Ready for Launch (Finally): Settlement Paves the Way for EB-5 Financing Options

Background and Litigation

Subsequent to the March 15, 2022, enactment of the EB-5 Reform and Integrity Act of 2022 (the “Integrity Act”), the United States Citizenship and Immigration Services (USCIS), an agency of the Department of Homeland Security (DHS), was met with several federal lawsuits initiated by numerous stakeholders within the EB-5 industry including trade associations, real estate developers, and privately owned regional centers.

These lawsuits challenged USCIS’s position that during the 60-day enactment period of the Integrity Act “all previously approved regional centers” (those authorized by USCIS prior to enactment of the Integrity Act) were to be unconditionally deauthorized. USCIS’s abrupt pronouncement to deauthorize all existing regional centers caused outrage among the EB-5 industry participants and, consequently, the aforementioned suits. Behring Regional Center filed suit positing that the “agency wrongly interpreted the Integrity Act as deauthorizing existing regional centers and that the agency’s announcement was arbitrary and capricious within the meaning of the Administrative Procedure Act.”

On June 25, 2022, Judge Vince Chhabria granted the plaintiff’s motion for a temporary injunction enjoining USCIS “from treating as deauthorized the previously designated regional centers.” In this order, Judge Chhabria advised that the plaintiff was “exceedingly likely (if not certain) to prevail on the merits of its claim that the agency’s decision is arbitrary and capricious under the Administrative Procedure Act.”

USCIS did not appeal to have the temporary injunction lifted, and on August 24, 2022, the parties filed a settlement agreement that clarifies the status of previously certified regional centers and other procedures for filing forms relating to the EB-5 program under the Integrity Act. 

Highlights of the Settlement Agreement

1. Previously approved regional centers (“existing RCs”) are considered to be in “good standing” prior to June 30, 2021, and such existing RCs did not lose their designation because of the enactment of the Integrity Act.
2. Existing RCs that wish to sponsor new investors must file a Form I-956 as an amendment by December 29, 2022, evidencing that they have required Integrity Act policies and procedures in place. Those existing RCs that complete this filing will not need to wait for approval to continue sponsoring investors and may keep their previous geographic area of designation without further showing. However, requests to expand the prior area to contiguous areas will require a submission of new project plans and economic analysis to support the requests.
3. When adjudicating Form I-956s of existing RCs, USCIS will defer to its decision in its prior designation notices when adjudicating certain issues and will allow for attachments from past filings to establish approval.
4. Within the Form I-956 process, Form I-956Es must include proof of a receipt notice from a I-956F project application. However, due to its processing delays, USCIS has implemented a new policy wherein, if USCIS takes more than 10 days to issue a Form I-956F receipt, an EB-5 investor can use evidence of physical delivery and filing fee payment from their Form I-956F as proof of receipt notice for their Form I-956E and subsequently interfile the receipt numbers once received. This policy applies also to I-956Fs already filed. For at least the first 16 weeks after the judge approves the Settlement Agreement, USCIS will also issue I-956F receipt notices by email.
5. USCIS will deem the new Forms I-956, I-956H, I-956F, I-956G, and I-526E to be interim until the conclusion of notice and comment rulemaking. The deadline for comments is October 24, 2022.

6. USCIS will publish an FAQ about the settlement within 21 days of the judge’s approval.

Conclusion

The EB-5 program has been a significant source of financing for real estate developers and other ventures in the United States over the last two decades. According to Invest in the USA (IIUSA), a national trade association comprised of EB-5 centers, “between 2008 and 2021, the EB-5 program helped generate $37.4 billion in foreign direct investment to create and retain U.S. jobs for Americans, all at no cost to the taxpayer.” The Settlement Agreement regarding the Integrity Act restores the EB-5 program until at least 2027 and allows regional centers to continue facilitating investment in the United States with the goal of creating more American jobs. The EB-5 program is once again a viable option for affordable financing by U.S. sponsors, which is a timely opportunity for many borrowers increasingly concerned with the rising cost of capital.