EB-5 Due Diligence

How USCIS Policy Changes Have Consistently Hurt EB-5 Investors


Foreign nationals all over the world dream of relocating to the United States with their family to enjoy the many benefits of U.S. permanent residency. The United States is home to top-tier universities, some of the world’s best hospitals, and excellent public education systems. Fortunately, the EB-5 Immigrant Investor Program offers foreign nationals the opportunity to obtain permanent resident status in the United States and enjoy all the perks that come along with it. The program was created in 1990 as a way to use foreign capital to stimulate the U.S. economy and create new jobs for U.S. workers. Foreign investors are able to receive U.S. green cards for themselves and their eligible family members in exchange for a qualifying investment in an EB-5 project. Since its creation, the program has helped thousands of foreign nationals immigrate to the United States.

Although the EB-5 program is considered one of the fastest and easiest ways to immigrate to the United States, there are still many obstacles that applicants must overcome to complete the EB-5 process. United States Citizenship and Immigration Services (USCIS) is the agency that oversees the program, and it has not made the process easy for those involved with an EB-5 investment. USCIS has consistently increased processing times, resulting in extremely long wait times, and also introduced retroactive policy changes that have led to unfair denials for several EB-5 investors. While it is likely that a lot of USCIS’s inconvenient decisions stem from incompetence, it is hard to imagine that some of the introduced policy changes have not been born of ill intentions.

EB-5 Investors Surprised by Undeserving Denials

In 2014, an EB-5 investor from South Africa applied to the program with the hopes of relocating her family to the United States to enjoy better educational and career opportunities that South Africa couldn’t offer. Her father gifted her an unsecured loan to cover the minimum investment amount needed to qualify for the EB-5 program, and with that, she was ready to file her I-526 petition and begin her EB-5 journey.

In November 2015, the investor received her I-526 adjudication, but to her dismay, her petition had been denied. USCIS denied her petition because it ruled that her EB-5 capital was composed of “indebtedness” instead of cash because it was a loan from her father. She was devastated and confused—even her immigration lawyers were caught off guard by the denial. The USCIS policy that resulted in her denial had not been in place at the time that she filed her I-526 petition, so there was no way she could have known that she didn’t fulfill the requirement.

The Truth About USCIS’s “Clarifications”

The investor in that example was one of many who faced an unfair denial due to a USCIS “clarification” that actually constituted a significant policy change. In April 2015, USCIS decided that third-party loans were no longer acceptable EB-5 investment capital unless the investor secured the full amount of the loan with personal assets to prove they were liable for the debt of the loan. Because no one could have predicted this policy change, several EB-5 investors filed I-526 petitions under the prior policy and faced wrongful denials when the policy change was applied retroactively.

Because USCIS claimed that this was a simple “clarification” rather than an actual policy change, it was able to apply the new rules to petitions filed before the rules were in place. Additionally, this allowed USCIS to avoid the notice and comment requirements of the Administrative Procedures Act (APA). This act requires that a general notice of new rules be released and that a chance for stakeholders to offer feedback and opinions on the upcoming policy change be offered. Since this was considered a “clarification,” stakeholders were not given that courtesy.

Court Rulings Regarding USCIS’s “Clarification”

Luckily, EB-5 investors can find some hope in knowing that courts tend to side with investors in such cases of wrongful denials. After USCIS’s “clarification” in April 2015, two EB-5 investors filed suit against the agency in an attempt to overturn their I-526 petition denials. To the relief of EB-5 investors around the world, the court ruled on November 30, 2018, to annul all I-526 petition denials issued as a result of the policy change and ordered USCIS to reprocess the denied petitions.

This was a major win for EB-5 investors as it pushed back against the malicious policies of USCIS. Not only did the court rule that third-party cash loans qualified as capital and not “indebtedness,” but it also concluded that USCIS had violated the rules of the APA by trying to enact policy changes without the proper procedure. The court viewed the “clarification” as a major policy shift to EB-5 requirements. In October 2020, the U.S. Court of Appeals for the District of Columbia upheld this ruling.

Drawn Out Court Decisions Can Still Be Too Slow

Unfortunately for many EB-5 investors, the court decisions are too slow to save their EB-5 investment. Even though the court ruling was declared in 2018, the appeal stretched the court decision out until 2020. Because of the unreasonable wait times, many investors have to deal with their children aging out of EB-5 eligibility, potential business plans being postponed or canceled, and/or missing out on potential educational opportunities.

While the EB-5 program is still one of the best options for foreign nationals looking to permanently immigrate to the United States, it does involve its fair share of challenges. Anyone planning an EB5 investment should know that USCIS has a history of introducing challenges and obstacles of EB-5 investors. EB-5 participants could be stuck waiting due to long processing times, stretched-out court rulings, and other inconvenient delays. If an investor does not plan accordingly, these obstacles could ruin future business and education plans and even jeopardize their entire EB-5 journey.