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  • Writer's pictureEdward Lehman

Judge Leaves Future of EB-5 Investment to USCIS

The Northern District of California recently ruled to vacate the “EB-5 Modernization Rule” implemented by the Department of Homeland Security (DHS) in 2019, arguing that the DHS officials responsible for enacting the rule, which updated various regulations governing the EB-5 immigrant investor program – including most importantly an increase in the investment amount of $500,000 USD to $900,000 for overseas nationals — were unlawfully appointed in violation of the Federal Vacancies Reform Act of 1998, and therefore had no legal authority to promulgate the changes.

While the court's decision invalidates the EB-5 Modernization Rule, the court declined to grant the plaintiff an injunction barring the current secretary of DHS from reinstating the EB-5 Modernization Rule, instead remanding the matter back to DHS.

The court ultimately agreed with plaintiff in the case but did not itself rule on the changes to the program, paving the way for a scenario where newly appointed DHS secretary, Alejandro Mayorkas, himself the former director of United States Citizenship and Immigration Services (USCIS), the federal agency that oversees the EB-5 program, will ultimately decide whether USCIS continues with the higher investment threshold amounts for overseas nationals looking to invest into the EB-5 program going forward.

In April 2019, the last Senate-confirmed Homeland Security secretary under the Donald Trump administration, Kirstjen Nielsen, resigned. Kevin McAleenan, who was serving as Customs and Border Protection Commissioner at the time, became the acting secretary of Homeland Security.

In July 2019, then-Acting Homeland Security Secretary McAleenan signed the EB-5 Modernization Rule, which, among other things, increased the standard investment threshold to $1.8 million USD, and the reduced investment threshold to $900,000 USD.

McAleenan resigned in November 2019.

In that same month, the Senate confirmed Chad Wolf as the Under Secretary for Strategy, Policy, and Plans, and because all three positions ahead of him in the Homeland Security order of succession signed McAleenan were vacate, he became the acting secretary of Homeland Security.

When the EB-5 Modernization Rule went into effect in November 2019, Wolf was serving as the acting secretary of Homeland Security.

In December 2019, California-based investment group Behring Co., which also operates Behring Regional Center, filed suit against DHS regarding the EB-5 Modernization Rule, arguing (1) the new rule was arbitrary and capricious, (2) DHS failed to properly perform an economic impact analysis, (3) DHS exceeded its statutory authority, and (4) DHS lacked authority to promulgate the new rule.

In issuing its ruling, the court agreed McAllenan’s appointment within DHS was invalid, and as such, at the time the new rule was approved, McAleenan was not properly serving as the acting secretary of Homeland Security.

But in asking the court to bar now Secretary Mayorkas from enforcing the EB-5 Modernization Rule, the court declined to take up that part of the suit, and set aside the new rule, remanding it to DHS itself. As such, the court left the implementation of the EB-5 Modernization Rule up to DHS, which will determine whether to continue implementing the higher investment threshold, or to adjust it to another amount.

AmChamUS supports increasing the EB-5 investment amount to account for updating the program to “modern” investment standards, as the $500,000 USD reduced threshold amount has been in effect since the 1990s.

But AmChamUS supports changes to the program based on legislative measures only, which would have bi-partisan support, and would carry stronger enforcement within the federal government, as opposed to bureaucratic procedural changes that lead to unilateral decisions from appointed officials.

The lawsuit brought on by Behring Co. against DHS is the unsurprising result of DHS’s actions under the Trump administration, further stifling the EB-5 program, which was already marred in delays that saw investors waiting up to 15 years to receive permanent residency to the United States.

Additionally, the unilateral rule changes confused would-be foreign investors and minimized the strength the of the EB-5 program compared to other country’s immigration-based investment schemes.

The EB-5 program has received more than $35 billion USD in foreign capital investment in its 30+ years of existence and created millions of jobs for American citizens.

AmChamUS does not agree with confusing legislative actions that force foreign nationals to reconsider, thus lowering the total annual investment amount that could be attained through the program, and reducing job creation within the U.S.

AmChamUS will continue to work with federal officials to see whether modernization rules can be taken up by the U.S. Senate to ensure more permanent fixtures are in place for the EB-5 program.

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