and § 11032 investors. For example, the INS must credit the investor with funds invested and jobs created or saved both before and after the date of enactment. This section gives investors a choice of two dates by which to measure their compliance: (1) the date they filed their adjustment of status application; or (2) the date the INS decides the I-829 petition. The new law provides “age-out” protection for children of immigrant investors who are covered by the new law. Specifically, the new law status that a noncitizen who was admitted on a conditional basis by virtue of being the child of an EB-5 investor shall still be considered a child for purposes of the new law, even if they turn 21 or marry. The new law also makes some general changes to the EB-5 law. Most importantly, § 11036 amends INA § 203(b)(5) to eliminate the “establishment” requirement for EB-5 investors. Instead of proving that they have “established” a commercial enterprise themselves, investors now need only show that they have “invested” in a commercial enterprise. This section also amends section INA § 216A to eliminate the “establishment” requirement for EB-5 investors who have filed I-829 petitions. This section also clarifies that a “commercial enterprise” may include a limited partnership. The changes made by this section apply to I-526 and I-829 petitions pending on or after the date of enactment. The new law also liberalizes the full-time employment requirement of the EB-5 program. The law defines “full-time” employment to mean a position that requires at least 35 hours a week at any time, regardless of who fills the position. This will primarily benefit EB-5 projects in the construction industry, where individual workers may come and go, but the position is still created on an ongoing basis. Finally, section 11037 of the new law amends section 610(a) of a 1992 law that established EB-5 regional centers to clarify that an EB-5 regional center can promote increased export sales, improved regional productivity, job creation, or increased domestic capital investment. This accords with a 2000 law that amended section 610(c) of the 1992 law in a similar way. Section 11037 also clarifies that the INS should approve applications for EB-5 regional center status as long as they are based on a general prediction concerning the kinds of commercial enterprises that will receive capital from investors, the jobs that will be created directly or indirectly as a result of the investment of capital, and the positive economic impacts that will result from the investment of capital. This section applies to regional center, I-526, and I-829 applications filed on or after the date of enactment. Ambiguities in the New Law As with any complicated statute, the new law does not address every possible issue or fact pattern. The following are just some of the new law’s readily apparent ambiguities: Implementation schedule: The first uncertainty about the new law concerns its implementation schedule. As written, the new law requires the INS to publish implementing regulations within 120 days of enactment. In response to INS objections, however, House and Senate immigration staffers orally agreed at the last minute to give the INS 365 days to issue regulations. That agreement will be set forth in a letter from Congress to the INS. In giving the INS extra time, the letter should require the INS to publish proposed regulations within 180 days of enactment and final regulations within 365 days. At least the new law is clear in forbidding the INS from taking any action against eligible investors until it publishes implementing regulations. On a related point, § 11031(c)(1)(A) requires the INS to decide within 180 days of enactment whether an investor who has filed an I-829 application meets the requirements to have their conditional resident status removed or instead will receive an additional two years to establish EB-5 eligibility. That section was written on the assumption that regulations would be published within 120 days and then the INS would have 60 days to make its determination. Since Congress is now allowing the INS 365 days to publish regulations, the INS probably will not have to issue its determinations under § 11031 within 180 days after all. By contrast, § 11032(a) requires the INS to approve certain adjustment of status applications filed by EB-5 investors within 180 days of enactment. That section does not require implementing regulations to take effect. For that reason the INS should still be required to make those determinations within six months. Motion to reopen requirements: Section 11031(b)(2) requires investors with denied I-829s to file motions to reopen within 60 days of enactment. How are investors and counsel going to know what the INS will require in the motion to reopen if the motions have to be filed before regulations are promulgated? Also, where will the motions to reopen be filed? Some attorneys have cases where an INS regional service center denied the I-829 petition but a local INS district office denied the motion to reconsider. Similarly, does an investor have to be paroled back into the United States to file a motion to reopen? Or can an investor be abroad and still file the motion? What instructions will the INS give U.S. embassies, consulates and airlines for paroling investors back into the United States? For investors in removal proceedings who file motions to reopen, can the investors file motions to terminate or administratively close proceedings? What are the requirements for the motion to reopen? Under the new law, it appears that the motion could be rather short and just set forth that: (1) the I-526 was approved between January 1, 1995 and August 31, 1998, (2) the investor obtained conditional resident status; and (3) the investor’s I-829 petition was filed before the date of enactment. Does anything else have to be included in the motion to reopen? The INS should promptly publish a memorandum addressing all these issues so that investors can properly file their motions to reopen within the 60-day deadline. Credit for prior capital invested and jobs created or saved: The new law gives the INS discretion to decide whether an investor will receive full credit for all amounts originally invested, even if not all that money eventually found its way to the underlying new business. The INS has similar discretion in deciding whether to give an investor any credit for jobs created or saved through the first investment. Based on prior restrictive interpretations on this issue in unpublished decisions, the INS may not be willing to give much if any credit for prior capital or jobs. Thus, absent clarification in the regulations on this issue, investors may essentially have to start over, reinvesting a full $500,000 or $1 million and creating or saving 10 jobs to be able to have a chance of obtaining permanent resident status under the new law. Review of the second investment: It is unclear how an investor will know if his or her second investment will satisfy the INS. The law doesn’t seem to give the INS a chance to vet the second investment before the investor actually plunks down his or her money. That may make some investors nervous about using the new law. On the other hand, they may not have any other options. Elimination of the enterprise establishment requirement: Section 11036 of the new law, which eliminates the requirement that the investor must have “established” the new commercial enterprise, applies to petitions pending on or after date of enactment. The law does not specify whether this extends to I-829 denials that are subsequently reopened under the EB-5 fix law. Inadmissibility and deportability: One requirement to be eligible under § 11032 for adjustment of status is the noncitizen cannot be inadmissible or deportable “on any ground.” But what if an investor filed an adjustment of status application under INA § 245(i)? The new law does not address that problem. Conclusion As a general matter, all investors who think they may qualify under the new law should start preparing now to document what they invested, when they invested it, and how many jobs they created or saved through that investment. The INS will probably determine that only a part of their original investment can be credited toward the new investment. Still, that is better than nothing. The new EB-5 provisions do not cure all problems with the EB-5 program. The new law will not even take effect until the INS publishes regulations to implement the new law. That may take a year or longer. Moreover, the INS is concerned about potential fraud in the EB-5 program, so its regulations may interpret the new law very narrowly. Investors should not assume that they will be able to gain an unconditional green card under the new law, or that even if they do it will occur quickly. Investors should consider other ways to obtain permanent residency in the United States if they qualify for them. In any event, careful consultation with an immigration lawyer experienced in EB-5 matters is important.
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