Common Obstacles Faced by EB-5 Investors
The EB-5 Program, while providing many benefits to the U.S. economy and investors alike, is not without its challenges. Program investors may encounter several obstacles during the process, and it is best to know what to expect before committing to this process. General challenges include those due to legislative changes, fraudulent behavior on the part of one or more of the parties involved, and USCIS requests for more information, Additionally, investors may encounter challenges specific to the individual steps of the process.
Program Changes Due to Legislation
While the EB-5 program has been firmly established for some time, some of the requirements and options within the program may change from time to time with legislation. For example, the minimum investment requirement may decrease or increase, program eligibility requirements might change, and minimum job creation requirements might increase or decrease. Investors who are currently in the middle of the EB-5 process with petitions based on previous policies could be negatively affected by any changes that occur mid-program.
Fraudulent Behavior
When misinformation is provided to investors or vital information is withheld, this is considered fraud. The Securities and Exchange Commission (SEC) and USCIS have implemented safeguards to help prevent this from occurring, but this misrepresentation still occurs on occasion and is always a risk.
USCIS Requests for More Information
On occasion, USCIS may decide that the information they have either is inadequate to justify approval of a petition or indicates that a denial is in order. If an investor receives a notice of intent to deny (NOID), he or she has the opportunity to provide additional information to clear up any issues that may lead to the denial of the petition. A request for evidence (RFE) indicates to an investor that more information is needed in order for USCIS to approve the petition. Both of these requests can lead to delays in the approval process and additional costs to the investor.
While a petition denial can be challenged through an administrative review, this process is very time-consuming as well. Fortunately, 90% of I-829 petitions and 85% I-526 petitions are approved, making the need for this review rare.
Challenges Faced in I-526 Petition Processing
Form I-526, which must be submitted at the start of the EB-5 process, requires both project description documents and evidence that the money being invested was legally obtained. The project documents submitted with the petition must show how the funds will be used, how the project will be able to create ten new fulltime jobs for U.S. employees for each investment, and that the investment is being placed in a new commercial enterprise (NCE)—a for-profit entity that has been newly formed, recently purchased, or expanded. Permission for the investor to go through the EB-5 process will be granted based on a review of these documents by USCIS, thus it is important that the documents be thorough, complete, and carefully reviewed by all interested parties and their retained attorneys to avoid denials and delays.
All EB-5 investors must account for the sources of all money that will be used in the investment. This may involve providing paystubs, bank records, and other documentation. In countries like China, this may be difficult to do since financial institutions rarely provide statements. In addition, some countries only permit certain amounts of money to be transferred out of the country, which may necessitate the use of financial institutions in other countries.
While the application is pending, both USCIS and the SEC may conduct background investigations on the commercial enterprise to review any past claims of fraud and ensure that the project is compliant with regulations and has the potential to create the needed number of jobs.
Obstacles to Obtaining Conditional Permanent Resident Status
If the I-526 is approved, EB-5 investors may continue the EB-5 process. For investors already residing in the United Status as nonimmigrants, this involves requesting conditional permanent residence status through a status adjustment. Status adjustments are processed by USCIS after a review of documentation. For investors who have yet to enter the United States, this is done through a review of legal and medical documents proving immigration eligibility by the National Visa Center (NVC) and a consulate interview conducted in their country of origin. Documents should be carefully reviewed to make sure information is accurate, thorough, and consistent with documents submitted earlier in the process—otherwise, processing delays may occur.
Delays in I-829 Approval
Once conditional permanent resident status has been granted to an immigrant investor, there is a two-year period before the visa expires. During this time, the selected project is expected to use the investment to create the necessary ten fully time jobs. At the end of the period, the investor must submit Form I-829, which will remove the conditions from the permanent resident status. This form must be accompanied by evidence that the invested funds are still at risk and that the ten jobs have been created and maintained. This evidence may include payroll records and financial records. It is important to ensure that the funds listed in the original paperwork match those listed on this final form and that those funds were directly used to create the ten required jobs.
While there are a variety of obstacles that investors may encounter during the EB-5 process, many can be avoided by a thorough investigation of projects and regional centers and a careful review of documents, ensuring that all requirements are met and needed documentation provided. This will avoid costly delays and denials in the petition process.
