Holmes Shum EB and US Securities Laws Revised 2-27-2015
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by Catherine DeBono Holmes and Bradford S. Cohen

Real estate developers have a new source of investment for their development projects, created by the Tax Cuts and Jobs Act of 2017

A new tax incentive for investment in low-income areas designated as “Opportunity Zones” was included in the Tax Cuts and Jobs Act of 2017, signed into law on December 22, 2017. Under this section of the Act, codified as sections 1400Z-1, and 1400Z-2 of the Internal Revenue Code, taxpayers with taxable capital gains from the sale of any asset (stock, property, etc.) who reinvest those gains within 180 days of the date of sale of the asset into “Qualified Opportunity Zone Property” will become eligible to receive significant tax benefits. These potential tax benefits are expected to result in substantial new investment by investors in real estate projects that meet the requirements of “Qualified Opportunity Zone Property.” This article explains what the requirements are for designation as Qualified Opportunity Zone Property, and discusses the structure of Opportunity Zone investments.

What are the potential benefits to persons who invest in a Qualified Opportunity Zone Property?

There are three potential benefits that investors may receive from an investment of their taxable capital gains into a Qualified Opportunity Zone Property:

Deferral of Capital Gains Tax – Investors will receive a deferral of taxation on 100% of the taxable capital gains invested in Qualified Opportunity Zone Property until the earlier of the date that their investment is sold or December 31, 2026;

Reduction of Capital Gains – Investors who invest by December 31, 2019 will be eligible to receive a 10% reduction of the taxable gain amount invested in Qualified Opportunity Zone Property if the investment is retained for at least 5 years, increasing to a 15% reduction if the investment is held for at least 7 years; and

No Tax on Capital Gains realized on Qualified Opportunity Zone Property – Investors who invest by December 31, 2019 and hold their investment in a Qualified Opportunity Zone Property will pay no tax on any capital gains realized when that investment is sold.

What are the requirements for Qualified Opportunity Zone Property?

There are four primary requirements for a real estate development to achieve the status of “Qualified Opportunity Zone Business Property”: Continue reading →

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JMBM’s Investment Capital Law Group is pleased to announce that Catherine DeBono Holmes, Chair of the Group, will participate as a panelist during the webinar, “How can EB-5 issuers make the most of the Opportunity Zone program?” sponsored by NES Financial.

Last year’s tax reform created massive incentives for holders of unrealized capital gains to put their money into “Opportunity Zones” (OZs) — economically distressed census tracts across the US. The list of Opportunity Zones was finalized in June 2018, with 8,700 census tracks designated – 11% of the country.

The Opportunity Zone program is likely to grow into a sizeable source of development funding over the coming years. The total available market is estimated around $6 trillion. The question is: How can your business benefit?

The webinar will be of interest to regional center operators, issuers and project managers, immigration and securities attorneys, and economists and business consultants.

Date: Thursday, September 20, 2018
Time: 11:00 AM PT (2:00 PM ET)

No registration fee is required. Register here.

Topics that will be covered include:

  • An introduction to Opportunity Zones
  • Requirements to set up an OZ Fund
  • Overlap of EB-5 Targeted Employment Areas and Opportunity Zones
  • Modifying EB-5 projects to welcome OZ investment
  • Emerging best practices in operation and administration of OZ Funds

We invite you to join us for this free and informative webinar. Register now!

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LOS ANGELES—Jeffer Mangels Butler & Mitchell LLP (JMBM) is pleased to announce that Catherine DeBono Holmes has been named to EB-5 Investors Magazine’s “Top 15 Corporate Attorneys” list for 2017.

Holmes is the Chair of JMBM’s Investment Capital Law Group and the author of the Investment Law Blog. She helps clients worldwide to raise, invest and manage capital from U.S. and non-U.S. investors.

Holmes has represented more than 100 real estate developers in obtaining financing through the EB-5 immigrant investor visa program for the development of hotels, multi-family, and mixed-use developments through the U.S., and has represented numerous Chinese investors in the purchase of hotels and businesses in the U.S.

“The EB-5 Immigrant Investor Visa Program has successfully provided funds to developers and businesses that create employment for Americans, as well as a pathway to legal immigration to the U.S. for foreign investors.  As the program continues to undergo scrutiny and change, EB5 Investors plays an important role by collecting and disseminating critical information to professionals in the EB5 community,” said Holmes.  “I am honored to be recognized by EB5 Investors as a top attorney.” Continue reading →

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Now that the USCIS has issued guidance requiring redeployment of capital proceeds received by a new commercial enterprise (“NCE”) from repayment of its initial investment in a job-creating entity (“JCE”) for EB-5 investors who have not completed their “sustainment period,” every General Partner or Manager of an NCE will need to consider their fiduciary duties to the NCE’s EB-5 investors in making a reinvestment decision on behalf of the NCE. Each NCE will have its own particular facts and circumstances that will need to be analyzed to determine which reinvestment option is most appropriate, but there are general principles of fiduciary duty that will apply to every General Partner or Manager of an NCE. The purpose of this article is to highlight some of the most important issues that will arise in making a reinvestment decision, and to describe how the General Partner’s or Manager’s fiduciary duties should influence their decision-making.

The basic duty of a General Partner or Manager of an NCE is to make investment decisions that are in the best interests of the EB-5 investors in the NCE. EB-5 investors have two primary goals in making an EB-5 investment: (1) to obtain a permanent visa and (2) to obtain repayment of their investment, to the extent possible, after they become eligible to receive a return of their capital under USCIS policies. Therefore, the General Partner or Manager must determine whether these two goals will be met with respect to every reinvestment decision made on behalf of the NCE. In particular, we suggest that the following issues must be considered in making any reinvestment decision: Continue reading →

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The white paper below was updated on July 24, 2017. It first appeared in the Investment Law Blog on February 21, 2017.

Now that the USCIS has released amendments to its Policy Manual regarding the required “sustainment period” for EB-5 investors to retain their investments “at risk”, the authors of this updated White Paper have revised our original standards and guidelines for redeployment of EB-5 investment capital issued in February 2017 to reflect the new policies adopted by the USCIS on redeployment.  We believe that the guidelines provided in this updated White Paper should meet the “sustainment” requirements established by USCIS in its amended Policy Manual, and should also meet the requirements of federal securities laws and the fiduciary duties of the general partner or manager of each new commercial enterprise when making a decision to redeploy their investment capital in a new investment.

— Catherine DeBono Holmes


A White Paper prepared by:

Klasko Immigration Law Partners, LLP
Arnstein & Lehr LLP
Jeffer Mangels Butler & Mitchell LLP

This White Paper sets forth a legal framework for establishing the standards and guidelines for redeployment of investment funds by a “new commercial enterprise” (“NCE”) received from investors (“EB-5 Investors”) seeking to qualify for visas pursuant to the EB-5 Immigrant Investor Program under Section 203(b)(5) of the Immigration and Nationality Act (“INA”), (8 U.S.C. § 1153(b)(5)) (the “EB-5 Program”). This White Paper assumes that the initial investment was made by the NCE in a “job creating entity” (“JCE”), the investment funds have been utilized by the JCE in accordance with a business plan approved by United States Citizenship and Immigration Services (“USCIS”) and then repaid by the JCE to the NCE after the requisite 10 jobs per EB-5 Investor have been created.  Here we conclude that a redeployment by the NCE that meets the guidelines described in this White Paper would reflect industry best practices for compliance with USCIS policy, securities laws and fiduciary duties of the general partner or manager of the NCE.

Reasons Why Redeployment of EB-5 Investment Funds Has Become Necessary

The EB-5 industry has dramatically changed over the past few years, due to the substantial increase in EB-5 Investors applying for EB-5 immigrant visas, particularly from the Peoples Republic of China.  The EB-5 Program limits the number of visas that are issued each fiscal year to alien investors and their spouse and qualifying children to a maximum of approximately 10,000.  In the event that the number of applicants exceeds the maximum available visas, the Visa Control and Reporting Division (“Visa Control Division”) of the U.S. Department of State will limit the number of applicants from each country to an aggregate maximum of 7% of the total number of EB-5 immigrant visas available each fiscal year (the “Visa Cap”). Until fiscal year 2015, the annual worldwide quota was not reached.  Continue reading →

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This article is co-authored by Daniel B. Lundy, Esq., of Klasko Immigration Law Partners, LLP. His Firm’s blog is available here.


By: Catherine DeBono Holmes, Esq., Daniel B Lundy, Esq. and Jeffrey E. Brandlin, CPA, CIRA, CFF

Managers and Investors in EB-5 Investment Funds should regularly monitor their investments in EB-5 Projects and be ready to take protective actions if their EB-5 Projects show signs of trouble.

It is vitally important for managers and investors in EB-5 investment funds[1] to stay informed of the status of their EB-5 projects[2], because EB-5 investors must demonstrate that the projects in which they invested were completed and, in some cases, that those projects are operating in accordance with projections, in order to qualify for approval of their I-829 petitions to remove conditions to their residence.  If the manager or EB-5 investors in an EB-5 investment fund discover signs that their EB-5 project may be experiencing financial distress or other difficulties that could prevent the project from being completed or operated in accordance with the original business plan for the project, the manager, the investors or their representatives need to evaluate whether there are any actions that could be taken to save the project, so that the EB-5 investors will ultimately qualify for approval of their I-829 petitions.  The manager or investors are in a far better position to take protective actions before the problems with their EB-5 project result in litigation, foreclosure, or SEC enforcement action, although it is still possible to take protective actions after one of these events occurs.  This article is the first of a series of articles that will describe how managers or investors can monitor their EB-5 projects to discover potential problems before they become a crisis, and the protective actions that may be taken to protect EB-5 investors if their EB-5 projects are in trouble.

Both managers and investors in EB-5 investment funds should continuously monitor and evaluate the progress of their EB-5 projects, and collect documentation of transfers of EB-5 funds, payments of project expenditures, and other financial records that will be required as part of the I-829 petitions.  An unwillingness to provide such documentation, which is mostly generated in the normal course of business, can be a red flag indicating that something is wrong.  The manager of each EB-5 investment fund is the primary party responsible for monitoring the EB-5 fund’s investment in the EB-5 project.  However, in cases in which the manager is affiliated with the EB-5 project developer, or the manager is not fulfilling its obligation to properly supervise and monitor the EB-5 project, the EB-5 investors should have their own independent representatives monitor the EB-5 project and evaluate if and when protective actions are necessary to protect the E-5 investors.  The manager of an EB-5 investment fund, or third party service provider where the manager is affiliated with the developer, should provide regular reports (preferably on a quarterly basis) to the EB-5 investors in the fund regarding the status of construction and financing of the project, payments made to the EB-5 investment fund and whether or not the EB-5 project is in compliance with the terms of the investment made by the EB-5 investment fund in the project.  EB-5 investors should insist that the manager of their EB-5 investment fund make these periodic reports if the manager is not already doing so.  If EB-5 investors do not receive these reports, they should engage an independent representative to meet with the manager, review the EB-5 project and advise the EB-5 investors directly regarding the status of the project and any problems that are discovered as a result of the review.  In the paragraphs below, we provide further information regarding how that may be done. Continue reading →

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This article is co-authored by Daniel B. Lundy, Esq., of Klasko Immigration Law Partners, LLP. His Firm’s blog is available here.

The USCIS stated in a stakeholder call on July 28, 2016 that minors can be primary applicants on I-526 petitions for visas under the EB-5 Program, but bear the burden of proving by a preponderance of the evidence that they have entered into a valid investment contract that is not voidable.

This acknowledgement by USCIS provides an opportunity for EB-5 sponsors to adopt a policy of accepting minor investors in EB-5 investment funds in a manner that can be proven to create a valid investment contract that is not voidable by the investor. The General Principles of the Civil Law of the Peoples Republic of China (“PRC“) provide one potential means of entering into a valid contract under PRC law. However, some EB-5 sponsors are reluctant to rely upon laws of the PRC as the basis for admission of minor investors, in part because of the uncertainty of what evidence would be necessary to prove that a contract is valid under the laws of the PRC to the satisfaction of the USCIS. For EB-5 sponsors seeking to rely on laws of the United States, the Uniform Transfers to Minors Act (“UTMA“) may provide the best means of establishing the validity of an investment contract with a minor investor.

UTMA has been adopted by nearly every state, and establishes a legal method to make a gift to a minor by using the required designation of ownership.

UTMA was drafted by the National Conference of Commissioners on Uniform State Laws in 1986, as an expansion and replacement for the Uniform Gifts to Minors Act (“UGMA“). UTMA has subsequently been adopted by every state except South Carolina, which still follows the Uniform Gifts to Minors Act. UTMA has also been adopted by the District of Columbia and U.S. Virgin Islands, but not by Puerto Rico. Under UTMA, any form of property, including securities, may be indefeasibly transferred to a minor by any transferor, simply by using the following designation of ownership: “_______________ [name of custodian], as custodian for ____________________ (name of minor) under the [name of Enacting State] Uniform Transfers to Minors Act.” Continue reading →

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The EB-5 Securities Law Roundtable, a group of securities lawyers from several different law firms around the United States, has been working jointly to provide comments to legislation that we expect will be proposed by Congress to improve the integrity of the EB-5 program. The focus of the Roundtable has been to recommend changes that we believe will conform the proposed legislation to existing securities laws, and will clearly define the roles and responsibilities of EB-5 regional centers, sponsors and issuers.

The Roundtable supports efforts by Congress to strengthen the integrity of the EB-5 program by establishing procedures that will assist in detecting and preventing potential fraud in offerings made under the EB-5 program. Lawmakers could do a great service to the many U.S. employees, businesses and investors who benefit from the EB-5 program by aligning the integrity requirements of the EB-5 program with existing U.S. securities law.

The Roundtable issued a press release on August 29, 2016 announcing its analysis and comments on the proposed legislation, a copy of which may be obtained, along with the comments of the Roundtable on the legislation, at the following website: https://www.eb5roundtable.com.

The comments of the Roundtable do not address immigration policy and eligibility aspects of proposed EB-5 legislation, such as the minimum investment amount, defining targeted employment areas, visa availability, effective dates or length of program authorization. This is because the goal of the Roundtable is to focus on those aspects of the legislation that concern the application of securities laws to the EB-5 program, and the role of each industry participant to assure compliance with those laws.

About the EB-5 Securities Roundtable
The EB-5 Securities Law Roundtable is an informal, independent group of leading EB-5 Securities Attorneys from law firms including Arnstein & Lehr; Baker, Donelson, Bearman, Caldwell & Berkowitz; Homeier Law PC; Jeffer Mangels Butler & Mitchell; Kutak Rock; Phillips Lytle; Sheppard Mullin Richter & Hampton; and Torres Law, organized to facilitate best practices in the offerings of EB-5 securities. The Roundtable is not affiliated with any EB-5 industry organization, regional center, offeror of EB-5 securities or job-creating recipient of EB-5 funds, and it receives no outside financial contributions. The comments of the Roundtable represent consensus views of the individual participants and do not necessarily represent the views of any individual participant, their respective law firms or clients of their law firms. The comments of the Roundtable do not represent legal advice. https://www.eb5roundtable.com

Catherine DeBono Holmes, a partner of Jeffer Mangels Butler & Mitchell LLP and chair of its Investment Capital Law Group, is a member of the EB-5 Securities Law Roundtable and a contributor to the comments developed by the Roundtable on the legislation. She regularly represents EB-5 regional centers, issuers of EB-5 securities and developers of projects who receive EB-5 financing. She has written more than 30 articles on topics relating to the EB-5 program, and is designated one of EB5 Investors magazine’s Top 25 Securities Attorneys.

Cathy HolmesCatherine DeBono Holmes is the chair of JMBM’s Investment Capital Law Group, and has practiced law at JMBM for over 30 years. She specializes in EB-5 immigrant investment offerings and hotel and real estate transactions made by Chinese investors in the U.S. Within the Investment Capital Law Group, Cathy focuses on business formations for entrepreneurs, private securities offerings, structuring and offering of private investment funds, and business and regulatory matters for investment bankers, investment advisers, securities broker-dealers and real estate/mortgage brokers. Contact Cathy at CHolmes@jmbm.com or 310.201.3553.


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By: Catherine DeBono Holmes, Esq. and Bernard P. Wolfsdorf, Esq.

The delay in processing EB-5 immigrant visas caused by the increasing waiting line commonly referred to as “retrogression” is causing an increase in demand by parents in China to have their minor children named as the primary applicant on I-526 petitions.

With estimated delays of five to six years for the processing of EB-5 immigrant visas or green cards for applicants subject to the Peoples Republic of China (“PRC”) quota, many parents are concerned their children will “age out” by reaching the age of 21 before their final green card interviews are scheduled. As a result, the children may be ineligible to immigrate as derivative beneficiaries and may be unable to join their parents and younger siblings when immigrating. Since many PRC parents are primarily motivated to obtain green cards under the EB-5 Program for the benefit of their children, these parents are requesting EB-5 investment funds to accept their minor children as investors, so that the child can file the I-526 petition as the principal applicant. Continue reading →

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Good for raising capital in California, but contrary to current SEC policy for transactions outside California

On October 10, 2015, the Governor of the State of California approved California Assembly Bill 667, which will legalize the payment of finder’s fees by an issuer of securities to a person who introduces one or more accredited investors who purchase securities of the issuer and who complies with the requirements of new Section 25206.1 of the California Corporations Code, as described below. This new law will take effect on January 1, 2016, and will create a fundamental change in California securities law. However, it will also create a conflict between California law and the current policy of the Securities and Exchange Commission (“SEC”), which considers payments of finder’s fees to persons not registered as securities broker-dealers as violations of Section 15(a) of the Securities Exchange Act of 1934 (“Exchange Act”).

The new California law recognizes the widespread practice of payment of finder’s fees to unregistered persons and acknowledges the need to legalize this practice to promote capital formation in small business.

The new California law was proposed by the Business Law Section of the California State Bar in 2012, for the purpose of legalizing what the Business Law Section acknowledged was already a widespread practice of payment of finder’s fees by businesses seeking to raise capital, both in California and nationwide. In recommending the change in California law, the proposal commented that percentage-based compensation is often the only type of compensation that an issuer can afford to pay to a finder. The proposal noted that the penalties for payment of finder’s fees to unregistered persons included rescission of sales of securities, which potentially harmed both issuers and investors in companies which raised capital using unregistered finders. The proposal concluded that legalizing finder’s fees was a necessary action to promote capital formation for small businesses and eliminate the risks caused to issuers and investors resulting from the treatment of this common practice as illegal under California securities laws. Continue reading →