Last week, USCIS issued significant Policy Guidelines concerning its stipulated attempt to address fairness concerns with coordinating I-526 petition adjudications with U.S. State Department visa allocations. In its release, USCIS announced that starting March 31, 2020, it will change the adjudication process for Form I-526 Petitions from a first-in, first-out basis to a visa availability approach. USCIS will host a public forum on March 13, 2020, at 11:00 am EST, to provide further information on this change. However, we suspect as with past stakeholder engagements, that the agency will not respond to detailed questions and/or concerns raised by the EB-5 community during this forum.

The significance of this processing change is that rather than taking a first-in, first-out approach for adjudications of the pending I-526 petitions, USCIS will now first process petitions for investors for whom a visa is either now or will soon to be available. In other words, for those petitioners whose countries are subject to retrogression (meaning a backlog imposed by the State Department based on supply and demand metrics), their I-526 Petitions will remain pending adjudication until the petitioner's priority date becomes or is near current. For purposes of illustration, the priority date for Mainland born Chinese petitioners is currently December 1, 2014. Therefore, any petitioner who filed an I-526 petition that has not yet been adjudicated after December 1, 2014, would remain on the "shelf" and will be prejudiced by this new adjudication process. Those mainland born Chinese petitioners who filed I-526 petitions prior to December 1, 2014, would now be eligible for adjudication. Taking into account that there are hundreds of mainland Chinese born related petitions still pending more than 5 years later, this change prejudices such petitioners from a timeline perspective. On a side note, it also begs the question of whether USCIS truly did adhere to the first-in, first-out process. We have noted several hundred petitioners getting adjudicated out of "order" in the last few years. Consistency is not, therefore, a trait this agency regularly applies.

There are two key beneficiaries of this change: i) I-526 petitioners who were born in non-retrogressed countries (currently any country than Mainland China, Vietnam and India) and/or whose priority dates are, otherwise, current, would be able to move to the front of the line for adjudication; and ii) petitioners with children who are subject to age-out (i.e., turning 21 and falling outside of the benefit accorded through a parent’s EB-5 petition) would be able to keep their ages frozen while pending I-526 petition approval. With respect to the latter group, for purposes of the immigrant benefit accorded to such derivatives, their ages are frozen for the duration of the I-526 petition process. Once the I-526 petition is approved, the age unfreezes and if the petitioner is subject to a long wait due to retrogression, the derivative would be at risk of aging out. This is one of the main reasons why there have been hundreds of petitions filed, over the last few years, by minors as parents were concerned with such age-out prospects.

Outside of those benefits, there are many disadvantages. We expect there will be a step-up in rates of attrition caused by this delay. Petitioners will simply get fed-up with the longer wait and withdraw their petitions. USCIS will counter that the wait to get the conditional green card would still be in place for retrogressed petitioners and so waiting longer for the I-526 petition is not detrimental. However, there is additional uncertainty being imposed by this additional wait. It is very possible that an I-526 petition could get a Request for Evidence ("RFE") 6 - 7 years later. In such a situation, how does one begin to even unpack that petition 7 years later and effectively address such RFE? Second, it will become more difficult for projects and/or EB-5 issuers to sustain the underlying businesses. The longer the money remains invested, the more risk imposed on both the underlying investments and on the EB-5 Issuers. Over the years, projects change or fail, managers resign, projects get sold, regional centers get terminated or file for bankruptcy, etc. With this increased wait time for retrogressed petitioners, it is likely that the original projects will undergo material changes. Having the certainty of timely I-526 petition adjudication under a first-in, first-out process gives investors confidence that they have passed the first gate and have strong likelihood of adjusting their status and/or successfully going through the consular process.

One of the interesting questions, which hopefully will be clarified at the March 13, 2020 stakeholders call, is whether a retrogressed petitioner would move to the front of the line once the priority date for his or her country becomes current. It would make sense that such petitioner should be first in line since his/her petition otherwise would have been filed much earlier than other petitions that are then pending.

Overall, this recent change adds more complication for the EB-5 marketing world following the imposition of the New Regulations on November 21, 2019. EB-5 Issuers, regional centers and developers are all still navigating the changes and attempting to understand how to market a more expensive program that includes greater geographic restrictions on projects that used to previously qualify at the lower investment tiers. As a law firm, we have been very active in analyzing this process and are currently working with several qualified developers and EB-5 issuers with respect to those projects that appear to meet the new, narrow definitions for the lower investment threshold. These projects are gaining a competitive advantage in the industry given the fact that many otherwise highly desirable projects no longer qualify at the lower investment threshold of $900,000 and, therefore, require the increased $1,800,000 investment amount which we believe is generally not marketable.