Tuesday, October 14, 2014

“Tenant-Occupancy” Methodology for Establishing Job Creation in EB-5 Cases

One of the most common forms of job creation is tenant occupancy. Tenant occupancy methodology allows a foreign investor to take credit for the employees of the tenant. Until recently, the USCIS has been reluctant to approve a business plan that relied upon tenant occupancy. 

However, on November 14, 2013, the USCIS formally approved a regional center based on tenant occupancy. Examining the USCIS’ decision gives guidance on how one can improve approval of a regional center based on tenant occupancy. Applicants and petitioners must create a plan that will project, by using economically and statistically valid forecasting tools, the number of newly created jobs that would not have been created but for the economic activity of the EB-5 commercial enterprise.  This proposed plan is then evaluated on a case-by-case basis using the preponderance of the evidence standard. The USCIS will generally require an evaluation of the verifiable detail provided and then examine the overall reasonableness of the methodology as presented. The key to get the proposal approved is to show that there is a reasonable causal link between the EB-5 enterprise and the job creation that would allow for the attribution of the tenant jobs to the EB-5 enterprise.

There are some difficulties and concerns with using this methodology that are worth mentioning. In order to successfully present the plan to the USCIS, the investor must establish that the newly projected jobs will be “newly” created and not simply relocated from a different location. It is also important to keep in mind that the USCIS only provided very generic guidelines on how the USCIS evaluates each investor’s proposal, so it is very important to examine prior proposals that have been approved in order to increase the chances of getting an approval.

The investors can also utilize the facilitation-based approach. This alternative method will require the investor to demonstrate that the economic benefits provided by a specific space project will remove a significant market-based constraint. The investor can demonstrative this by showing how a specific commercial space project can correct a market imperfection and create a new labor demand and income that will create specified prospective number of tenant jobs in the invested space.