On August 23, 2014, the State Department announced that, for the first time, Chinese nationals had exhausted their share of immigrant visas (green cards) under the EB-5 preference category before the end of the fiscal year. There are limits on the number of immigrant visas (green cards) that can be granted to foreign nationals from any one foreign country each fiscal year. Practically, reaching this limit before the fiscal year ended on September 30 had little immediate impact upon Chinese EB-5 visa applicants, as processing for this category resumed on October 1, 2014. However, this does raise questions regarding the future of this visa category as well as the EB-1 and EB-2 preference categories should demand for immigrant visas continue to grow at the same pace among Chinese nationals.
What is retrogression and why is it a problem?:
The numerical limits on immigrant visas by country means there is a waiting time before the immigrant visa can be granted. How long an applicant must wait for their case to be reviewed is determined by the priority date assigned to their case and the cut-off date set by the State Department for review of cases. If the applicant’s priority date is before the cut-off date (referred to as being “current”), case processing continues, if it is after this cut off date (“not-current”), they must wait until the priority date is reached. The EB-5 category is still current, meaning that all applications are being processed and there is no “cut-off” date yet being imposed. When cases are not current, predicting when ones priority date will become current and when the long wait will be over can be difficult if not impossible.
When there is increased demand for visa category from applicants from a particular country, the cut-off date may be reset to an even earlier time (retrogressed), making the wait for processing even longer. Any time that there is increased demand from one particular country in a visa category, the risk of retrogression is always a concern.
The State Department’s view on the future of EB-5 for Chinese Nationals:
The Chief of the State Department’s Visa Control and Reporting Division, Charlie Oppenheim, recently explained how the popularity of the EB-5 preference category in China impacts the current trends with visa numbers and forecasted future visa number availability and possible retrogressions based on his knowledge and experience. According to Mr. Oppenheim should remain “current” through May or June 2015. However, because EB-5 visas have become more popular since their establishment in 1990, the high demand for visa numbers will continue and so does the possibility for retrogression for Chinese nationals. Applicants in the EB-5 category may then apply as well in the EB-1 or EB-2 preference categories and this would means there will be less “leftover” visa numbers that were previously given to other visa categories such as EB-1 and then” trickled down” to EB-2 India and China applicants. This lack of “trickle down ” visas of course will in turn add to the slow movement in those categories.
Retrogression: How delayed processing may impact viability of EB-5 application:
The basic premise of the EB-5 investor visa program is that the applicant invests in a new commercial enterprise, which meets specific requirements and creates or preserves at least 10 full-time jobs for qualifying U.S. workers within two years (or under certain circumstances, within a reasonable time after the two-year period) of the immigrant investor’s admission to the United States as a Conditional Permanent Resident.
The EB-5 investor must show the lawful source of the funds invested at the time immigrant petition (I-526) is filed and the investor must show that the capital is placed in an “at risk” investment until the application of the investor’s removal of condition application (I-829).
The EB-5 investor visa utilizes two models. An investor can make an “equity” investment into a qualifying EB-5 program. However many Regional Center investment projects are structured as a loans. In this frequently used financing model, the investor does not make a loan to the project but rather makes an equity investment to a limited loan partnership created by the Regional Center. The Regional Center makes a loan to the EB-5 lob creation project. The job creation project agrees to pay back the limited liability partnership in five years.
If EB-5 visa numbers regress this could lengthen time before investor could apply for removal of conditional residency. While the investor is waiting for a visa number to become available, the job project could pay back the loan within that five year time period before the conditions on residency are removed. The question that must be answered in the future is whether the investment was at risk if the loan was repaid years before the investor was able to have the conditions on his residence removed.