Second Grace Period for EB-5 Investments

Immigration Daily has learnt that USCIS will almost certainly NOT reinstate the $900K modernization regulations until Congress reauthorizes the Regional Center Program. Please see below for why, and also for the implications of this point.

• Now the big question: Why? Why cannot USCIS reinstate the $900K modernization rule now by fiat, using the processes established in the Administrative Procedure Act? The reason is that all regulations require statutory authority. The EB5 Modernization Rule relies, inter alia, on the statute for the Regional Center program as its statutory authority. Since the Regional Center program has now lapsed, as a matter of statute there are no Regional Centers at this time. USCIS cannot promulgate rules on non-existent entities. That is why USCIS cannot, until Congress reauthorizes the RC program, issue a rule affecting Regional Centers.
• USCIS can promulgate a new rule applicable only to Direct EB5 projects right away because Direct EB5 is in the organic Immigration and Naturalization Act (INA), and Direct EB5 has not lapsed, since it cannot lapse. However, to do that, USCIS will have to rewrite the $900K modernization rule to remove all references to Regional Centers, which may make it so different as to require a new rule-making process. When the RC program is reauthorized by Congress, USCIS will then need to promulgate a second modernization rule for Regional Centers. The first rule cannot retroactively be applied to entities which were phantom entities when the rule was published (RCs are, at the present time, phantom entities from the point of view of immigration law). So USCIS will have to do fresh rule-making twice. Going through the rulemaking process for just direct EB5, which is a tiny fraction of the overall EB5 program, does not make common sense (provided USCIS will use common sense here, of course). So it is highly unlikely that USCIS will reinstate the $900K rule until Congress gives it statutory authority by reauthorizing EB5 Regional Centers. When will that be? See below.
• Congress is busy. It is already in the midst of budgetary fights and has before it a massive infrastructure bill to consider. Legislation of this magnitude will take probably till early September to finalize language for and till late September for final passage. So a reasonable earliest time frame for EB5 reauthorization is Oct 1.
• Many in the EB5 industry keep dreaming that Congress will ride to the rescue and will modify the EB5 program significantly. Unfortunately, the EB5 program as a whole is small potatoes from Congress’s perspective, and the only thing we can hope for is clean reauthorization, with perhaps some integrity measures tacked on--but nothing else. (Note: Let no one forget that Senator Graham (R-SC)  is the sole senator responsible for stopping the reauthorization of the RC program and putting the entire EB5 industry in its current predicament.)
• When Congress does reauthorize the Regional Center program, USCIS will then move to reissue its $900K EB5 Modernization regulations. The agency has invested too much in these regulations over three Presidential administrations to drop the matter. Given the long delay between the Behring decision and promulgation of a rule months afterward, there may be no basis for USCIS to show “good cause“ per the APA to make an interim final rule applicable immediately upon publication. USCIS will therefore need to give 60 day notice when reissuing. Ergo: A SECOND GRACE PERIOD -- where all RCs can seek investment at $500K with liberal TEAs for 60 days. This Second Grace Period will be considerably different from the grace period of 2019, we will sketch out the shape of the Second Grace Period and what it means to the EB5 industry in a future issue, stay tuned.

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