Virginia, US

One of the hot topics in EB-5 practice at this time is known as “redeployment.” Under USCIS’s current policies, every EB-5 investor is required to sustain his or her investment capital so that it is “at risk” in the New Commercial Enterprise (“NCE”) until final adjudication of his or her I-829 Petition to Remove Conditions (“I-829 Petition”). In its August 10, 2015, draft Policy Memorandum, USCIS provided further guidance on these requirements, indicating that to sustain the investment, it must remain in a single NCE (although the NCE may deploy funds to wholly-owned businesses or, in the Regional Center context, to job-creating entities [“JCEs”]). Current USCIS processing time for an I-526 is approximately 15 months. The conditional residency period is 24 months. Current processing times for an I-829 is approximately 20 months. Therefore, the entire process can take approximately five years. Most Regional Center based EB-5 applications can accommodate this time frame as they involve financing vehicles of five-year duration and many include options to extend in the event green card processing take somewhat longer. 

The applicants most impacted by the “redeployment” issue are those from China since— as a result of the annual EB-5 per country limitations—their cases are currently backlogged, including case processing, for six, to eight or more years under current circumstances.

Capital “At Risk”

The Policy Memorandum further clarifies that capital would not be considered “at risk” if it is merely being held in the NCE’s bank account or an escrow account during the sustainment period.  At the I-829 stage, USCIS will continue to require evidence verifying that the escrowed funds were released and that the investment was sustained in the NCE such that it remains “at risk.” USCIS further clarifies that to the extent that all or some portion of the NCE’s claim against the JCE is repaid to the NCE during the sustainment period, the NCE must continue to deploy such repaid capital in an “at risk” activity for the remainder of the sustainment period. This suggests that the NCE’s redeployment of funds in an “at risk” venture during the sustainment period is acceptable, but there has not been clear guidance on what types of “at risk” ventures will satisfy these requirements. 

Guidance Expected “Soon”

In a stakeholders’ call held by USCIS on August 13, 2015, an economist for USCIS reiterated the agency’s position that the original investment made by an NCE in a JCE would have to remain outstanding until final adjudication of the I-829 petition. In a more recent stakeholders’ call on March 3, 2017, USCIS indicated that guidance on this topic would be coming out “soon,” which indicates that they are coming up with an acceptable solution. To date, there have been no further statements regarding the specific requirements for the NCE’s redeployment of investment funds.

The statements made by USCIS in its Draft Memorandum do not require that the EB-5 funds be redeployed into another JCE, targeted employment area, or within the geographic area of the regional center that originally sponsored the NCE’s investment in the original JCE. Some writings suggest that redeployment of funds in an investment in (1) publicly traded securities or (2) privately held securities or real estate is acceptable. Investing in publicly traded securities provides the opportunity for gain and the risk of loss, in addition to liquidity. Moreover, it has the added advantage of being transparent with respect to the securities’ valuation since the price of these securities is typically public information. Similarly, the redeployment of capital in another real estate project, either with the same developer or with another developer, with investment terms that takes into account the potential I-829 timetable for EB-5 investors in the NCE may also be acceptable. Securities counsel has concurred with this suggestion as well.

The NCE’s redeployment of EB-5 funds in an “at risk” venture during the investors’ sustainment period appears to be accepted by USCIS, although specific guidance has not been given on exactly what types of “at-risk” ventures qualify.  Fragomen will continue to closely track this issue and will keep all clients and partners informed as developments occur.

If you have any further questions please contact Mitch Wexler and Katie Wu.