Opinion
No. 3:01-CV-2224-N
March 6, 2003
ORDER
Before the Court are the parties' cross-motions for summary judgment. For the reasons stated below, Plaintiff Kenkhuis' motion is denied and Defendant Immigration and Naturalization Service's ("INS") motion is granted.
Kenkhuis challenges the INS' decision to revoke approval of his petition for preferred visa status as an immigrant investor under section 203(b)(5) of the Immigration Act of 1989. 8 U.S.C. § 1153 (b)(5) (2000). Although the INS initially approved Kenkhuis' petition, it subsequently revoked that approval. The INS determined that Kenkhuis had not satisfied the statutory requirements that he (1) had invested or was in the process of investing $500,000, in a (2) new commercial enterprise (3) resulting in the creation of full-time employment for at least ten qualifying employees.
Kenkhuis sought a visa under 8 U.S.C. § 1153 (b)(5)(A), which confers preferred visa status on immigrants who are engaging in a new commercial enterprise that benefits the United States economy and creates full-time employment opportunities. See generally R.L. Investment Ltd. Partners v. INS, 86 F. Supp.2d 1014, 1016-18 (D. Haw. 2000), aff'd, 273 F.3d 874, 874 (9th Cir. 2001) (discussing background of the statute) [hereinafter cited as " RLILP"]. This visa type is the fifth preference within the "employment-based" categories, and is sometimes referred to as the "EB-5" program. Id. at 1016-17. In order to promote the statutory goal of job creation, the applicant must have invested or be in the process of investing $1,000,000 or at least $500,000 if the investment is made in a targeted employment area. 8 U.S.C. § 1153 (b)(5)(C)(i)-(iii).
The statute does not define the term "invest." Accordingly, the INS as delegate of the Attorney General, see 8 U.S.C. § 1103 (a); 8 C.F.R. § 2.1, adopted rules to implement the EB-5 program, including a definition of "invest" and "capital." 8 C.F.R. § 204.6 (2002).
Capital means cash, equipment, inventory, other tangible property, cash equivalents, an indebtedness secured by assets owned by the alien entrepreneur, provided the alien entrepreneur is personally and primarily liable and that the assets of the new commercial enterprise upon which the petition is based are not used to secure any of the indebtedness.
* * * * *
Invest means to contribute capital. A contribution of capital in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement between the alien entrepreneur and the new commercial enterprise does not constitute a contribution of capital for the purposes of this part.Id. § 204.6(e).
Kenkhuis filed an I-526 petition for an EB-5 visa based on his operation of the Hen-Lin Dairy, a dairy farm established on May 11, 1988. Kenkhuis claimed that he increased his investment by over $500,000 after November, 1990. This increase was accomplished by leaving his profits in the enterprise, and not by an infusion of new money. The INS approved Kenkhuis' petition in 1998, and in early 2000 gave Kenkhuis notice of intent to revoke its approval. In July, 2000, the Texas Service Center revoked approval of Kenkhuis' I-526 petition. Kenkhuis appealed to the Administrative Appeals Office ("AAO") of the INS, see 8 C.F.R. § 103.3 (a)(1)(iv), which affirmed the decision below in September, 2001, on the basis that Kenkhuis had failed to show: (1) establishment of a new commercial venture, (2) investment of $500,000 of capital, and (3) creation often full-time positions since November 29, 1990. Kenkhuis then commenced this declaratory judgment action challenging each of those determinations. Because the Court determines that the INS did not abuse its discretion in determining Kenkhuis had not invested $500,000 of capital, it need not address the many other points of dispute between the parties. RLILP, 86 F. Supp.2d at 1021 (INS must show only that it had one valid ground for denial).
The major dispute between the INS and Kenkhuis on this point is over whether the capital investment requirement can be met by leaving earnings within the business enterprise, or must be met with an infusion of new capital. This Court may alter the AAO's decision only if it finds that decision was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. § 706 (2)(A). This review must be even more deferential and circumscribed where the decision was made by an adjudicatory body and involves the agency's interpretation of the statute and regulations it administers and the statute is silent on the point in question. Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 842-45 (1984). Moreover, the Immigration and Nationality Act specifically provides that in administering the Act, the "determination and ruling by the Attorney General with respect to all questions of low shall be controlling," 8 U.S.C. § 1103 (a), and here the AAO was acting as the delegate of the Attorney General.
Kenkhuis argues that there is no economic difference between retained earnings and newly infused capital. The Court finds that persuasive, but the Immigration and Nationality Act "commits the definition of the standards in the Act to the Attorney General and his delegate in the first instance, and their construction and application of th[ese] standard[s] should not be overturned by a reviewing court simply because it may prefer another interpretation of the statute." INS v. Rios-Pineda, 471 U.S. 444, 451 (1985) (quotation marks omitted). Because the statute is silent on the meaning of "invest," this Court must affirm the INS' interpretation if it is based on a permissible or reasonable construction of the statute. Chevron, 467 U.S. at 843. Reasonableness is evaluated in terms of both the text of the statute and compatibility with the Congressional purpose behind the statute. E.g., Continental Air Lines, Inc. v. Department of Transportation, 843 F.2d 1444, 1449 (D.C. Cir. 1988).
The definition of "invest" used by the AAO in this case requires an infusion of new capital, not merely a retention of profits of the enterprise:
The regulations specifically state that an investment is a contribution of capital, and not simply a failure to remove money from the enterprise. The definition of "invest" in the regulations does not include the reinvestment of proceeds. . . . Retained profits, however, do not constitute a contribution of capital as required by the regulations. Any successful business, if operated long enough, could eventually generate $1,000,000 in profits. The use of profits to pay normal operating costs and to slowly grow a business over several years until the growth amounts to 140 percent of the net worth as of November 29, 1990 is not the type of substantial expansion due to an infusion of capital contemplated by the regulations.
Administrative Record at 33 (emphasis in original).
The AAO's construction is consistent with an everyday usage of "invest," meaning to put money or capital into a venture. It is also consistent with the legislative history indicating the purpose of the EB-5 program is to encourage infusions of new capital in order to create jobs. The Senate Report on the legislation twice refers to investments of "new capital" that will promote job growth. S. Rep. 55, 101st Cong., 1st Sess. 5, 21 (1989). The AAO's construction is also consistent with the remarks of Sen. Simon in the floor debate on the statute. Finally, as the AAO noted, Kenkhuis' contrary construction would permit the accretion of capital over years; that would be contrary to the legislative intent that the job creation resulting from the infusion of new capital take place within a reasonable time, in most cases not longer than six months. See supra note 2. Accordingly, the Court holds that the construction of "invest" used by the INS is a reasonable construction of the statute, and the INS did not abuse its discretion in revoking approval of Kenkhuis' petition for failure to meeting the statutory requirement of investment. In view of this determination, it is unnecessary to address the parties' other disputes.
E.g., Merriam-Webster Online defines `invest' as to commit (money) in order to earn a financial return."
The Report first notes that the new section "[e]stablishes an employment generating investor visa requiring at least $1 million in new capital that will generate employment for at least 10 Americans or legal residents." S. Rep. 55, 101st Cong., 1st Sess. 5 (1989). The Report later states: "Amended section 203(b)(4) is intended to create new employment for U.S. workers and to infuse new capital into the country, not to provide immigrant visas to wealthy individuals. The committee endorses the present investor requirements as described in 22 C.F.R. § 40.7 (a)(14), note 1.3 (except for the investment amount and number of individuals to be employed, and except for note 1.3-6). The term `benefit the U.S. economy' may be used to assess the comparative value to the U.S. economy of the proposed new commercial enterprise. The creation of the requisite number of U.S. jobs need not occur immediately upon immigration of the alien entrepreneur, but the job creation should be completed within a reasonable time — in most cases not longer than 6 months after the alien's admission. Finally, the committee intends that processing of an individual not continue under this section if it becomes known to the Government that the money invested was obtained by the alien through other than legal means (such as money received through the sale of illegal drugs)." Id. at 21.
The comments of Sen. Simon in support of this provision follow:
One section of the bill that I am particularly pleased to have had included from my original bill is the employment generating investor visa provision. Following the recommendation of the Select Commission, the bill establishes a new visa category for entrepreneurs who are willing to contribute to America's economic growth and provide new jobs for Americans by investing in new American enterprises. This one provision will generate over $8 billion annually in new investment in small and independent U.S. businesses and provide up to 100,000 new jobs for Americans — two goals which we need to pursue as quickly as possible.
This provision in the overall compromise bill is one for which there are no currently applicable INS procedures. It is a step into the future for immigration. Accordingly, I encourage the Department of Justice in promulgating regulations expeditiously and administering this provision to work closely with the State Department and the Commerce Department who have familiarity with international and commercial considerations that the Immigration Service has not traditionally had the occasion to have full familiarity or expertise. Similarly, although this provision is not completely parallel to foreign investor visa programs, I hope we can learn from and build upon the track record and experiences of the Governments of Canada and Australia who have had great success in attracting talented people through their investor visa programs.
In enacting the investor visa program, we want to attract entrepreneurs and job creators into the U.S. economy, and as long as their investment is legitimate, we do not want or need excessive or arbitrary industrial policy tests about what constitutes a worthwhile investment. For example, the bill requires investor immigrants to start new firms. But this should not be intended to preclude an investor starting that new company from utilizing the existing assets of a failed enterprise. We should encourage and not cripple the creativity of these enterprising immigrants.
Our bill distinguishes among investors in only one way. The general rule — and the vast majority of the investor immigrants will fit in this category — is that the investor must invest $1 million and create 10 U.S. jobs. However, we are mindful of the need to target investments to rural America and areas with particularly high unemployment — areas that can use the job creation the most. For this group, we make available at least 3,000 visas annually. America's urban core and rural areas have special job creation needs and this visa program is sensitive to that in this way. Investments in this area must still create 10 jobs but require an investment less than $1 million. The Attorney General is authorized to set the required investment at a lower amount but at least $500,000. Clearly, the closer the Attorney General sets this to $500,000, the more we can encourage investments in these critical areas. The third circumstance the bill envisions is for areas that have significantly lower unemployment levels than the national average. For these areas that are not rural and do not have pockets of high unemployment within them, the Attorney General can set a higher required investment amount.
"Neither the Senate nor the House bill established any sort of criteria about the type of business investment. The only guideline is that the investment minimums must be satisfied and the venture must employ at least 10 people for 2 years. This makes good sense. As long as the employment goal is met, it is unnecessary to needlessly regulate the type of business — manufacturing, service, retail or the like — nor the character of the investment. Corporations, partnerships, proprietors — all legal types of business entities — are appropriate as long as the immigrant invests at least $1 million and creates 10 U.S. jobs. If two or more investor immigrants, each investing $1 million, want to join together to establish a business, that should be permitted. The million-dollar requirement or lesser amounts in rural and high unemployment areas should apply to the entire investment, including reserves, and need not be applied only to the operational costs of the enterprise." 136 Cong. Rec. S17, 106, S17, 112 (daily ed. Oct. 26, 1990).
It is, therefore, ORDERED that the motion for summary judgment of the INS is GRANTED and the motion for summary judgment of Kenkhuis is DENIED.