The Concepts of "Reasonable Reliance" vs. "Deference to Prior Decisions" in EB-5
Words of wisdom from the Chang case strongly support the USCIS position that the comprehensive business plan and the economic benefits model, especially the job creation predictions, which are based on that comprehensive plan and underlie the I-526, Immigrant Petition by Alien Entrepreneur approval are the foundation for the later I-829, Petition by Entrepreneur to Remove Conditions adjudication. The 9th Circuit Court opined that ".…if I-526 approval is decoupled from I-829 approval, then petitioners whose I-526 petitions had been approved would have no reasonable reliance that the rules set out in 8 C.F.R. § 216.6 would not change in midstream. If, on the other hand, approval of the I-526 petition was an official provisional approval of the petitioner's plan, contingent on its effectuation, then a retroactivity analysis is required." (Chang at 51)
The Chang Court determined that application of the 1998 EB-5 Precedent Decisions was an unacceptable retroactive application as to these particular investors which did change the rules midstream for them. This was an "as applied" challenge and ruling. However, the prospective application of the modified interpretations of EB-5 statutes and regulations contained in the Precedents on new investors' petitions was perfectly acceptable as had already been settled in a different case. That prior case was: R.L. Investment Limited Partners v. INS, 273 F.3d 874 (9th Cir.2001) ("RLILP") (adopting in full the district court's decision in R.L. Investment Limited Partners v. INS, 86 F.Supp.2d 1014 (D.Haw., 2000).
"….The RLILP plaintiffs were not situated similarly to Appellants in the instant [Chang] case: as their I-526 petitions had not been approved, they had no reliance interest comparable to that of Appellants. They challenged the prospective application of the precedent decisions to their new unapproved I-526 applications,….." Chang at 50.So, if EB-5 investors wish to rely on the approval of their I-526 to be relatively assured of lifting the conditions on their LPR status, then they need to follow through with and succeed in the comprehensive plan that they have already put forth. The investors are no more eligible to change midstream than USCIS. Reasonable reliance on the comprehensive plan goes both ways. If at the I-829 stage, USCIS is only expected to do a straight forward fact-check to see that the comprehensive plan has come to fruition or is on the cusp of achieving the goals, then USCIS is not required to perform an ab initio investigation into a totally new or substantially altered [materially changed] comprehensive business plan and the accompanying economic model and job prediction forecast.
The above premise is especially true for a Regional Center investor. In that case, the Regional Center will have gone to a great deal of effort and expense to compose a very comprehensive business plan, investment strategy (with standardized business documentation) and associated economic model/analysis complete with job creation forecasts based on sound methodology and current reliable data. The individual investors will likely just take what the Regional Center provides as the basic evidence to support the I-526 and merely supplement that evidence with financial documents. Even the financial documents will likely have been vetted by the Regional Center up to USCIS standards before the investor is even allowed to join the Regional Center affiliated investment partnership. Even with incomplete statistical data, USCIS is willing to go on record as stating that around 90% of EB-5 investors are associated with a Regional Center. It is likely even a higher percentage than that.
The statutory evidentiary requirements for an I-829 petition provide that they "….'shall contain facts and information demonstrating that - (A) a commercial enterprise was established by the alien; (B) the alien invested or was actively in the process of investing the requisite capital; and (C) the alien sustained [these actions] throughout the period of the alien's residence in the United States.' 8 U.S.C. § 1186b(d)(1)." [The I-829 requirements are] "…in marked contrast to the documentation requirements of 8 C.F.R. § 204.6(j), governing approval of the I-526 petition… the several pages of requirements listed in this subsection [for the I-526] .... require a much more comprehensive documentation of the petitioner's plans and resources." (Chang at 52)
INA § 216A (d)(1) [8 U.S.C. § 1186b(d)(1)] now says that the petition must include evidence of:
(A)(i) invested, or is actively in the process of investing, the requisite capital; and
INA § *203(b)(5) calls for "investing" the "required amount" of "capital" in a "commercial enterprise" that "creates" or "preserves" at least "ten (10) full time jobs" for "qualifying employees". If the jobs have not been created at the time of the I-526 filing then a "comprehensive business plan" must be submitted. If investing through a "Regional Center" the jobs may be either "direct" or "indirect". One must use "reasonable methodologies for determining the number of jobs estimated" to be "created indirectly." All this boils down to submitting a very comprehensive business plan and then sticking to it.
The Chang Court pointed out that "….successful execution of the approved plan, and absence of material misrepresentation in the I-526 petition …[is]… an excellent predictor of I-829 approval…" Chang at 53. This supposition is contingent upon the actions that the investors take after that point and depends on "….if they held up their end of the bargain by fulfilling the terms of their approved I-526 petitions…." (Chang at 61)
From Chang v. United States, 327 F.3d 911 (9th Cir. 2003): [Emphases added throughout.]
"The EB-5 statute requires that each I-829 petition "shall contain facts and information demonstrating that - (A) a commercial enterprise was established by the alien; (B) the alien invested or was actively in the process of investing the requisite capital; and (C) the alien sustained [these actions] throughout the period of the alien's residence in the United States." 8 U.S.C. § 1186b(d)(1). In 8 C.F.R. § 216.6(d), examples of the appropriate documentation include tax returns, to show that the enterprise was in fact established; an audited financial statement, to show that the alien had actually invested; and bank statements, invoices, receipts, contracts, business licenses, and payroll records to show that the petitioner had sustained the actions throughout the two year conditional residence period. This is in marked contrast to the documentation requirements of 8 C.F.R. § 204.6(j), governing approval of the I-526 petition. We will not review the several pages of requirements listed in this subsection; suffice it to say that they require a much more comprehensive documentation of the petitioner's plans and resources. At 52.
Deference to Prior Decisions
While this USCIS Policy of limited deference is set forth in a memo that specifically addresses nonimmigrant petitions it is also applicable in the EB-5 context.
"CIS has the authority to question prior determinations. Adjudicators are not bound to approve subsequent petitions or applications seeking immigration benefits where eligibility has not been demonstrated, merely because of a prior approval which may have been erroneous. Matter of Church Scientology International, 19 I&N Dec. 593, 597 (Comm. 1988). Each matter must be decided according to the evidence of record on a case-by-case basis. See 8 CFR § 103.8(d). However, because a recent review of CIS practices has shown that in certain instances, adjudicators have been questioning prior determinations where there is no material change in the underlying facts as a matter of routine, the below policy is being set forth." [Emphases added.]
The referenced memo is dated April 23, 2004, and the problem has been addressed through additional training since then to cover multiple contexts.
Matter of Church Scientology International, 19 I&N Dec. 593, 597 (Comm. 1988) is cited for the following words of wisdom and the plethora of citations to back it up.
"The Service, in the absence of any legislative history, regulations, or precedent decisions on the applicability to religious personnel of the "L-1" and Schedule A, Group IV, provisions, has been attempting to set standards and may have inadvertently rendered some inconsistent decisions. In spite of this, this Service is not required to approve applications or petitions where eligibility has not been demonstrated, merely because of prior approvals which may have been erroneous. Matter of Khan , 14 I&N Dec. 397 (BIA 1973), by extension; Matter of M- , 4 I&N Dec. 532 (BIA 1951; BIA, A.G. 1952); see also Pearson v. Williams , 202 U.S. 281 (1906); Lazarescu v. United States , 199 F.2d 898 (4th Cir. 1952); United States ex rel. Vajta v. Watkins , 179 F.2d 137 (2d Cir. 1950); Mannerfrid v. Brownell , 145 F. Supp. 55 (D.D.C.), aff'd , 238 F.2d 32 (D.C. Cir. 1956)." [Emphases added.]
The above premise of not being bound by past mistakes or earlier incorrect interpretations, finds additional support long before and after that particular case. RLILP and Chang fully support the notion of not being bound by past interpretations. There is however, the proviso especially noted in Chang of not imposing unanticipated retroactive effects on a prior decision that had a solid basis for reasonable reliance. In other words, it is impermissible to change the rules midstream or after-the- fact.
The Board of Immigration Appeals (BIA) and various federal courts have set precedents and later discarded, revised, narrowed or otherwise distinguished the holdings in certain lines of cases along a similar and often evolving topic. This is nothing new, it has happened since the common law began. It is how the common law came to be. Although we in the United States rely primarily on statutory law, certain common law principles remain in our legal system, at least the few that have survived since 1789. The judicial branch adheres quite rigidly to the principle of "stare decisis" which is Latin for "to stand by that which is decided." It is the principal that our precedent decisions are to be followed until such time that they are overturned either by the authority that set it or a higher authority. The authorities involved with changes to immigration law include all three branches of government.
In December 2009, USCIS issued another Policy Memo specifically addressing EB-5 processing. This memo recognizes the interplay between the various stages of EB-5 applications and petitions.
The December 2009, EB-5 memo addresses, in part:
EB-5 Issues and Processing
Now that the vast majority of immigrant investors are Regional Center affiliated, anyone involved in EB-5 needs to consider the interplay between three different USCIS forms and a variety of overlapping concepts and issues.
The purpose of this form is to apply for designation as a Regional Center. The applicant is usually an individual acting on behalf of a private business whether a partnership, company, corporation, etc. Some applicants may be state or local government agencies acting under some legal authorization and mandate to try to improve their economy and yet others may be a joint public-private entity. What then is a Regional Center? One can look up the statutory and regulatory definitions…good luck with that. In short, the Regional Center is supposed to be a welcoming benevolent agent of the U.S. that draws foreign investors into the U.S. economy. Regional Centers are supposed to be partners to USCIS. They are unofficial ambassadors of the U.S. and their purpose is to make the attainment of immigration benefits (immigrant visas for the investor and family) easier by doing the hard work of project planning and coordinating multiple investors (foreign and domestic), providing sound investment strategies designed to create sufficient jobs which are supported by reasonable and valid economic predictions.
The approval of an I-924 does not in itself provide an actual immigration benefit. It only provides a label, i.e. "USCIS Designated Regional Center under the Immigrant Investor Pilot Program". That designation allows for the marketing of a business venture to a wider audience with the inducement of an easier immigration visa process and perhaps the only avenue for U.S. immigration available to the immigrant investor. The Regional Center affiliated immigrant investor may rely on "indirect jobs" forecast through an "economic model" which has been provided by the Regional Center and at least reviewed by USCIS as to its methodology either for an actual project or an exemplar project similar enough to the subsequent actual investment vehicle to instill confidence in successful attainment of an EB-5 immigrant visa.
The premise of an investment as asserted in a Regional Center application, i.e. the business plan, and the vetted written documentation, are only "recommended for a favorable determination" as supporting prima facie evidence of eligibility for a future I-526 and even further I-829. A prima facie showing of eligibility, through use of previously vetted plans and documentation, is a good starting point but is not the final word. An individual applicant must still prove complete eligibility for a favorable determination on the individual petition. A material change to any part of that prima facie evidence which had been previously examined may derail an entire project and have negative ramifications upon all EB-5 investors. An I-924 can be used to seek an amendment to the plans, predictions and documentation in advance of individual I-526 petitions being filed en masse in order to make sure that the new prima facie evidence is still EB-5 compliant.
The form I-526 is supposed to be supported by a viable comprehensive business plan that makes a credible projection as to job creation which is supported by the reasonable assumptions in a statistically valid economic model based on an accepted methodology. Through the I-526, the immigrant investor says: "This is what I am going to do with regard to my investment and here is how I am going to create the required jobs." The plan asserted at this stage is the one against which the later I-829 will be assessed for follow through. If the plan has been materially changed from what the investor originally put forth, then what follows at the I-829 stage becomes an unknown quantity. That is not the appropriate stage of the process to assert a new business plan and a new economic model.
The form I-829 stage should be a straight forward fact-checking process the purpose of which is to determine if the assumptions put forth at the I-526 stage have come to fruition or are on the cusp of achieving predicted goals.
Example #1: The comprehensive business plan and model predict at the I-526 stage that the infusion of X amount of money invested in project/company Y will result in Z number of jobs. At the I-829 stage one must show that X actually was invested in Y and USCIS should accept that Z number of jobs, have been created.
Example #2: The comprehensive business plan and model predict at the I-526 that one will invest in a mall and X number of mall tenant's jobs will be created and because of that, Y number of indirect jobs will be created based on investment of Z amount of money. Here, the investor would need to show that Z was invested in the mall and tenants have taken leases on the stores in the mall. Because of this, one can assert that X number of tenant jobs have been created, therefore, Y number of indirect jobs have also been created and one has met the requirements to lift conditions on residence status.
Other Interconnected Considerations
The requirements for an I-526 petition are best considered by the Regional Center applicant even though they are not specific to that application. Are the investment opportunities going to create enough jobs to satisfy the requirements for ALL the EB-5 investors the Regional Center can find or will the project have a finite number of EB-5 investor slots? How many domestic investors will the project require? Do the documents that the Regional Center wants to use for the investment satisfy the EB-5 laws? How about the SEC laws? How about the OFAC or IRS? Will the same documents be sufficient for both the foreign and domestic investors or does the Regional Center need two sets? Does the Regional Center want to use an escrow arrangement as a marketing tool to entice and pacify immigrant investors or will such arrangements just hinder the overall project and lead it to fail for both foreign and domestic investors? How much flexibility can the Regional Center build into its arrangements with EB-5 investors before crossing the line into the danger zone of having such arrangements be branded a material change or an impermissible redemption agreement or of not being closely enough associated with the job creation or not a real "at risk" investment?
The Evolving Role of USCIS in EB-5
The whole of EB-5 is intertwined in a highly complex manner that dictates that the separate petitions and applications overlap one another. None can be considered in a void unto itself. In contrast to an I-526 or I-829, an I-924 invites material changes and it is a major function of USCIS to do all it can to help the Regional Centers get the preliminary matters in good order for later compliance and a favorable deference to prior determinations on the various well vetted technical matters. The AAO clearly points out that USCIS is strongly encouraged to accept assertions made during the Regional Center preliminaries later on at the I-526 stage of the process. This is a desirable outcome for USCIS because to be able to do so makes the subsequent I-526 adjudication easier. In order to fulfill such a request, the initial Regional Center evidence must be worthy of consideration and deference later on by refraining from making material changes to what was previously approved. It is not in the best interest of USCIS to accept documentation at the I-924 stage that will not be acceptable at the I-526 stage of the process. It is in the best interest of USCIS, the Regional Centers, the immigrant investors and most especially the U.S. economy and the U.S. workers, to help perfect I-924 applications and do it most expeditiously.
USCIS has a Congressionally mandated duty to help the Regional Center applicant to further help the EB-5 immigrant investor and in doing so USCIS will help itself. The Regional Center must prove itself worthy in order to get the desired chance and then it must fulfill its promise through its actions. Just as a naturalization applicant can perfect his/her N-400 application during the process, so too, can a Regional Center applicant perfect its I-924 application.
An I-924 is similar to an N-400 in terms of reciprocity also. In the case of: Luria v. United States, 231 U.S. 9, 34 S. Ct. 10, 58 L. Ed. 101 (1913), excerpt below, it was recognized by the U.S. Supreme Court that a grant of naturalization is a mutual agreement between the naturalization applicant and the United States of America. The designation as Regional Center can be viewed in a similar light. A Regional Center should be afforded ample opportunities to perfect its application for designation due to the benefits that it is expected to provide in return for that honor. Many high standards and promises are extracted from the applicant in order to attain status and gain rights and privileges in an air of mutual agreement to assume and bear obligations and duties on both sides in a formal exchange between them.
"Citizenship is membership in a political society, and implies a duty of allegiance on the part of the member and a duty of protection on the part of the society. These are reciprocal obligations, one being a compensation for the other…….
8 USC 1153 Note: Pilot Immigration Program
Pub. L. 102-395, title VI, Sec. 610, Oct. 6, 1992, 106 Stat. 1874, as amended provides that:
(a)…. under section 203(b)(5) of the Immigration and Nationality Act (8 U.S.C. 1153(b)(5)), the Secretary of State, together with the Secretary of Homeland Security, shall set aside visas for a pilot program to implement the provisions of such section. Such pilot program shall involve a regional center in the United States, designated by the Secretary of Homeland Security on the basis of a general proposal, for the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment. A regional center shall have jurisdiction over a limited geographic area, which shall be described in the proposal and consistent with the purpose of concentrating pooled investment in defined economic zones. The establishment of a regional center may be based on general predictions, contained in the proposal, concerning the kinds of commercial enterprises that will receive capital from aliens, the jobs that will be created directly or indirectly as a result of such capital investments and the other positive economic effects such capital investments will have.
Paragraph (a) above is the statutory source of the loosely and broadly defined "pilot program" and "regional center" while (c) is the source of the inclusion of "indirect jobs" as determined by "reasonable methodologies". The statute directs the Secretary of Homeland Security to "implement the provisions" [which translates to: write implementing regulations] which was initially delegated to INS [subsequently replaced by USCIS]. Congress did not provide much raw material to work with so the "immigrant investor pilot program" and the requirements for designation as a "regional center" under that program are largely regulatory in nature as the regulations were pretty much a blank canvass to be creative with. Unfortunately, the implementing regulations were written by Legacy INS, which was much more Law Enforcement oriented than today's USCIS charged with being Customer Service oriented in delivering benefits. In 1998, the EB-5 Precedent Decisions were issued that provided some further guidance on particular issue in the context of the individual immigrant petitions. Litigation has added to the body of law on EB-5 but the Regional Center still does not have much case-law to draw from. Regulatory revisions are desperately needed as to the adjudication and Administrative Appellate Review process. The I-924 needs to be treated differently than the I-526 or I-829. It does not have to be fully eligible and approvable at time of filing. Greater flexibility is needed in the adjudication and review of the I-924 in order to make the Immigrant Investor Program function better overall.
The AAO has not had a long history, if any, with reviewing I-290B Appeals of I-924 Denials, none have been published nor have any non-precedent decisions been posted yet. One non-precedent Regional Center Proposal Denial Appeal has been posted, dated in 2008, and two certification reviews has also been posted, dated in 2009. It was recently reported in a stakeholder meeting summary that somewhere in the neighborhood of thirty (30) I-924's and/or Proposals have been denied in recent months but it is unknown if any have been appealed, time will tell. Hopefully, it will not take USCIS as long to re-write the pertinent implementing regulations as it is taking to publish the implementing regulations for the EB-5 Amendment of 2002, which still languish in endless internal review or "on the shelf" untouched, gathering dust.
1April 23, 2004 USCIS Memo Re: The Significance of a Prior CIS Approval of a Nonimmigrant Petition in the Context of a Subsequent Determination Regarding Eligibility for Extension of Petition Validity. http://www.uscis.gov/USCIS/Laws/Memoranda/
2Chang v. United States, 327 F.3d 911 (9th Cir. 2003)
3In 1998, the AAO (attributed to The Associate Commissioner, Examinations) through the BIA, issued four EB-5 Precedent Decisions, but they are for the Immigrant Investors, Not Regional Centers. Matter of Ho http://www.justice.gov/eoir/vll/intdec/vol22/3362.pdf Matter of Hsuing http://www.justice.gov/eoir/vll/intdec/vol22/3361.pdf Matter of Izummi http://www.justice.gov/eoir/vll/intdec/vol22/3360.pdf For the I-924, the most pertinent part of the 13 part holding is number "(9) The Service does not pre-adjudicate immigrant-investor petitions; each petition must be adjudicated on its own merits." However, the AAO inappropriately applies number "(3) A petitioner may not make material changes to his petition in an effort to make a deficient petition conform to Service requirements." Matter of Soffici http://www.justice.gov/eoir/vll/intdec/vol22/3359.pdf
4An argument could be made that IF the investor did materially change their plan BUT could still show the required results of a full "at risk" investment of the "required amount" and did "create the required number of jobs", THEN an ab initio investigation into a totally or substantially altered comprehensive business plan and the accompanying economic model and job prediction forecast should be performed. That proposition will need to be tested in a lawsuit to see if it succeeds or fails. This would be more appropriate for a "stand-alone" investor rather than a Regional Center affiliated investor.
6The "establishment" requirement was amended by later legislation. Now, they can just join after the fact and "engage" in an investment, including in a limited partnership. See: http://www.uscis.gov/portal/site/uscis/menuitem.5af9bb95919
&vgnextchannel=994f81c52aa38210VgnVCM100000082ca60aRCRD The "establishment" requirement was amended by later legislation. Now, they can just join after the fact and "engage" in an investment, including in a limited partnership.
78 CFR § 103.3(c).
8Adjudication of EB-5 Regional Center Proposals and Affiliated Form I-526 and Form I-829 Petitions; Adjudicators Field Manual (AFM) Update to Chapters 22.4 and 25.2 (AD09-38) http://www.uscis.gov/USCIS/Laws/Memoranda/Static%20Files
9Application For Regional Center Under the Immigrant Investor Pilot Program
108 USC § 1153 Note: Pilot Immigration Program.
118 CFR § 204.6(e) and (m)(3).
Joseph P. Whalen is not an attorney. He is a former government employee who is familiar with the INA. His education is in Anthroplogy with a concentration in Archaeology and has both a BA (from SUNY Buffalo) and an MA (from San Francisco State University) in Anthroplogogy. He previously worked as an Archaeologist for the U.S. Forest Service before becoming an Adjudicator with INS which became USCIS.
The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.