Economists, Lawyers Tussle at USCIS EB-5 Meeting

By David North on June 25, 2012

It was one of those inconclusive, awkward Washington meetings that left everyone feeling frustrated.

To add to the tension, it was also a session in which government economists, with an unpleasant message for their audience, were speaking to a crowd of private-sector lawyers. The lawyers wanted both a more generous immigrant investor (EB-5) program and more precision in the procedures, and they seemed to feel that they got neither.

And while the host agency was USCIS, and the subject was an aspect of immigration policy, the words "immigrant" and "visa" were never spoken.

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But, because of my specialized point of view, I was probably the most comfortable person in the room. My basic position is that it is tacky to sell an otherwise inadmissable alien family a batch of visas for half a million dollars; and with that in mind, I could sit back and enjoy the muted infighting between the collection of lawyers, on one hand, and the USCIS officials, on the other.

These were real estate lawyers, incidentally, a sleeker, less-diverse group than the immigration lawyers that usually attend such meetings with USCIS.

The issue was just how USCIS makes decisions about half-million-dollar applications for EB-5 investor visas. What kinds of projects are OK with the government and what kinds are not? Will the proposed investments create the right number of jobs to qualify?

Most of the conversation revolved around the quaint, to me, concept of "tenant occupancy". The notion is that sometimes a half-million-dollar investment in buildings (offices, hotels, and I suppose factories) can be construed by the economists as leading to the creation of enough jobs to provide the visas, and sometimes it cannot.

"Tenant occupancy" turns out to be a major element in the EB-5 program; while it is generally recognized that would-be immigrant investors are only rarely actually creating new companies or start-ups, I had no idea until this meeting that, according to one of the speakers, fully 70 percent of EB-5 investments involve this approach.

The underlying statutory idea is that half a million dollars, if well invested, will create 10 full-time jobs, and the task of the USCIS economists is to see if, with enough estimating and modeling and uses of indirect job-creation notions, the half-million will do the trick.

Frankly, thinking you can create 10 full-time jobs by simply building a half-million-dollar structure, which probably is not much larger than a nice house in the suburbs, strikes me as a bizarre concept, but that's what "tenant occupancy" is all about. The half-million is not invested in creating a business, it is simply invested in a building in which the business will take place.

With that as the basic concept, there was plenty of room for disagreement, and that's what the "stakeholders' meeting" on June 22 was all about, according to the agency's announcement. My blog on an earlier meeting on the subject can be seen here.

One of the elements of the USCIS position — something called a "bombshell" by one of the nicely dressed attorneys — was that you could not use immigrant investor money to simply buy land and hope to use that purchase to produce the green cards. USCIS is right on that one: Buying land is about as distant from creating jobs as an investment can be.

Several attorneys present, and perhaps one on the teleconference wire as well, objected to that position, and others tried to get USCIS to allow some EB-5 money to be used that way if other parts of the investment created more than their share of jobs, thus preserving at least the semblance of the half-million dollars = 10 jobs formula.

In addition to that, the lawyers kept pressing the government to be more precise — "more quantifiable" — in their rules. How long is the needed "long-term" relationship between the builder and the occupant of the building?

There were also pressures on the government to extend its rule of thumb that a construction project should take just two years, and jobs should start being created at the end of that time. "You know that a big project, a hospital for instance, cannot be built in a big city in two years", one of the lawyers told Alejandro Mayorkas, the USCIS director who presided at the session.

Mayorkas left most of the talking to a staff member he introduced as the chief economist, John Rogers. Rogers, rightly, refused to discuss specific projects, but he struggled uncomfortably as he tried to provide some information on the project decision-making process without departing too far from the government's position that each project had to be evaluated on its own merits.

Some of the lawyers and developers had flown in from the West Coast and other distant places for the occasion. They probably needed a couple of drinks on the flight back.