EB5AN is deeply concerned about the implications of the lawsuit brought by Invest in the USA (IIUSA) against U.S. Citizenship and Immigration Services (USCIS) over the October 2023 sustainment period policy.
The 2023 policy interpreted the language of the EB-5 Reform and Integrity Act of 2022 (RIA) to mean that an EB-5 investor’s money must be kept at risk for two years from the time of investment. This interpretation contrasts with USCIS’s prior policy, which required the money to be kept at risk for the two years of an investor’s conditional residence.
This lawsuit raises a number of key questions we feel must be transparently addressed.
What Is the Purpose of This Lawsuit?
What Does This Lawsuit Get Right?
What Would the Lawsuit Accomplish if Successful?
Who Made the Decision to Pursue This Lawsuit?
What Is the Purpose of This Lawsuit?
According to IIUSA, the lawsuit is intended to “to protect investors and uphold the integrity that industry leaders worked with Congress for more than a decade to achieve.”
If the intent is to protect investors, how does this lawsuit further that goal? What exactly does the lawsuit protect investors from?
From what we understand, IIUSA seems to believe that the new policy puts investors at more risk in two key ways:
- Two years is not long enough to create the jobs required by the EB-5 program.
- A shorter sustainment period may limit the availability of high-quality projects
These are real risks, but they can be avoided easily enough—and they are certainly not caused by the shorter sustainment period. The reality is that some projects on the market today with durations of five or more years have high immigration and financial risk. Reputable regional centers, however, will continue to offer high-quality, lower-risk projects regardless of the length of the sustainment period. Therefore, we believe the lawsuit does not do anything to protect investors.
Consider this logic:
The lawsuit is intended to protect EB-5 investors from low-quality, higher-risk projects. But why are such projects available to investors? They are available because regional centers sponsor them. So does the lawsuit do anything to prevent regional centers from sponsoring low-quality, high-risk projects? No.
If the purpose is really to protect investors, this lawsuit makes no sense.
Instead of working to promote a higher standard for regional centers, IIUSA’s lawsuit simply limits investor choice. While this may seem reasonable since the members of IIUSA are regional centers, EB5AN believes that higher standards and more choice for EB-5 investors is better for all EB-5 stakeholders.
Regional centers ought to have the best interests of their EB-5 investors at the core of their operations. Standing against positive developments for EB-5 investors—such as the shorter two-year sustainment period policy—erodes the trust between investors and regional centers.
What Does This Lawsuit Get Right?
The main legal argument of the lawsuit is that USCIS violated the Administrative Procedures Act by changing the sustainment period via policy guidance. The ordinary method for publishing new rules is to go through the process of notice-and-comment rulemaking, which can take a lot of time.
On this point, IIUSA is clearly correct. USCIS should have published a proposed rule instead of issuing a policy change. The new policy contradicts the prior rule on the sustainment period. The differences between policy and regulation create confusion, which is not good—but the lawsuit only adds to that confusion.
Regardless of the outcome of the lawsuit, however, we hope USCIS will seek to establish the two-year sustainment period through proper notice-and-comment rulemaking. While the process through which USCIS established this policy may have been flawed, we believe that the policy itself is still beneficial as a whole.
What Would the Lawsuit Accomplish if Successful?
If successful, the lawsuit will return the sustainment period policy to what it was before October 2023. Under the old policy, the sustainment period began when an investor received his or her Green Card. For many EB-5 investors, this meant keeping their capital invested indefinitely while waiting for an EB-5 visa to become available.
IIUSA says it does not desire this outcome. So, along with the lawsuit, IIUSA petitioned USCIS to engage in rulemaking to set the sustainment period length to a fixed five years.
Why five years?
IIUSA provides several reasons for its proposal of a five-year sustainment period: Five years is the long-time industry standard, it is comparable to other federal investment programs, and it gives enough time for investments to create jobs. And if the period were a set five years, investors from backlogged countries would have a set timeline for repayment.
Conversely, IIUSA argues that a two-year sustainment period is too short. They assert that key provisions of the law do not make sense if the sustainment period ends before the conditional residency period is complete. Thus, they argue that the policy goes against what Congress intended in the RIA. But all of IIUSA’s arguments against a two-year sustainment period also apply to a five-year period, particularly for investors from backlogged countries.
So, again, why five years?
Regional centers, brokers, and other EB-5 professionals make more money the longer each EB-5 investor’s funds are held. Developers, meanwhile, benefit from longer-term access to inexpensive capital.
Therefore, a five-year sustainment period is better for everyone—except EB-5 investors.
If a five-year sustainment period could provide certainty—and if it applied only to future investors—this could be a good outcome. But since the outcome of the lawsuit is uncertain, relying on such a result is a risky proposition.
Who Made the Decision to Pursue This Lawsuit?
As discussed in our prior posts on this topic (here, here, and here), the decision to sue USCIS was made by the IIUSA board of directors. The board of IIUSA is made up of a number of EB-5 industry stakeholders, including regional center principals.
EB5AN is not and has not served on the board of IIUSA. However, EB5AN is a member of IIUSA and believes in its core purposes “to achieve permanent authorization, enhance investor protections, increase transparency and set the highest industry standards.”
While the lawsuit does have merits, we believe it is not designed to enhance investor protections or serve investor interests.
In an open letter to the EB-5 industry, we have respectfully requested that IIUSA withdraw this lawsuit and allow USCIS to go through the proper process to establish its new two-year sustainment policy in the regulations so as to not create additional uncertainty.
View EB5AN Letter re the IIUSA Sustainment Period Lawsuit
At EB5AN, we will continue to work to raise industry standards, increase transparency, and promote investor interests. EB-5 investors deserve nothing less.
