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Sep 9, 2016

Congressman Goodlatte of Virginia Floats EB-5 Reform Bill

Matthew Galati

On September 9, 2016, Rep. Bob Goodlatte (R-Va.)’s office circulated the “American Job Creation and Investment Promotion Reform Act of 2016.” This version of the bill has apparently not been formally introduced to the U.S. House, nor has it been assigned an H.R. number. It is expected to be introduced in the coming days. The bill includes substantial reforms to existing EB-5 law, although many have been discussed or introduced previously. We will continue to monitor actions on the Goodlatte Bill in Congress during the coming weeks. The EB-5 Regional Program advances towards sunset, which is currently scheduled for September 30th unless the program is extended.

Some key takeaways from the Goodlatte Bill are as follows:

  • It intends to apply many new requirements retroactively
  • Minimum capital investment amounts are set to increase to $1.2 million / $800,000. The qualifications for the lower investment amount are revised significantly from existing law
  • Certain sources of funds such as gifts and investments derived from indebtedness are much more narrow
  • I-526 petitioners must be 18 years of age
  • Individuals involved with Regional Centers and overseas migration agents must be registered with USCIS
  • RC program reauthorized for 5 years
  • Many new RC requirements regarding job creation and reporting

We would like to stress that the Goodlatte Bill is not current law. After introduction, it would be subject to the bicameral legislative processes and ultimate signing by the president. It may never be enacted. We invite you to consult with a member of the GANDSInvestors Team for specific advice regarding your case.

A full copy of the Goodlatte Bill is below. 

Specific section-by-section highlights are the following:

Section 1 – Short Title and Table of Contents

  • Names the Goodlatte Bill the “American Job Creation and Investment Promotion Reform Act of 2016”

Section 2 – New EB-5 General Provisions

  • Adds a new “Source of Funds” section that affects investors in the following ways:
    • Requires lawful sourcing of “administrative costs and fees associated with the alien’s investment”
    • Mandates DHS to require business and tax records, as applicable, produced within the past seven years, as well as other sources of capital
    • Identification of all intermediaries who transfer funds on the investor’s behalf
    • Restricts gift cases – gifts can only be given by the investor’s spouse, parent, adult children, sibling, or grandparent
    • Codifies USCIS’ recent interpretation regarding investments derived by indebtedness; requires loans to be issued by institutions that are registered bankers or lenders
  • Provides a new section regarding denial, revocation, and debarment relating to EB-5 benefits in cases of 1) threats to public safety / national security and 2) fraud, misrepresentation or criminal misuse
  • Allows for AAO review of all EB-5 processes and requires exhaustion of administrative remedies before federal courts may have jurisdiction
  • The effective dates of these “Section 2” provisions may be affective at any time after enactment, but not later than 90 days afterward  
  • However, the source of funds provisions will not apply to I-526 petitions filed
    • before June 1, 2015;
    • filed after then but before enactment provided that an I-924 exemplar was filed before June 1, 2015 or approved before enactment; or
    • For current CPRs to file their I-829s.

Ed Note: It is not clear why the Goodlatte exempts I-526 petitions filed prior to June 1, 2015 if the provisions are not effective until after date of enactment. Given principles of statutory construction, it appears that this is an attempt to retroactively apply new law to pending cases. Hopefully this ambiguity would be cleared up in committee markup.

Section 3 – Reauthorization and Reform of the Regional Center Program

  • Repeals the current law giving rise to the RC program (a section from an appropriations act from 1993), codifying the RC program in the INA
  • RC program extended to September 30, 2021
  • Defines RCs as pooled investments with defined geographic areas
  • Allows for DHS discretion in processing petitions
  • Allows for incorporation of project documents by reference
  • Codifies requirements for RC applications (Form I-924), requires compliance with federal and state securities laws
  • Amends job creation requirements for RC- based I-526 petition
    • Limits indirect job creation to only 90% of required job creation, presumably meaning that each investor must create one direct NCE hire
    • Limits use of tenant occupancy models
    • Prohibits use in public municipal bonds
    • Allows for constriction activity jobs to aggregated if shorter than 24 months; may be counted as direct jobs (Ed. Note – it is not clear whether this is an exception to the indirect job creation limitation discussed above
    • Requires RC Amendments in certain circumstances
  • Exemplar filings must be made (but not necessarily approved) before any I-526 petition; exemplar contents codified
  • Binds USCIS adjudication to defer to exemplar approvals in I-526 and I-829 circumstances, except for cases of fraud, misrepresentation, criminal use, etc.
  • Requires USCIS cite visits to RCs and Projects
  • Annual reporting requirements
    • Codifies I-924A annual filings, includes new accounting requirements and mandates amendments in certain circumstances
    • Authorizes sanctions against regional centers that violate reporting requirements
    • Prohibits certain individuals with criminal or civil penalties from being involved with RC program; prohibits involvement unless person is a US citizen or national or Green Card holder
    • Provides SEC jurisdiction over RC program, as applicable
    • Introduces new “EB-5 Integrity Fund” that raises RC and I-526 fees
    • Permits USCIS to require registration of agents and promoters, including ability to enact permissible fee arrangements and oversight of offering investment opportunities
  • Good faith treatment for EB-5 investors
    •   Where EB-5 entity is debarred, certain petitions may nonetheless be approvable
    •   Allows NCE to move to new regional centers and petitioners to make new investments in cases of termination
    • Allows for I-829 filings
  • Requires RC accounting transparencies and specific accounting requirements
  • Effective dates are similar to Section 2

Section 4 – Other EB-5 Visa Reforms

  • Amends TEA Designations Law
    • Creates “rural areas” and “priority urban investment” areas designations, creating visa set aside and allows unused visas to be used in subsequent years
      • Expands current “rural area” definition
      • Priority Urban Investment area defined more narrowly than current TEA definitions
      • Expands TEA definitions to include closed military bases and areas of high poverty
      • Allows TEA designations to be valid for 2 years, based on time of investment or filing
    • Grants USCIS jurisdiction to designate TEAs, requiring a 60-day timeframe to adjudicate
    • Creates carve out for “infrastructure” or “Manufacturing” projects
  • Amends minimum capital investment amounts
    • Standard is USD$1.2 million
    • Lowered to $800,000 in cases of infrastructure, manufacturing, or TEA projects
    • Allows DHS to raise investment amounts by regulation
    • Automatically increases investment amounts every 5 years, commencing on Jan. 1, 2022
  • Requires DHS to verify that investor and dependents are not on OFAC’s Specially Designated Nationals List
  • Provides dependents over the age of 21 to continue to still be considered a child in some cases of I-829 denial
  • Increases EB-5 government administrator’s pay
  • Allows for concurrent I-485 filing where visas are available
  • Effective dates similar to above (Ed. Note: Again, this may be a retroactive application)

Section 5 – Conditional Permanent Resident Status

  • Essentially Codifies May 30th Memo interpretation of “Reasonable time”, but allowing for 1-year extension of conditional residency
  • Limits interview waiver authority
  • Allows condition removals to be filed before conditional residency is assumed if capital and employment was created 24 months prior to initial Green Card admission
  • Effective date of enactment, exceptions for beneficiaries currently with underlying petitions filed

Section 6 – Procedure for Granting Immigrant Status

  • Requires petitioners to be at least 18 years old at time of I-526 filing
  • Codifies principles similar to Matter of Izummi “approvable when filed” standard
  • Effective of enactment

Section 7 – Timely Processing

  • Requires USCIS to initiate fee study
  • Allows fees to be adjusted to ensure average processing times are
    • I-924: 120 days
    • I-526: 150 days
    • I-829: 180 days
  • Allows for additional Fees to be charged to reduce Asylum petitions and technological improvements such as e-filing
  • Authorizes Premium Processing with fees higher than other employment-related cases
  • Allows suspension of processing times in cases of national security or law enforcement concerns

Section 8 -- Transparency

  • Prohibits preferential treatment and limits communications
  • Requires USCIS’ reporting of communications, oral and written
  • Allows for exemptions to recording case record in cases of law enforcement and whistleblowers
  • Requires specific EB-5 email account that provides case-specific and non-case specific information

Section 9 – Reports

  • Requires new GAO and Inspector General reports no later than December 31, 2019
  • Review of job creation methodologies to take place no later than 1 year after enactment

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