By Taher Kameli and Chathan Vemuri
On October 27 of 2020, the D.C. Circuit Court of Appeals invalidated a United States Citizenship and Immigration Services (USCIS) denial of an EB-5 immigrant investor’s petition under its Loan Proceeds Policy. The DC Circuit invalidated the Loan Proceeds Policy, under which cash from loans were treated as indebtedness and had to be collateralized by the investor’s assets. This policy, which was adopted in 2015, differed from its older policy where the USCIS only looked at “whether capital resulting from secured loans was secured by the assets of the investor (indebtedness),” and that the new commercial enterprise’s assets were not used to secure that indebtedness. The two appellants, who were Chinese and Japanese nationals respectively, contested this policy as they wanted to invest $500,000 that they individually borrowed from their corporations, in their EB-5 project, but which were not secured by their assets. The D.C. Circuit ruled that loan proceeds could not be treated as “indebtedness” as per the USCIS’s Loan Proceeds Policy but rather as cash and that it could be invested without impediment. Collateralization requirements for investing loan proceeds was therefore improper. The ruling was held to be a landmark victory for EB-5 immigrant investors, as it now allowed them more options for investment funds, including unsecured loans.
The monumental nature of this decision has finally paid off for one of the parties behind this landmark case, Huashan Zhang. On April 2021, the USCIS approved Zhang’s I-526 Immigrant Petition by Alien Investor to receive an EB-5 Immigrant Investor classification. This entailed approving his use of the unsecured loan of $500,000 from his corporation to invest in his EB-5 project. By granting this petition, the USCIS demonstrated how much Zhang v. USCIS has changed the EB-5 program. Allowing EB-5 immigrant investors the opportunity to fund their projects via different sources that are not subject to scrutiny as potentially unlawful or requiring collateralization from their own money, makes it easier for EB-5 investors to participate in the program and successfully immigrate to this country. Unsecured loans not funded by their own money can be legitimate, providing some relief for investors.
Yet despite this victory and acceptance of it by the USCIS, the USCIS’s formal rules still do not fully comport with the recent ruling. The USCIS manual still requires that EB–5 investors’ loans must be secured by their own assets. Even though the USCIS accepted the DC Circuit ruling in its own decision to approve Zhang’s petition, this inconsistency leaves doubt as to whether they’ve fully committed to it for all EB-5 investors. Yet the recent decision to approve Zhang’s I-526 petition indicates their acceptance of the DC Circuit ruling’s soundness and the USCIS has indicated that it would be reconsidering past petitions that had been denied on the basis of lack of collateralization of loans.
Furthermore, even though the DC Circuit sided with investors about whether to fund projects with unsecured loans, the lack of clarity as to USCIS’s own commitment to the ruling aside from approving one petition should still leave EB-5 investors with caution. Absent an indication of a firm commitment to the ruling on the part of USCIS, such as permitting use of unsecured loans in its manual, EB-5 investors should still be careful and consult with immigration attorneys before proceeding to fund their EB-5 projects with unsecured loans. Looking to any changes in the law, whether on the part of the USCIS, or on the part of other courts considering the DC Circuit ruling would be necessary caution before other EB-5 investors make any decisions about using unsecured loans.
In spite of this, the fact that the USCIS decided to adhere to this ruling in its decision to grant Zhang’s I-526 Petition is an encouraging sign that the USCIS is taking the decision’s ability to streamline the EB-5 investment process seriously. Whether it becomes formal USCIS policy remains to be seen.
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 Costa, Christopher, USCIS Approves Zhang EB-5 Petition Following D.C. Circuit Ruling, Nat’l Law Rev. (May 17, 2021) https://www.natlawreview.com/article/uscis-approves-zhang-eb-5-petition-following-dc-circuit-ruling
 Id. (The nationals were Huashan Zhang and Masayuki Hagiwara respectively)
 Barnett, Joseph, An Overview of the Groundbreaking EB-5 Case “Zhang v. USCIS”, Green Card By Investment (May 13, 2021) https://greencardbyinvestment.com/EB5-news/zhang-uscis-overview-investors-unsecured-loans/
 Zhang v. USCIS, Investors May Be Able to Use Unsecured Loans, EB-5 Daily (May 13, 2021) https://www.eb5daily.com/2021/05/zhang-v-uscis-investors-may-be-able-to-use-unsecured-loans/