Immigrant Investors: Small Number of Participants Attributed to
Pending Regulations and Other Factors (01-APR-05, GAO-05-256).
In 1990, Congress established an investor visa category, referred
to as EB-5, whereby immigrants are granted conditional residence
and after 2 years, permanent residence status in the United
States if they invest in a commercial enterprise that will
benefit the U.S. economy and create at least 10 full-time jobs.
The Basic Pilot Program Extension and Expansion Act of 2003 (P.L.
108-156) mandates that GAO provide certain information regarding
the EB-5 employment category. In response to the mandate, this
report provides information on immigrant participation, including
the number of participants, their countries of origin, and the
number who sought U.S. citizenship. Also, this report includes
information about the types of business established and where
they were established.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-256
ACCNO: A20620
TITLE: Immigrant Investors: Small Number of Participants
Attributed to Pending Regulations and Other Factors
DATE: 04/01/2005
SUBJECT: Citizenship
Claims adjudicators
Dependents
Eligibility criteria
Federal law
Federal regulations
Immigrants
Immigration and naturalization law
Immigration or emigration
Lawyers
Resident aliens
Statistical data
Visas
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GAO-05-256
United States Government Accountability Office
GAO
Report to Congressional Committees
April 2005
IMMIGRANT
INVESTORS
Small Number of Participants Attributed to Pending Regulations and Other Factors
GAO-05-256
[IMG]
April 2005
IMMIGRANT INVESTORS
Small Number of Participants Attributed to Pending Regulations and Other Factors
What GAO Found
The number of visas granted under the EB-5 category has been a small
fraction of the approximately 10,000 allocated annually by the authorizing
legislation. According to State Department records, a total of 6,024 visas
have been issued to immigrant investors and their dependents since 1992.
As of June 2004, 653 investors (not including dependents) had met this
immigration category's requirements and received permanent legal resident
status.
Number of Visas Issued by Year, Fiscal Years 1992 through 2004 Number of
visas allocated per year
Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Number of visas issueda
Source: GAO analysis of State Department data.
aSince decisions for applications are not necessarily rendered the same
year they are received, numbers of visas issued in a year may be from
applications submitted in prior years.
The immigration officials and lawyers who represent immigrant investors
that we interviewed attribute the low participation to the rigorous
application process and the uncertainty of meeting the requirements that
can result in the permanent residency benefit. They also cited, as a
potentially negative impact on future applicants, the failure to issue
implementing regulations to adjudicate hundreds of EB-5 permanent
residence applications that have left investors in conditional resident
status-some for as long as 10 years. In 2002, Congress mandated that the
regulations be issued by March 2003. The regulations were initially
drafted but continue to be under review by the Department of Homeland
Security. DHS cited many difficult and competing demands associated with
establishing the new department and meeting its mission challenges as
reasons the regulations have not been completed.
United States Government Accountability Office
Contents
Letter
Results in Brief
Background
EB-5 Participation Is a Small Fraction of the Visa Allocation
Immigrant Entrepreneurs with Permanent Resident Status Have
Invested an Estimated $1 Billion in a Variety of Businesses,
Primarily in California
Conclusions
Recommendation
Agency Comments and Our Evaluation
1
2 4 7
16 19 20 20
Appendix I
Objectives, Scope, and Methodology
Objectives
Overview of Our Scope and Methodology
Number of Immigrant Investors and Country of Origin
Immigrant Investors and Their Businesses
Processing of Immigrant Investor Visa Applications at the Two
USCIS Service Centers and Criteria Used for Approvals and
Denials
Views of Immigration Lawyers
Data Reliability
22
22 22 23 23
27 27 27
Appendix II Immigrant Investor Program Application Process 29
Immigrant Investors' Initial Application 32
Application for Conditional Resident Status 35
Application to Change Conditional Residency Status to Permanent
Residency Status 36
Application for U.S. Citizenship 38
Appendix III Comments from the Department of Homeland Security
Appendix IV GAO Contacts and Staff Acknowledgments 41
GAO Contacts 41
Staff Acknowledgments 41
Tables
Table 1: Number of EB-5 Visas Issued, by Country of Origin, Fiscal Year
1992 through 2004
Table 2: Estimated Number of Immigrant Investors Who Have Sought U.S.
Citizenship, Fiscal Years 1992 through June 200416
Table 3: Types and Estimated Number of Businesses Established by Immigrant
Investors with Permanent Resident Status, Fiscal Years 1992 through June
2004
Table 4: States Where Immigrant Investors Established Business Operations,
Fiscal Years 1992 Through June 2004
15
17 18
Figures
Figure 1: EB-5 Application Process 6
Figure 2: Number of Visas Issued by Year, Fiscal Years 1992
Through 2004 8
Figure 3: EB-5 Application Processing Flow 30
Abbreviations
AAO Administrative Appeals Office
CLAIMS Computer Linked Application Information Management
System DHS Department of Homeland Security DOJ Department of Justice EB-5
employment-based visa category, fifth preference INS Immigration and
Naturalization Service IVAMS Immigrant Visa Allocation Management System
MFAS Marriage Fraud Amendment System RFE request for evidence USCIS U.S.
Citizenship and Immigration Services
This is a work of the U.S. government and is not subject to copyright
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separately.
United States Government Accountability Office Washington, DC 20548
April 1, 2005
The Honorable Arlen Specter
Chairman
The Honorable Patrick J. Leahy
Ranking Minority Member
Committee on the Judiciary
United States Senate
The Honorable F. James Sensenbrenner, Jr.
Chairman
The Honorable John Conyers, Jr.
Ranking Minority Member
Committee on the Judiciary
House of Representatives
To promote job creation and encourage foreign investment in the
United States, Congress created an additional employment-based
immigrant visa category (preference benefit) as part of the Immigration
Act of 1990, P.L. 101-649, as amended. This category, commonly
referred to as EB-5, allows immigrant investors to receive conditional
resident status in the United States for a 2-year period upon the
investment of $1 million (or $500,000 in targeted employment areas) in
a U.S. business that creates at least 10 full-time jobs. If the investors
meet the requirements, they can apply for permanent legal resident
status. The EB-5 immigrant investor category began in 1992 and is
administered by the U.S. Citizenship and Immigration Services (USCIS),
a component of the Department of Homeland Security (DHS). Under
the authorizing legislation for the EB-5 category, approximately
10,000 immigrant investor visas may be issued each year.1
The Basic Pilot Program Extension and Expansion Act of 2003
(P.L. 108-156), mandates that we provide certain information regarding
the EB-5 category. In accordance with the mandate, this report provides
information on
1Under the law, this preference category allots up to 7.1 percent of the
worldwide level of immigration (approximately 10,000 visas annually) to
qualified investors and their spouses and children. The allocation is not
a target or a goal. See 8 U.S.C. S:1153(b)5.
o the level of participation, including (1) the number of individuals
who have received immigrant investor visas in each year since the
category's inception, (2) their country of origin, and (3) the number of
immigrant investors who have sought U. S. citizenship, and
o the businesses established by immigrant investors, including (1) the
types established, (2) their locations and whether they remained in the
same location, and (3) the number of jobs created.
To perform our work, we reviewed applicable laws, including the
Immigration Act of 1990 and the 21st Century Department of Justice
Appropriations Authorization Act (P.L. 107-273 (2002)), as well as
studies, analyses, and other relevant literature covering the EB-5
category. Also, we reviewed USCIS and Department of State policies and
guidelines related to EB-5. We analyzed State Department data to determine
the number of visas issued under the EB-5 employment category from 1992
through June 2004 as well as the immigrant investors' and their
dependents' countries of origin. USCIS electronic databases do not include
information on where immigrant investors established their businesses, the
extent to which the businesses remained in the original location, the
types of businesses established, the number of jobs created, or the number
of immigrant investors who applied for U.S. citizenship. Therefore, to
obtain this information, we conducted a manual review of a random
probability sample of 90 case files. We also interviewed USCIS
headquarters officials in Washington, D.C., as well as USCIS service
center officials in California and Texas to obtain information about
immigrant investor application processing procedures and their opinions on
other EB-5 issues. Further, to obtain perspectives on the EB-5 category
from nongovernmental sources, we interviewed four immigration lawyers in
the private sector who were knowledgeable about the EB-5 application
process. We did not independently corroborate the opinions provided by
USCIS officials and immigration lawyers that we interviewed. Our selection
of immigration lawyers was based primarily on the recommendations of the
American Immigration Lawyers Association. We conducted our work from March
2004 to February 2005 in accordance with generally accepted government
auditing standards. Appendix I presents more details about our objectives,
scope, and methodology.
Results in Brief The number of visas granted under the EB-5 category has
been considerably less than the approximately 10,000 designated annually
by the authorizing legislation. According to State Department data, a
total
of 6,024 visas have been issued to alien entrepreneurs and their
dependents since 1992. The annual number of visas issued peaked at 1,570
in 1997 and, since then, has declined. Our analysis of USCIS data
indicates that as of June 2004, an estimated 653 investors (not including
dependents) had met the EB-5 requirements and received permanent legal
residency. The USCIS officials and immigration lawyers that represent EB-5
participants that we interviewed attribute the low participation to a
series of factors that led to uncertainty among potential investors. These
factors include an onerous application process; lengthy adjudication
periods; and the suspension of processing on over 900 EB-5 cases-some of
which date to 1995-precipitated by a change in USCIS's interpretation of
regulations regarding financial qualifications. 2 In 2002, Congress
mandated in the 21st Century Department of Justice (DOJ) Appropriations
Authorization Act (P.L. 107-273) that USCIS issue regulations to implement
congressional directives by March 2003 to address these pending cases.
According to USCIS officials, they initially drafted the regulations.
However, the regulations have been under review and revision primarily
between USCIS and the Department of Homeland Security, Office of General
Counsel, since March 2003. Many difficult and competing demands associated
with establishing the new Department of Homeland Security and meeting its
mission and management challenges were cited by DHS as a reason the
regulations have not been issued.
Our analysis indicates that about 83 percent of applicants approved for
the EB-5 category are from Asia, including Taiwan, South Korea, and China.
We estimate that about 38 percent of the immigrant investors who have met
the EB-5 requirements and been approved for permanent residence applied
for U.S. citizenship, although seeking citizenship is not a requirement.
Immigrant investors invested in a variety of business types that have
generally remained at their initial locations. The immigrant entrepreneurs
invested primarily in hotels or motels, manufacturing companies, real
estate companies, domestic sales companies, farms,
2At this time, USCIS functions were carried out by the Immigration and
Naturalization Service (INS), an agency within the Department of Justice.
As of March 1, 2003, INS ceased to exist, and its functions were
transferred to the U.S. Customs and Border Protection (CBP) and
Immigration and Customs Enforcement (ICE) within the Department of
Homeland Security's Directorate of Border and Transportation Security as
well as USCIS. See Homeland Security Act of 2002, P.L. 107-296 (2002).
import/export companies, restaurants, and technology companies. We
estimate that 41 percent invested in businesses in California. Very few
investors relocated their businesses to a state other than the one listed
on the investor's initial EB-5 application. Specifically, of the 653
investors who have met the EB-5 requirements and been approved for
permanent residence, we estimate that 644 (or 99 percent) of the
businesses remained in the same state. We also estimate that from fiscal
year 1992 through June 2004, immigrant entrepreneurs who completed the
EB-5 benefit requirements and attained permanent legal residency, invested
about $1 billion.
We could not determine a reliable estimate of the number of jobs created
by immigrant investors because, during the application review process,
USCIS adjudicators only ensure that each business created the minimum
requirement of at least 10 jobs but do not apportion the creation of
additional jobs between EB-5 investors and non-EB-5 investors. For
example, if there are non-EB-5 investors involved or the investment is
part of a greater overall business expansion, USCIS credits the individual
immigrant investor with all the jobs created, rather than trying to
determine exactly how many jobs are attributable to the immigrant
investor's portion of the investment.
Delay in issuing implementing regulations has left hundreds of visa
holders in limbo for as long as 10 years, contributing to a negative
perception of the employment-based category and potentially limiting
investment in the United States.3 Therefore, we recommend that the
Secretary of the Department of Homeland Security finalize and issue the
regulations necessary to provide final adjudication in these cases. In
commenting on our recommendation, DHS stated that the regulations have
been and remain a priority within DHS, they are working to resolve complex
issues regarding the EB-5 implementing regulations, and they are working
with the Department of Justice.
Background Under the authorizing legislation for EB-5, approximately
10,000 visas may be issued each year to investors and their dependents.
One category sets aside 3,000 visas for investors making investments in
3According to USCIS, the majority of the investors and their dependents
can retain conditional resident status while their application for
permanent resident status is pending, but they have to apply for an
extension every year.
targeted employment areas.4 Another category sets aside an additional
3,000 visas each year for a special pilot program.5 This visa category is
for alien entrepreneurs who make qualifying investments in a business
located within a "regional center."6 The remaining EB-5 visas are
available to immigrant investors who do not invest in a targeted area or a
regional center. Any of the approximately 10,000 immigrant investor visas
not issued remain unused and do not carry over to subsequent years.
Figure 1 provides an abbreviated description of the application process
immigrant investors must follow to be approved for the EB-5 category,
obtain conditional resident status to establish the business, and complete
the EB-5 requirements to attain permanent resident status. While not
shown, after 5 years from the date conditional resident status is granted,
the investor may apply to become a naturalized U.S. citizen.7
48 U.S.C. 1153(b)(5)(B). Section 8 C.F.R. S: 204.6(e) defines a targeted
employment area as an area that, at the time of the investment, is either
a rural area or an area that has experienced unemployment of at least 150
percent of the national average rate.
5In 1992, P.L. 102-395 required the Secretary of State, together with the
Attorney General, to establish this pilot program with an original
allocation of 300 visas. In 1997, Congress expanded the number of
permitted visas from 300 to 3,000 per year and in 2003, extended the
program to October 1, 2008. Department of Commerce, Justice, and State,
the Judiciary, and Related Agencies Appropriations Act of 1998, P.L.
105-119 (1997) S:116 (a); and the Basic Pilot Program Extension and
Expansion Act of 2003, P.L. 108-156, S:4(b).
6Section 8 C.F.R. S: 204.6(e) defines a regional center as any economic
unit, public or private, that is involved with the promotion of economic
growth, including increased export sales, improved regional productivity,
job creation, and increased domestic capital investment. A regional center
seeking USCIS approval must submit a proposal showing how it plans to
focus on a geographical region within the United States and to achieve the
required growth.
7Under the Immigration and Nationality Act, a legal permanent resident who
has resided continuously in the U.S. for five years is eligible to apply
for citizenship. 8 U.S.C. S: 1427.
Figure 1: EB-5 Application Process
Source: GAO analysis of US CIS data.
aImmigrant investors may choose to immigrate from abroad by applying for a
visa at the U.S. consulate in their home country. If the U.S. consulate
denies the visa, no further action is taken.
Appendix II presents additional details about EB-5 processing procedures
and the criteria USCIS uses to make approval and denial decisions.
EB-5 Participation Is a Small Fraction of the Visa Allocation
The participation of immigrant investors (and their dependents) has been
well below the annual EB-5 visa category cap of approximately 10,000. Our
analysis of State Department and USCIS data show that, as of June 2004,
6,024 visas have been issued to immigrant investors including their
dependents and an estimated 653 investors (excluding dependents) had met
the EB-5 requirements and been approved for legal permanent resident
status. Most immigrant investors who have been approved for the EB-5
category came from Asia.
The Number of Immigrant Investors Is Far Fewer than the Number of
Allocated Visas
According to State Department data, a total of 6,024 visas have been
issued to immigrant investors and their dependents under the EB-5 category
since its inception in 1992 through fiscal year 2004. Approximately 10,000
EB-5 visas per year (potentially 130,000 visas through fiscal year 2004)
have been authorized to be issued to individuals and their dependents if
the principal investor agrees to make the required investment, establish a
business in the United States, and create at least 10 full-time jobs.
According to USCIS, there is no way to determine the number of potential
applicants or the number of applicants who have applied for the category.
Figure 2 shows that the number of visas approved under EB-5 since 1992 is
a small fraction of the approximately 10,000 per year visa allocation set
by its authorizing legislation.
Figure 2: Number of Visas Issued by Year, Fiscal Years 1992 Through 2004
Number of visas allocated per year
10,000
USCIS officials and immigration lawyers that represent EB-5 participants
attributed the low participation to a series of factors that contributed
to uncertainty among potential investors. These factors included the
suspension of processing of hundreds of EB-5 applications in 1998 and the
subsequent issuance of several precedent setting decisions intended to
clarify how adjudicators should interpret EB-5 regulations.
USCIS officials cited several possible contributing factors as reasons for
the low participation and approval rates as follows:
o Rigorous nature of the EB-5 application process versus other
employment-based visa applications: According to agency officials, many
potential immigrants may have other options to achieve lawful permanent
resident status that are less difficult to qualify for, less expensive,
and more certain. For example, other employment based immigrant visas do
not require a substantial investment of money to establish a business and
hire employees. Also, other employment visas, such as those for
professionals with advanced degrees or priority workers including persons
who have a well-documented and extraordinary ability in the sciences,
arts, education, business, or athletics, may be easier for immigrants to
obtain because the
Total annual visa allocation per year
2,000
1,500
1,000 500 0 Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
2004
Number of visas issueda
Source: GAO analysis of State Department data.
aSince decisions for applications are not necessarily rendered the same
year they are received; the number of visas issued in a year may include
applications submitted in prior years.
Factors Contributing to Low Participation
USCIS Views
immigrant's employer is responsible for completing the application and
complying with the applicable USCIS regulations.
o Lack of expertise among adjudicators: USCIS officials said that prior
to 1998, EB-5 adjudicators were not sufficiently trained to properly
adjudicate EB-5 applications, which typically involve complex business and
tax issues. After the additional guidance (discussed below) was issued,
USCIS officials changed the EB-5 training curriculum to provide
adjudicators with training that addressed the complexities of EB-5
applications and helped to ensure that appropriate decisions would be
rendered in accordance with applicable statutes, regulations, and agency
policy. According to agency officials, the improved training may have
resulted in fewer applications being approved and, therefore, contributed
to a lower approval rate.
o Uncertainty of the outcome of adjudication: The statute provides for a
2-year conditional residence period but does not guarantee investors
lawful permanent resident status at the end of the period. The required
investment and employment creation must be established to the satisfaction
of USCIS prior to approving the investor for permanent legal resident
status. Potential investors may be deterred by the uncertainty that USCIS
may determine that they did not meet the EB-5 terms. Agency officials said
that the 1998 changes in the USCIS interpretation of the EB-5 regulations
(discussed below) have contributed to this uncertainty. Further, the
undetermined status of hundreds of EB-5 applications waiting for
promulgation of new regulations may have a negative effect on attracting
new applicants. Also, a history of federal litigation prompted by the
precedent decisions where the courts have taken
Immigration Lawyers' Views
various positions may have contributed to uncertainty regarding the future
interpretation of EB-5 law and regulations.8
o Public awareness and media attention: Publicity regarding EB-5 (also
discussed below) has been negative and may have contributed to decreased
interest in the EB-5 visa category and a resulting drop in the number of
alien entrepreneurs applying for EB-5.
All of the immigration lawyers we interviewed said that although
immigrants still want to participate in the EB-5 category, the suspension
of adjudications of hundreds of investors' applications has deterred
participation. They also cited subjectivity within the adjudication
process and the length of time it takes for USCIS to adjudicate the
various petitions as having contributed to the decline in EB-5
participation. As a result the U.S. is not realizing the full economic
potential of EB-5. Specifically, these lawyers noted the following:
o Requirements may be too restrictive: Overly restrictive and sometimes
ambiguous requirements are a significant deterrent to participation by
potential immigrant entrepreneurs. The 1998 decisions made it even harder
to obtain approvals of EB-5 applications and have resulted in investors
looking for other alternatives, such as other employment-based visa
options that are not contingent on capital investment and job creation.
Further, qualifying a person for EB-5 status is one of the most
complicated subspecialties in immigration law. A sophisticated knowledge
of corporate, tax, investment, and immigration law are required. In
8There has been extensive litigation in the courts regarding the
government's denial of applications for both participation in the EB-5
category and permanent resident status upon completion of the category's
requirements. In R.L. Investment Limited Partners and Wanxuan Zou v. INS,
86 F. Supp. 2d 1014 (D.C. Hawaii 2000) (RLILP), affirmed 273 F.3d 874 (9th
Cir. 2001), the court upheld the government's denial of an application for
an EB-5 application for the program that was virtually identical to
certain applications approved before the issuance of the precedent
decisions. In Chang v. U.S., 327 F.3d 911 (9th Cir. 2003), however, the
court held that INS could not automatically apply its more restrictive
interpretation retroactively to investors who had already received
conditional resident status and who were trying to have those conditions
removed. Instead, the court ruled that the agency must allow these
investors an opportunity to show how such a retroactive application would
hurt them. The court noted that the immigrant investors in Chang were not
similarly situated to the RLILP plaintiffs, because, in Chang, prior to
the issuance of the precedent decisions, their applications for the EB-5
category had already been approved and the investors had made significant
commitments.
Precedent-Setting Decisions
many cases it may be more practicable for investors to come to the United
States through other visa categories or pursue immigrant investor programs
in other countries such as Australia and Canada.
o Rigorous documentation requirements: The documentation USCIS requires
from investors seeking entry through the EB-5 category is extensive.
Potential investors are repeatedly required by the EB-5 adjudicators to
provide additional evidence, making the process more difficult. The
process of requesting and receiving additional evidence can add up to 4
months' processing time for each request.
o Lack of clear guidance: Some parts of the statute governing the EB-5
category are subjective and open to adjudicator interpretation. For
example, one of the EB-5 requirements is that the business must "benefit
the U.S. economy." However, the statute provides no guidance on what types
of investments meet this criterion. Thus, adjudicators are generally left
to their own judgement as to the value, or benefit, of the proposed
investment.
o The lack of timeliness in processing and adjudicating applications:
The lawyers said that, in their experience, it takes from 5 to 7 years for
their clients to complete a program that is often advertised as a 2-year
conditional residency program.
According to USCIS officials, one factor that has contributed to
reluctance of aliens to participate in the EB-5 employment category can be
traced to program changes in 1998. The changes resulted from a series of
events beginning in 1996 and 1997. During this period State Department
consular officers and then Immigration and Naturalization Service (INS)
EB-5 adjudicators began questioning the financial arrangements in some
EB-5 applications. As a result, the INS General Counsel examined a sample
of cases exhibiting the questionable financial arrangements and on the
basis of this review determined that hundreds of EB-5 applications that
had been approved contained the following financial characteristics:
o The businesses were financed with debt and not equity investments in
the new business.
o The immigrant investor was not personally at risk for the required
investment of money.
o The full statutory amount of capital was not made available for use by
the business for employment creation or business operations.
Hundreds of Prior Approved Applications Have Been on Hold for Years
o The promissory note used to meet the minimum capital requirement did
not have a fair market value equivalent to the statutorily required
investment amount.
o The guaranteed payment on the immigrant investor's cash contribution
in the plan was allowed to be used to make payments on the promissory
notes, resulting in an insufficient infusion of new capital into the
business.
In December 1997, the INS General Counsel issued an opinion finding that
the financial characteristics involving the debt arrangements and other
mechanisms designed to limit the investors' risk did not comport with the
statute and regulations governing EB-5. Further, the General Counsel
concluded that INS was not bound by its previous decisions in adjudicating
these EB-5 applications (i.e., Form I-526) and that it could revoke
previously approved applications containing the business arrangements at
issue.9 As a result of this opinion, adjudicators were to determine if
previously approved EB-5 applications comported with the law and identify
which applications, if any, should be revoked. Also, the INS General
Counsel opinion recommended that INS establish guidelines for adjudicating
applications with the aforementioned business arrangements as well as
future applications.
In March 1998, INS suspended EB-5 processing on about 900 cases with an
approved EB-5 application (i.e., Form I-526) and a pending application for
permanent resident status (i.e., Form I-829) that reflected the business
arrangements at issue. The suspension was to allow INS to develop guidance
on how adjudicators should interpret the EB-5 regulations. As part of this
process, the Administrative Appeals Office (AAO) selected a sample of the
applications in question and adjudicated them using the INS General
Counsel's legal opinion and other case law.10 On the basis of its review
of these applications, AAO
9The opinion concluded that INS failed to understand the true nature of
the investment plans it reviewed and that it, therefore, misapplied its
own statute and regulations. The opinion reasoned that the fact that INS
had, in the past, favorably adjudicated a number of petitions involving
the business plans at issue did not, as a matter of law, prevent INS from
denying future petitions involving such plans. Memorandum, David A.
Martin, General Counsel, December 19, 1997, reprinted in 75 Interpreter
Releases 332, 343, 345 (March 9, 1998).
10AAO is the appellate body that considers cases under the appellate
jurisdiction of the Associate Commissioner for Examinations. As such, AAO
can overrule, modify, and distinguish a prior precedent.
determined that the financial arrangements included in hundreds of
applications did not comport with the statute and EB-5 regulations.
Therefore, in June and July 1998 AAO issued what has become known as
"precedent-setting decisions" that clarify how adjudicators should
interpret EB-5 regulations.11 From this point forward, adjudicators were
required to follow the new interpretation of the EB-5 regulations as
described in these decisions when adjudicating EB-5 applications.
In August 1998, INS removed the hold on application processing and EB-5
adjudicators determined that most of the suspended applications should be
denied. However, according to USCIS officials, the majority of the denial
letters were never processed and the cases remained pending.
By 2002, those investors whose cases were pending continued to remain in
conditional resident status waiting for action by USCIS. According to
USCIS officials, there has been an increase in litigation stemming from
delays in issuance of the implementing regulations. Many of the affected
aliens have filed legal actions against the department. Further, investors
who were affected by the changes resulting from the 1998 decisions lobbied
Congress for help. In 2002, Congress addressed the pending applications
through a provision in the 21st Century Department of Justice
Appropriations Authorization Act12 requiring USCIS to implement
regulations that would allow those immigrant investors whose initial EB-5
application was approved between January 1995 and August 1998 to address
deficiencies in their applications for permanent residence and amend them
to comply with USCIS's new interpretation of the EB-5 regulations.
Although the implementing regulations were to be issued within 120 days of
the passage of the act (March 2003), as of March 2005, DHS had not issued
the regulations.
According to USCIS officials, they initially drafted regulations that
would allow the department to implement congressional directives in the
2002 act. These draft regulations have been under review and
11Under INS regulations, decisions relating to the administration of
immigration law may be designated as precedents in future proceedings.
Precedent decisions are binding on all service employees in the
administration of the INA. They are to be published and made available to
the public. 8 C.F.R. S: 103.3(c).
12P.L. 107-273 (2002).
revision primarily between USCIS and the Department of Homeland Security,
Office of General Counsel, since March 2003. A spokesman for the DHS
Office of General Counsel stated that the size and complexity of the
government reorganization necessary to establish the new Department of
Homeland Security and the resulting need to prioritize among competing
demands with limited staff has delayed work on the new EB-5 regulations.
Further, the DHS Office of General Counsel said that there are outstanding
issues regarding the promulgation of the regulations but that these issues
are considered to be ongoing internal department deliberations which they
would not discuss.
Until implementing regulations are established, the 2002 act does not
allow USCIS to deny any of the applications on hold for permanent
residency or place any applicant in removal proceedings. As a result,
according to USCIS officials, some immigrant investors have been in the
United States for over 10 years without completing the EB-5 requirements
and being granted permanent legal resident status. Further, immigration
lawyers that we interviewed told us that failure to issue the new
regulations has deterred potential investors from participating and caused
hardships for some of the investors forced to remain in conditional
resident status. For example, to maintain their conditional residency in
this country, investors who had their cases suspended must obtain an
extension of their legal resident documentation annually (commonly
referred to as their green card) from USCIS. According to these
immigration lawyers, this in itself is not an easy process.
Most Immigrant Investors Most EB-5 investors have immigrated from Asia. As
table 1 shows,
Are from Asia 39 percent of the EB-5 visas have been issued to
individuals from Taiwan. Overall, 83 percent of immigrant investor visas
were issued to individuals from Asia.
Table 1: Number of EB-5 Visas Issued, by Country of Origin, Fiscal Year
1992 through 2004
Country (or geographical
area) of origina Number Percentage of total
Asiab All other countries by geographic area
Taiwan 2,323 39
South Korea 839 14
China (mainland) 752 12
Hong Kong Special Administrative 395 7
Region (S.A.R.)
India 130 2
Japan 66 1
All other Asia 476 8
Total for Asia 4,981
Europe 546
South America 143
Africa 122
c
North/Central America 214
d
Australia/New Zealand 18
Total 6,024
Source: GAO analysis of Department of State data.
aImmigrant visas are numerically limited by category and by country of
origin, which in most cases is a person's country of birth rather than his
or her current citizenship.
bTurkey is included as part of Asia.
cNorth America excludes the United States but includes Canada, Greenland,
Mexico, all the countries of Central America, and the island countries and
dependencies of the Caribbean.
dLess than 0.5 percent.
Immigrant Investors May As previously mentioned, seeking U. S. citizenship
is not a requirement or May Not Apply for U.S. of the EB-5 category. Also,
USCIS does not track the status of Citizenship immigrant investors once
they have completed the EB-5 requirements
and been approved for permanent residence. However, as shown in table 2,
we estimate that 38 percent of approved immigrant investors had applied
for U.S. citizenship, 61 percent had not applied, and
1 percent were ineligible to apply, as of the time of our review.13 Our
methodology for these estimates is explained in appendix I.
Table 2: Estimated Number of Immigrant Investors Who Have Sought U.S.
Citizenship, Fiscal Years 1992 through June 2004
Estimated Estimated number percentages
Applied for U.S. citizenship 247
Did not apply for U.S. citizenship 399
a
Ineligible to apply for U.S. citizenship 7
Total 653
Source: GAO review of USCIS files.
aThis estimate results from one case in our sample in which the alien was
ineligible to apply for U.S. citizenship because she had previously
renounced her citizenship. She reentered the United States as an immigrant
through the EB-5 category.
Immigrant Entrepreneurs with Permanent Resident Status Have Invested an
Estimated $1 Billion in a Variety of Businesses, Primarily in California
Over the life of the EB-5 employment category immigrant investors have
established a variety of businesses and on the basis of the sample of
cases we reviewed, we estimate that a total of $1.04 billion was invested
through 2004 by immigrant investors who have been granted permanent
residency. Of the estimated 653 investors who have met the EB-5
requirements and been approved for permanent residence, most maintained
their business in the same state during the 2-year conditional period,
with 41 percent establishing their businesses in California. USCIS
officials did not have reliable data indicating the total number of jobs
created solely as a result of investments by EB-5 participants.
Immigrant Investors Established a Variety of Businesses by Investing an
Estimated $1 Billion
Hotels and motels make up an estimated 19 percent of all businesses
created by immigrant investors granted permanent resident status (123 of
653 businesses). We classified the various types of businesses into 10
broad categories. Table 3 shows the estimated number of businesses
established in each category. To provide additional insights into the
types of businesses established under EB-5, we also recorded for each
broad category, where applicable, the types of products
13All percentage estimates from the sample have been rounded to the
nearest percent and have margins of error of plus or minus 10 percent
unless otherwise noted.
manufactured, sold, imported or exported, or produced as well as the types
services offered.
Table 3: Types and Estimated Number of Businesses Established by Immigrant
Investors with Permanent Resident Status, Fiscal Years 1992 through June
2004
Estimated
Estimated percentage
Business category Examples of business category number of total
components
Hotel/motel 123 19
Clothing, cabinets, computer 116 18
Manufacturing equipment, convertible beds,
corrugated boxes, food, furniture, health supplements, knit goods, rubber
and plastics, telephone equipment, textiles, woven bags
Real estate Property management, development, construction 94
Domestic sales Clothing, airplane parts, artificial turf, granite, 65
new cars,
pharmaceuticals, toys, hair salons, retail food
stores
Farms Almonds, fish, fruit 58
Airplane parts, clothing, gems/jewelry, home 58
Import/export appliances,
household decorator goods, seafood, textiles
Restaurants 44
Retirement homes 22
Computer services, long-distance telephone service 22
Technology provider,
wireless cable television development
Other businesses Car wash, child care center, meat processing plant, 51
nightclub,
nursing home, security broker
Total 653
Source: GAO review of USCIS files.
To provide a measure of the EB-5 category's benefit to the U.S. economy,
we obtained information about the dollars invested by immigrant investors.
On the basis of the case files we reviewed, we estimate that the total of
investments made by the 653 immigrant investors granted permanent resident
status from fiscal year 1992 through June of 2004 is $1.04 billion. Using
a 95 percent confidence level, we estimate that the investment amount is
between $784 million and $1.3 billion.14
14Additional money was invested by alien entrepreneurs who ultimately did
not complete the EB-5 benefit process or have yet to have their petition
for permanent legal resident status approved. We did not obtain investment
data on immigrant investors who had not met all of the EB-5 requirements
at the time of our review.
Immigrant Investors with Permanent Resident Status Established Business
Operations Predominantly in California, and the Businesses Seldom
Relocated
We estimate that 41 percent (265 of 653) of immigrant investors with
permanent resident status established their businesses in California.
Table 4 shows the states where approved immigrant investors established
their businesses as well as our estimate of the number of businesses
established in each state.
Table 4: States Where Immigrant Investors Established Business Operations,
Fiscal Years 1992 Through June 2004
Estimated Estimated percentage
State number of total
California 265 41a
Maryland 71
Arizona 53
Florida 44
Virginia 44
Washington 35
Michigan 26
Colorado 18
Hawaii 18
Nevada 18
Georgia 9
Minnesota 9
Nebraska 9
New Jersey 9
Texas 9
Utah 9
Vermont 9
Totals 653
Source: GAO review of USCIS files.
Note: Estimated numbers and percentages may not total because of rounding.
aThe confidence interval in this case exceeds plus or minus 10 percent and
is 30 percent to 51 percent.
We also found that few immigrant investors with permanent resident status
relocated their businesses during the 2-year conditional period. Of the
653 approved investors, we estimate that 99 percent, or 644, maintained
business operations in the same state throughout the 2-year conditional
period. Specifically, we estimate that
o 79 percent, or 515, of the immigrant investors' businesses remained in
same city and state;15
o 20 percent, or 129, of the immigrant investors' businesses remained in
the same state, but moved to a new city;16 and
o 1 percent, or 9, of the immigrant investors' businesses moved to a new
city and state.
The Number of Jobs Created by Immigrant Investors Could Not Be Estimated
We could not determine how many jobs immigrant investors have established
because of the way USCIS credits the number of jobs created by an
investor's business. During the adjudication process, USCIS adjudicators
ensure that each business creates the minimum requirement of at least 10
full-time jobs. But if there are non-EB-5 investors involved or the
investment is part of a greater overall business expansion, USCIS credits
the single EB-5 investor with the total of all jobs created even though
many of the jobs are not the result of his portion of the investment.17 In
one such example, USCIS credited a single immigrant investor with creating
1,143 jobs based on a $1.5 million investment. While this investment did
not create all 1,143 jobs, for adjudicative purposes, when the immigrant
investor is the only one seeking the immigration benefit, all jobs are
attributed to that investor, even if the capital of others is fueling the
enterprise. In this example, the immigrant investor's capital infusion was
only a small part of a multimillion dollar expansion of an existing
business that involved multiple franchises and other non-EB-5 investors.
Conclusions
At the time the 1998 precedent decisions were published, more than 900
EB-5 participants' applications were placed on hold, resulting in
immigrant investors residing in the United States for as long as 10 years
15As a result of data limitations, the confidence interval for this
estimate exceeds plus or minus 10 percent and is 68 percent to 88 percent.
16As a result of data limitations, the confidence interval for this
estimate exceeds plus or minus 10 percent and is 11 percent to 31 percent.
178 C.F.R. 204.6(g)(2) states that the number of full-time positions
created for qualifying employees shall be allocated solely to those alien
entrepreneurs who have used the establishment of the new commercial
enterprise as the basis of a petition on Form I526. No allocation need be
made among persons not seeking classification under section 203(b)(5) of
the act or among non-natural persons (e.g., corporations), either foreign
or domestic.
under conditional residency status. According to immigration lawyers, the
failure to issue the new regulations is creating hardships for the
investors whose cases are on hold and has been a deterrent to new
investors, thereby limiting the economic benefit to the United States.
USCIS cannot act on the pending applications for permanent resident status
or place any of those applicants in removal proceedings until the required
regulations are promulgated. Despite a congressional mandate in 2002 that
USCIS and DHS provide implementing regulations by March 2003 to address
the pending applications, the regulations have not been issued. Drafted
regulations have been under review between USCIS and DHS since March 2003.
DHS officials stated that the transformations of legacy agencies into its
department and related management and mission demands have contributed to
the delay in issuing the regulations. However, they could not provide any
assurance when the regulations would be issued.
Recommendation
Agency Comments and Our Evaluation
Given the undetermined status and potential hardships imposed on hundreds
of EB-5 applicants awaiting the promulgation of implementing regulations
and that 2 years have passed since Congress required DHS to issue
regulations for adjudicating these EB-5 applications, and to better
achieve the economic benefits of the EB-5 category, we recommend that the
Secretary of the Department of Homeland Security finalize and issue these
regulations.
We provided the Department of Homeland Security and the Department of
State with a draft of this report for review and comment. The Department
of State had no comments on the draft. In commenting on our
recommendation, DHS stated that the regulations have been, and remain, a
priority within DHS and that it is working with the Department of Justice
to resolve complex issues regarding the EB-5 implementing regulations.
DHS also identified recent steps taken by USCIS to improve the
administration of the EB-5 foreign investor program. Steps cited were the
creation of the Investor and Regional Center Unit and plans to set a
standard for timeliness in processing EB-5 cases.
According to DHS, the Investor and Regional Center Unit will establish a
nationwide and coordinated program and will have oversight for all policy
and regulation development, field guidance, form design, case auditing,
and training regarding the EB-5 program. DHS said it believes
this new unit will strengthen and protect the integrity of the program by
guarding against past abuses and promoting the intent of Congress to
encourage investment and increase employment within the United States.
DHS said the objective of the timeliness standard is to provide a reliable
time frame from filing and adjudicating the petition to enter the program
through to the targeted adjudication of the subsequent petition to remove
conditions on the investor's residency.
DHS referred to the creation of the regional centers as a significant
change to the EB-5 category. However, the first EB-5 regional center was
approved in 1993, and the vast majority of regional centers were approved
prior to 1998. Also, the option for a foreign investor to make a reduced
investment of $500,000 in a targeted employment area, a rural area, or an
urban area of less than 20,000 people is not unique to the regional
centers. Foreign investors in regional centers are credited with jobs
created directly or indirectly as a result of their investment whereas
foreign investors in the regular EB-5 process must create at least 10 jobs
directly in their commercial enterprise. The full text of DHS comments are
provided in appendix III.
We are sending copies of this report to interested congressional
committees and subcommittees. We will also make copies available to
others on request. In addition, this report will be available at no charge
on GAO's Web site at http://www.gao.gov.
If you or your staff have any questions about this report or wish to
discuss the matter further, please contact me at (202) 512-8777 or Bill
Crocker at (202) 512-4533. Other key contributors to this report are
listed in appendix IV.
Paul L. Jones
Director, Homeland Security and Justice
Appendix I: Objectives, Scope, and Methodology
Objectives
Overview of Our Scope and Methodology
As mandated by the Basic Pilot Program Extension and Expansion Act of 2003
(P.L. 108-156), we reviewed the fifth employment-based visa category
(EB-5) for immigrant investors that was created in 1992 and is currently
administered by U.S. Citizenship and Immigration Services (USCIS), a
component of the Department of Homeland Security.1 Specifically, this
report provides information on
o the level of participation, including (1) the number of individuals
who have received immigrant investor visas in each year since the EB-5
category's inception, (2) their country of origin, and (3) the number of
immigrant investors who have sought U.S. citizenship, and
o the businesses established by immigrant investors, including (1) the
types of commercial enterprises established, (2) the businesses' locations
and whether they remained in this location, and (3) the number of jobs
created by the immigrant investors' businesses.
We reviewed applicable laws, including the Immigration Act of 1990
(P.L. 101-649 (1990)) and the 21st Century Department of Justice
Appropriations Authorization Act (P.L. 107-273 (2002)), as well as
studies,
analyses, and other relevant literature covering the EB-5 category. Also,
we reviewed USCIS and Department of State policies and guidelines
relating to EB-5.
To obtain information on our objectives, we reviewed a random
probability sample of 90 approved EB-5 cases (discussed in more detail
below). We also conducted interviews and site visits with USCIS
headquarters officials as well as service center officials in California
and
Texas-the two USCIS service centers that process immigrant investor
applications. Further, to obtain perspectives from nongovernmental
sources, we interviewed four immigration lawyers in the private sector
1Aliens are allowed to enter the United States under immigrant and
nonimmigrant visas. Immigrant visas are for those who wish to obtain
permanent resident status in the United States and are categorized as
either family or employment visas. Within each category, USCIS established
a preference whereby certain visas are processed before others. For
example, the first priority of employment-based visas (EB-1) refers to
those deemed by USCIS to be priority workers-that is, a person who has a
well-documented and extraordinary ability in the sciences, arts,
education, business, or athletics. EB-5 refers to the fifth
employment-based preference category. Nonimmigrant visas are for those
aliens (such as students or those traveling for business or pleasure) who
wish to enter the United States on a temporary basis.
Appendix I: Objectives, Scope, and Methodology
Number of Immigrant Investors and Country of Origin
Immigrant Investors and Their Businesses
who were knowledgeable about the EB-5 category. We did not independently
corroborate all of the opinions provided by USCIS officials and
immigration lawyers that we interviewed. Our selection of immigration
lawyers was based primarily on the recommendations of the American
Immigration Lawyers Association.
More details about the scope and methodology of our work are presented in
the following sections.
USCIS's Computer Linked Application Information Management System
(CLAIMS), the initial source of data entry for information from EB-5
applications, has a documented history of unreliability.2 Therefore, we
obtained information on the number of immigrant investor visas and country
of origin from an alternative source-the Department of State's Immigrant
Visa Allocation Management System (IVAMS). The State Department is
required by statute to maintain a complete, current, and accurate
accounting of the number and origin of aliens within all visa categories.
We obtained State Department data to determine the number of visas issued
(to both alien entrepreneurs and their dependents) under the EB-5 category
by year since the its inception in 1992 through fiscal year 2004. We also
analyzed the data by the country of origin to determine the countries with
the most visas issued.
Because reliable data for addressing these objectives were not available
in electronic format from either USCIS or the State Department, we
conducted a file review of EB-5 cases that had been approved for permanent
residence. Because of the labor-intensive nature of the case file review,
it was not feasible to individually review the files for all approved
immigrant investors since the EB-5 category's inception in 1992. As a
basis for selecting a sample, we obtained from USCIS an electronic list of
all EB-5 participants who have received permanent residence approval since
2GAO, Homeland Security: Risks Facing Key Border and Transportation
Security Program Need to Be Addressed, GAO-03-1083 (Washington, D.C.:
Sept. 19, 2003); Homeland Security: INS Cannot Locate Many Aliens because
It Lacks Reliable Address Information, GAO-03-188 (Washington, D.C.: Nov.
21, 2002); and Immigration Benefits: Several Factors Impede Timeliness of
Application Processing, GAO-01-488 (Washington, D.C.: May 4, 2001).
Appendix I: Objectives, Scope, and Methodology
the category's inception in 1992 and selected a simple random probability
sample from these approved applicants. We identified the sample cases from
the agency's Marriage Fraud Amendment System (MFAS)-an electronic database
used to manage and process EB-5 applications for permanent residence.3
MFAS tracks EB-5 participants by name, file number, home address, and
other information.
At the time of our sample selection of case files, the MFAS database
reflected 1,893 EB-5 cases. Of these, according to USCIS data, 804 had an
approved application for permanent legal resident status (Form I-829).
Another 866 EB-5 cases were shown to have applications for permanent legal
residency in pending status. The remaining 223 cases were primarily shown
to be denied, closed, or otherwise terminated.
We planned to draw our sample from the population of 804 approved case
files. An initial review of the data showed that 93 files belonged to
dependents, so we eliminated these files from consideration leaving a
total population of 711 approved immigrant investors. Of the 711 approved
investors, we randomly selected a probability sample of 111 case files for
review.
The physical files are not maintained in one location. Some files may be
at the Texas or California service centers, while others may be located at
one of the 33 USCIS district offices across the country, while still
others may be located at the USCIS records storage facility in Missouri.
Therefore, USCIS officials agreed to locate and retrieve the files we
randomly selected as our sample and ship them to the Texas Service Center
for our review. In examining the files as they were retrieved, still more
files that the USCIS database showed were investors were actually
dependents of investors.
From our probability sample of 111 immigrant investor files, we identified
8 ineligible files (4 of these files belonged to dependents and 4 did not
contain a Form I-829). From the remaining 103 files in the sample, we
obtained 90 usable files. This represented an overall response rate of 87
percent. USCIS was not able to provide the remaining 13 files during the
course of our fieldwork. We were able to get information from all
3According to USCIS officials, the Marriage Fraud Amendment System is used
to process EB-5 applications because, like those immigrating upon
marriage, EB-5 participants must undergo a conditional period prior to
being granted permanent residence status.
Appendix I: Objectives, Scope, and Methodology
90 usable files on most of the items we measured. For some items, we were
not able to get information from a small proportion of the 90 usable
files. In conducting our analysis, we assumed that missing information
would be similar to information we obtained on the items we measured. Our
estimates may be biased to the extent that the information differs. The
response rates to individual items varied among items. Considering the
error rate in the MFAS database regarding the proportion of files that
were actually dependents and not investors, we estimated that the total
population of approved immigrant investors is approximately 653.
With our probability sample, each member of the population had an equal
and nonzero probability of being selected. Each sampled application was
subsequently weighted in the analysis to account for selection
probabilities and nonresponse. Because we followed a probability procedure
based on random selections, our sample is only one of a large number of
samples that we might have drawn. Since each sample could have provided
different estimates, we express our confidence in the precision of our
particular sample's results as a 95 percent confidence interval. This is
the interval that would contain the actual population value for 95 percent
of the samples we could have drawn. As a result, we are 95 percent
confident that each of the confidence intervals in this report will
include the true values in the sample population.
All percentage estimates from the sample have been rounded to the nearest
percent and have margins of error of plus or minus 10 percent unless
otherwise noted. The 95 percent confidence interval for the estimated
total of $1.04 billion invested ranges from $784 million to $1.3 billion.
We used a data collection instrument in our file review to record
information from the following USCIS forms filed by the EB-5 applicants:
o Form I-526 (Immigrant Petition by Alien Entrepreneur) is an
application submitted to USCIS by an entrepreneur who is applying for the
EB-5 category.
o Form I-485 (Application to Register Permanent Residence or Adjust
Status) is an application submitted to USCIS by an immigrant who is
residing in the United States and who wishes to obtain permanent resident
status. If USCIS approves this form, the immigrant is issued a conditional
green card. In the case of the EB-5 category, USCIS places a 2-year
condition on the resident status to give the investor sufficient
Appendix I: Objectives, Scope, and Methodology
time to establish his business in accordance with the EB-5 requirements.
o Form I-829 (Petition by Entrepreneur to Remove Conditions) is
submitted to USCIS by a conditional resident who obtained such status
through the EB-5 category and who wishes to apply for permanent resident
status as a result of satisfying all the EB-5 requirements.
o Form N-400 (Application for Naturalization) is an application
submitted by immigrants who wish to become U.S. citizens.
For a small proportion of the 90 case files, some data items were not
filled in. In those few cases we assumed that the missing data, if filled
in, would be proportional to similar data available in the universe of
case files. Therefore, our estimates may be biased to the extent that the
actual data, if available, may have differed.
Where Immigrant Investors Established Business Operations and whether the
Business Remained in That Location
Where immigrant investors established their businesses and whether the
businesses remained in these localities was determined from the business
addresses listed on two forms that applicants file during the EB-5
process. We recorded the city and state of the business at (1) the time
the applicant applied for the EB-5 category using the Form I-526 and (2)
the time the applicant applied for permanent residence using the Form
I-829. Using these business addresses, we determined the cities and states
where applicants established their businesses when they applied for EB-5
status and whether the applicants' businesses remained in these locations
while completing the EB-5 requirements. Our analysis is limited by the
fact that this conditional period typically lasts 2 years and does not
cover the time period after immigrants have been approved for permanent
residency. Using this information, we statistically projected the tendency
of all businesses established by EB-5 applicants to remain in their
original locations.
Types of Commercial We determined the types of commercial enterprises
established, the Enterprises Established, dollars invested, and the number
of jobs created based on the information Investment Amounts, and supplied
by applicants on Form I-829 (Petition by Entrepreneur to Remove Number of
Jobs Created Conditions) and various supporting documents (such as bank
statements,
federal or state income tax returns, quarterly tax statements, payroll
records, and employment tax documents).
Appendix I: Objectives, Scope, and Methodology
Number of Immigrant Investors Who Have Sought Permanent U.S. Citizenship
Processing of Immigrant Investor Visa Applications at the Two USCIS
Service Centers and Criteria Used for Approvals and Denials
Views of Immigration Lawyers
USCIS computerized systems (CLAIMS) had data on the number of
EB-5 applicants who have been approved for permanent U.S. citizenship.
However, as mentioned previously, information in the CLAIMS database
was not always accurate. Therefore, during our file review, we determined
if applicants sought U.S. citizenship by the presence of a Form N-400
(Application for Naturalization) in the file and whether this application
was approved by USCIS. We statistically projected these results.
To determine how immigrant investor visa applications were processed,
we interviewed USCIS managers and EB-5 adjudicators; reviewed relevant
statutes, policy guidance, and training manuals; and visited the USCIS
service centers in California and Texas. During the site visits, we paid
particular attention to differences, if any, between the two service
centers
regarding processing procedures and the criteria used for approvals and
denials.
To obtain perspectives on the EB-5 category from nongovernmental
sources, we interviewed four immigration lawyers in the private sector
who were knowledgeable about EB-5 application process. Our selection of
interviewees was based primarily on the recommendations of the
American Immigration Lawyers Association. Because we interviewed a
nonprobability sample of immigration lawyers, the views and opinions of
these lawyers cannot be regarded as representative of the views and
opinions of all immigration lawyers.
Data Reliability
To assess the reliability of State Department data on the number of
individuals who have received visas under the Immigrant Investor Program
and their country of origin, we interviewed knowledgeable agency officials
about the data and electronically tested the data to identify obvious
problems with completeness or accuracy. On the basis of these steps, we
determined that the State Department visa data were sufficiently reliable
for the purposes of this report.
To examine the reliability of the data contained in USCIS EB-5 files, we
conducted independent checks of selected data from 20 immigrant investor
files that were pending USCIS review by undertaking online
Appendix I: Objectives, Scope, and Methodology
searches on the respective firms in the Lexis-Nexis and Dunn and
Bradstreet databases. We also visited four of the investor businesses and
interviewed the alien entrepreneurs who had met the EB-5 requirements and
been approved for permanent residence to verify the veracity of the
information contained in the files that we used in the report. We also
interviewed knowledgeable agency officials about the data. To ensure
accurate recording and entry of the EB-5 file data into our database, each
entry was double-checked against the relevant case file by an analyst who
had not initially entered the data. We determined that the EB-5 case file
data were sufficiently reliable for the purposes of this report.
Appendix II: Immigrant Investor Program Application Process
To participate in the Immigrant Investor Program-or EB-5 employment
category----an individual must seek and obtain approval from the U.S.
Citizenship and Immigration Services.1 Participation in the program occurs
after approval at three major steps in the application process.
o First, the immigrant investor applies for the EB-5 category (while
either residing abroad or residing in the United States) by submitting
USCIS Form I-526.
o Second, the immigrant investor applies for conditional resident status
after the Form I-526 is approved either by submitting a Form I-485 or by
filing paperwork with the State Department. After obtaining conditional
resident status, immigrant investors have a 2-year probationary period to
establish their business and meet the EB-5 requirements.
o Finally, the immigrant investor applies for permanent resident status
by submitting USCIS Form I-829. When eligible, immigrant investors may
apply for U. S. citizenship. However, this is not a requirement of the
program.
Figure 3 shows the application process for the Immigrant Investor Program.
1Aliens are allowed to enter the United States under immigrant and
nonimmigrant visas. Immigrant visas are for those who wish to obtain
permanent resident status in the United States and are categorized as
either family or employment visas. Within each category, USCIS established
a preference whereby certain visas are processed before others. For
example, the first priority of employment-based visas (EB-1) refers to
those deemed by USCIS to be priority workers-that is, a person who has a
well-documented and extraordinary ability in the sciences, arts,
education, business, or athletics. EB-5 refers to the fifth
employment-based preference category. Nonimmigrant visas are for those
aliens (such as students or those traveling for business or pleasure) who
wish to enter the United States on a temporary basis.
Appendix II: Immigrant Investor Program Application Process
Figure 3: EB-5 Application Processing Flow
Source: GAO analysis of USCIS and Department of State data.
Appendix II: Immigrant Investor Program Application Process
Legend of USCIS forms: Form I-526 (Immigrant Petition by Alien
Entrepreneur) Form I-485 (Application to Register Permanent Residence or
Adjust Status) Form I-829 (Petition by Entrepreneur to Remove Conditions)
Appendix II: Immigrant Investor Program Application Process
Form I-290B (Notice of Appeal to the Administrative Appeals Office)
Form I-551 (Alien Registration Card)
aThe Administrative Appeals Office adjudicator can deny (dismiss) the
appeal, approve (sustain) the appeal by overturning the service center's
decision, return (remand) the appeal to the service center if new issues
surface during the appeal review, or reject the appeal if it is not
submitted by the deadline.
bAdjustment of status refers to the USCIS procedure allowing individuals
in the United States to apply for permanent residence by filing Form
I-485.
cThe Department of State's National Visa Center is the central processing
point for immigrant visas issued abroad.
dLawful permanent residents are immigrants who are legally allowed to
reside permanently in the United States.
Processing of immigrant investor applications occurs at two of USCIS's
service centers-the California Service Center, located in Laguna Niguel,
California, and the Texas Service Center, located in Dallas, Texas.
Adjudicators review the pertinent forms and make approval and denial
decisions at each step in the process. We found that both the California
and Texas service centers use the same processing procedures and review
criteria when reviewing immigrant investor applications. The following
narrative provides more detail on the information adjudicators consider
when reviewing EB-5 applications.
The initial application Form I-526 must be accompanied with additional
documentation supporting (1) the business proposal, (2) the investment of
money, (3) the number of full-time jobs to be created, and (4) the
applicant's management role in the business.
o Business proposal-The application should clearly outline and describe
the type of business, where it is to be located, how it is to be financed,
the investor's banking relationships, and information about the business
(e.g., its customer base, number of employees, and source of inventory or
raw materials). Although the immigrant investor is not required to submit
specific supporting documents, USCIS officers will likely require a
comprehensive business plan or other documents outlining the business
proposal with Form I-526. Also, if the business already exists, articles
of incorporation, a set of audited financial statements, or, if in the
proposal stage, pro forma financial statements should be part of the
proposal package.
Immigrant Investors' Initial Application
Appendix II: Immigrant Investor Program Application Process
o Investment of money-Documents supporting the investment must show
evidence that the investor has the funds to meet the program's
requirement, $1 million (or $500,000 for investment in targeted employment
areas).2 Speaking anecdotally, an adjudicator said this requirement is
often the weakest part of the proposal. The documents need to show the
source of the funds and that the immigrant investor is personally at risk
for the money. In addition, the investor must show that the money is from
legitimate sources, such as a lending institution. Investors may also be
expected to provide copies of past income tax returns, including tax
returns from their country of origin, to show their history of financial
resources. Other documents supporting this section of the proposal would
include personal bank statements; sales documents if, for example, the
money was being obtained from the sale of other property; documents
showing the transfer of money; and letters of reference from financial
institutions. An officer noted that many of the applications he sees do
not adequately document the investment criterion. For example, many
investors find it difficult or are unwilling to show the source of funds.
Also, some immigrant investors structure the financing arrangements so
that the financial risk is to the business and not the immigrant investor
himself. Finally, some immigrant investors fail to show investment or
proposed investment of the required amount of funds.
o Creation of jobs-Immigrant investors must document that the proposed
business venture will generate at least 10 full-time jobs. Current
regulations allow for job sharing. However, the number of fulltime
positions must still equal 10. If the business is operating at the time
the application is submitted, the immigrant investor should provide
documentary evidence of employment with submission of payroll records,
state employment records, and copies of Internal Revenue Service Form I-9,
Employment Eligibility Verification, for each employee.
o Applicant's role in the business-Immigrant investors must be actively
involved in managing their businesses. Documentation proving this role
would include, for example, copies of board minutes appointing the
immigrant investor to a management position, copies of stock certificates,
copies of tax records, or copies of articles of incorporation.
2Section 8 C.F.R. S: 204.6(e) defines a targeted employment area as an
area that, at the time of the investment, is either a rural area or an
area that has experienced unemployment of at least 150 percent of the
national average rate.
Appendix II: Immigrant Investor Program Application Process
According to USCIS officials, because of the wide differences in the types
and sizes of businesses involved, there is no single checklist or
procedure to follow in reviewing petitions. However, as noted above,
adjudicators stressed that the review of the application focuses on a
feasible plan for the business, the immigrant investor's investment in the
business meeting the required dollar amount, the creation of the required
number of jobs, and the immigrant investor's role in the management of the
business. A significant part of the training for adjudicators for
reviewing petitions for this program centers on knowledge of business
principles.
Throughout the application review process, if deficiencies in the petition
or supporting documents are noted, the adjudicator summarizes them in a
memo, a request for evidence (RFE), which is sent to the investor after
the initial review is completed. The immigrant investor is granted 12
weeks plus 30 days to respond to the RFE. While waiting for the response,
the case is placed on hold. Once the RFE is returned to USCIS with the
information needed, the adjudicator completes the review of the petition.
According to USCIS officials we interviewed, most Forms I-526 require that
an RFE be sent to the investor.
If an application is to be denied, the adjudicator prepares a letter
(signed by the service center director) describing the reason for denial
and mails it to the investor. The letter details the specific reasons for
the denial decision and cites the applicable sections of 8 C.F.R. S: 204.6
(the regulations governing adjudications of Form I-526) that the
investor's petition violated.
If the immigrant investor's application is denied, the investor may appeal
the decision by filing Form I-290B, Notice of Appeal to the Administrative
Appeals Office, to the service center that made the unfavorable decision.
The appeal is forwarded to the AAO at USCIS headquarters for review. AAO
adjudicators use the same criteria when reviewing immigrant investor
applications as those used by service center adjudicators. The AAO unit
may approve, deny, or remand the case to the service center, or reject the
case if the appeal is filed untimely. If the appeal is denied, there are
no further appeal rights within USCIS. The only remaining appeal option
for the immigrant investor is through the U.S. court system. If the appeal
is remanded, the AAO directs the service center adjudicator to review the
case again. The remanded case would be reviewed again following the same
procedures as if it were initially received.
If the immigrant investor application is approved, the Form I-526 allows
the immigrant investor to indicate his preferred option for applying for a
Appendix II: Immigrant Investor Program Application Process
conditional 2-year visa. One option is applicable if the immigrant
investor is already in the United States under some other legal status. In
this case, the immigrant investor may apply for "Adjustment of Status,"
with submission of Form I-485. The second option, consular processing, is
available if the immigrant investor applied from abroad or chooses to go
abroad and obtain a visa from the State Department.
As previously mentioned, immigrant investors can choose how they wish to
obtain their conditional resident status either by completing Form I-485
and submitting it to USCIS or by completing a State Department visa
application at a U.S. consulate abroad.
Application for
Conditional Resident Status
Form I-485 Processing
After the immigrant investor application is approved, the immigrant
investor submits Form I-485 and supporting documents to the applicable
USCIS service center. This procedure allows an eligible applicant to
become a lawful permanent resident of the United States without having to
go abroad and apply for an immigrant visa. The application process for
Form I-485 is not exclusive to the Immigrant Investor Program because it
is used to apply for adjustment of status under all types of visas.
The adjudicator in reviewing the Form I-485 and accompanying documentation
(e.g., medical records, biographical information, the Federal Bureau of
Investigation background check results, and the Form I 526, in the case of
immigrant investors) may require an interview prior to application
approval or denial. An adjudicator may request an interview for reasons
such as evidence of criminal activity or unlawful residence status. USCIS
policy requires that district offices handle all faceto-face contact, so
these cases are referred to the USCIS district office with jurisdiction
over the area where the investor applicant resides. After the interview,
the district office makes a determination to approve or deny the Form
I-485. If the Form I-485 is denied, the process is terminated and alien
removal proceedings begin. If Form I-485 is approved, the investor is
issued a conditional Form I-551, Alien Registration Card, which allows the
investor 2 years' conditional residence to establish the business and meet
the EB-5 requirements.
Throughout the review process, if deficiencies in the petition or
supporting documents are noted, the adjudicator summarizes these questions
in a memo, an RFE that he sends to the immigrant investor. The immigrant
investor is granted 12 weeks plus 30 days to respond to the RFE. While
waiting for a response, the case is placed on hold. Once USCIS
Appendix II: Immigrant Investor Program Application Process
receives the response to the RFE, the adjudicator finalizes the review and
makes the approval, denial, or referral decision.
Consular Processing
Application to Change Conditional Residency Status to Permanent Residency
Status
Investors who choose to apply for an immigrant visa abroad use consular
processing. With consular processing, the investor does not submit an
I485. Under this procedure, the State Department forwards a visa
application to the immigrant investor, who completes the application and
submits it to the U.S. consular office in the country of residence. A U.
S. consular officer interviews the immigrant investor and determines
whether to approve or deny the application. If the application is denied,
the process is terminated and the immigrant investor is not allowed to
enter the United States. If the visa is approved, the investor is issued
travel documents that are presented to U. S. immigration authorities upon
arrival in the United States.
With approval of a conditional visa (either with an approved Form I-485 or
through consular processing), the immigrant investor is granted 2 years of
conditional residency. During the conditional period, immigrant investors
are expected to initiate their business venture (if they have not already
done so) and meet the expectations set out in their approved Form I-526.
Within 90 days immediately preceding the second anniversary of the date
that the immigrant investor was granted conditional status, the investor
is to submit Form I-829. Otherwise, if immigrant investors do not file the
application within the required time period, they will lose their
conditional status, and removal proceedings will begin requiring the
immigrant to leave the United States.
With the petition to remove conditions, the applicant must provide
evidence that the enterprise met the terms of the originally approved Form
I-526. Filing this application extends the investor's conditional status
for 1 year while the petition is processed. The Form I-829 must be
accompanied by evidence that the immigrant investor made (or is in the
process of making) the required investment and created (or will create
within a reasonable time) 10 full-time jobs. The immigrant investor must
also show that these actions were sustained during the 2-year conditional
period. This evidence should
o verify that the investor invested or was actively in the process of
investing the required capital (either $1 million or $500,000) in a
commercial enterprise;
Appendix II: Immigrant Investor Program Application Process
o show that the investor sustained the enterprise and the investment in
the business throughout the period of conditional permanent residence; and
o verify the number of full-time employees at the beginning of the
investment and at present.
The immigrant investor should include other available documentation if it
is relevant to the commercial enterprise.
Throughout the review process, if deficiencies in the petition or
supporting documents are noted, the adjudicator summarizes these questions
in an RFE that he sends to the immigrant investor. The immigrant investor
is granted 12 weeks plus 30 days to respond to the RFE. Once the USCIS
receives the response to the RFE, the adjudicator finalizes the review and
approves or denies the application. According to USCIS officials we
interviewed, most Form I-829s require that an RFE be sent to the immigrant
investor.
If the adjudicator determines that the case should be denied, a memorandum
of recommendation of denial is sent to the USCIS district office with
jurisdiction over the immigrant investor's residence. The memorandum is a
detailed description of why the adjudicator believes that the petition
should be denied. The memorandum details the specific reasons the petition
should be denied and cites the applicable sections of 8 C.F.R. S: 216.6
(the regulations governing adjudications of Form I-829) that the
investor's petition violated.
Once the district receives the memorandum of recommendation of denial, a
district office adjudicator prepares the denial letter (based on the
memorandum), which is signed by the district director. Once the immigrant
investor receives the letter, removal proceedings begin. The immigrant
investor may appeal the denial before the immigration judge who presides
over the investor's removal proceedings. If the immigration judge does not
overturn the USCIS decision, the immigrant investor's only other appeal
option is through the U.S. court system. If the adjudicator approves Form
I-829, the immigrant investor is granted permanent resident status,
indicating the immigrant investor is a lawful permanent resident with no
further obligations under EB-5. USCIS no longer tracks the immigrant
investor after he or she becomes a lawful permanent resident.
Appendix II: Immigrant Investor Program Application Process
Application for Five years from the date of approval of the Form I-485 or
the date the investor entered the United States (if the investor chose
consular
U.S. Citizenship processing), the immigrant investor is eligible to apply
for citizenship if the Form I-829 is approved. If the investor wants to
become a naturalized U.S. citizen, a Form N-400, is submitted to USCIS,
and if it is approved, the immigrant investor is granted citizenship.
Immigrant investors are not required to apply for citizenship.
Appendix III: Comments from the
Department of Homeland Security
Appendix III: Comments from the Department of Homeland Security
Appendix IV: GAO Contacts and Staff Acknowledgments
GAO Contacts
Staff Acknowledgments
(440281)
Paul L. Jones, (202) 512-8777
William W. Crocker III, (202) 512-4533
In addition to the above, James D. Ashley, David P. Alexander, Leo M.
Barbour, Grace A. Coleman, David S. Dornisch, Ann H. Finley, Kimberly
Michael, Miguel A. Salas, Jerome T. Sandau, and Ellen Wolfe made key
contributions to this report.
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