Apparently nothing frustrates USCIS more than an underutilized visa program, such as the one that allows a well-to-do-investor's family to get a collection of green cards by – briefly – investing half a million dollars in the U.S. So, the agency has announced its efforts to expand that program.
This is the EB-5 investor's program (called that because it is the fifth Employment-Based green card category), that requires a two-years-only investment, usually a passive one, in a commercial venture OK'd by an USCIS-approved regional center. At the end of two years (plus some processing delays) every member of the family gets a green card for life, and the investor can withdraw the investment.
Other nations, such as Canada and Australia have demanded that the immigrant investor actually operate a company that hires real people – but not the U.S. The use of a contrived, indirect job-creation formula is all that is needed. The EB-5 investor need not even visit the state where the two-year investment is located, much less actually manage a business; all he has to do is send a check.
There is an annual ceiling of 10,000 EB-5 visas (covering both the investor and his or her immediate family members), but the ceiling has not been reached, year after year. Ever since the Obama administration arrived, they have been trying to encourage more applications, and now they have described what they have been doing to meet that goal. In a presentation for a June 30 "Stakeholder Meeting" officials announced:
- they have lowered the investor petition denial rate on one petition from 17 percent to 14 percent;
- they have made it easier to license the regional centers, the largely private, for-profit
entities that channel most of these investments; and
- they have lifted (slightly) the number of investor approvals from 274 for all of FY 2010 to a projected 332 for FY 2011 (based on 166 approvals in the first half of the year); these data are for the form I-829, whose function we will discuss shortly.
These "accomplishments" should be seen against two backdrops: 1) how the agency handles other petitions from other aliens, and 2) how these EB-5 investments look in the broader economic scene.
USCIS is an agency that routinely says "yes" – if not "YES!" – to people, citizens and aliens, individuals and corporations, wanting immigration benefits. As noted in an earlier blog, the Center for Immigration Studies sought information through a FOIA request on how often the agency says yes and no to various petitions. The limited data we received showed more than 300,000 decisions regarding nonimmigrant worker petitions, and the rate of approvals, in this instance, was 99.64 percent. In other words, the agency said no only once in 300 cases, and yes in the other 299 cases.
A denial rate of 14 percent in the EB-5 program must mean that the USCIS staff is seeing a set of applications that are far below average for the agency. The denials, incidentally, are for the I-829 petitions, which allow the investor to withdraw his or her money and receive green cards for the entire family. This happens a couple of years after the investment is made.
A more significant petition in this process, the one made before the investment is made, is the I-526, and here the quality of these petitions seems to be getting worse, or USCIS is getting better at sorting out the bad apples. The denial rate – bear in mind this is an agency that usually says yes more than 99 percent of the time – for these petitions actually increased from 11 percent in FY 2010 to 19 percent in the first six months of the current fiscal year.
The agency approved 1,369 I-526 petitions in FY 2010, and seems, based on the first half of this fiscal year, to be heading toward 814 approvals in FY 2011. That's a sharp decline.
Meanwhile, the agency was being even tougher on the regional center proposals, turning down 31 percent of the initial ones, and 22 percent of the amended ones; both numbers relating to the first six months of this fiscal year.
Incidentally, the agency should be commended for releasing these statistics on this program; it should do the same for all of the programs it operates, but rarely does.
Clearly, there are a lot of unacceptable proposals, probably even some trashy ones, despite USCIS efforts to encourage applications and to help applicants. Maybe USCIS should simply realize that it has an unpopular, difficult program on its hands and stop promoting it.
On the second point, regarding the financial objectives of the EB-5 program, my strong sense after following this program for a couple of years is that EB-5 investments are of much lower quality than most of investments on the broader market – the lure, after all, is the bunch of green cards for the family, not the financial return. So marginal entrepreneurs with questionable deals turn to the prospect of EB-5 money only after they cannot find money anywhere else. Maybe that's why the visas are underused.
Looking at this from another angle, let's step back for a moment and ask what kind of serious venture capitalist seeks funding in half million dollar chunks, investments that can be withdrawn after 24 months?
My venture capitalist stepson, with a Harvard MBA piled on top of a PhD in chemical engineering and a decade of experience in the field, would laugh at the thought.
As a result, EB-5 money does not seem to be going primarily into promising start-ups or into Silicon Valley; it is more likely to show up in decaying ski resorts in Vermont (beloved to Sen. Leahy (D VT), head of the Judiciary Committee), in an uneconomical sewage treatment plant in the Mojave desert and in a questionable effort to revive the Watergate Hotel in Washington, D.C., and in similar ventures.
Classic conservative economic theory is that government should not pick winners and losers in the marketplace; I do not necessarily accept that thought, but if a government agency gets to play that role, I would prefer it would be one experienced in finance (such as Treasury or Commerce) not one whose expertise is in immigration.
Meanwhile, in a multi-trillion dollar economy, the amount of money raised (for two years) in the EB-5 program is peanuts. Let's say that each of the 814 approvals this year will raise half a million dollars, that's only $407 million – is the game worth the candle?