For over 20 years, USCIS recognized Congressional intent to
maintain a broad definition of “capital” in order to maximize the
promotion of job creation within the United States. This position
was supported by the legislative history of the EB-5 program.
During the legislative history of the EB-5 program the Senate
Judiciary Committee formally endorsed the requirements already
used by the treaty investor program (E-2) when it discussed
defining “capital,” signaling its intent for a broad definition of the
word.6 The Foreign Affairs Manual and USCIS policy governing
the E-2 program’s definition of “capital” explicitly includes cash
obtained from a personal loan (i.e. a loan with no collateral) to be
an acceptable investment. Furthermore, Legacy INS, the department which was replaced by USCIS, explicitly recognized this
Congressional intent in the Federal Register by stating:
“[T]he Service has expanded the definition of capital for
two reasons. First, the legislative history of the Act suggests
that Congress intended the definition to be broad…[S]econd,
the overwhelming majority of those commenting on this issue
supported such a change, believing that excluding debt from the
definition of capital would ignore modern business practice and
severely limit the number of investors eligible or willing to apply
under the employment creation provision.”7
This rationale behind the definition of “capital” still holds true
today. Excluding certain forms of “capital,” such as cash derived
from a mortgage loan which is secured by real property not 100
percent wholly-owned by an alien entrepreneur ignores modern
business practices and severely limits the number of investors
eligible or willing to apply. The effect of this exclusion is to reduce
the number of U.S. jobs which could be created through the
EB-5 program. Furthermore, constraining who can gift lawfully
obtained “capital” to an alien entrepreneur would also directly
reduce the number of U.S. jobs which could be created through
the EB-5 program.8 These constraints on the definition of “capital”
and how such “capital” can be obtained do not reduce fraud or
allow the investment of unlawfully obtained “capital” because the
requirement that all “capital” must be derived from lawful sources
of “capital” remains intact.
This discussion regarding the definition of “capital” is necessary
because of recent actions by USCIS to limit investments of cash
derived from the proceeds of a mortgage loan where such loan
is not secured by a property the alien entrepreneur solely owns.
For example, an alien entrepreneur who has proven to USCIS
satisfaction that he or she has lawfully earned the monies used to
purchase a property, and who now seeks to mortgage that property
to obtain cash to create U.S. jobs, will have his or her I-526 Petition
denied if he or she owns that property with anyone other than his
or her spouse (i.e. if the alien entrepreneur owns the property with
a parent or child). USCIS has taken the position that it does not
matter if the cash used to purchase the house was lawfully sourced.
The mere existence of a third-party (i.e. a child) with co-ownership
rights, even where the third-party has officially consented to the
mortgage and has formally gifted any rights to the proceeds to the
alien entrepreneur without an expectation of return, will cause a
denial. In such situations, USCIS claims that the property is not
fully secured by assets the alien entrepreneur owns.
In a real world context, consider if entrepreneur were to
mortgage a property co-owned by him and his mother (assuming
he has demonstrated a lawful source of capital to purchase the
property) to obtain cash to start a business. The mother signed
an affidavit stating she consented to the use of the property and is
gifting any proceeds received by her son for this purpose. No one
would or could claim that such cash used to start the business was
not the entrepreneur’s. Furthermore, the cash invested would not
represent a debt of the new business, as the cash is not secured by
the business or any of its assets and is freely available to the business
to create jobs. However, under USCIS’ interpretation of “capital”
this entrepreneur would not be allowed to invest in the United
States and create U.S. jobs through the EB-5 program. Thus, this
interpretation of “capital” only serves to reduce the amount of U.S.
jobs that can be created through the EB-5 program.
Other than the flawed reading of the case precedent decisions
discussed above, there does not seem to be a valid rationale for
constricting the definition of “capital.” This makes it hard for
EB-5 program stakeholders to understand the motivations behind
this change of policy by USCIS. Because a broad definition
of the term “capital” would maximize the program’s ability
to create jobs for U.S. workers and fulfill the laws purpose of
promoting economic growth in the United States through foreign
investment, any pending legislation should include language to
accomplish this.
★
Dillon
Colucci
Dillon Colucci is an EB-5 immigration attorney
and an associate in the immigration group at
Greenberg Traurig LLP, at their New York City
office. Colucci practices and handles U.S. immigration concerns, and helps individuals, families,
professionals, skilled workers, investors, and
businesses live, work, invest, and do business in
the United States. Foreign
investors who would like to
invest in EB-5 programs and
receive legal permanent
residency fall under Colucci’s
umbrella of immigration law.
INA Section 203(b)(5) states “visas shall be available…to alien immigrants for
the purpose of engaging in a new commercial….which will benefit the United
States economy and create full-time employment for not fewer than 10 United
States workers.”
1
See Julia Harris, USCIS, http://www.uscis.gov/sites/default/files/USCIS/
Outreach/PED_IPO_Deputy_Chief_Julia_Harrisons_Remarks.pdf, accessed
November 30, 2015.
2
See http://www.uscis.gov/sites/default/files/err/B7%20-%20Immigrant%20
Petition%20by%20Alien%20Entrepreneur,%20Sec.%20203(b)(5)%20of%20
the%20INA/Decisions_Issued_in_2014/MAY292014_01B7203.pdf.
3
4
Matter of Soffici, 22 I&N Dec. 158, 166 (Assoc. Comm’r 1998).
Matter of Izummi, 22 I&N Dec. 169, 186 (Assoc. Comm’r 1998); Matter of
Hsiung, 22 I&N Dec. 201, 204 (Assoc. Comm’r 1998).
5
See Senate Report 101-55. The definition of “capital” under the E-2 program
is not defined by regulation or in the Foreign Affairs Manual. However, 9 FAM
41.51 N8.1-2 explicitly states “capital” may include funds, intangible property
(i.e. copyrights, intellectual property), loans secured by real property, or personal
loans not secure by anything but personal liability.
6
7
See 56 FR 60910 (1991) at 60902.
One current proposal would limit who can make a gift of “capital” to an alien
entrepreneur to only immediate family members (i.e. spouse, parent, sibling,
grandparent or child). This would exclude aunts, uncles, adopted parents, emotional parents, and wealthy benefactors.
8
WWW.EB5INVESTORS.COM
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