California’s Revised TEA Policy and Updated Data

On Monday, May 6, California’s Office of Business and Economic Development (“California GO-Biz”) published its new policy regarding certification of high unemployment targeted employment areas (TEAs). In addition to its blanket city, county and metropolitan statistical area (MSA) letter, California GO-Biz will now issue individual certification letters based on its updated data for high unemployment MSAs, counties, and cities, available at California GO-Biz’s EB-5 Investor Visa Program web page:  http://business.ca.gov/Programs/EB5Program.aspx.

California GO-Biz now will again issue TEA certification letters based on combinations of up to twelve contiguous census tracts. California used to do so, but stopped in 2012. California is still using census tract boundaries from the year 2000, and is currently verifying 2010 boundaries.

Allowing State Governments to Receive EB-5 Capital

I hear the White House and some states want to amend the EB-5 statute to allow a regional center to give EB-5 capital to a state or locality (as a loan, I presume). Such regional centers would have a substantial advantage over purely commercial regional centers as they would be perceived by investors to be involved with the government. [Such would also alter the risk factor as the state would presumably be more likely than a private entity to repay the funds.] This was the model for an infamous project to build a floating bridge near Seattle. The project was very popular before it failed as an EB-5 project and funds had to be returned.

If this new proposed investment model is not good for your regional center, you may want to meet with your congressional representative. The White House and some states are moving forward on this, and they are supported by some venture capitalists. It appears the Senate and House are now marking up a new EB-5 bill as part of the comprehensive immigration reform bill, so you may want to act immediately.

Leahy EB-5 Bill Submitted to Congress

The bill I discussed in an earlier newsletter by Sen. Patrick Leahy was submitted to Congress on May 7, 2013.  It does not contain many of the positive provisions that the earlier draft did.  It seems to require all job creation occur in the project’s TEA, and requires at least one census tract within a TEA combination of census tracts to have at least 20% of residents below the poverty level.  It also provides a separate option for a “rural” TEA designation for states with populations under 1.5 million.  It also allows the minimum EB-5 investment amount of $500,000 to increase with inflation.  On the other hand, it makes the program permanent; TEA certifications last for five years, it allows the I-526 petition to be filed concurrently the adjustment application (benefitting individuals within the United States), and allows full-time equivalents and provides a simpler project preapproval process.  The bill can be found here: http://www.judiciary.senate.gov/ legislation/immigration/amendments.cfm (follow “Leahy2-(MRW13335)” hyperlink).

Electronic Filing

USCIS apparently announced at a recent AILA EB-5 conference that it will be launching an electronic filing system for I-526 petitions. Petitioners will be able to file the I-526 form online with payment and receive an immediate receipt. Hard copies of supporting documents will then be filed.

USCIS has already done this in other areas, including I-140 petitions for employment based immigrants. Unless there is a deadline that electronic filing will enable the petitioner to meet, there is not a great deal of advantage to filing online and we typically do not use that system.

USCIS also is considering using a repository for regional center project documents so that individual investors do not have to file project documents. The idea of a repository for regional center project documents may save on paperwork, but care must be taken to include amendments and updated documents.

Industries and NAICS Codes

USCIS’s policies regarding NAICS codes are evolving. Although USCIS continues to issue RFEs and assert that NAICS codes must be at least four digits, it recently approved a regional center for multiple two- and three-digit codes. It also approved a wide-ranging 15-county, four-state geographic area for this regional center, an area much larger than any approved in 2012. It is unclear whether this decision is merely an anomaly, or an indicator that USCIS is moving in a new direction.

There are also now two types of industry categories with NAICS codes that relate to regional centers. One type represents the focus of a regional center’s EB-5 investment activity. Regional centers are limited to sponsoring projects and investing in these industries only if approved in their USCIS approval charter or by amendment – such industries as traveler accommodation, NAICS 7211 (for projects such as hotels and motels); and commercial and institutional building construction, NAICS 2362 (to build hotels, motels, and other structures).

The other type represents incidental project industries that are the recipients of comparatively small amounts of EB-5 capital or which do not receive EB-5 capital but are nonetheless impacted by it. These industries cover the range of a business’s job-creating activities beyond the primary activity represented by the regional center industry. For example, a particular project may generate jobs due to a variety of soft construction expenditures, such as legal services, NAICS 5411 and architectural, engineering, and related services, NAICS 5413. These industries may receive EB-5 capital, but the amount is relatively small compared to the total amount of capital that will be expended in the project.

As another example, a hotel may also generate jobs through activities other than those that would be categorized under traveler accommodation. For example, a hotel may generate activities through revenue from its banquet spaces in the industry of caterers, NAICS 7223. A regional center does not need to be specifically approved for such incidental project-related industries and their NAICS codes. These can instead be presented in documentation supporting the I-526 petitions.