On July 24, 2020, USCIS issued a new policy memo clarifying its guidance on acceptable deployment and redeployment of EB-5 capital. This new guidance is effective immediately and affects all pending I-526 and I-829 petitions. Below we discuss USCIS new restrictive redeployment policies and how they impact the industry.
USCIS’ New Restrictive Redeployment Requirements
Previously, in its initial redeployment policy memo issued on June 14, 2017, USCIS offered vague guidance that any redeployment of EB-5 capital would generally be acceptable only if (1) the business plan was substantially completed, (2) the funds were reinvested into activities consistent with the NCE’s purpose, and (3) the funds were redeployed within a “commercially reasonable period of time.”
Now, USCIS’ new policy memo clarifies that any redeployment of EB-5 capital must be tied to the purpose and scope of its accompanying NCE and Regional Center. This effectively greatly limits the range of acceptable redeployment activities and clarifies several issues, including:
- Role of the NCE and RC: USCIS confirms that any redeployment of EB-5 capital must be consistent with the original purpose of the NCE and within the geographic umbrella of the Regional Center. This effectively greatly limits both the range and scope of acceptable redeployment activities since its inextricably tied to the NCE and RC. Moreover, both the NCE and RC must continue operating and remain in good standing during this entire period. The dissolution or termination of either the NCE/RC would also cause the denial of the underlying I-526/I-829 petitions.
- Redeployment must be through NCE: Any redeployment of EB-5 capital must be through the same NCE. Note that USCIS does not clarify if this applies only if the EB-5 funds are actually repaid to the NCE (versus being repaid to a SPE/SPV that was created to disburse or lend the EB-5 funds to the JCE).
- Cannot Redeploy into “Financial Instruments”: EB-5 capital cannot be deployed into financial instruments, including municipal bonds or securities. USCIS’ logic is that these activities are primarily financial in nature and not consistent with the requirement that NCEs must be engaged in “commercial or business activity.”
- Commercially Reasonable Period of Time: Confirms that 12 months would generally be considered a commercially reasonable period of time for redeployment of EB-5 capital. USCIS would also be open to accepting a longer period of time depending on the specific facts or circumstances of a case.
What our Clients Need to Know
Since USCIS’ initial memo on redeployment, EB-5 stakeholders have repeatedly requested USCIS provide further guidance clarifying acceptable activities, scope, and timing of investments. While the new memo provides much greater clarity, it also ushers in a new set of restrictive requirements overnight that will leave many EB-5 stakeholders scrambling to assess the eligibility of their current plans as well as any accompanying risks and exposure. All Regional Centers, issuers, and EB-5 stakeholders should immediately review their current redeployment plans with EB-5 counsel to ensure that they are still in compliance. This is especially critical because the policy memo is effective immediately and extends to all pending EB-5 petitions.
Given that redeployment must now be tied to both the NCE and Regional Center, it is advisable to review the NCE’s limited partnership/operating agreement and offering documents to ensure your redeployment plans align with the NCE’s purpose. Both EB-5 securities counsel will be necessary to navigate through the maze of corporate, securities, and immigration issues. A preliminary assessment may be needed to analyze whether any actions need to be taken to revise your redeployment plans, including amending the NCE’s organizational documents, PPM, or filing an I-924 to expand your Regional Center’s geographic region. For example, clients who are immediately at-risk include those who have structured portfolios to invest EB-5 capital and those who have redeployed into municipal bonds must now consider the ramifications on their investor’s pending petitions. Finally, any remedial measures must be approached with caution since the specter of material change looms over any changes to the NCE’s organizational documents, and should only be done after careful consultation with EB-5 counsel.
Our firm has structured and advised on numerous EB-5 redeployment plans and will be working closely with our clients to review and advise them on their current redeployment plans. We will continue to monitor this issue and provide updates as we analyze the impact on the industry. Contact us today to discuss your EB-5 questions with our team of EB-5 experts.