New EB-5 RC Filing Fee, I-526/I-529 Increases Beg Many Questions

Although I've only discussed the upcoming Regional Center filing fee in recent blogs, I should have mentioned the new increases affecting EB-5 Investors filing I-526s and I-829.  D-Day is here tomorrow and effective Nov. 23, 2010, these are the new fees:

  • I-924, the new "Application for Regional Center under the Immigrant Investor Pilot Program", will require a $6230 filing fee; Regional Centers previously did not have to pay a filing fee.
  • I-526,  "Immigrant Petition for Alien Entrepreneur" goes from $1435 to $1500
  • I-829, "Petition by Entrepreneur to Remove Conditions" goes from $2850 to $3750

The modest raise in the I-526 fee is negligible; the $900 increase in the I-829 is a little more intriguing to me.  It's just my speculation, but I suspect that has a lot to do with the impetus behind Neufeld's December 2009 memo.  In that memo, which you can find HERE, USCIS' top EB-5 person went into great detail – 23 pages of it, in fact — discussing the removal of conditions, satisfaction of job creation requirements, and the concept of "material change".  While many in AILA reacted with dismay to the level of detail Mr. Neufeld provided in the memo, it was no surprise to this former adjudicator.  It was a big, clear reminder of what we've known all along, delivered with some very specific guidance.

I suspect that the $900 fee increase comes to bear on the historical amount of time USCIS' adjudicators are having to spend on I-829 petitions, primarily due to their increasing expertise on the subject of this most complex of visas.  Having in house economists is the surest way to dspense with baloney job projections, and Mr. Neufeld's repeated reminders about the need to communicate material changes in project activity were no doubt triggered by the preponderance of cases they are seeing where the RC was in the business of "ABC" at the I-526 level and are now in the business of "XYZ" at the I-829 level.  Seems a lot of these RCs forgot about the annual requirement to update USCIS of how things are progressing.  (Note: that annual reporting requirement, in the law since the Regional Center concept was first launched, will also come via a new form, the I-924A; that form does NOT appear on the new fee list and is still being tweaked.)  My only thought is that it is a shame this fee increase is being passed on to the actual investors…when the whole reason for the complex I-829 adjudication is the fault of Regional Center!

Regarding the new Regional Center filing fee:  for the past few months, since this fee was proposed, you would not believe the number of prospective Regional Center clients who have been scrambling to beat tomorrow's deadline.  I mean, I know $6000 is a lot of money but given the investment required to create an RC (read on) and the level of adjudication analysis involved, it's hardly a deal-breaker when deciding whether or not to form an RC.  Look, it's no secret that the great big new RC filing fee is intended to dissuade those who are less-than-serious from continuing the barrage of RC filings currently faced by USCIS' EB-5 adjudication team in Laguna Niguel, CA.  As I've commented previously, the prevalence of new EB-5 Centers which are essentially "shelf" RCs – similar to the shelf corporations created in offshore jurisdiction for the purpose of having "vintage" entities at hand when expedient for tax planning — is what is keeping USCIS Cali as busy as they are. 

Regional Centers are just that…"centers" which, if approved, can get into the business of defining projects in which to participate and steer EB-5 investor funds into those projects.  In certain cases, the Regional Center is the conduit to its own pre-defined projects; in others, the RCs get approved for a certain geographic area and for a number of industry sectors, but only provide an exemplar project.  The underlying legitimacy is ultimately defined by the quality of the project selected by the Regional Center but, to paraphrase a cliche, "show me your project and I'll tell you all about your Regional Center".  Put simply, strong Regional Centers don't pick wacky projects.

That last point is why many of these "shelf" Regional Centers are effectively being offered "for sale" by the attorneys or individuals who created them.  You see, depending on a number of variables, the creation of a new Regional Center involves anywhere from $25,000 to $200,000+ in legal, business planning, and econometrics costs…and takes 6 months to a year.  Given more-than-doubling of the number of approved Regional Centers in the past year — it took almost 17 years to approve the first 40 or so and one year to double the amount — and the reality that all but a small percentage of these are not actively marketing viable investment projects, this new market for "dealer demo" Regional Centers is hardly a surprise.

I'm approached often by developers and project managers struggling between the selection of an established Regional Center as a conduit for their project versus the option of forming their own Regional Center. "It depends", I tell them, and I point out these variables:

  • if your project is a one shot deal, the expense of a new RC probably doesn't make sense; on the other hand, it if will involve multiple tranches, it might.
  • if you go with an established RC, you will be able to market your project very quickly, as soon as USCIS confirms the activity of it involves a "material change" in what they've been approved to do. However, it is my experience that in these cases the COST to the project will ultimately be higher in terms of dollars; the fees which go to the RC generally exceed the cost of structuring your own RC.
  • if you go with an established RC, you are getting into bed with all their prior projects, so do your due diligence.  For example, let's say your project cuts a deal with RC X, a long-standing RC with a good record of success in past projects.  You need to thoroughly examine their historical timelines as well as identify any particular projects which are in or near I-829 adjudication.  Remember my blog a few weeks ago when I was complaining about certain RCs being very vocal about their approval record while flatly omitting their record of denials?  The reality is that even if yours is a superb project with great investor protections, it will be impossible to successfully market it if RC X has a failed or failing project under its umbrella.

Once again, as the Knight of the Templar told Indiana Jones when he was trying to identify the Holy Grail: "Choose Wisely."