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EB­5 Visa Investors Win Class Cert. Over USCIS Policy

Friday a District of Columbia federal judge certified an impacted class of visa applicants by ruling that the USCIS (U.S. Citizenship and Immigration Services) erred in how it interpreted federal immigration law by determining that money for funding projects related to the EB­5 visa investment program.

EB-5 Funding

According to the USCIS, the funding money for EB-5 could only be either cash or loans secured by personally owned assets.

The judge applied the decision to the class of investors who invested cash from loan proceeds and had been denied their I-526 petition on the sole basis that the loan was not collateralized by the investor’s personal assets.

Possibility for retroactive reopening of all I-526 denials

The court’s decision probably will be stayed pending appeal if USCIS appeals the denial to the Court of Appeals. Without appeal, the decision will retroactively reopen all I-526 denials issued solely on the collateralization requirement, regardless of how long ago the denial was issued.

Background

Around 2015, USCIS started denying petitions of EB-5 investors who used the cash proceeds of a loan as their source of funds unless the loan was collateralized by the personal assets of the investor.

USCIS did so by applying its regulation that says that when the capital contributed is “indebtedness,” the indebtedness must be collateralized by the investor’s personal assets. Here you can find more information about using loans or gifts to fund an EB-5 petition.

Misinterpretation of the Immigration and Nationality Act

According to the summary judgment opinion by U.S. District Judge Emmet G. Sullivan, USCIS misinterpreted the Immigration and Nationality Act by setting the limitations on what constitutes “cash” put up by applicants, who hope to secure legal permanent residency by investing at least $500,000 in domestic projects meant to create jobs.

The judge recognized that his decision does not stop USCIS from reviewing whether the loan proceeds were “legally obtained,” which is always an EB-5 requirement, and USCIS could look into whether the investor made misrepresentations to the lender about the nature of the loan.

Violation of Adminitrative Procedure Act

By being “arbitrary and capricious” and because USCIS did not provide a required period of notice and public comment, the federal agency’s interpretation of “cash” also violated the Administrative Procedure Act.

“The regulation is unambiguous and USCIS’ interpretation contravenes its plain meaning,” the opinion read. “The court also concludes that USCIS’ interpretation is inconsistent with its own precedent and the context and history of the EB­5 program. As such, the court concludes that USCIS’ decisions to deny plaintiffs’ petitions were arbitrary and capricious.”

Judge Sullivan remanded the impacted cases to USCIS so the agency can reconsider the applicants’ petitions based on his opinion. He also modified the class definition, broadening it by eliminating any calendar date distinctions for whom may be included, while also limiting its applicability to those whose applications were solely nixed because of the loan issue.

EB-5 Denials reversed

The judge reversed the denials but did not grant the petitions, instead sending them back to USCIS for decision in light of the judge’s decision, based on longstanding precedent because “there may be sensitive issues lurking that are beyond the ken of the court.” USCIS could find other reasons to deny.

Under the EB­5 visa program, foreign citizens can obtain a U.S. visa by investing $500,000 in a qualifying enterprise that creates at least 10 American jobs. The EB-5 program is the preferred visa for obtaining a green card.

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