On May 8, 2012, USCIS (US Citizenship and Immigration Services) published its Operational Guidance with the subject line “Guidance on EB-5 Adjudications Involving the Tenant-Occupancy Methodology” (“The Guidance”).
As background, the “tenant-occupancy” economic methodology is a tool used by EB-5 Regional Centers and projects to calculate “job creation”. For example, an EB-5 project may propose to construct an office building, counting jobs created by the tenants of the project. If a tenant law firm in the new building were to employ 100 people, the EB-5 project would take credit for the 100 new jobs created by the law firm. Recently however, USCIS has challenged including these jobs in the job creation context, explaining that the positions in the law firm can be credited only to the law firm, and not the EB-5 project. Apparently, RFEs and threats of denials have been sent by USCIS to some EB-5 projects’ Regional Centers, and individual investors. One can only image the firestorms those notices set off.
Judging from its subject line, you might think the Guidance discusses or provides guidance on the apparently controversial economic methodology of “tenant-occupancy.” However, the term “tenant-occupancy” is mentioned only once in the entire body of the Guidance. In fact, the Guidance provided no discussion at all of the intricacies or merits of the “tenant-occupancy” economic methodology. The Guidance merely reiterates USCIS’ “deference policy,” which is
… generally that a prior favorable decision will be relied upon in later proceedings unless the facts underlying the prior decision have materially changed, there is evidence of fraud or misrepresentation in the record of proceedings, or the previously favorable decision is determined to be legally deficient.
The loophole in this “deference policy” statement is big enough to drive a truck through. Experienced immigration lawyers know well that USCIS is inconsistent at best and sometimes outright self-contradicting. Practitioners who regularly submit H-1B and L-1 initial and extension petitions are aware that USCIS follows a “deference policy” only when it suits the agency. Cases following fact patterns approved previously may be denied next time around without any explanation.
The Guidance specifically states:
If we approved a Form I-924 regional center application based on a specifically identified project, including the specific location and industry involved, we will not revisit the determination that the economic model and underlying business plan were reasonable when adjudicating related Form I-526 petitions, Form I-485 applications, or Form I-829 petitions
If we approved a Form I-526 petition for an immigrant investor based on a specifically identified project not associated with a regional center, we will not revisit the determination that the business plan was reasonable when adjudicating the investor’s related Form I-485 application or Form I-829 petition.
In fairness, the above language is significant because it provides some predictability with regards to the EB-5 process. In other words, once USCIS has approved a specific project, it cannot change its mind later regarding that projects’ job creation methodology.
However, the fact that this apparent fundamental fairness with respect to already-approved adjudication processes needs repeating is indicative of a significant problem existing in the EB-5 adjudication. USCIS has been interpreting the statutes and regulations without much regard to the actual statutes and regulations. (USCIS would adamantly deny it, but that does not change at least the perception of those who practice in the EB-5 arena). At a recent stakeholder meeting, one seasoned practitioner raised the concern that USCIS appeared to be making policy, through issuance of RFEs. As a new interpretation appears, a new controversy will flare, and a crisis erupts in every quarterly stakeholder meeting, where practitioners report on the new concerns USCIS experienced via RFEs.
I was hoping that this Operational Guidance on tenant-occupancy methodology would actually discuss the merits of the tenant-occupancy methodology, and provide us with direct answers on this issue. Is the methodology acceptable or is it not? Reading between the lines, I have to conclude that USCIS has rejected this methodology (mythology) for future application, but will let the ones already approved slide.
I do not believe that USCIS wants the EB-5 program to fail. Director Mayorkas has unequivocally explained that he wanted this program to succeed, and it is my belief that this Guidance was a sincere effort by Director Mayorkas to bring some clarity to the process.
However, USCIS needs to let stakeholders know what it looks for, that it is serious about following the statutes and regulations, and that it refrains from introducing new elements into the adjudication process that are not part of the law. USCIS is not above the law and cannot interpret the law any way it pleases. If USCIS, petitioners, and users of the EB-5 program follow the statutes and regulations meticulously and faithfully, the “game” would be fair and the playing field would be level, predictability would follow and the program will succeed.
USCIS is clearly not solely to blame for this. Many creative and aggressive EB-5 practitioners and stakeholders are pushing the envelope and stretching the interpretation of the law as well. They do this at their own peril and they jeopardize the entire EB-5 program because USCIS will react to these practices. Both sides need to take a step back and think through this clearly. Any short term “win” or “gain” cannot possibly compensate for any long-term ills that this program will suffer if it continues on its current course.