Impact of Projected EB-5 Quota Retrogression for China
Based on the demand for EB-5 visa numbers during 2013 and the volume of approved I-526
petitions at the National Visa Center, the Department of State has provided the AILA EB-5 and
DOS committees with tentative projections for movement in the EB-5 category during the rest of
the 2014 fiscal year. The forecast is somewhat murky given the low ¡§visibility¡¨ at USCIS,
meaning that there is limited information available regarding how many visa numbers USCIS
will request, a challenge that is exacerbated by the substantial I-526 backlog and the fact that I-
526 petitioners and their dependents cannot concurrently file for adjustment of status. With that
in mind, the Department of State has advised the following:
- If demand continues at the current pace, a cut-off date may need to be established for
China, which accounts for more than 80% of total number usage. No other countries
in the EB-5 category will be impacted. (It should be noted that in December 2012,
the State Department predicted the establishment of a cut-off for China EB-5, but
this never occurred because of the slow pace of I-526 approvals.)
- If a cut-off date is established, it will not likely take effect until July 2014 at the
earliest and is more likely to occur in August or September 2014. It is possible that
numbers will again become current for some period of time at the onset of the new
fiscal year on October 1, 2014.
- Of the cases at NVC:
Therefore, depending on how quickly USCIS reduces the I-526 backlog, the EB-5
cut-off date may need to be retrogressed more than one year.
- 966 have priority dates in 2011;
- 2,969 have priority dates in 2012; and
- 813 have priority dates in 2013.
- All EB-5s are created equal; the cut-off would apply to China EB-5 across the board,
with no distinction between regional center and direct EB-5 petitions.
In anticipation of this potential quota retrogression, the AILA EB-5 Committee suggests the
1. Carefully monitor investors with children who may ¡§age out.¡¨
The Child Status Protection Act (CSPA) freezes the age of children who are derivative
beneficiaries of an I-526 petition while the petition is pending. However, once the
petition is approved, the child¡¯s age is no longer frozen if the conditional residence
cannot be completed because the quota is not current for that investor. A Chinese
investor with children nearing age 18 or older will want to freeze the child¡¯s age for as
long as possible if China EB-5 priority dates retrogress. The longer the time the I-526 is
pending, the longer the time the child¡¯s age is frozen. Thus, it will be beneficial for
certain Chinese nationals who have children close to "aging out" to have the I-526
petition adjudication process take longer. For this reason, it would be advantageous for a
Chinese national to receive a Request for Evidence and to delay responding to the RFE
until the latest possible date.
China EB-5 priority date retrogression will make it imperative for counsel to carefully
track the ages of a petitioner¡¯s children, to encourage prompt I-526 filing, and to
strategize how to prolong the I-526 petitioning process if a child is close to "aging out."
It will also be imperative for counsel to make certain that the immigrant visa is applied
for within one (1) year of the priority date becoming current, in order to benefit from the
period of time the child¡¯s age is frozen during the petitioning process under the CSPA.
2. Develop alternative strategies for direct EB-5 investors.
In a direct EB-5 investment, the investor is often the manager of the investment. Quota
retrogression may delay for years the ability of Chinese nationals to immigrate after filing
the I-526 petition and therefore to start up the business. The Chinese national cannot
obtain an E-2 visa as there is no investment treaty with China. An investor who cannot
immigrate to the United States for many years because of quota retrogression may not be
able to demonstrate that he will be able to manage a direct EB-5 investment and may
need to either find someone else to manage the business or develop a nonimmigrant visa
strategy to come to the U.S. to start up the business.
Additionally, the investor must demonstrate that the commercial enterprise will employ
no fewer than 10 qualifying employees within 2½ years of I-526 petition approval. A
comprehensive business plan must be submitted with the visa petition demonstrating that
the qualifying employees will be employed within that time period. It will be difficult to
produce a credible business plan when an investor has no idea of when he will be able to
immigrate to the United States.
3. Advise clients regarding regional center project issues.
Many regional center projects involve loans from the new commercial enterprise to the
EB-5 project. These are often 5 year loans premised on all investors receiving
conditional permanent residence before the loans are paid back. Investor clients should
be advised that changes to loan agreements may be required and that such changes may
affect their exit strategies. On the other hand, regional center projects would have longer
periods of time in which to create the requisite jobs in the event that quota retrogression
delays the onset of the conditional residence period of the investors.