As part of its administrative law functions, USCIS operates its Administrative Appeals Office (AAO). The AAO allows petitioners and applicants for some, but not all, categories of classification to appeal a negative decision. The AAO issues two types of decisions: “precedent” and “non-precedent.” Precedent decisions are intended to provide clear and uniform guidance to USCIS adjudicators and the public on the interpretation of immigration law and policy. Non-precedent decisions are only binding upon the parties to that particular appeal and are generally much narrower in scope.
Importantly in the EB-5 realm, the AAO has jurisdiction to review the Service Center / Immigrant Investor Program Office’s denials of Form I-526. It should be noted though that in the case of a denied I-829, an investor may only seek administrative review before an immigration judge in his or her removal proceedings – the AAO has no jurisdiction.
With regard to Form I-526, there are four precedent decisions that were issued in 1998:
- Matter of Ho – Although touching upon many of the I-526 requirements, this is THE decision for setting forth what must be in an EB-5 compliant business plan;
- Matter of Izummi – In this very comprehensive case, the AAO held that, among other things, guaranteed repayments / redemptions cannot be utilized to meet the requirement that EB-5 capital be “at risk.” Furthermore, it was held that EB-5 cases must be approvable when filed, preventing material changes to defective petitions in order to meet USCIS requirements;
- Matter of Soffici – This seminal case set forth the requirements of how EB-5 investors must show a clear and transparent source and path of funds; and
- Matter of Hsiung – In this case the AAO discussed at length the use of promissory notes as EB-5 capital, as well as reorganizing / restructuring existing businesses.
No EB-5 precedent decisions have been issued since 1998. Yet these four decisions heavily influence present day Service Center and AAO adjudication. This is evident in non-precedent cases decided today.
For example, on July 2, 2014, USCIS issued a non-precedent decision touching upon many elements of EB-5 petitions. In that case, the investor sought direct EB-5 classification through a $1 million investment in a used car dealership based on an existing E-2 enterprise. The case was denied because the petitioner did not demonstrate that the threshold investment amount was from his personal capital, that the sources of funds were lawful, and that the business would create the requisite 10 full time jobs for employees.
On appeal, the petitioner’s case was dismissed. The AAO held that assets purchased with the company’s profits after investment (as opposed to the investor contributing personal assets) cannot constitute capital for the purposes of EB-5, nor can funds from accounts receivable that were not withdrawn as taxable income and re-invested by the petitioner (Matter of Izummi). Regarding his source of funds, the investor failed to source his transfers beyond the deposits and, accordingly, this was insufficient proof of a lawful source of capital (Matter of Soffici). Finally, the investor’s use of independent contractors instead of direct W-2 employees was held to diminish the credibility of his business plan and thus the case was denied for this reason as well (Matter of Ho).
Notwithstanding their lack of binding authority, EB-5 non-precedent decisions provide key insights as to how USCIS adjudicates EB-5 cases. Accordingly, they should be considered “must reads” for attorneys, business plan writers and other stakeholders alike.
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