Many EB-5 new commercial enterprises with investors from Mainland China have been challenged with sustaining “at risk” investment during ever-increasing processing times. As waves of EB-5 projects are completed and job-creating entities prepare to repay EB-5 capital to new commercial enterprises, many new commercial enterprises are faced with the question of what constitutes permissible redeployment of EB-5 capital during EB-5 investors’ sustainment periods. On June 14, 2017, U.S. Citizenship and Immigration Services (“USCIS”) updated its Policy Manual to further clarify the “at risk” requirements for EB-5 capital investments and provided additional guidance on redeployment. USCIS noted that, after the job creation requirement has been met, it is possible to redeploy EB-5 capital into (a) one or more similar loans to other job-creating entities, or (b) particular types of new issue municipal bonds within the scope of the new commercial enterprise’s ongoing business.

While this additional guidance is welcome in an industry that has faced this redeployment quandary for some time, it continues to leave many questions unanswered. In particular, there are several considerations for new commercial enterprises related to redeployment of EB-5 capital into new issue municipal bonds.

• When considering redeployment into new issue municipal bonds, new commercial enterprises may need to evaluate a variety of municipal bonds in the marketplace (e.g., health care, higher education, housing, industrial development, transportation, tribal finance, general governmental, and other varieties of municipal bonds) and carefully determine which municipal bond sector is most closely related to the ongoing business of the new commercial enterprise.
• Depending on the issuer of the municipal bonds and circumstances pertaining to the use of proceeds of the municipal bonds, the interest on the municipal bonds may be tax-exempt or taxable to the investor.
• USCIS has not specified whether investment in new issue municipal bonds must be in the primary initial issuance of the municipal bonds or whether a new commercial enterprise may invest in municipal bonds through the secondary market.

Kutak Rock LLP has served as bond counsel in more than 10,500 municipal bond issues aggregating more than $320 billion in principal amount in all 50 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico. Our public finance attorneys work with our EB-5 team to offer unique insights on redeployment into new issue municipal bonds in line with USCIS policy.

Additional Information

For additional information or to discuss redeployment of EB-5 capital into new issue municipal bonds, please contact the lawyers listed below.

Mariza McKee
Mariza.McKee@KutakRock.com 
(312) 602-4112

Kamille Curylo
Kamille.Curylo@KutakRock.com
(312) 602-4129