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Preparing for the I-829 bubble

We are pleased to welcome Kevin Wright as our guest blogger today. Kevin is considered one of the foremost experts on the EB-5 program. As an accomplished researcher, analyst, speaker, and professional author, Kevin has assisted more than 70 applicants in receiving Regional Center designation and subsequent approval of their specific EB-5 projects.

EB-5 Regional Centers and developers have had much to celebrate in recent years as I-526 approvals have reached the highest levels in EB-5 history. Approvals for the past five years have averaged at 83.7%. In the last two years alone, over 6,500 foreign nationals received their conditional green cards through the EB-5 program and over $3 billion dollars have been invested in the U.S. economy. The following chart illustrates the number of I-526 approvals in the previous two years.

YearI-526 Submissions
20123,002
20133,699

 
However, this influx of I-526 approvals in 2012 and 2013 will lead to an “I-829 bubble” for the EB-5 industry in the coming years. Investors must file their I-829 Application, the petition to remove conditions from their green card, within the 90 days before their conditional residence expires. This means that within a period of approximately one year, almost 6,000 I-829s will need to be filed.

In preparation for this, Wright Johnson has already seen a surge in Regional Centers requesting reexamination of their project’s economic analysis to ensure their job creation numbers are correct, so that investors can obtain their full permanent residence in the United States.

In consultations with these developers, we have discovered not all project developers understand the importance of accurately tracking the metrics used as inputs into the economic model. These inputs, generally consisting of construction expenditures and operational revenues, or direct employment figures, are vital to establishing job creation, the key element to succeed in the I-829 approval process. It is vital that the project developer, investor’s immigration counsel, and Regional Center work together to monitor project expenditures and operation metrics to ensure they are ready to support job creation projections at the I-829 stage. To date, only 20 Regional Centers have had I-829s approved.

Recently, we have seen a wave of cases where the foreign investor is approaching the deadline to file their I-829 application, but the project developers are not prepared with the appropriate verification required to support the updated job study and actually verify the employment creation. In order to avoid this dilemma, developers and Regional Centers must be sure to keep precise records of expended funds and invoices or other proof of payment that support the job-creating categories used in the initial economic analysis, including architectural and engineering costs, hard costs, site work, and FF&E on the project. This is usually done through showing receipts and other records verifying the expenditure, such as audited financial statements. This is also important from an operational verification standpoint in tracking revenue, W-2, and I-9 information.

In cases where the petitioner cannot establish that they have created the requisite 10 jobs in the 30-month job creation window outlined by United States Citizenship and Immigration Services (USCIS) due to unforeseen circumstances, the investor can request a reasonable extension, for a period of generally up to one year, if the project job creation timeline has fallen behind schedule. This should be avoided if possible, as the EB-5 statute does state that jobs must be created in 24 months, or within a reasonable timeframe. Reasonable timeframe is subjective and the USCIS has discretion when reviewing unforeseen circumstances.

Aside from providing evidence of job creation at the I-829 stage, project developers and Regional Centers must stay on top of the myriad of events that occur during the investment process. For example, the foreign investors must show that their investment has been sustained throughout the 30-month job creation period. This is typically established through the issuance of K1 forms to each investor. It is difficult to issue a Form K1 to an EB-5 investor if they do not have a social security number. Regional Centers and developers must make sure that their investors obtain and provide their social security numbers as soon as they have been issued.

In addition, the Regional Center and developer must make sure that the investor’s funds are deployed into the project at the time of the investor’s consular interview. The Department of State often wants to see that the investor’s funds have been released from escrow and deployed to the project at the time of the final green card interview. Therefore, it is important that the investor is fully prepared at their first consular interview. With the possibility of a Chinese EB-5 visa wait line developing in summer 2015, investors want to be sure their cases are documentarily complete. If an applicant is not successful at the final interview, they can lose their place in line if the visa quota substantially backs up after the interview.