For United States Citizenship and Immigration Services (USCIS), the fiscal year runs through September 30, and as calendar year 2020 came to a close, it was clear that the year constituted the most volatile and unpredictable in the EB-5 Immigrant Investor Program’s three-decade history. A pandemic swept the globe. Economies were nearly destroyed. EB-5 investors around the world were left in consulate limbo following temporary closures and phased reopening. Furthermore, while President Trump’s immigration bans largely skipped EB-5 investment participants, travel restrictions, flight schedule reductions, and routine visa service suspensions still created a de facto ban scenario for the industry. The COVID-19 epidemic was only one obstacle the EB-5 program faced in FY2020, however.
The New Modernization Rule Is a Major Blow to Prospective EB-5 Investors and Regional Centers
Before COVID-19 was even an issue, the enactment of the Modernization Rule on November 21, 2019, was the first blow to the EB-5 program in FY2020. This new legislation sharply increased the minimum investment amount required to participate in the EB-5 program, affecting both regular and targeted employment area (TEA) EB-5 investments. The requirement was increased by 80%, to $1.8 million and $900,000, respectively, pulling the EB-5 option from countless EB-5 investment prospects’ tables. The rule also altered TEA designation policies and procedures, which resulted in mass termination notices to regional centers across the United States throughout FY2020.
The New Visa Availability Approach Further Disadvantages Prospective Chinese Investors
Later in the year, in a huge shift from its classic first-come, first-serve approach in place since EB-5 program inception, USCIS introduced the visa availability approach for I-526 processing. This meant the prioritization of I-526 petitions from EB5 investment applicants for whom visas were immediately available. While this change was designed to increase efficiency in processing, it has led to grave consequences for the already heavily backlogged investors from China.
These three circumstances were catalysts in creating atypical processing patterns for I-526 petitions in FY2020, and in this post, we take a closer look at the specifics to uncover the bigger picture behind the altered I-526 processing for the year.
Advance Warning of Modernization Drove Bottlenecking in I-526 Filings
Prior to the November 2019 effective date for the Modernization Rule, USCIS provided advanced warning of planned changes under the new legislation. Nearly doubling the price of program entry undoubtedly rendered many prospective EB-5 investments unviable. Foreign nationals already locked into their individual plans to participate rushed their I-526 submissions to clear the November 21 deadline and avoid the nearly doubled capital requirement. USCIS reported 4,285 I-526 petitions filed in the first half of FY2020 (October 1, 2019, through March 21, 2020) and 4,264 of them were submitted before January 2020—an 80% increase year over year!
The agency did not provide overly detailed breakdowns of the filing dates, but with the previous EB-5 investment capital requirements being $1 million and $500,000 and the dramatic increase in filings compared to the previous year, it is safe to assume most of those I-526 applications likely came through before the Modernization Rule took effect. Then, besides the continuous downtrend under the current Immigrant Investor Program Office (IPO) leadership, an equally dramatic fall in filings logically occurred at the onset of the COVID-19 pandemic. These circumstances created a bottleneck scenario for I-526 processing.
Q1 FY2020 Leadership Shift Widened the Gap in I-526 Approvals and Denials
Almost immediately following the leadership change at the IPO in FY2019 from Julia Harrison to Sarah Kendall, a steep downtrend from all-time processing highs began. Kendall’s abysmal processing volumes were initially attributed to a sharp refocus on integrity and training among I-526 adjudicators, according to IPO officials.
It is possible that the updated visa availability approach on I-526 petitions will have bolstered I-526 processing figures, but as of January 12, 2021, detailed processing data simply isn’t available. This new visa availability approach was implemented in April 2020 as a way for USCIS to focus efforts on petitions for which visas are readily available. How significant will the impact be? It’s impossible to be sure until reports are in, but it wouldn’t be surprising if figures don’t improve much.
In part, this could be attributed to a steady denial rate. The denial rate for I-526 applications has not fallen, likely due to adjudicators’ updated training and fresh eyes on application processing. Fewer approvals, steady denials—this is the recipe behind the continued decline in EB-5 investment productivity apparent in the statistics. The approval rate for I-526 petitions in the first half of the fiscal year last year was 81%—the lowest the industry has seen in years.
While this figure is well within long-term EB-5 norms, it’s still not great news. It has resulted in increased instances of requests for evidence (RFEs) and notices of intent to deny (NOIDs) among EB5 investment participants. Fortunately, most of them have resulted in delays, not outright denials. If you are an EB-5 investor who has received an RFE or NOID, one of the best ways to avoid denial is by working with an experienced EB-5 investment attorney on your response. They will be able to provide invaluable guidance and insight into USCIS’s processes and its adjudicators’ preferences and tendencies, saving you time and resources.
COVID-19 Brought I-526 Processing to a Near-Grinding Halt in Q2 FY2020
Record-breaking highs in I-526 processing wait times are no surprise following the shutdowns post-pandemic outbreak. Processing of I-526 cases came to a near-grinding halt in the second quarter of FY2020. By August 2020, I-526 estimated processing times had nearly doubled from 29.5–44.5 months to 46–74.5 months. However, this extreme ballooning then retracted again, based on December 2020 reporting of a 30.5–50-month time range.
That said, USCIS created a separate estimated processing time range in August 2020 for I-526 petitioners from China, effectively deprioritizing them under the visa availability approach. This has essentially nullified the closing of the two-year gap between processing times for Chinese investors and EB5 investment participants from other parts of the globe, at least for now.
One silver lining in the cloud of FY2020 data is that actual processing times for I-526 petitions have proven significantly quicker here in the trenches compared to the unprecedentedly high estimates posted on the USCIS website. Furthermore, that trend seems to be increasing.