The USCIS has issued major policy guidance clarifying important issues related to the redeployment of capital under the EB-5 program.
Why EB-5 Capital Redeployment?
A general understanding of the EB-5 timelines and how the investment is structured between the NCE and JCE is essential to understand the need for the redeployment of capital.
| Steps | No Visa Retrogression | Visa Retrogression |
| 1. I-526 filing | ||
| 2. I-526 approval | 18-24 months | 18-24 months |
| 3. Waiting period for the priority date to become current and EB-5 visa to become available. | N/A | Variable. A few months to more than 10 years |
| 4. Issue of EB-5 visa and start of the two-year period of conditional permanent residence (CPR). | 6-12 months | 6-12 months |
| 5. I-829 filing at end of the two-year period. | 24 months | 24 months |
| 6. I-829 approval and removal of conditions. | 12-18 months | 12-18 months |
If the investor’s country has not exceeded the per-country annual cap of around 700 visas, then the EB-5 timeline between I-526 approval and I-829 filing after the CPR is around 3 years.
This period becomes uncertain, and can even go beyond a decade if there is a huge backlog of EB-5 applications from the investor’s country. Some Chinese investors are staring at Step 3 waiting period of more than 15 years.
Generally, EB-5 investments are structured as a five-year loan made by the New Commercial Enterprise (NCE) to the Job Creating Enterprise (JCE). This is done presuming that the period of at-risk requirement (between Step 3 and Step 5) will not exceed five years.
So, the JCE pays the EB-5 investment back to the NCE after the end of the five-year period, which means the money will no longer be at-risk in a commercial enterprise.
This creates a big problem for retrogression-hit investors because the rules state the investment must remain at-risk until the end of the two-year CPR. Such investors will see the JCE returning the money to the NCE before Step 3 ends and before the two-year CPR even begins.
To avoid falling foul of the EB-5 eligibility rules, the investor must redeploy the capital and put it at-risk again until the end of Step 5.
And the latest USCIS policy guidance clarifies how an investor can and cannot redeploy capital along with other clarifications.
Permissible Redeployment
As per the USCIS Policy Guidance, redeployment in any business activity is permissible, provided it is a commercial activity and not a purely financial transaction.
Deploying the funds into securities or financial instruments on a secondary market like the stock exchange won’t fulfill the ‘commercial activity’ requirement even if there is risk of loss of investment.
Barring this specific exception, permissible redeployment has been defined broadly.
How to Redeploy?
As per the guidance, the redeployment must be done:
- through the same NCE and same RC, and
- within the geographic area over which operations are approved.
In a major relief, the guidance allows changes to the scope of the NCE’s business operations provided the funds are redeployed in lawful business activity.
Redeployment need not be within a Targeted Employment Area (TEA) even if the original investment had been made in a TEA.
When to Redeploy?
Before this guidance, the USCIS rules required redeployment within a reasonable period of time. Now it has been stipulated that investors are expected to redeploy within one year of return of funds. Also, a period in excess of one year will be considered an unreasonable delay unless the investor shows there were issues beyond the control of the RC and NCE.
Conclusion
As per the latest guidance, redeployment can happen after these steps have been completed.
- The initial investment was made as per the EB-5 rules.
- The funds were fully deployed to the JCE.
- The original business plan has largely been completed.
- The jobs have been created.
- Funds are available to for return or have been returned to the NCE.