Satisfying the EB-5 Source-of-Funds Requirement with Gifted Capital

The base-level requirement for every EB-5 investment participant is providing the minimum amount of capital to be invested. The EB-5 Immigrant Investor Program, first implemented in 1990, offers up the dream of a life in the United States in exchange for an investment in the U.S. economy. How much is required? $1.8 million minimum for regular program-approved projects or $900,000 for projects located in targeted employment areas (TEAs).

While there is some variation in how one can invest and what constitutes meeting certain requirements, the only variation in the minimum investment requirement is the reduction in the amount when investing in a project located in a TEA. So what happens when a foreign investor doesn’t have the funds, but a relative or close friend does? Foreign nationals are increasingly taking advantage of the EB-5 program’s flexibility regarding funding sources by using gifted capital.

Prospective investors who have wealthy relatives and close family friends willing to fund an EB5 investment journey can do so with capital that has been given to them as long as they can provide the proper evidence to United States Citizenship and Immigration Services (USCIS) that the money was in fact a gift and not a loan and that it originated from lawful sources. In fact, it is quite common for parents who aren’t personally interested in U.S. permanent residency to give the required EB-5 investment capital to their children who are.

Proving EB-5 Investment Capital Source of Funds

USCIS is extremely flexible when it comes to accepting different sources of EB-5 investment capital, including gifted funds, so long as they can be proven to come from legal origins. Evidence can vary from being quite simple to rather complex, depending on where the money originated from. The receipt of transfer from the donor to recipient alone does not fully constitute evidence of the capital source. It must also be proven that the donor obtained the funding legally.

USCIS guidelines say that investors must submit documentation that suggests the funds are “more likely than not” derived from legal sources. Depending on where the donor got the funds, this could be a fairly straightforward request, but not always. In any case, USCIS’s goal is to establish the legitimacy of a gift and how the donor came into possession of the money. Let’s take a closer look.

Proving Funds Were a Gift, Not a Loan

To qualify as gifted EB-5 investment capital, no repayment terms can be tied to the funds. Satisfying this requirement can be done easily by having the donor draft a written gift agreement explicitly stating that the gift is “irrevocable” and that the recipient has no obligation to pay it back. Both parties need to sign the document.

When a donor does not speak English, the agreement should be composed in the donor’s native language. Before submission to USCIS with the I-526 application, the document must be accompanied by a certified translation in English. Although gifts may come from anybody, USCIS tends to more heavily scrutinize gifted funds from friends and business associates than from family members.

Providing Evidence of the Lawful Source of Funds

Demonstrating a capital investment’s lawful sources is required by USCIS as well. This requirement is exactly the same for any capital, gifted or not. Accompanying the gifted funding should be documents that prove the legal origin of the capital being given. These documents should contain as much detail as possible and can include records ranging from paystubs or bank and investment statements to tax returns, loan documents, and property declarations. All evidence not in English must include a certified translation.

Consulting with an EB-5 Immigration Attorney

The EB-5 program is hands-down one of the easiest, quickest routes to U.S. permanent residency among foreign nationals with the means to invest. That doesn’t mean the process is free of complications. USCIS regulations are complex, and proving the sources for EB5 investment capital funds can be one of the most difficult requirements to satisfy.

Gathering the necessary evidence can prove quite challenging and often takes a lot of time. For this reason, experienced EB-5 immigration counsel can be invaluable to EB-5 investment participants (and their donors) when working with gifted capital. Ensuring the smoothest EB-5 journey possible is reason enough to partner with an EB-5 immigration attorney to prepare your submission for proving the lawful sources of gifted funds.