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EB-5 Rural Project Reality: When is a Backlog Formed Vs. Announced?

January 20th, 2024 Colin Behring

In the complex world of EB-5 investments, understanding when a backlog is actually formed versus when it is officially announced is crucial, especially for investors from high-demand countries like China and India. The allure of rural projects and their supposed priority processing, and loose association to being key to a “speedy greencard” often blindsides investors to the underlying reality of backlogs. What is helpful is that it is possible to see backlogs coming, and they are predictable long before the visa bulletin announces formal retrogression. This article aims to dissect this process step-by-step, providing insights into the formation and announcement of backlogs.

The Genesis of a Destined EB-5 Rural Project Backlogs: Existing I-526E Petition Filings

  1. Initial Filing of I-526E Petitions: The backlog for EB-5 rural projects begins with the first step in the EB-5 process, Immigration attorney’s filing the I-526E petitions. Curerntly, Behring is aware of over 2,563+ investor petitions from both China and India. Backlogs are absolutely imminent unless other factors intervene. Each EB-5 investor petition represents an investor’s intention to invest in a rural project and get a greencard under the EB-5 program. It will eventually count toward the investors country quota, regarded as the country of chargeability, which after the quota is exhausted in a given fiscal year, records on the Visa Bulletin.
  2. Non-Transparent Reporting: Unfortunately, the statistics on I-526E filings are not reported timely or transparently by USCIS, making it difficult to gauge the real-time status of applications and potential backlogs. After viewing available statistics, recent or not, there are informal steps that can be taken to garner additional insight into “pending petitions” which will eventually turn into visa numbers, taking quota and potentially contributing to future retrogression:
  • Survey existing industry participants: Investors can supplement any existing I-526E filing data they have by surveying existing industry participants including regional centers, immigration attorneys, immigration agents, developers and anyone else with knowledge of investor movements. Given that the top 10 regional centers, attorneys or immigration agents touch over 90% of all filings, you will garner significant actionable data from that sample.
  • Freedom of Information Act Request (FOIA): Individuals can file a Freedom of Information Act Request to obtain USCIS filing data. The only challenge to this strategy that keeps the market from engaging in FOIA request more often is that they can take years to obtain the said information.
  • FOIA + Writ of Mandamus: The FOIA Request is powerful but the timing delay makes it almost useless. A Writ of Mandamus for the FOIA request can be the remedy. The Writ of Mandamus can expedite the delivery of the FOIA request providing valuable information in a timely manner. This has been done successfully multiple times in the EB-5 realm but multiple conditions must be satisfied for the Mandamus Action to be accepted by a Judge.

The Role of the Visa Bulletin

  1. Delayed Reporting: The Visa Bulletin, which is supposed to be the indicator of visa availability, is inherently delayed and delayed so much to a point that it could be considered “misleading”. It records only the issuance of visas, not the leading indicators (such as I-526E filings) that occur preceding steps of petition filings and approvals. I-526E filings are almost a perfect proxy for actual visa-issuances. The issue that keeps them from being the actual dependent variable is that the number slides up and down because of I-526E denials, withdrawals, document disqualifications and dependents (family size).
  2. Backlog Announcement: Consequently, by the time the Visa Bulletin announces a backlog, it is often too late for investors to make an informed decision. Investors who filed after the priority date listed on the visa bulletin were never aware they were in a backlog at the time they initially filed. When the visa bulletin posts retrogression and priority date, the backlogged investors who could have applied months/years ago are already caught in a backlog they didn’t see forming at the time of filing.

Understanding the Quota Calculations

  1. Annual Cap and Set-Asides: The EB-5 program has an annual cap of 10,000 visas, with a portion set aside for rural projects (20% or 2,000 visa’s).
  2. Country-Specific Quotas: Applying the 7% per-country cap to these visas dramatically reduces the number available to high-demand countries. For example, the 20% rural set-aside on the 10,000-cap results in 2,000 visas. With the 7% country cap, this number falls to 140 visas for a country like China or India.
  3. Family Size Consideration: Factoring in the average family size (approximately 2.5), the actual number of investors who can benefit reduces further. In our example, this means only around 56 investors from a country like China or India can be accommodated. To put this in other words, in a single fiscal year which on its face allows 10,000 visa’s, only 56 investors from India and 56 investors from China will benefit from priority processing in an EB-5 rural project unless visa numbers are achieved somewhere else.

The Illusion of Priority Processing

  1. Marketing Tactics: Rural projects are marketed with the promise of priority processing. However, given the backlog formation, this priority processing becomes moot for countries that have exceeded their quotas.
  2. Reality Check: The real-time accumulation of petitions creates a backlog well before it’s officially announced, rendering the promise of faster processing ineffective for investors from countries like China and India beyond their certain initial 56 investor capacity.

 

What Factors Can Reduce Retrogression or Backlogs?

While the backlog and retrogression in EB-5 rural projects for countries like China and India present a challenging scenario, there are several factors that could potentially alleviate this situation. Understanding these elements offers a glimmer of hope for investors caught in the backlog:

  1. I-526E Petition Denials and Withdrawals: A natural attrition in the number of petitions through denials or voluntary withdrawals can reduce the backlog and relieve per country quota. While this isn’t an ideal scenario, it does inadvertently ease the pressure on the quota system. A great amount of withdrawals have already occurred during the recent years as the EB-2 category saw a tremendous jump forward during the COVID years when family based visa carry-overs sent significant numbers to the EB-2 cagtegory relieving significant backlogs for countries like India. China, with extremely long backlogs in place since 2015, have seen a significant number of investors children age-out and effectively render the EB-5 petition not useful anymore. Those petitions were subsequently withdrawn and may not have been recorded within the per country quota.
  2. Carry Over Visas: One significant and most likely source of relief could be carry-over visas. These are visas from the EB-5 category that went unused in a previous fiscal year and are carried over to the next. Additionally, visas unused in other EB categories can potentially be reallocated to the EB-5 program, offering some respite to the backlog.
  3. Smaller Family Sizes: The quota calculations assume an average family size. If the actual family sizes of investors turn out to be smaller, this could mean more investors can be accommodated within the set quota, thus alleviating some backlog pressures. Small family sizes are typically a result of a families child applying individually as an unmarried young professional or an unmarried foreign university student who wants to expand their professional opportunity without having to go the route of H1-B or other temporary visa status.
  4. External Immigration Policy Changes: Changes in broader U.S. immigration policies or adjustments in the EB-5 program itself could also impact the backlog. Legislative changes that increase the total number of visas available or alterations to the distribution of visas among different categories could provide some relief. Also, according to the current 2022 RIA policy, the program is set to expire in 2027 and that would be the official cutoff of all EB-5 petition filings, which would put a bookend on any future filings, therefore a finite calculation for retrogression and backlogs for any remaining visa petitioners.
  5. Increased Efficiency in Visa Processing: Enhancements in processing efficiency by USCIS and the Department of State could also help in reducing the backlog. This could involve streamlining procedures, increasing staffing, or adopting more efficient technologies for processing applications.
  6. Investor’s Country-Specific Developments: Economic and policy developments within investor’s home countries, such as China and India, can also influence the demand for EB-5 visas. Changes in these domestic landscapes might lead to fluctuations in application rates, thereby impacting the backlog. Economic difficulties in China as well as stricter capital controls will prevent investors from both China and India from being able to properly fund EB-5 investments, resulting in decreased future demand. Exchange rates or tax policies can also decrease EB-5 investment if the cost to invest indirectly goes up as other currencies are devalued or taxes deplete investor resources that otherwise would have gone to EB-5 investment.
  7. Global Economic and Political Factors: The global economic climate and political stability can also play a role. Shifts in these areas can influence investor decisions and migration trends, potentially leading to a decrease in applications from certain countries.

Look Beyond Backlogs and the Official Announcement of Retrogression

For EB-5 investors, especially from high-demand countries, it is essential to understand that a backlog is often formed much before it is announced. Relying solely on the Visa Bulletin for backlog information can lead to misguided investment decisions. The promise of priority processing for rural projects is no longer a feasible advantage for countries like India or China. Investors need to evaluate projects based on their merits, rather than perceived processing advantages. Being well-informed and proactive in understanding the nuances of backlog formation versus announcement is key to making sound investment decisions in the EB-5 program.

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