Two important developments now dominate the news regarding the U.S. EB-5 investor immigrant program: Chinese retrogression and a recent U.S. Securities Commission crackdown on lawyers receiving commissions from regional centers.
The Chinese retrogression issue has been in the news for quite a while. In a good piece written in early 2013, U.S. immigration lawyers Tammy Fox-Isicoff and H. Ronald Klasko saw the retrogression coming and outlined the impact it would have on investors from China and – seeing as how 80% of EB-5 immigrants to the U.S. hail from China – the U.S. economy.
Fox-Isicoff and Klasko made an important point when they said, “With quota retrogression, it may be several years between the filing of the form I-526 and the time the investor can lawfully immigrate to the United States and manage his investment.”
Why this is important can be found in the fine print of the U.S. Visa Bulletin.
Retrogression And The U.S. Visa Bulletin
I’ve talked about the U.S. Visa Bulletin before. You may think that people who wish to immigrate to the U.S. line up at the door and come in first come, first served. This is incorrect.
Each year, Congress sets a worldwide quota on the number of immigrants it will allow to come into the United States. A sub-quota is then set for each country and further sub-quotas are set for each category of immigrant. For example, of the one million total U.S. immigrants allowed last year, China was allocated about 70,000 employment spots. That employment allocation was then broken down by five preference categories titled EB-1 through EB-5. These established how soon an applicant in each employment category from China would be accepted into the United States.
Now we break it down further still. Out of the 10,000 EB-5 visas available each year, each country is allocated seven percent, or in the case of China, 700 per year, plus any unused EB-5 visas that were left over from other countries that did not use up their visas. For years, China was getting their allotment just fine. Business as usual. Then something happened.
On August 23rd, 2014 the U.S. Citizenship and Immigration Service (USCIS) announced that the EB-5 preference category had become “unavailable” for Chinese applicants. The visa numbers for China had reached their limit for the first time in the over 20-year history of the EB-5 investor immigration program. The door was closed and there would be no more EB-5 applications for China until the backlog had been cleared:
On April 13, 2015, at the Invest In the USA (IIUSA) Conference in Washington D.C., Chief of the Visa Control and Reporting Division of the U.S. Department of State Charles Oppenheim reported that the EB-5 China immigrant visa category will retrogress beginning May 2015. Oppenheim has indicated since October 2014 that this day would come. This was further confirmed upon the release of the May 2015 visa bulletin. Accordingly, this means that retrogression of the EB-5 China immigrant visa category will retrogress two years and have a cut-off date of May 1, 2013.
In other words, if you had your application in before May 1, 2013, then you are still in line – a lengthy one – for receiving your EB-5. Until that logjam is cleared, the EB-5 is closed to Chinese investors.
Fox-Isicoff and Klasko have pointed out several complicating aspects of retrogression. They mentioned its impact on Chinese children and the Child Status Protection Act (“CSPA”), as well as how the length of the quota retrogression will extend the time when the investor can have his investment capital returned. They suggest that it will be difficult if not impossible to predict when any particular investor’s priority date will be reached. I agree. It will be very tough to predict when an adjustment of status can be filed and when a conditional immigrant visa interview can be scheduled.
No doubt many Chinese investors will be prepared to put up with these extra hardships. Thankfully, EB-5 investors from outside China will not have to. Investors from other countries are not subject to this retrogression and thus, in the absence of changes to the program, we can expect more EB-5 applications from other countries while Chinese ones diminish.
SEC Crackdown on Commissions
The SEC is preparing sanctions against as many as two dozen immigration lawyers, people familiar with the matter said, for collecting deal fees from foreign investors trying to access the EB-5 visa program, which grants U.S. residency for $500,000 investments that create 10 jobs.
The lawyers were prohibited from earning transaction fees because they weren’t registered as brokers, according to the people, who asked not to be named because the investigations aren’t public.
While receiving a “commission” now appears to be all but eliminated, attorney “fees” remain free from any such constrictions. They are effectively beyond the reach of SEC regulation, except perhaps when they are obviously commissions but simply called legal fees. The likely result will be increases in legal fees as lawyers divert their attention away from introductions to regional centers and focus on preparing and filing applications.
I will monitor these developments and report further on them in the months ahead.