Chinese EB-5 Retrogression: What Does it Mean?

Starting May 2015, EB-5 availability will be restricted for Chinese applicants. I-526 petitioners/applicants that receive approval from then on will have to indefinitely postpone their plans to enter the United States (unless, of course, they are able to get some other visa). In this sense, the introduction of a cutoff date is no different for EB-5 than it is for EB-2 or 3. However, further analysis indicates that the difference is significant. Priority date cutoffs result in a fundamental change in the EB-5 program.

On the I-526 petition (which begins the process) immigrant investors must submit a credible business plan along with evidence that the required investment is being made and will be at financial risk. In normal circumstances, once this petition is approved, the immigrant is given a two year period of conditional residence to (help or fully) manage the investment and fulfill economic requirements, which involve the saving or creation of at least ten jobs. After the two years have transpired, an I-829 petition must be used to prove that those requirements were met. The immigrant investor must essentially show that the plans set forth on the I-526 petition were carried out. Approval here translates to unconditional permanent residence. Crucially, it must also be shown that the immigrant never liquidated the investment.

Though EB-5 conditional residence visas are comparable to nonimmigrant investor visas, their distribution is subject to the same annual caps as unconditional green cards. This is where difficulty becomes apparent. In order for a Chinese national to receive I-526 approval for a direct filing (non-regional center), he or she must present a business plan with the strong potential to lead to the employment of at least ten U.S. workers over the next two years. Accompanied must be evidence that he or she will be able to maximize the plan’s chance of success. It would thus be apparent that non-regional center EB-5 among Chinese nationals necessitates something that cannot obtain: that their U.S. residence would start immediately following the approval of their I-526 petitions. This issue, while perhaps affecting less than half of Chinese EB-5 filers, appears fatal to their ultimate success.

The two most promising ways out of the dilemma are either if the immigrant can predict when conditional residence will start on the I-526 petition, or if he or she can somehow be allowed to manage the investment from abroad. The first seems possible only if the priority date cutoff is almost redundantly close to the present day, as priority date movements can be very sporadic. Though usually accurate, relevant predictions from the Visa Office don’t extend very far into the future. The second does not seem like a business plan that USCIS would approve, and the legalities of such a situation are not clear or well defined. Chinese direct EB-5 thus appears unavailable. If it somehow isn’t, there’s still the awkward question of how long to wait before submitting an I-829 petition. Should one wait two years plus the unknown amount of time it would take for the priority date cutoff to reach the present–or just two years? The difficulties inherent to potential answers leave this question open.

While direct EB-5 seems out of the question for new Chinese filers, their use of regional centers may still be feasible. There is no apparent reason why immigrant investors need to be in the country for this. However, there are other pitfalls to be considered. The amount of time an investor must keep his or her money at risk has become somewhat indefinite. I-526 approval requires showing that a capital investment has been made, and I-829 approval requires that the investment was sustained. The new waiting periods will occur between these two events, adding extra uncertainty and making the program much less attractive. Lending $900,000 to $1,800,000 to a regional center for an indeterminable amount of time plus two years isn’t an ideal investment prospect. Further, because their investors are investing in order to immigrate (rather than the other way around), the centers have been able to focus on things other than maximizing return.

In addition to this, Chinese immigrant investors also must consider whether their children over 16 (if they have any) will reach age 21 before the waiting period ends. If so, the children may lose their chance at gaining permanent residence along with their parents. While these challenges are not insurmountable, they make the program much less attractive. We will be publishing tips on coping with them soon. Nonetheless, we predict that many potential Chinese immigrant investors will decide against the program due to its apparent high uncertainty and limited potential for profit. But because of this, in a few years the waiting period may be removed. We hope that a more permanent solution will be devised by then.