On Jan. 11, 2017, the U.S. Department of Homeland Security (DHS) issued proposed rules regarding the EB-5 Immigrant Investor Regional Center program. The proposed rules address a number of issues. First, initial applications for regional center designation will undergo a bifurcated process. Entities will submit an initial application for regional center designation. A separate exemplar filing will be required before any investor petitions will be considered. DHS has also proposed implementation of safeguards and greater oversight of regional center activities; requirements for continued participation in the regional center program; and rules for termination of regional center designation for noncompliance. DHS will accept comments regarding he rules for 90 days ending April 11, 2017.
The proposed rules will seek to bifurcate the process for initial designation of regional centers. The process would require the filing of an initial application for regional center designation. The sample project or exemplar project requirement would be eliminated from the initial application.
The process would then require the submission of a separate exemplar application for any regional center project. The exemplar application would need to be approved before any investor petitions under the project would be considered. The approved exemplar would be used as evidence when adjudicating individual immigrant petitions related to the exemplar project.
DHS argues that change would streamline the regional center designation process by reducing workload and costs.
DHS will also add the following requirements to exemplar filings: (1) any documents related to the investment offering that have been filed with the U.S. Securities and Exchange Commission; and (2) any investment and offering documents that the regional center intends to provide to investors, as well as any agreements between the investor and the regional center.
DHS is considering limiting each exemplar’s validity period, perhaps 2 to 3 years. DHS has found that exemplars that have not been amended and not obtained any investments within 2 to 3 years are not active.
DHS is also seeking public comment modifications to definition of “material change” on an approved exemplar. DHS currently denies petitions with significant changes from the exemplar project. Under a mandatory exemplar requirement, modifications the material change policy might be necessary.
DHS is seeking comments regarding regulations for additional safeguards to ensure that all regional centers (1) use immigrant investor funds to promote economic growth, and (2) protect against the misuse of such funds. These safeguards might include assurances that the regional center commit to an appropriate level of internal monitoring and oversight of investment offerings and business activities associated with the regional center.
DHS is considering reforms to the methodology for maintaining regional center designation. Currently, regional centers must file Form I-924, Annual Certification of Regional Center, on an annual basis. DHS may require evidence of the following:
1. Requiring evidence of active participation in the regional center program including having pending exemplar applications filed within a specific time frame or the existence of pending Form I-526 or I-829 petitions associated with the regional center;
2. Requiring periodic demonstrations that the regional center has active monitoring and oversight activities as described in the previous section;
3. Requiring prompt notification to DHS of significant changes to the regional center through the timely filing of amendments to the regional center designation;
4. Changes to the regional center’s name;
5. Changes to the regional center’s ownership;
6. Changes to the regional center’s organizational structure;
7. Changes to the regional center’s administration that affect its oversight and reporting responsibilities;
8. Changes to add or remove regional center principals; and/or
9. Changes to the geographic scope of the regional center.
DHS is considering whether or not other changes may be deemed significant, such as material changes to an approved exemplar filing.
DHS is considering additional guidance regarding what events may result in termination of regional center designation. Some of the activities that DHS is considering explicitly listing as activities that would result in termination of the regional center include:
1. Failure to meet the continued participation requirements;
2. Obtaining designation by fraud or misrepresentation; using unlawfully sourced funds to run regional center operations; or
3. Misusing investor funds, including, but not limited to, use in any unlawful activity (e.g., Ponzi schemes).
Under the EB-5 program, lawful permanent resident (LPR) status is available to foreign nationals who invest at least $1 million in a new commercial enterprise that will create at least 10 full-time jobs in the United States. A foreign national may invest $500,000 if the investment is in a “targeted employment area,” defined to include certain rural areas and areas of high unemployment. Petitioners participating in the Regional Center Program may meet statutory job creation requirements based on economic projections of either direct or indirect job creation, rather than only on jobs directly created by the new commercial enterprise.