Redeployment ‘clarified’: the good, the bad, & the litigious

  • Written by GCBI Team Posted on July 31, 2020 | Updated on July 31, 2020 | 3 min read

USCIS has “clarified” its redeployment policy in a July 24 Policy Manual update. While immigration lawyer Robert Divine calls it a “good faith effort by USCIS,” he does identify issues: it should only apply after July 24, otherwise litigation will be “inevitable”; the “problematic” requirement that redeployment occur within the jurisdiction of the original regional center; and the disallowance of buying financial instruments in secondary markets.

Redeployment explained

Redeployment occurs when EB-5 capital is repaid before investors have fulfilled the requirement of having their capital be sustained “at risk” for the period of their conditional permanent residency. This is an issue for investors in retrogressed countries, like China, as they may have their investment mature prior to the end of their conditional residency. When the capital is returned to the New Commercial Enterprise (NCE) from the Job Creating Entity (JCE) after the required jobs have been created — but prior to end of this “at risk” sustainment period — the capital must be “redeployed” into another “commercial activity.”

It has been a major issue in EB-5 with many question marks as lawyers and stakeholders have done their best to interpret policy that was incomplete in its guidance. Did redeployment need to be in a regional centre’s jurisdiction? If the original investment was in a Targeted Employment Area, did redeployment need to also occur within a TEA? 

Veteran immigration lawyer Robert Divine has reviewed the update and while he sees some positives in clarifying certain issues, he also sees issues that will result in litigation and problems for some investors.

The update offers the following guidelines:

Redeployment must occur through the original NCE

Divine points out this is a problem for investors who are the victims of fraud or whose NCE managers have disappeared. Those investors cannot receive distribution through bankruptcy or receivership and redeploy the capital on their own; they must gain control of the NCE to do so.

Redeployment doesn’t have to occur in the TEA

Divine notes that USCIS does not address the issue of whether TEA reinvestment is required if the original investment did not create the requisite number of jobs.

It must occur inside the jurisdiction of the original regional center

This policy clarification may cause regional centers to increase the size of their jurisdiction to better accommodate redeployment. Divine states that this “seems to apply to investors only before they are admitted to conditional permanent residence.”

It must happen, generally, within a year

USICS has deemed this to be a “reasonable period.” Circumstances, however, may allow for a longer period.

It must create “commercial activity” — financial instruments on at the secondary market don’t count anymore

This is a big issue and it precludes the purchase of “new issue bonds” for a public works project, says Divine; however, the lawyer believe that “USCIS still would approve such redeployment along with other ‘new’ uses of capital such as into a REIT explicitly for new construction of renovation.” This is an issue Divine foresees resulting in lawsuits from investors who have already redeployed their capital.

Redeployment may involve ‘any activity’

As long as the activity is consistent with the “purpose of the NCE to engage in the ongoing conduct of lawful business.” Divine says that this clears up the question of whether redeployment must be within the scope of the NCE’s original documents.

Divine’s take: ‘a good faith effort’ but it may create litigation and ‘gnashing of teeth’

While the lawyer sees some positives in the agency clarifying unknowns and resolving educated speculation, he reminds us that many NCE’s have redeployed capital under the old guidance. Thus this create the problem after the fact of redeployment having to happen within the original regional center jurisdiction and not involving the investment in secondary financial instruments. 

Divine makes the reasonable conclusion that USCIS should revise the policy to only apply after July 24, 2020. “Otherwise, litigation on these points will be inevitable after much gnashing of teeth.”

He also believes that precluding redeployment through secondary financial instruments is “unnecessarily limiting for investors who already created the requisite jobs through an economic risk.” 

Lastly, Divine harbors the reasonable hope that USCIS should accommodate EB-5 investors who have suffered fraud or mismanagement by NCE’s so that the investors can redeploy through some proxy for the NCE.

Read Robert C. Divine’s article “EB-5 Redeployment Policy ‘Clarified’ Retroactively”

See the USCIS Policy Alert

Send feedback to USCIS regarding this policy update (by August 24, 2020)