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Immigrant Investor Green Cards: Rise of the Phoenix?*
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By Stanley Mailman and Stephen Yale-Loehr** If “to rise like a phoenix from the ashes” means to overcome a seemingly insurmountable setback, that bird may well be the EB-5, the immigrant investor category that leads to the green card. As explained below, in 1998 the Immigration and Naturalization Service (INS) seemed to deal the EB-5 a death blow. Yet today, seven years later, there is new hope for the EB-5. This article explores the history and status of this green card category, and concludes that such hope may be warranted. Background Congress created the EB-5 in 1990 as part of a general overhaul of the legal immigration system. INA § 203(b)(5), 8 U.S.C. § 1153(b)(5). Ten thousand visas are available to investors each year in this green card category. To qualify, a foreign investor must establish a new commercial enterprise in which he or she must normally invest at least $1 million. If the investment is in a rural or high unemployment area, however, $500,000 will suffice. The investment must create or save at least ten full-time jobs for U.S. citizens, permanent residents, or other immigrants authorized to work in the United States. The ten workers cannot include the investor or the investor’s immediate family. See generally Charles Gordon, Stanley Mailman & Stephen Yale-Loehr, Immigration Law and Procedure § 39.07 (rev. ed. 2005). Procedurally, an immigrant investor who applies for EB-5 status first gets conditional resident status. Two years later, he or she must apply again to the immigration agency (now the U.S. Citizenship and Immigration Services (USCIS)) to have the conditions removed and become a regular green card holder. The drafters of the 1990 legislation had high hopes for the immigrant investor category, predicting that 4,000 foreign nationals and their family members would apply for the green cards annually, bringing in up to $4 billion and creating 40,000 jobs every year. Al Kamen, An Investment in American Citizenship: Immigration Program Invites Millionaires to Buy Their Way In, Washington Post, Sept. 29, 1991, at A1. The reality has been very different. The EB-5 is grossly under-used. A new report by the Government Accountability Office (GAO) found that in the last twelve years, 6,024 EB-5 green cards have been issued, for an average of just 500 a year. U.S. Government Accountability Office, No. GAO-05-256, Immigrant Investors: Small Number of Participants Attributed to Pending Regulations and Other Factors (Apr. 2005), available at http://www.gao.gov/new.items/d05256.pdf (last visited Apr. 18, 2005) [hereinafter GAO EB-5 Report]. The annual number of EB-5 green card visas issued peaked at 1,570 in 1997, and fell to a low of 71 in 2003. Id. at 8. That number rose slightly in 2004 to 126, id., and is expected to increase further this year. Why the Decline? Several reasons account for the category’s disuse. See generally Stanley Mailman & Stephen Yale-Loehr, Controversy Over Investor Category, New York Law Journal, Apr, 27, 1998, at 3. First, qualifying a person for EB-5 status is one of the most complicated subspecialties in immigration law. Lawyers must have a sophisticated knowledge of corporate, tax, investment, and immigration law. See Stephen Yale-Loehr, EB-5 Immigrant Investors, in 2 American Immigration Lawyers Association, Immigration & Nationality Law Handbook 308, 321 (2004–05 ed.). Second, the statute provides for two years of conditional residence, with no guarantee of lawful permanent resident status at the end of the period. The uncertainty and risk of denial long after they invested their money undoubtedly deter many potential investors. Third, many potential investors find it easier to qualify for permanent residence in other ways that are less expensive and more certain. Fourth and perhaps most importantly, in 1998 the legacy INS cracked down on EB-5 green cards. The agency issued four precedent decisions that year that tightened EB-5 eligibility requirements. The INS also applied its new, more restrictive interpretations retroactively to investors who had applied in good faith under the old rules. The INS terminated some investors’ lawful status and began actions to deport them and their families. Litigation challenging the agency’s actions ensued, and still continues. New Initiatives In 2002 Congress stepped into the act. It passed provisions to give several hundred investors caught by the retroactive application of legacy INS’s 1998 changes an opportunity to re-establish EB-5 eligibility. 21st Century Department of Justice Appropriations Authorization Act, Pub. L. No. 107-273, §§11031–37, 116 Stat. 1758 (2002). Under those provisions, investors who would have met the normal EB-5 requirements will be granted unconditional green card 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 specifically excludes any investors who have committed fraud. The 2002 law required the immigration agency to issue implementing regulations by March 2003. Unfortunately, that has not yet happened. Despite all the problems in the EB-5 category, interest in this type of green card continues. In September 2004 the USCIS held a public meeting in Washington, D.C. to discuss the EB-5 category. Over 100 people attended. The USCIS held the meeting to allow concerned parties to express their comments and concerns. Paramount among the issues discussed were lengthy processing times, which can cause businesses to back out of deals or a foreign national’s financial status to change. Attendees urged the USCIS to decide EB-5 petitions more quickly. They said they would be willing to pay a premium processing fee for faster adjudication of their EB-5 petitions. Attendees also urged the USCIS to consider concurrent filing of adjustment of status applications with EB-5 petitions, just as the agency already allows for other employment-based green card petitions. They also deplored ambiguities in USCIS EB-5 regulations. The USCIS officials promised to make changes to the EB-5 category to meet the needs of investors and the business community. The USCIS followed up on that promise in January 2005. See memorandum from William R. Yates, USCIS Assoc. Dir. for Operations, to all USCIS offices, Establishment of an Investor and Regional Center Unit, File No. HQPRD 70/6.2.8 (Jan. 19, 2005), available at http://uscis.gov/graphics/lawsregs/handbook/EB5Unit011905Pub.pdf (last visited Apr. 18, 2005). Among other things the memo establishes a new Investor and Regional Center Unit (IRCU) at USCIS headquarters. The IRCU will provide oversight for EB-5 policy and regulatory development, field guidance, and training. According to the memo, establishing the IRCU will “strengthen and protect the integrity of the [EB-5] program while promoting the intent of Congress to encourage investment and increase employment within the United States.” Id. The new USCIS memo and the September 2004 meeting may mark a major leap forward in USCIS policy. The changes hold the promise of making the EB-5 process more user-friendly in terms of processing times and responsiveness to investors’ concerns. Congress also remains interested in the EB-5 category. On April 6, 2005, Rep. James Sensenbrenner, chairman of the House Judiciary Committee, wrote USCIS Director Eduardo Aguirre, asking the USCIS to process EB-5 cases more quickly by instituting premium processing and concurrent filing for immigrant investor petitions, two of the key issues raised at the September 2004 meeting. The USCIS has not yet replied to Rep. Sensenbrenner. Even so, problems remain. The USCIS still has not published regulations to implement the 2002 law. Moreover, several lawsuits are pending in federal court challenging the actions that legacy INS took in 1998 to restrict the EB-5 program. In one case a federal appeals court held that that legacy INS violated the EB-5 law when it applied restrictive interpretations of the EB-5 program retroactively to investors who had applied in good faith before those changes were made. Chang v. United States, 327 F.3d 911 (9th Cir. 2003). The appeals court remanded the case to district court, where the case is still pending. See also Sang Geun An v. United States, No. C03-3184P (W.D. Wash. Feb. 16, 2005) (following Chang). Until these and similar cases are resolved, foreign investors will lack confidence in investing in the United States and creating jobs for U.S. workers. Disposition of those lawsuits on terms favorable to the investor litigants would go far toward encouraging potential immigrants to invest their money in the United States. Similarly, the USCIS should promptly publish regulations implementing the 2002 law. Conclusion The immigrant investor category has worked in other countries. For example, between 1986 and 2002 more than $6.6 billion (Cdn) has been invested in Canada’s immigrant investor program. It can work here too. The GAO found that even though few investors have used the EB-5 category so far, EB-5 participants have invested an estimated $1 billion in a variety of U.S. businesses. GAO EB-5 Report at 1.The USCIS is on the right track with its recent actions. With some nudging by Congress and other interested parties, the potential of the EB-5 program can be finally realized, 15 years after its enactment. At that point the EB-5 phoenix will finally soar. __________ * This article originally appeared in the April 25, 2005 issue of the New York Law Journal. Copyright © 2005 New York Law Publishing Company. The authors thank the Journal for permission to reprint this article. ** Stanley Mailman and Stephen Yale-Loehr are co-authors of Immigration Law and Procedure, published by LexisNexis Matthew Bender. Mr. Mailman (smailman@ssbb.com) is of counsel to Satterlee Stephens Burke & Burke in New York City. Mr. Yale-Loehr (syl@millermayer.com) is of counsel at Miller Mayer in Ithaca, N.Y., and teaches immigration and asylum law at Cornell Law School. In the interest of full disclosure Mr. Yale-Loehr represents many immigrant investors and companies, including one that is suing the USCIS. He also helped to draft the 2002 law mentioned in this article.
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