IIUSA files lawsuit challenging the EB-5 investment sustainment requirement

On October 11, 2023, USCIS released guidance on the capital investment sustainment period under the EB-5 Reform and Integrity Act of 2022 (“RIA”). The updated rule provides that EB-5 investments only need to be “expected to remain invested for not less than two years” starting from the date the investment is made and placed at risk, and removes the old requirement that investors must keep their investment during the entire two-year conditional permanent residency period. Invest In the USA (“IIUSA”), a national trade group for EB-5 regional centers, filed a lawsuit against USCIS. Invest in the USA v. United States Department of Homeland Security et al, Case # 1:24-cv-00918 (March 29, 2024). IIUSA argues that this change breaks from decades of practice, regulations, and the USCIS Policy Manual. They also claim USCIS failed to follow the proper notice-and-comment process before making this change.

The sustainment of investment is a key requirement in the EB-5 program. For investors who invested before the RIA was enacted, immigrant investors must show that they kept their investment sustained throughout the two-year conditional permanent resident period. This period starts either when the immigrant investor adjusts the status to conditional permanent residency inside the United States, or upon entry to the United States if the immigrant investor was living abroad. In addition, investors must prove that their investment has created, or will likely create within a reasonable time, 10 full-time jobs for qualifying employees to have the conditions removed. 

INA 216A, as changed by the RIA, no longer requires investors to keep their investment during the period of conditional residence. The law now says that investment must stay invested for at least two years after it is placed at risk, as long as the job creation requirement is met before the end of the process. Although the law does not say when the two-year period begins under INA 203, USCIS has stated that the two-year period starts when the full qualifying investment is properly made to the new commercial enterprise and is placed at risk, including being made available to the job-creating entity.

According to the new rule, for post-RIA EB-5 investors, the capital investment only needs to stay at risk for at least two years. Pre-RIA investors must still follow the old rule. They ned to keep their investment at risk for the full two-year conditional permanent residence period. In other words, the shorter two-year rule does not apply to these pre-RIA investors. 

In this case, IIUSA challenged the revised two-year capital investment sustainment requirement. First, IIUSA argued that such revision violated the Administrative Procedure Act (“APA”). According to IIUSA, Congress intended to codify, not replace, the existing two-year sustainment period during conditional residency when it enacted RIA. IIUSA believed the new interpretation is a legislative rule as the revision amends binding regulations by changing the sustainment period from conditional residency to a fixed two-year period starting at the date of investment. However, such a rule-making was conducted without a formal notice-and-comment rulemaking process. Because USCIS acted contrary to the APA rulemaking requirement and was in excess of its statutory authority, USCIS’s action is unlawful, IIUSA argued. Additionally, IIUSA claimed this revision was arbitrary and capricious. Specifically, IIUSA argued that USCIS failed to provide a reasoned explanation or consider stakeholder reliance interests. Nor were there any considerations given to alternatives or the effect on job-creating projects requiring long-term investment. The sudden change of the RIA, according to IIUSA, harms regional centers, disrupting investments structured under the prior rule, and creating widespread confusion and market instability. 

IIUSA proposed to hold the case in abeyance while USCIS completes formal notice-and-comment rulemaking on a firm timeline to adopt a new sustainment period regulation. Specifically, IIUSA proposed that upon settlement, USCIS should remove the policy guidance regarding the challenged two-year sustainment requirements. They also suggested that investors who invested before the settlement should benefit from the October 2023 policy, even though IIUSA disputes its legality, in order to protect their good-faith investments. Investors who invest after the settlement date are subject to the new sustainment rule adopted through notice-and-comment rulemaking.

USCIS was willing to hold the case in abeyance while it undertakes formal notice and comment rulemaking to announce a new sustainment period regulation, estimated for November 2025. USCIS, however, has not committed to a specific timeline to promulgate a final rule. USCIS found IIUSA’s proposal for a firm rulemaking timeframe and applying new rules to future investors impractical. According to USCIS, if USCIS sets firm rulemaking deadlines and then applies the new rules to investors who file after a settlement but before the new rules are finalized, those investors would have to meet eligibility requirements based on rules that did not exist when they filed. This could be considered impermissibly retroactive, and investors might sue the agency for changing the rules after they filed their petitions, arguing that they could not have known the standards when they applied. USCIS pointed out that some investors, especially from countries like China, face long visa backlogs. For example, some investors who filed over 10 years ago still have not received their conditional green cards due to limited visa numbers. Under the old rules, these investors must keep their investment at risk for an unknown period while they wait for visa availability. If the old rules are applied to new investors, these people could also face indefinite sustainment periods if visa backlogs continue, leading to legal challenges from investors.

While this case remains pending, it is important for regional center investors to stay informed about the latest policy changes and the status of the litigation. Investors who filed their petitions before March 2022 (pre-RIA investors) are not impacted by this lawsuit. They must continue to sustain their investments throughout the two-year period of conditional residency. However, investors who filed after the RIA was enacted (post-RIA investors) could be affected if IIUSA succeeds in court. IIUSA petitioned USCIS for rulemaking to establish a five-year sustainment period pursuant to 5 U.S.C. § 553(e) and 6 C.F.R. §§ 3.1–3.7. Any such change would likely apply only to future investors and not retroactively. If the court reinstates a longer sustainment period, post-RIA investors might need to redeploy their capital to comply with the new rule. Additionally, because the court is no longer bound by the agency’s interpretation of the law after the end of the Chevron doctrine, it is possible that the judge will make an independent determination in this case.

We will continue to closely monitor the progress of this case and keep you informed of any significant developments.