Great (Un)Expectations: EB-5 Integrity Fund Mandates Arrive

By Rebecca S. Singh, Esq. and Simon Butler

Fresh off of the news from U.S. Citizenship and Immigration Services (“USCIS”) outlining EB-5 Integrity Fund requirements for regional centers, industry insiders are chewing on the somewhat perplexing revelations surrounding the payment methods and investor calculations brought to light by the agency—with the consensus being that further clarification would really, really help.

The missive, which details the processes involved for RCs in contributing to the fund, in many respects was expected following enaction of the Reform and Integrity Act (“RIA”) last year (March 15, 2022). The prescribing force behind these requirements, RIA established the aforementioned fund—per the Notice cited in the Federal Register—for the following purposes:

“(1) Conducting investigations based outside of the United States, including monitoring and investigating program-related events and promotional activities and ensuring that an alien investor’s funds associated with the alien’s investment were obtained from a lawful source and through lawful means; (2) Detecting and investigating fraud or other crimes; (3) Determining whether regional centers, new commercial enterprises, job-creating entities, and alien investors (and their alien spouses and alien children) comply with U.S. immigration laws; (4) Conducting audits and site visits; and (5) For other purposes as the Department of Homeland Security (DHS) determines necessary.

Now, with all of this funding, USCIS can finance its trips and investigations.

The timing of this Notice is not a surprise; ever since RIA came into effect, EB-5 project developers and regional centers have been heavily marketing overseas. It has been evident for a long while that the U.S. Department of State regularly attends marketing EB-5 events overseas. As anyone who regularly travels to events overseas would know, the cost of attendance quickly mounts up. Now, with all of this funding, USCIS—which has been conducting site visits for some time—can finance its trips and investigations. (Of course, USCIS.)

More importantly, how much money  is now being extracted? According to the Notice, “the fee [being] $20,000 for regional centers with more than 20 investors and $10,000 for those with 20 or fewer investors,” the agency prescribes the following schedule: “The fee payment for fiscal year (FY) 2023 is due by April 1, 2023, and regional centers must pay the fee online directly at Pay.gov, a system managed by the U.S. Department of the Treasury. Starting FY 2024 (October 2023), the fee will be due at the start of each fiscal year between October 1 and October 31.”

More Calculations!

As if calculating the jobs for the annual statement (Form I-956G) weren’t enough …

On its website, USCIS proceeds to interpret how the number of investors are determined. The agency explains r: “Based on INA sections 203(b)(5) and 216A(f)(1), USCIS generally considers an individual to be an investor from the point of filing a petition for classification (Form I-526/E) through the point of filing a petition for removal of conditions (Form I-829).”

The methodology for generating these figures is clarified thusly: “[USCIS] intends to estimate the approximate number of total investors in a regional center in any given fiscal year by subtracting the number of Forms I-829 associated with the regional center filed at any time on or before September 30 of that fiscal year (including filings from prior fiscal years) from the total number of pending and approved Forms I-526 or I-526E associated with the regional center filed at any time on or before September 30 of that same fiscal year (including filings from prior fiscal years).” 

USCIS further states: “The method of approximating investors described above is meant to guide USCIS adjudicators in this calculation.” This language is quite concerning as one number off will determine whether a regional center pays the higher fee—a $10,000 difference! This should encourage RCs to keep accurate data, especially as USCIS has noted that “a Form I-829 that is filed separately by a spouse or child of an investor that obtained conditional permanent resident status based on their relationship to the investor and was not included on the principal investor’s Form I-829 may typically be excluded from the total investor calculation.” The phrase “may typically be excluded” needs to be clearly defined but seems to be geared toward derivatives filing separate petitions due to the death of the principal applicant. Therefore, this is another area to be cognizant of, as awareness could help prevent duplication of multiple I-829s filed under one family. Otherwise, USCIS may penalize RCs for subtracting too many I-829s from the I-526 numbers. 

Simple, right?

Among regional center proponents, the way these calculations were made vis-à-vis the “20 or fewer”/“more than 20” investor categories seem a bit muddled—especially given the fact that USCIS admits in the Notice that it “recognizes that there may be alternative methods of calculating “total investors” and has considered potential reliance interests in arriving at this interpretation.” For now, let the calculations begin!

Fiscal Flustering

Even more significantly, RCs were pretty much dormant during the period following the expiration of the regional-center program from June 30, 2021 until at least May 2022—60 days after the RIA was set into law. These regional centers had little to no business during that time, though they are now expected to pay a substantial fee for FY 2023. That seems unfair, as the opportunity for RCs to more comprehensively fulfill these financial obligations would be greater come FY 2024 than FY 2023, owing to the growth in business in the months following the reinstatement of the regional-center program. With the fees being the same, anyway, such a move would not have placed significant constraints on USCIS’s efforts to inject cash into the Integrity Fund. So rushing this scheme out before all of the tenets are fully and clearly explained seems a bit counterproductive.

Meanwhile, RCs also are trying to figure out some of the cryptic mandates regarding the payment processor. The agency’s proverbial wrench turns a little tighter here: “Please note that the U.S. Department of Treasury guidelines permit USCIS to accept a maximum payment amount of $24,999 from one credit card in one day, and a single obligation cannot be split into multiple credit card payments over multiple days in order to evade this limit.” Enter a kind of clarification from Pay.gov that seems to muddle things up even more: “If submitting payment for more than (1) one annual fee (with a credit card), and the combined total exceeds $24,999.99, you must use the ACH payment method to complete your additional transactions.” (That ACH payment method, by the way, refers to one’s bank account; debit also may be used.)

Read that again. There are two different maximum dollar-amounts circulating: $24,999 versus $24,999.99. It is a small discrepancy, but a discrepancy nonetheless—which is not out of character for USCIS. The problem is, this makes things even more confusing, and such lack of clarity makes more work for all concerned. If an RC somehow makes a mistake in paying the fee due to the confusion resulting from these rules, would it be subject to termination from USCIS?

If an RC somehow makes a mistake in paying the fee due to the confusion resulting from these rules, would it be subject to termination from USCIS?

Such a scenario may not be out of the question. Warns the agency: “Per the new EB-5 law, we must terminate the designation of any regional center that does not pay the fee within 90 days of the due date. Termination will not be automatic, and we will provide a notice of intent to terminate and the opportunity to prove that the fee was paid in the proper amount within 90 days of the due date before sending a notice of termination.”

The scariness of this messaging, paired with the convoluted language outlining the payment processes and investor calculations, makes USCIS’s announcement appear rushed—smacking, unfortunately, of a quick money grab. That perception could have been avoided if the agency connected with its constituents on these issues … and that, of course, is an ongoing, seemingly never-ending concern. In that respect, the future looks rather status quo. Let’s just hope the payment system works.

There is a silver lining, though. USCIS does note that it “will not impose late fees for payments that were due in FY 2023.” In addition, the agency stated that it “will start imposing a late fee, beginning October 2023, for any payments made more than 30 days later than the due date.” On the other hand, there’s: “We will announce the amount of the late penalty and the process for collecting in a future publication before we collect it or it is due.”

To channel Tom Petty, the waiting is the hardest part. In the case of USCIS, it’s also the most perplexing. But as long as regional centers won’t (as Petty sang) back down on their questions, explanations should be heard.

If that is not running down a dream, nothing is.

https://mshahlaw.com/great-unexpectations-eb-5-integrity-fund-mandates-arrive/