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Immigration Law Blog

Trump Administration may Implement Immigration Worksite Enforcement Measures

By:  Santiago J. Padilla, Esq.

The American Immigration Lawyers Association ("AILA"), of which I am a member, came out this week and advised that it expects the Trump Administration to move forward with significant worksite enforcement actions, including immigration raids of employers (as had been done in the Bush Administration, e.g., Swift & Co. in 2006), site visits for companies that hire nonimmigrant workers (e.g., H-1B, L-1A, J-1, etc.), and Form I-9 enforcement, including auditing of the E-Verify process. Based on this warning, U.S. employers need to make sure that their house is in order.

In particular, all employers must ensure that their Form I-9 policies ensure proper completion of the Forms I-9 for all employees and should seek to implement E-Verify when possible. The Form I-9 is an interestingly complex form, because it contains several traps for the unwary. For example, a Form I-9 must be filled-out for every new employee within three (3) business days of commencing work with the employer. If that does not happen, the employer is subject to penalties. While many may think that this is simply a "technical" violation, the Department of Justice's Office of the Chief Administrative Hearing Office ("OCAHO") has held that such failure is a "substantive" violation that could subject the employer to significant fines. In particular, while the employer has an opportunity to correct "technical" violations, there is no opportunity to correct "substantive" violations.

Other traps include using the wrong version of the Form or a version that is outdated. Specifically, this happens when an employer seeks to correct its failure to have filled-out the Forms I-9 and then seeks to use the current form.  Yet, under the law, the employer must use the Form that was current at the time that the employee commenced work, otherwise the employer is again subject to penalties. The most common error that employers commit is using a current Form I-9 for employees that commenced work several years ago. That is incorrect except for employees that need "re-verification", which generally means that their immigration status has changed and the previous Form I-9 must be updated.

In any case, to the extent Form I-9 audits and enforcement will increase during the Trump Administration, it is imperative for employers to prepare as soon as possible, such as performing informal internal audits.

Summary of EB-5 Program for Developers

By:  Santiago J. Padilla, Esq.

Congress added the EB-5 category as part of the Immigration Act of 1990 to stimulate the creation of new jobs through investment by immigrants. Under the EB-5 Program, if an immigrant invests $1,000,000 in a U.S. business that creates 10 direct full-time jobs, that immigrant investor can obtain permanent residency or a "Green Card" for himself or herself and his or her dependents. However, if the U.S. business is located in a Targeted Employment Area ("TEA"), the investment threshold is reduced to $500,000. A geographic area is classified as a TEA if its unemployment rate is at least 150 percent of the national average.

This formulation, however, resulted in being somewhat problematic for most businesses because the "direct jobs" that a business can normally create is usually limited. Indeed, few businesses have the capacity of hiring 50 to 100 workers, regardless of the investment.

However, if the business or project is affiliated with a government-approved "Regional Center," an additional category of jobs may be counted towards the job creation requirement - these are the so-called "indirect jobs". The Regional Center concept was not part of the original legislation enacted in the year 1990. The Regional Center Program was enacted in the year 1992 in response to the fact that very few businesses could generate a sufficient number of direct jobs to support a large EB-5 business or project. Under the Regional Center Program, "indirect jobs" as well as "induced jobs" can be counted towards the job creation requirement. Indirect jobs are those held by the potential suppliers to the newly created business or project, e.g., the workers that supply and deliver linens to the hotel project after it opens for operations. Induced jobs are a subcategory of indirect jobs and are those generated when workers (both direct and indirect) spend part of their increased compensation on consumer goods and services. In any case, the counting of indirect jobs and induced jobs typically yields dramatic increases in the size of the capital that can be raised.

Therefore, under the EB-5 Regional Center Program, multiple number of immigrant investors can invest in a single U.S. business or project and, provided that 10 direct, indirect and/or induced jobs are created for each immigrant investor, all of the immigrant investors would be able to obtain permanent residency in the United States. It should be noted that the calculation of indirect and/or induced jobs requires a sophisticated economic analysis of the effects of the project on the local community. Under some economic models, a multiplier factor is applied to the construction spending or operating revenues to arrive at the number of jobs created. A separate multiplier applies to calculate the direct jobs and the indirect jobs likely to be created by the project. The multiplier factor varies depending on a number of inputs or variables, such as project location, industry or property type, and construction activity and techniques.

Unique Opportunities for Developers

Nevertheless, from a developer's perspective, the EB-5 Regional Center Program presents a unique opportunity to raise capital at fairly low interest rates because the immigrant investor's primary motivation is obtaining permanent residency and not necessarily obtaining a return on his or her investment. Therefore, most developers seek to either obtain Regional Center status for their project or affiliate with an existing Regional Center so that indirect jobs can be counted towards the job creation requirement. The great majority of smaller developers choose to affiliate with a Regional Center particularly because obtaining Regional Center status is time-consuming and rather expensive for a small project. As such, only the largest projects seek to gain Regional Center status on their own.

TEA Determination

In addition to affiliation with a Regional Center, one of the most important first steps that a developer needs to determine is whether or not the project will be located in a TEA so that the immigrant investors will be able to invest the reduced amount of $500,000. Determination of the TEA is made by designated State authorities. For example, in Florida determination of the TEA areas is made by the Department of Economic Opportunity of the State of Florida. However, prior to committing significant resources in acquiring land, etc., the developer should obtain a determination letter from the designated State authority, although USCIS is the final authority as to whether a project is located within a TEA.

Project Capital Stack

EB-5 capital can fill any space in the capital stack of a project and may take the form of debt or equity; ranging from unsecured loans to senior mortgage loans to equity. However, in most cases, only about 30% to 40% of the total funds required for the project come from EB-5 immigrant investors.

Two basic investment approaches are available to invest the immigrant investor's equity capital in the project - the "loan model" and the "equity" model. Most EB-5 investments are structured under the loan model. Under the loan model, all of the immigrant investor's capital is deployed by the new commercial enterprise ("NCE") to the job creating entity ("JCE") as a loan. Usually, the Regional Center forms the NCE that makes a loan to the JCE. The loan could be secured by a first or junior mortgage against the property, secured by equity interests (mezzanine financing), or even unsecured.

Simply stated, the third- party Regional Center (or often its principals, affiliates or other related parties, referred to as "affiliates") acts as a "middleman" between the investors and the developer JCE, utilizing the investors' capital as the loan proceeds.

Securities Law Compliance

Another aspect of an EB-5 project is that the developer should also affiliate with a licensed securities broker-dealer in order market the investment opportunities. Because capital contributed by foreign nationals under the EB-5 Program typically takes the form of an investment in a business entity, the Securities and Exchange Commission has taken the position that EB-5 investment offerings are subject to U.S. securities laws, even though EB-5 investments may be mostly offered outside the United States to non-U.S. Residents.

In many cases, a migration agent in the foreign country or countries that are targeted as potential EB-5 immigrant investor countries may need to be engaged in order to raise capital in that particular country. Generally, at the time the developer is raising capital, most investors will live in foreign countries rather than in the United States. In such cases, migration agents market the securities of EB-5 Projects to investors overseas. These intermediaries are usually located in the same country as the investors and speak the same language as the investors. However, some investors may live in the U.S. under a temporary visa, such as a student visa or a work visa. These persons are more likely to be solicited by securities broker-dealers in the United States.

Immigrant Investor's Exit Strategy

The immigration laws require that the immigrant investor's investment be completely "at risk" and, as such, there can be no guarantee that the monies will be returned to the immigrant investor. Nevertheless, most loan structures provide for a repayment of the loan made to the JCE (not to the immigrant investor), but such repayment cannot occur prior to the final approval of the immigrant investor's permanent residency. Moreover, the timing of this "exit" usually depends upon the JCE's liquidity and ability to repay the loan or to distribute equity. In most cases, an immigrant investor will not be able to "exit" for at least 5 years, not only because of the project's timeline and ramping up its production of income, but also because of the retrogression in the number of EB-5 visas that are granted every year.

Process to Affiliate with a Regional Center

In order to affiliate with a Regional Center, the developer must apply for affiliation and sign an Affiliation Agreement. In this affiliation, the Regional Center will usually request an affiliation fee (normally $20,000 to $50,000) and also require that each immigrant investor pay an administrative fee for investing in the project (normally $30,000 to $50,000).

An application to become affiliated with a Regional Center, usually requires the developer to prepare the following documentation and present the same to the Regional Center for approval:

(1) Business Plan (which complies with Matter of Ho, 22 I&N Dec. 206 (Assoc. Comm'r 1998));

(2) Corporate Documents of the business entities involved;

(3) Summary of the capital stack of the project, including equity contributions, commercial financing, EB-5 funds, and other sources of funds;

(4) Private Placement Memorandum;

(5) Summary of Marketing Plan to attract EB-5 investors;

(6) Economic Analysis from a qualified economist indicating that the project will create the requisite direct and indirect jobs; and

(7) Escrow Agreement for the deposit of EB-5 funds.

Pooled Investments and Multiple Businesses are Allowed under EB-5 Program

By: Santiago J. Padilla, Esq.

Under the EB-5 Program, it is widely known that an investor and his immediate family may obtain a permanent residency or a "Green Card" by investing $1 million (or $500,000 if the business is located in a high unemployment area) in his or her own business and creates the requisite number of jobs within two years of the adjudication of the EB-5 Petition.

A little know aspect of this program is that under the Direct Investment EB-5 Program, the investments of several investors can be "pooled". This means that one business can be used as the basis for the petition of more than one immigrant investor. Each immigrant investor must invest the required amount of capital and each immigrant investor's investment must result in the required number of jobs. In addition, this also means that the business can have owners who are not seeking to enter the EB-5 Program, provided that the source(s) of all capital invested is (or are) identified and all invested capital has been derived by lawful means. Therefore, in the example used above, so long as the immigrant investor manages the business, others can also invest in the business, regardless of whether they are seeking to obtain a visa.

Another unique aspect of the EB-5 Direct Investment Program is that an investor may invest the required capital in multiple businesses. In fact, an immigrant investor may diversify his or her total EB-5 investment across a portfolio of businesses or projects, so long as the minimum investment amount is placed in a single commercial enterprise. However, the important aspect is that the capital be deployed through a single commercial enterprise and all jobs are created directly within that commercial enterprise or through the portfolio of businesses that received the EB-5 capital through that commercial enterprise. For example, if the investor invests $1,000,000 in a commercial enterprise and that company thereafter deploys $600,000 of the investment toward one business that it wholly owns, and $400,000 of the investment toward another business that it wholly owns. In this case, the two wholly-owned businesses would have to create an aggregate of ten new jobs between them. Yet, it should be noted that an investor cannot qualify, on the other hand, by investing $600,000 in one commercial enterprise and $400,000 in a separate commercial enterprise.

The EB-5 Direct Investment Immigrant Visa - Unique Advantages

By:  Santiago J. Padilla, Esq.

Many clients are aware of the EB-5 Regional Center Program and the path to obtain a Green Card by investing in a project that is promoted by a Regional Center. Indeed, there are a great multitude of EB-5 Projects and there is much discussion regarding which project has more advantages. However, some investors find the EB-5 Regional Center Program undesirable for several reasons, including but not limited to (a) the lack of control that they have over the direction of the business, (b) the limited upside potential of the business, and (c) the inflexibility of changing the nature of the business should something go wrong. Indeed, many entrepreneur investors would rather invest in their own business where they themselves determine and are responsible for the success or failure of the business.

For those entrepreneur investors, there is the EB-5 Direct Investment Program, which is actually the original formulation of the EB-5 Immigrant Visa. Under that program, the investor invests the required $1 million (or $500,000 if the business is located in a high unemployment area) in his or her own business and creates the requisite number of jobs within the time period required. Because I believe that this option is attractive for many entrepreneurs, in this blog, I indicate a couple of unique aspects of the EB-5 Direct Investment that should be taken into consideration.

First, under the EB-5 Direct Investment Program, in some cases the investor does not have to start a new business, but rather, he or she can invest in an existing business. Specifically, the immigrant investor can invest in a business, regardless of when that business was first created. The only condition is that a "substantial change" result in the net worth or the number of employees. In this respect, "substantial change" is defined as a 40 percent increase either in the net worth, or in the number of employees, so that the new net worth, or number of employees amounts to at least 140 percent of the pre-expansion net worth or number of employees.

For example, if an immigrant investor invests in an existing restaurant business which has 8 full-time employees, that investment would meet the requirements of the EB-5 Direct Investment Program if the number of full-time employees is increased to 12. As such, in this example, the investor was not required to hire 10 new full-time employees (as is usually the case under the EB-5 category), but rather only enough employees to increase the number of full-time employees by 40%.

A second unique aspect that I want to emphasize is that the new full-time jobs need not be created immediately. The immigrant investor has a reasonable period of time not exceeding two years within which to create the new full-time jobs. Therefore, in the example above, the additional 4 full-time jobs can be created within two years after the adjudication of the I-526 Petition. This gives the immigrant investor a significant period of time within which to actually hire the new employees. However, it should be noted that the Business Plan should clearly identify the new jobs that will be created, why the new jobs will be needed, and when the new jobs will be created.

Organizing a Real Estate Investment for E-2 Visa Purposes

By: Santiago J. Padilla, Esq.

With the great influx today of foreign investment into the United States, many clients have asked me whether the purchase of real property is sufficient to obtain an E-2 treaty investor visa. The question is a good one, but the answer is not easy to decipher from the regulations.

First, the Immigration and Nationality Act provides for the possibility of obtaining nonimmigrant visa status for a citizen of a country with which the United States maintains a treaty of commerce and navigation who is coming to the United States to develop and direct the operations of an enterprise in which the national has invested, or is in the process of investing a substantial amount of capital. Specifically, the Code of Federal Regulations at 8 C.F.R. 214.2(e)(2) provides as follows:

(2) Treaty investor. An alien, if otherwise admissible, may be classified as a nonimmigrant treaty investor (E-2) under the provision of section 101(a)(15)(E)(ii) of the Act if the alien:

(i) Has invested or is actively in the process of investing a substantial amount of capital in a bona fide enterprise in the United States, as distinct from a relatively small amount of capital in a marginal enterprise solely for the purpose of earning a living;

(ii) Is seeking entry solely to develop and direct the enterprise; and

(iii) Intends to depart the United States upon the expiration or termination of treaty investor (E-2) status.

These requirements seem fairly straight-forward, but it is difficulty to glean from the plain language of these provisions whether or not the purchase of real estate would meet the enumerated requirements. However, Section 214.2(e)(13) gives us an indication because it provides as follows:

"The enterprise must be a real, active, and operating commercial or entrepreneurial undertaking which produces services or goods for profit. The enterprise must meet applicable legal requirements for doing business in the particular jurisdiction in the United States."

This provision has been interpreted to mean that the investor is expected to be actively engaged in developing and directing the investment; in other words, passive investments, such as non-committed funds in a bank account or speculative investments in stocks or undeveloped land, do not qualify because such investments do not require the investor to direct or develop a commercial enterprise.

Therefore, viewed in this light, a real estate investment whereby the investor simply holds title to one parcel of property would not constitute a "bona fide enterprise" as required by the regulations. However, if the enterprise involves purchasing and selling multiple real properties, or renovating multiple real properties, or managing multiple parcels of rental property, such as with an apartment building or a strip mall, such investment may very well qualify as a "bona fide enterprise."  The key is whether or not the activity constitutes a "bona fide enterprise" taking into account all of the circumstances.  For example, if the investor owns one rental property, it is clear that there is no "bona fide enterprise" because this is, essentially, a passive investment.  However, if the investor owns twenty-five separate condominium units which are being maintained, renovated and rented from time to time, then in that case, it would appear the investment is a "bona fide enterprise."

Yet, each investment must be viewed individually to determine whether or not it meets the other requirements of the law. For example, the enterprise cannot be a "marginal enterprise solely for the purpose of earning a living" for the investor. This means that the enterprise ought to employ several individuals in order to qualify. In short, the business must contribute to the U.S. economy by employing U.S. workers.

The Dilemma of the L-1A Nonimmigrant Visa for Small Businesses

By: Santiago J. Padilla, Esq.

The U.S. immigration laws (the Immigration and Nationality Act) provides nonimmigrant visa status for an intracompany transferee who, within the last three years, has been employed abroad continuously for one year, and who will be employed by a branch, parent, affiliate, or subsidiary of that same employer in the U.S. in a managerial or executive capacity. This is the L-1A transferred multinational executive classification. Specifically, the requirements for the L-1A visa are as follows:

  • The applicant must have worked continuously for an affiliate or subsidiary of a U.S. employer for one year of the last three years prior to entering the U.S. in nonimmigrant status.
  • The applicant's employment with the foreign affiliate or subsidiary must have been in a managerial or executive capacity.
  • If the U.S. employer is an affiliate, the foreign and U.S. employer must have the same or nearly the same shareholders or controlling block of owners.
  • The applicant must be coming to the U.S. to work for the U.S. employer as a manager or executive employee.
  • The U.S. employer must have a commercial office or other commercial installations or facilities.

At first blush, this formulation appears to be straight-forward and relatively easy to meet. Indeed, for multinational corporations such as Toyota, Microsoft, General Motors, and other companies with executives throughout the world, it is very easy to comply with the elements. And, in fact, until recently, it was relatively easy for a small to medium-sized company to also meet the required elements. Therefore, when a small foreign company wanted to expand in the U.S., it would establish a subsidiary in the U.S. and then transfer one of its executives with confidence that a visa could be obtained.

However, meeting the required elements is becoming very difficult for a small company to meet for one specific reason. Currently, USCIS requires a visa candidate to clearly show that the visa candidate is an "executive," which according to the current interpretation means a person who has at least two to three levels of subordinates, with several of those subordinates being managers and/or having university degrees. More importantly, under the Immigration and Nationality Act, as amended, "an employee who primarily performs the tasks necessary to produce the product and/or to provide the service(s) of the organization" does not qualify for an L-1A visa. That person is not an executive or manager.

This makes it almost impossible for a small company to obtain an L-1A visa for a transferred executive especially because of the enormous economic burden that this would entail. Indeed, most small foreign companies that desire to expand to the U.S. do not have a complex corporate structure. In fact, in many cases the owner of the foreign enterprise is himself the visa candidate, who may only have a handful of subordinate employees and who usually performs the day-to-day tasks of the company. Yet, that person will not qualify for an L-1A visa. Many claim this to be unjust. However, that is precisely how USCIS and the courts are currently interpreting the law. See Brazil Quality Stones, Inc. v. Michael Chertoff et al., Case No. No. 06-55879 (9th Cir. July 2008).

Therefore, in order for a company to have success in transferring an employee to the U.S., the company must show that the individual was an executive prior to coming to the U.S. and will be an executive in the U.S. That means that the visa candidate must have at least two if not three levels of subordinates, with several of those subordinates being managers and/or persons with university degrees. Most importantly, the visa candidate should not be performing the day-to-day tasks that are required to produce the product or service provided by the company.

Children Attending Public School on a B-1/B-2 Tourist Visa

By:  Santiago J. Padilla, Esq.

As I have indicated in previous posts, an individual that enters the United States with a B-1/B-2 tourist/business visa is not permitted to study in the United States. See 8 C.F.R. 214.2(b)(7), which specifically states as follows:

"(7) Enrollment in a course of study prohibited. An alien who is admitted as, or changes status to, a B-1 or B-2 nonimmigrant on or after April 12, 2002, or who files a request to extend the period of authorized stay in B-1 or B-2 nonimmigrant status on or after such date, violates the conditions of his or her B-1 or B-2 status if the alien enrolls in a course of study. Such an alien who desires to enroll in a course of study must either obtain an F-1 or M-1 nonimmigrant visa from a consular officer abroad and seek readmission to the United States, or apply for and obtain a change of status under section 248 of the Act and 8 CFR part 248. The alien may not enroll in the course of study until the Service has admitted the alien as an F-1 or M-1 nonimmigrant or has approved the alien's application under part 248 of this chapter and changed the alien's status to that of an F-1 or M-1 nonimmigrant."

As such, with certain exceptions, an F-1 visa (for academic students) or M-1 visa (for vocational students) must be obtained before enrolling in classes or courses of study. Moreover, the law states that any B-1/B-2 visitor who studies unlawfully will not be eligible to change status to another visa classification.

A common issue arises when a family is in the process of requesting a change of status to a non-immigrant employment based visa, like an L-1A, E-2, or H-1B visa, and the children of the alien being sponsored need to attend public school. The Foreign Affairs Manual provides that children who are entitled to derivative nonimmigrant classification may attend school on a B visa. See 9 FAM 41.11, Note 5.2. Moreover, the Department of State Visa Office has concurred with this practice and has expressly stated that children who may be entitled to derivative non-immigrant status may attend public school on a B visa. See Visa Office Response to AILA/DOS Liaison Meeting dated March 23, 2006. This also applies when the parents of the children are in B status. Specifically, in response to the question as to whether or not a child may attend public school on a B-2 tourist visa, the Visa Office wrote as follows:

"DHS and VO have agreed that if an alien parent is in the U.S. on a legitimate long-term stay on B status, an accompanying child can engage in studies on B status provided that the child's principal purpose for being in the U.S. is to accompany the parent, not to engage in study. This is consistent with the FAM guidance:

9 FAM 41.11 N5.2 Classification of Children Who Will also be Attending School

(TL:VISA-2; 08-30-1987)

A principal alien's child entitled to derivative nonimmigrant classification from the principal alien is not required to qualify under INA 101(a)(15)(F) as a nonimmigrant student, even though the child will attend school in the United States while accompanying the principal alien."

See Visa Office Response to AILA/DOS Liaison Meeting dated March 23, 2006, at page 8. As such, when the parents of the alien child are here for a legitimate purpose, such as organizing the company that will sponsor the nonimmigrant visa, his or her dependent children are able to attend public school on a B-1/B-2 visa.

In addition, while 8 U.S.C. ยง214(L) and Section 41.61 of the Foreign Affairs Manual provide that an alien may not attend public school without reimbursing the school for the cost of such education, those sections only apply to foreign students in F-1 status. Those provisions do not apply to dependents of foreign nationals in the U.S. on long-term non-immigrant visas. See State Dept. Reminder re F-1s in Public Schools, posted March 28, 2000, attached hereto. Therefore, not only is public school attendance authorized, but nowhere in the regulations does it require the beneficiary parents of such children to pay for the public school education.

Denial of an Immigrant Petition Does Not Necessarily Invalidate Prior Non-Immigrant Status

By:  Santiago J. Padilla, Esq.

An immigration law issue that I am sometimes asked is whether or not the filing of an application for permanent residency invalidates the nonimmigrant visa of the applicant.  This is a highly sophisticated immigration law question that many immigration practitioners have not dealt with.  However, the answer is rooted in an analysis of the immigration regulations and precedent decisions.

The example is as follows - an O-1 Visa holder desires to apply for permanent residency and applies under the Employment Based First Preference as a person with extraordinary ability. Therefore, the individual files an I-140 Petition and an I-485 Application for Adjustment of Status. However, USCIS subsequently denies the I-140 Petition (including the travel permit that the petitioner obtained). The question is whether or not the O-1 Visa is still valid under the "immigrant intent" doctrine which provides that after having filed a residency petition, the individual cannot apply for a classification that does not have "dual intent."

In fact, the immigration regulations seem to provide that the only non-immigrant classification that is allowed to have "dual intent" is defined in 8 CFR 214.2(h)(16)(i) - H-1C and H-1B and 8 CFR 214.2(l)(16) - L-1 and their dependents.

Therefore, the question is whether or not an H-1B, L, P-1 and/or O-1 visa holder that applies for permanent residency loses his or her underlying nonimmigrant visa.

This issue has been conclusively addressed by the Bureau of Immigration Appeals (BIA) in the precedent decision of Matter of Hosseinpour, 15 I&N Dec. 191, 192 (BIA 1975); 70 No. 42 Interpreter Releases 1444, 1456-58 (No. 1, 1993). The decision includes a discussion of the evolution of Section 245 of the Immigration and Nationality Act and the maintenance of nonimmigrant status while seeking adjustment of status. Specifically, the 1952 Act provided that "Any alien who shall file an application for adjustment of his status under this section (245) shall thereby terminate his nonimmigrant status."  Id.  However, a 1958 amendment to the Act specifically eliminated this provisionSee Public Law NO. 85-700, August 21, 1958.  In recognition of this, the Bureau of Immigration Appeals determined in Hosseinpour that Congress intentionally eliminated the termination provision so that maintenance of nonimmigrant status would be possible for adjustment of status applicants.

Despite the BIA's decision in Hosseinpour, some practictioners still contend that a residency applicant risks losing his or her nonimmigrant status upon filing a residency petition.  Therefore, the Texas Service Center of USCIS recently clarified that

"Applicants who are in a valid non-immigrant status and file for Adjustment of Status and are subsequently denied may resume a pre-existing and still valid non-immigrant status for duration of that non-immigrant status authorized stay."

See TSC Clarification to American Immigration Lawyers Association, February 11, 2008 Q&A. As such, it is clear that most H-1B, O-1, L and other nonimmigrant visa holders will not automatically lose their nonimmigrant status when they apply for permanent residency in the United States, regardless of whether or not the petition is denied.

Capital Contributions were Investment for E-2 Visa Purposes

By:  Santiago J. Padilla, Esq.

In a recent case before the United States District Court for the Southern District of Florida, the court reviewed whether the United States Citizenship and Immigration Services (USCIS) abused its discretion by refusing to classify capital contributions, made by an owner seeking an E-2 Treaty Investor employment visa, as a treaty-qualifying investment.

The E-2 non-immigrant visa was established by Congress to promote capital inflow from foreign investors and create new employment opportunities for United States citizens. Particularly in light of the current economic climate, capital investments that create jobs are needed even more. The United States currently has reciprocal investment treaties with 81 countries that permit foreign nationals to acquire employment-related work visas if they make qualifying investments in the United States. Under the law, E-2 Treaty Investor Visa applicants are required to invest a "substantial" amount of capital in a U.S. enterprise.  However, the regulations do not provide an exact dollar amount of what is a "substantial" amount of capital. In fact, the United States Citizenship and Immigration Services bases its decisions regarding sufficiency of the investment on the type of business in question. In addition, the business must be able to generate sufficient income within five years of the investment.

In All Bright Sanitation of Colorado, Inc. v. U.S. Citizenship and Immigration Services, Case No. 10-cv-21808-SCOLA (S.D. Fla. Sept. 11, 2012), All Bright's owner and sole shareholder invested more than $500 thousand to purchase an established garbage collection business. The investment consisted of gifted garbage collecting equipment, gifted cash, and two loans, one of which was not backed by collateral, but had a signed personal guaranty of payment.

Specifically, Simon Geisler, a citizen of Austria, formed and incorporated All Bright Sanitation, a Colorado corporation of which he was the sole owner and shareholder. The E-2 Visa Application indicated that Geisler, through All Bright, had invested a total of $653,329 in order to purchase an existing garbage collection business, Canyon Waste & Recycling, Inc. ("Canyon"). The claimed investment was comprised of $226,690 in equipment, $375,000 in loans, and the rest in cash. The cash had allegedly been given to Geisler by his father, who owned and operated another waste management company in North Carolina. Geisler's father had also gifted the garbage collection equipment, for $1 directly to All Bright. There were two loans: one from Canyon's owners to All Bright for $175,000; and another from LEAF Funding, Inc., a third party lender, to All Bright for $200,750. Although there was no collateral on the $175,000 loan, Geisler signed a personal guaranty for payment. The garbage collection equipment, gifted by Geisler's father, was pledged as collateral on the $200,750 loan. That loan was also backed by a personal guaranty from Geisler.

The United States Citizenship and Immigration Services denied All Bright's E-2 Treaty Investor Application stating as follows. First, USCIS stated that the equipment did not qualify as an investment because the owner did not possess and control the equipment, since the corporation and the sole shareholder were two separate entities. In other words, the sole shareholder did not personally have actual title or ownership of the equipment at any time. Next, USCIS asserted that the loans could not count as an investment because they were not secured by the personal assets of the owner.

Upon appeal, the Court reversed the denial of All Bright's E-2 Treaty Investor Application by the United States Citizenship and Immigration Services. First, the Court determined that the regulations do not require the owner to have actual title of equipment, just possession and control of them. In this case, All Bright's shareholder had possession and control because he had the keys to the equipment and then pledged it as collateral for a corporate loan. Second, the Court held that the loans did constitute investments because the owner signed personal guaranties for both loans. Finally, the Court dismissed any argument that the owner was acting as a "front," because gifts are permitted to be counted toward the investment as long as they originate from a legitimate source.  On this point, the Court specifically stated as follows:

"The Agency's argument that Geisler was a mere "front" for his father's investment is also unpersuasive because the regulations permit gifts to be counted towards an investment, so long as the gifts come from a legitimate source and are in the "possession" and "control" of the treaty investor. Thus, the fact that the equipment originated with Geisler's father (thereby arguably making him a "front" for the investment) would appear irrelevant, if the equipment was thereafter "possessed" and "controlled" by Geisler and used in his investment with Canyon."

All Bright Sanitation of Colorado, Inc., 2012 U.S. Dist. LEXIS 128825, pg. 33-34. With an unfortunately large number of Requests for Evidence and denials issued by the United States Citizenship and Immigration Services, foreign investors and employers have hope that they will think twice about arbitrarily denying future applications.