13 Jan Recent AAO Decisions Highlight Importance of EB-5 Business Plans
The Administrative Appeals Office (AAO) recently released copies of decisions from 2013 on appeals denying EB-5 Visas to applicants. In fourteen of the twenty-six decisions from January to April of 2013, the failure to provide an adequate comprehensive business plan was a factor in the denial. This highlights the importance of providing a detailed and comprehensive business plan to accompany all EB-5 Petitions.
EB-5 Visas
The Immigration and Nationality Act allows alien investors and entrepreneurs to petition for conditional residency in the United States when investing the requisite amount of lawfully acquired capital in a business that will benefit the U.S. economy and create jobs for at least ten full-time employees. The investment required is $1,000,000, unless the business is in a Targeted Employment Area (TEA), in which case the requisite amount is lowered to $500,000. An ar ea qualifies as a TEA if it is a rural area or has experienced unemployment of 150% of the national unemployment average. The ten jobs created must be for U.S. citizens, permanent residents, or other immigrants who are authorized to work in the U.S. These positions may not be filled by the petitioner, or by his or her spouse, sons or daughters.
Comprehensive Business Plan Requirements
Applicants must submit a comprehensive business plan which addresses how the company intends to create these jobs. Matter of Ho sets out the minimum requirements for a comprehensive business plan. Each business plan must contain a description of the business, including the products or services it provides, and its objectives. In addition, the plan should include a market analysis, a description of relevant processes and suppliers, a marketing strategy, a description of the structure of the organization, and information on projected costs, income and sales. With regard to employees, the plan should contain information on the experience of currently employed personnel, staffing requirements, a timetable for hiring new staff, and job descriptions for both current employees and projected new positions. Finally, it is of paramount importance that the business plan be credible – this element is the key distinction between an acceptable business plan and one that fails on its face.
Recent AAO Decisions
A survey of recent denials of EB-5 Petitions by the AAO shows that deficits in the petitioning business plan were at the root of a majority of these decisions, as further clarified below:
Qualifying Employees
Many of the denials were related to the failure of the petitioner to adequately address how the business would create permanent full-time positions for ten qualifying employees within the business plan. Twelve of the fourteen denials by the AAO from the first four months of 2013 were based on inadequate business plans – these business plans failed to address critical issues such as the number of existing employees at the time an investment was made versus the number of employment positions subsequently added, projected staffing requirements, the experience of current staff, detailed job descriptions, whether projected employment positions would be full- or part-time, and timetables for hiring staff.
Credible Business Plan
Lack of credibility of the submitted business plan was a major factor to many of the recent AAO denials. Plans were found to lack sufficient detail to be credible, or to contain conflicting information regarding job creation and related matters that was not fully explained. In one instance, in a decision dated January 11, 2013, the AAO went beyond finding a business plan to lack credibility, to determine that a petitioner had made a willful, material misrepresentation. That petition was filed by an investor in foodservice and hospitality establishments; however, the petition, accompanying business plan and documentation, revealed that the petitioner had not made the claimed investment and the business plan was vague. It was based on projected purchases of a hotel and gas station which purportedly would save 53 full-time jobs, but the business plan did not include information on current employees, job descriptions or a hiring schedule. This decision demonstrates how damaging the failure to provide a comprehensive business plan, providing adequate explanations regarding information that appears to be contradictory, can be, as the finding of a willful material misrepresentation to incur an immigration benefit is a ground of inadmissibility.
Conclusion
In light of this determination, and given that more than fifty percent of recent denials of administrative appeals of EB-5 petition rejections involve the failure to submit an adequate business plan, it is clear that it is extremely important to provide a competent and comprehensive business plan with the original EB-5 Petition. In making sure that a complete and coherent business plan accompanies the petition, attorneys are helping their clients to avoid costly and time-consuming delays and Requests for Evidence (RFEs) as well as other potential hazards.
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