April 14, 2021, is a historic date for EB-5: U.S. Citizenship and Immigration Services (USCIS) approved the petition it had been fighting in court — in the Zhang v. USCIS case. An appeals court recently upheld a prior court decision that cash from an unsecured loan was acceptable capital for an EB-5 investment — contrary to the Immigration Service’s interpretation that disallowed such a source of funds. WR Immigration (Wolfsdorf Rosenthal) says Zhang’s I-526 approval “appears to confirm that USCIS will not be appealing to the U.S. Supreme Court for further review.”
The Zhang lawsuit challenged the 2015 USCIS policy announcement that the proceeds from an unsecured loan is debt, not cash — and therefore is not eligible as part of an EB-5 investment. In 2018 a federal court ruled that cash from an unsecured loan was an acceptable source of funds for an EB-5 investment — even if the investor later defaulted on the loan.USCIS appealed the decision, but a three-panel D.C. Circuit Court upheld the prior court’s decision in October 2020. The only path left to USCIS was the Supreme Court.
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One of the Circuit Court judges explained the court ruling against the agency interpretation as follows: ”Cash is fungible, and it passes from buyer to seller without imposing on the seller any of the buyer’s obligations to his own creditors. The buyer’s source of cash — whether pay check, gift, or loan — makes no legal or practical difference.”
Following the appeals court ruling, some EB-5 experts were waiting to see if USCIS would continue to fight at the Supreme Court level. But approval of Zhang’s petition seems to imply that the agency is reconciling its policies with the court’s decisions.
In EB-5, it appears that cash is indeed king. Even if it’s cash from an unsecured loan.
Read “USCIS Loses Appeal Of Landmark Decision: EB-5 Investors Can Use Unsecured Loans As Investment Capital”See the WR Immigration blog “7 Years for a “Special” Form I-526 Approval”
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