USCIS clarifies Redeployment rules of EB-5

USCIS clarifies Redeployment rules of EB-5

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USCIS clarifies Redeployment rules of EB-5

As we know, an essential part of the EB-5 application, the I-526 petition, is the investment component. USCIS updated the policy last week and published it on July 24, 2020. The policy clearly explains what constitutes an eligible EB-5 investment. Besides, if the investment needs to be redeployed, the policy also clarifies what the eligible redeployment instruments are and what they are not. The following paragraphs are excerpts from the policy.

Congress created the immigrant investor category so the U.S. economy can benefit from an immigrant’s contribution of capital. Capital needs to be at risk until I-829 filing. The investor needs to create directly or indirectly 10+ full-time positions.[1] The policy continues and states that:

  • The Capital includes cash, equipment, inventory, other tangible property, cash equivalents, and the indebtedness secured by assets owned by the immigrant investor.
  • The immigrant investor is personally and primarily liable.
  • The assets of the new commercial enterprise upon which the petition is based, are not used to secure any of the indebtedness.[2] 
  • All capital must be valued at fair market value in U.S. dollars.

The policy clearly states that if the immigrant investor is guaranteed a return or a rate of return on all or a portion of his or her capital, then the amount of any guaranteed return is not at risk.[3] For the capital to be at risk, there must be a risk of loss and a chance for gain. Additionally, if the investor is guaranteed the right to eventual ownership or use of a particular asset in consideration of the investor’s contribution of capital into the new commercial enterprise, the expected present value of the guaranteed ownership or use of such asset will count against the total amount of the investor’s capital contribution in determining how much money was placed at risk. For example, if the immigrant investor is given a right of ownership or use of the real estate, the present value of that real estate will not be counted as investment capital put at risk of loss.[4]  So, again clearly, if the investor is purchasing a condo on a forward basis or being promised to own a condo as the return of capital, that initial investment will not qualify. Furthermore, the regulatory definition of “invest” excludes capital contributions that are “in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement [5].”  

Mandatory redemptions, options exercisable by the investor are impermissible debt arrangements. However, options exercisable by the new commercial enterprise are permissible arrangements.[6]  But again, the instrument cannot be a debt instrument. It has to be shares that exhibit equity-like behavior of uncertain returns and no promise of mandatory redemption.

Deployment of Capital

Before the job creation requirement is met, a new commercial enterprise may deploy capital directly or through any financial instrument so long as the immigrant investor must have placed the required amount of capital at risk to generate a return on the capital placed at risk. The purchase of financial instruments traded on secondary markets generally does not satisfy these requirements.

Once the job creation requirement has been met and the investment capital is returned or otherwise available to the new commercial enterprise, the new commercial enterprise may further deploy such capital within a reasonable amount of time[7] defined to be within a year, to satisfy applicable requirements for continued eligibility.[8] The capital may be further deployed, as described above, into any commercial activity that is consistent with the purpose of the new commercial enterprise to engage in the “ongoing conduct of lawful business,”[9] including as may be evidenced in any amendments to the offering documents made to describe the further deployment into such activities.[10]

Consistent with precedent case decisions and existing regulatory requirements, further deployment must continue to meet all applicable eligibility requirements within the framework of the initial bases of eligibility,[11] including the same new commercial enterprise[12] and regional center.[13] Besides, because a regional center has “jurisdiction over a limited geographic area,” [14] further deployment must occur within the regional center’s geographic area, including any amendments to its geographic area approved before the further deployment. The further deployment, however, does not need to remain with the same (or any) job creating entity or in a targeted employment area (TEA) even if the original investment was in a TEA.

For example, if a new commercial enterprise associated with a regional center loaned pooled investment capital to a job-creating entity that created sufficient jobs through the construction of a residential building in a targeted employment area, the new commercial enterprise, upon repayment of the loan that resulted in the required job creation, may generally further deploy the repaid capital anywhere within the regional center’s geographic area (regardless of whether it would qualify as a targeted employment area) into any commercial activity that satisfies applicable requirements such as one or more similar loans to other entities. This is a very nice development. Previously, it was unclear if this kind of redeployment activity was permissible.

In a blog published last week, Daniel Lundy from Klasko Immigration Law Partners stated that [15] “This new guidance does not specify that it applies only to redeployments on or after the date of publication. This means the possibility of retroactive application is strong.” Lundy also added that “redeployment can (and must) occur only after the investor has made the initial investment, 100% of the money has been deployed to the job-creating entity, the original business plan has largely been completed, the jobs have been created, and the money is available to be returned or has been returned to the NCE.  Redeployments that do not meet these requirements may be deemed a material change that would result in the denial or revocation of investor I-526 petitions for any investor who has not yet become a conditional resident.” 

If you want to get more information about the newly released clarification on redeployment rules, or EB-5 in general, please do not hesitate to call us at + 1 917 355 9251, or write to us at

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