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Summary of USCIS EB-5 Interactive Series Call: Expenses that are Includable (or Excludable) for Job Creation BY MICHAEL KESTER ECONOMIST, IMPACT DATASOURCE, LLC

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n June 4th, USCIS held the second engagement of its 2015 EB-5 Interactive series, “Expenses that are Includable (or Excludable) for Job Creation,” which included a presentation and question and answer session led by USCIS economists. As USCIS has never provided specific guidance on allowable expenditures for EB-5 projects other than in Requests for Evidence (RFE), determining which development expenses to use for economic job-creation modeling purposes can be a challenge. The goal of the June 4th engagement was to provide some clarification on how USCIS adjudicators view project expenses in an effort to mitigate the number of RFEs and delays in processing. USCIS also published Talking Points to summarize the June 4th engagement. The prepared presentation was split into a discussion of hard costs and soft costs.

Hard Cost Discussion

Soft Cost Discussion

Hard construction costs required relatively little clarification, as these costs tend to be straightforward and allowable. The USCIS economists reiterated the importance of providing sufficient line-item detail and/or categories of construction costs instead of aggregated hard construction estimates. They also reminded listeners that the inclusion of 3rd party feasibility studies and/or other support from developers are beneficial in showing the reasonableness of development projections.

Soft costs that USCIS adjudicators consider allowable have historically been one of the biggest gray areas related to job-creation projections. Reflective of this history of ambiguity, the bulk of the USCIS presentation and questions from callers were related to soft costs.

One topic of note during the hard cost portion of the presentation was related to construction contingency and reserve fund costs. In stark contrast to previous guidance received for a number of years in RFEs, USCIS economists stated that budgeted contingency expenditures are permissible to estimate job creation at the I-924 or I-526 stage, as long as they “adhere to acceptable industry practices.” At the I-829 stage, the economists confirmed that USCIS will review whether these contingency costs were spent on EB-5-eligible activities.

While the discussion on soft development costs provided some additional clarity on what USCIS economists consider to be jobcreating, some uncertainty still remains – specifically, related to financing fees and the proper economic modeling of purchases of furniture, fixtures and equipment (FF&E). Soft costs generally not allowable include stock market transactions, brokerage fees, purchase of land titles, EB-5-related legal fees, and expenditures related to local government compliance. Soft costs mentioned as being allowable consisted of architectural and engineering costs, FF&E, legal costs unrelated to EB-5 compliance, and marketing/sales costs. In general, USCIS mentioned they may consider other soft costs related to ancillary, privatesector activities.

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