Prepared by Stephen Yale-Loehr*
Posted November 13, 2015
Title 1: Reauthorization and Reform of the Regional Center Program
Section 101: Title: American Job Creation and Investment Promotion Reform Act of 2015.
Section 102: Reauthorizes EB-5 regional center program for four years, until September 30, 2019. Repeals section 610 of the original 1992 appropriations law and moves the regional center program to INA § 203(b)(5)(E).
P. 2: Discusses what is required in applying for RC designation.
P. 2 lines 36-41: 10% of the jobs have to be direct jobs at the job-creating entity (JCE) level; up to 90% of the jobs can be indirect.
P. 3 line 20: Relocated jobs don’t count.
P. 3 line 29: EB-5 money can’t be used to buy publicly available bonds.
P. 3 line 34: Construction jobs count, even if they last less than two years.
P. 3 line 39: RCs must give advance notice of any changes to their organizational structure, ownership, or administration, including their sale. DHS must allow notice of any significant proposed changes for at least 30 days on a USCIS website before deciding.
P. 4 line 9 through p. 5 line 23: RCs must file a business plan, offering documents, marketing materials, and an economic report for RC investments. The documents must include information such as material litigation or bankruptcies in the last ten years, potential conflicts of interest, fees paid to agents or broker dealers, and a certification that everyone participating with the project is complying with relevant securities laws, to their best of their knowledge, after a due diligence investigation. DHS must approve these documents before an I-526 petition can be filed.
P. 5 line 24: DHS project approval is binding on agency unless there is evidence of fraud, misrepresentation, material change, material mistake in law or fact, etc. [This draft deletes DHS’s “unreviewable discretion” to deny project approval. This draft also abandons the idea of premium processing for project review.]
P. 4 line 35: USCIS to perform at least one site visit for each EB-5 project.
P. 6 line 1: RCs have to certify annually that they are complying with various requirements. [This section basically codifies and expands upon the current I-924A reporting requirements, in addition to separate certifications stated above on pp. 4-5.]
P. 7 line 13: DHS can sanction an RC for various violations, such as knowingly submitting a statement of material fact or materially deviating from any approved business plan.
P. 7 line 25: Sanctions include civil penalties of up to 10% of the total EB-5 capital raise, a temporary suspension, a permanent bar from program participation, or RC termination.
P. 8 line 1: Anyone associated with an RC or a commercial enterprise associated with an RC, including a marketer and promoter, is barred from participating in the EB-5 program if convicted within the last 10 years for fraud or deceit, a civil violation resulting in a liability of more than $1 million involving a fraud or deceit, or a crime resulting in jail for more than one year. A person is also barred if sanctioned by a state securities commission or equivalent for fraud or deceit. A person is also barred for money laundering, espionage, terrorist activities, or other grounds. A person is also barred if he or she has received a reprimand or otherwise been disciplined by a state bar within the last ten years.
P. 9 line 9: Anyone directly or indirectly involved with a regional center must be a lawful permanent resident or US citizen. No foreign government can provide capital to or be directly or indirectly associated with the ownership or administration of an RC, NCE, or JCE.
P. 9 line 18: DHS must do background checks on all persons associated with an RC or a commercial enterprise associated with an RC.
P. 9 line 29: DHS may terminate an RC, NCE, or JCE for a variety of reasons, such as knowingly providing any false information. [This draft deletes DHS’s “unreviewable discretion” to terminate.]
P. 10 line 5: The bill defines a person “involved” with an RC, NCE, or JCE to include officers, board members, managers, general partners, and other persons with substantive authority. [This draft is narrower than the original version of S. 1501.]
P. 10 line 15: An EB-5 RC transaction is deemed to have occurred within U.S. territory for purposes of the securities laws. [This codifies the SEC’s position in the Chicago Convention case.]
P. 10 line 20: Reg S offerings are allowed.
P. 10 line 26: RCs must certify that they are complying with and will ensure that all parties associated with the regional center remain in compliance with state and US securities laws.
P. 10 line 37: RCs must issue an annual certification that they remain in compliance.
P. 11 line 5: If an RC discovers through due diligence that they have violated securities law in the previous fiscal year, they must report the noncompliance, actions currently being taken to remedy noncompliance, and certify they are now in compliance.
P. 11 line 15: An RC must monitor and supervise the sales of securities made by parties associated with the regional center to ensure compliance with US securities laws. They must keep records for at least five years.
P. 11 line 23: DHS may suspend or terminate an RC if the RC or any parties associated with the RC know or reasonably should have known that they are subject to a final SEC order involving fraud or deceit, have submitted a certification that contains an untrue statement of a material fact or omitted a material fact, or for other reasons. [This is narrower than the original version of S. 1501.]
P. 12 line 6: Defines “parties associated with a regional center.”
P. 12 line 23: Each RC must pay an annual fee of $25,000 to establish an EB-5 integrity fund. The fee is reduced to $10,000 if the RC had 20 or fewer total investors in the previous fiscal year. [The prior version of S. 1501 had an annual fee of $20,000, with no variation based on RC size.] DHS may change the amount. DHS is to use the fund for audits and site visits, and to conduct investigations inside and outside the United States, including source of funds issues.
P. 13 line 25: Direct and third party promoters of an RC, NCE, and JCE must register with USCIS.
P. 13 line 37: RCs must have a contract with all third party promoters outlining rules and standards.
P. 14 line 6: Source of funds:
P. 14 line 7: An investor must prove the lawful source of their administrative fees, as well as the capital contribution.
P. 14 line 20: 7 years of tax returns required.
P. 14 line 30: An EB-5 investor must identify all people who transfer funds into the United States on behalf of the investor.
P. 14 line 36: limits gifted funds. Gifted funds can only be used for EB-5 investments if gifted by a spouse, parent, son or daughter over 21, sibling, or grandparent. Gifts must be in good faith and not to circumvent limits on permissible sources of capital.
P. 15 line 8: Capital based on loans must be secured by assets owned by the investor.
P. 15 line 9: Loans must be obtained by a bank or lending institution that is properly chartered or licensed under laws of state, territory, or country, or applicable jurisdiction. DHS must determine that the bank is not sanctioned or restricted by consulting relevant commercial and government databases such as OFAC, TFFC, and FinCEN.
P. 15 line 16: Treatment of investors if RC is terminated: If a regional center or NCE is terminated, investors that have already obtained conditional residence would have 180 days to affiliate with an new regional center, make a new investment in a new NCE, or make a new investment through an NCE affiliated with a different regional center. The two-year conditional residence program would start over. An exception applies if DHS has reason to believe the investor was a knowing participant in the conduct that led to the RC’s termination.
P. 16 line 6: DHS may deny or revoke any EB-5-related petition for threats to public safety or national security. [This is narrower than the original version of S. 1501, and eliminates the “unreviewable discretion” language.]
P. 16 line 20: DHS can debar an RC or any person associated with an RC if DHS determines that the person was a “knowing participant” in the conduct that led to the RC’s termination. No judicial review of this provision exists except for constitutional claims or questions of law raised in removal proceedings.
P. 17 line 4: DHS may deny or revoke any EB-5-related petition for fraud, deceit, intentional material misrepresentation, or criminal misuse.
P. 17 line 11: DHS can debar an RC or any person associated with an RC if DHS determines that the person was a “knowing participant” in the conduct that led to the RC’s termination. A person or RC debarred under this provision may appeal to the AAO. No judicial review of this provision exists until all administrative appeals have been exhausted.
P. 18 line 9: Effective dates:
P. 18 line 10: In general, the amendments made by this section take effect 90 days after enactment.
P. 18 line 14: DHS has discretion to apply the changes concerning denials or revocations based on the bona fides of RC participants ((H)), threats to national security or fraud ((N)), misrepresentation, or criminal misuse ((O)), or administrative review ((P)) earlier than 90 days after enactment.
P. 18 line 19: Section 102 effective dates: The changes made concerning new limits on indirect job creation ((E)(iv)), relocated jobs, publicly available bonds, and construction jobs ((E)(v)), and source of funds ((L)) do not apply to I-526 petitions filed before June 1, 2015. They also do not apply to I-526 petitions filed after June 1 and before the date of enactment as long as the investor was investing in the same NCE as contained in an exemplar filed before June 1 or approved by DHS before the date of enactment. An exception applies if DHS determines that the filing or approval was based on fraud or misrepresentation or was legally deficient. These same changes also do not apply to I-829 petitions if the underlying I-526 petition was filed before June 1, 2015, or was approved before the date of enactment.
P. 18 line 32: An investor has 180 days to supplement the record to meet the changes set forth in the new EB-5 law.
P. 18 line 38: Defines “exemplar” to include both an I-924 application that “includes the commercial enterprise’s business plan, economic analysis, and organization documents,” or an I-526 petition filed by an investor in the project. [The draft is unclear on whether the definition includes “naked” I-924s.]
P. 19 line 3: GAO report by December 31, 2018 on the economic benefits of the EB-5 program, compliance, fraud prevention, etc.
P. 19 line 34: DHS OIG report by December 31, 2018 on EB-5 vulnerabilities, potential concerns re economic espionage, exports of sensitive technology, terrorist money laundering, etc.
Section 103: I-829 Changes (modifies INA § 216A)
P. 21 line 23: DHS may extend a person’s conditional resident status for an additional year beyond the normal two-year period. [This seems to codify the presumption in the USCIS May 2013 EB-5 policy memo allowing an additional year to create the necessary number of jobs.]
P. 22 line 22: I-829 interviews can be waived except if the investor invested in an RC, NCE, or JCE that has been sanctioned or is in a class of aliens determined to be threats to public safety or national security.
P. 23 line 4: Effective dates: Section 103 takes effect two years after enactment.
Section 104: EB-5 Visa Reforms
P. 23 line 20: 50% of EB-5 visas in TEA-affiliated investments are reserved for immigrants who invest in rural areas; 50% are reserved for immigrants who invest in high unemployment or high poverty areas.
P. 23 line 26: DHS is not bound by a state’s TEA determination.
P. 23 line 29: New terms of art: infrastructure project, manufacturing project, high unemployment area, and high poverty area:
P. 23 line 31: An infrastructure or manufacturing project can be designated either upon filing a business plan and related documents or when an investor files an I-526 petition.
P. 24 line 1: A designation of a high unemployment area or high poverty area as a TEA is valid for two years starting when an exemplar is approved or when investors invest. A designation can be renewed for additional two-year periods if the area continues to meet the definition of a high unemployment area or high poverty area. If the designation expires, an investor who has already invested doesn’t have to invest more money.
P. 24 line 11: The minimum investment amount in an infrastructure project, a manufacturing project, or a project physically located in a TEA is $800,000. Otherwise the minimum investment amount is $1.2 million.
P. 24 line 24: Automatic adjustments to occur every five years based on CPI changes.
P. 25 line 9: defines “capital” to include “all real, personal, or mixed tangible assets owned and controlled by the alien investor, or held in trust for the benefit of the alien and to which the alien has unrestricted access.”
P. 25 line 12: Capital must be valued at fair market value in US dollars.
P. 25 line 35: Defines a high poverty area as a census tract or contiguous census tracts, each of which: (1) has a poverty rate of at least 20%; (2) is not in a metropolitan area and has a median family income less than 80% of the statewide median family income; or (3) is in a metropolitan area and has a median family income less than 80% of the statewide or metropolitan area median family income.
P. 25 line 35: Defines high unemployment area in two ways. First, it can be an area in which each census tract or contiguous census tracts has an unemployment rate 150% of the national unemployment rate. Second, it can be an area that itself doesn’t meet the 150% unemployment rate requirement (e.g., an abandoned industrial zone or closed military base) but which includes contiguous census tracts that have the requisite unemployment rate.
P. 26 line 3: Defines infrastructure project as a capital investment project in an approved business plan that is administered by a governmental entity that contracts with an RC, NCE, or JCE as financing for maintaining, improving, or constructing a public works project.
P. 26 line 10: Defines JCE.
P. 26 line 17: Defines manufacturing project as a capital investment project to improve, construct, or operate a plant, factory, or mill that primarily exists to produce or assemble a product in the US.
P. 26 line 21: defines NCE.
P. 26 line 27: Defines rural area.
P. 26 line 33: defines TEA as (1) a high unemployment area, (2) a high poverty area, (3) a rural area, (4) an area within an enterprise community, a renewal community, an empowerment zone, or a promise zone, or (5) a closed military base.
P. 27 line 11: If a parent’s I-829 petition is terminated, a child is still a child for EB-5 purposes if the child remains unmarried and the parent files a subsequent I-526 petition within one year after the original petition was terminated.
P. 27 line 22: Increased pay for USCIS EB-5 workers.
P. 27 line 27: Bill amends INA § 245(k) to include EB-5 investors. [This means that an EB-5 investor who has been out of status for less than 180 days may nevertheless adjust status.]
P. 27 line 32: The bill allows concurrent filing of an adjustment of status petition of a visa is immediately available.
P. 28 line 10: Section 104 takes effect upon enactment, with certain exceptions. The changes in (b)(1) (minimum investment amount) and (c)(1) (TEA and other redefinitions) do not apply to I-526 petitions filed before June 1, 2015. The changes also do not apply to I-526 petitions filed after June 1 and before the date of enactment as long as the investor was investing in the same NCE as contained in an exemplar filed before June 1 or approved by DHS before the date of enactment. An exception applies if DHS determines that the filing or approval was based on fraud or misrepresentation or was legally deficient. These same changes also do not apply to I-829 petitions if the underlying I-526 petition was filed before June 1, 2015, or was approved before the date of enactment. An investor has 180 days to supplement the record to meet the changes set forth in section 104.
Section 105: Procedure for Granting Immigrant Status:
P. 29 line 5: Investor can file an I-526 petition only after USCIS has approved the project business plan and related documents.
P. 29 line 8: Section 105 takes effect on the date of enactment.
Section 106: Timely Processing
P. 29 line 14: USCIS must start an EB-5 fee study within 30 days after enactment.
P. 29 line 18: USCIS is supposed to ensure that on average, regional center applications are decided in 120 days, I-526 petitions are decided in 150 days, and I-829 petitions are decided in 180 days. [Note: the draft does not require the agency to adjudicate EB-5 petitions within these time frames.]
P. 30 line 20: Authorizes DHS to establish a premium processing fee for EB-5 applications. The premium processing fee is to be set in an amount sufficient to adjudicate such applications within one-half the normal processing time. DHS is to set up the premium processing fee within 180 days after enactment.
Section 107: Transparency:
P. 31 line 13: USCIS can’t give preferential treatment to any EB-5 investor or project.
P. 31 line 12: This includes not attempting to expedite in a manner not available to all petitioners.
P. 31 line 26: DHS must keep copies of all emails and phone calls concerning an EB-5 case.
P. 32 line 16: evidence from law enforcement or intelligence agencies are not to be made part of the record.
P. 33 line 4: Only communications through appropriate channels.
P. 33 line 34: USCIS director must keep a log of all communications.
P. 34 line 9: All non-case specific information about program requirements or administration that was not previously publicly available must be made publicly available within 30 days.
P. 34 line 19: Penalties for violating these new communication requirements range from a written reprimand to removal.
P. 34 line 33: effective dates: Section 107 amendments take effect the date of enactment.
Title II: Reauthorization of Certain Immigration Programs:
Section 201: reauthorizes E-Verify program for four years, to September 30, 2019.
Section 202: reauthorizes special immigrant nonminister religious worker program for four years, to September 30, 2019.
Section 203: reauthorizes Conrad State 30 J-1 waiver program for certain foreign doctors for four years, to September 30, 2019.
Deleted from original version of S. 1501 (page references are to original version of S. 1501):
P. 5 line 22 through p. 6 line 20: EB-5 investors can get credit for jobs created by domestic investors “only for the percentage of total jobs created that is equal to the percentage of total capital investment provided by such non-alien entrepreneurs in the commercial enterprise. The percentage of jobs created for which alien entrepreneurs may accrue credit … based on such non-alien entrepreneur capital contribution may not exceed 30 percent of all jobs created even if such contribution exceeds 30 percent.”
P. 14 line 3: DHS can deny or revoke a business plan application if DHS thinks it presents a significant risk of fraud, self-dealing, conflicts of interest, etc. No judicial review of such denials or revocations.
P. 15 line 23: At least 50% of all indirect jobs in a TEA project have to be created within the TEA.
P. 28 line 1: DHS has unreviewable discretion to terminate on basis of fraud, misrepresentation, criminal misuse, or poses a threat to national security.
P. 54 line 16: If the investor has sustained his investment for at least 24 months before admission, the investor may file his or her I-829 petition at any time.
P. 55 line 5: DHS may deny an I-829 petition for fraud, misrepresentation, criminal misuse, or threats to public safety or national security. DHS doesn’t have to disclose the basis for its determination if such disclosure would be contrary to the national interest.