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EB5 Visa Lawyer – Comments on USCIS Draft Memorandum on EB-5 Adjudications Policy

On November 9, 2011, USCIS posted for comment the Draft Memorandum on EB-5 Adjudications Policy. The Memo provides clarifications on the current law and policies concerning adjudication of EB-5 petitions. American Immigration Lawyers Association (AILA) provided its comments and suggestions for the Final Memo. AILA pointed out the major issues with the Draft Memo. Attorney Ekaterina Powell from our law office has prepared this summary to address the most important AILA’s comments that hopefully will be considered by USCIS.

New Commercial Enterprise

First of all, of major concern is the definition of a “new commercial enterprise.” The Draft memorandum does not provide clear analysis on what is considered a “new commercial enterprise.” Accordingly, the Memo should be supplemented with the explanation on what business will qualify under the regulations.

The initial inquiry should be on whether the investment is in a commercial enterprise that was established after November 29, 1990. If the investment is in a commercial enterprise that was established after November 29, 1990, the requirement is met and no further inquiry is appropriate.

If the investment is made in a commercial enterprise established on or before November 29, 1990, the investor must meet one of two tests: 1) the investor must restructure or reorganize an existing business or 2) expand the business in such a way as to accomplish a 40 percent increase either in the net worth or the number of employees of the business.

Therefore, if the investor can establish that the business was created after November 29, 1990, it should end USCIS’ inquiries and the business should be deemed a “new commercial enterprise.”
Purchase of assets of another company

The second major concern is classification of the business as a “new commercial enterprise” if it purchases assets from another enterprise. The Memo as it is written now does not provide clarifications on this issue. The problems arise when the entity from which the new enterprise purchased assets was created before November 29, 1990.

The final version of USCIS Memo should include the analysis that a new commercial enterprise established after November 29, 1990 does not lose its status as a new commercial enterprise because it purchases assets from an independent company which it does not acquire and with respect to which it is not a successor in interest (assuming it does not acquire all of the rights and liabilities of the independent company whose assets have been purchased).

If there is no succession-in-interest, the new company simply cannot provide documentation for the company it purchased the assets from because it does not have an ownership relationship and, thus, does not have access to the documents of the seller.

Therefore, the Final Memo should clarify that the date that the company from which assets were purchased was established is completely irrelevant as to whether the purchasing company is a new commercial enterprise if there is no succession-in-interest.

Restructuring and Reorganization

The Final Memo shall clarify what constitutes sufficient restructuring or reorganization for the purposes of creating a new commercial enterprise as these terms have not been defined yet. At least, a change in the mission or focus of a business should also result in sufficient reorganization or restructuring.

Changed Circumstances

The Draft Memo supports the realms of the business world and suggests that at the time of removal of conditions on permanent residence, the petition may be approved if the circumstances have changed and the business has operated not in accordance with the business plan that was submitted with the original petition.

However, The Final Memo should be more specific on this point. Historically, USCIS has denied the removal of conditions petitions if there has been a material change in a project even if the investor’s money has already been used in projects and has created jobs.

In the Draft Memo, USCIS states that the removal of conditions may be successful if the investor provides documentary evidence demonstrating that, notwithstanding the business plan contained in the Form I-526, the requirements for the removal of conditions have been satisfied.

However, USCIS has not provided clear guidance on this issue and it seems like, in a situation with changed circumstances, eligibility will depend on a particular adjudicator and will be in his/her own discretion.

The proposed changes to USCIS policy will provide more clarity and will give less room to discrepancies in exercise of discretion in EB-5 petitions’ adjudication process. EB-5 adjudication policies are currently undergoing a lot of changes. Check back on our blog for the most recent updates.