Proving the Legality of Common Sources of EB-5 Investment Funds

The EB-5 Immigrant Investor Program offers many enticing benefits to foreign residents who want to relocate to the United States. After making an EB-5 investment in a new commercial enterprise (NCE) or troubled business, investors and their families may eventually qualify for permanent resident status, gaining permission to live and work in the United States. The minimum EB-5 investment amount is only $500,000 when investors choose projects located in targeted employment areas (TEAs), which are either rural or have high unemployment rates. Further, every EB-5 investment must result in the creation or preservation of 10 full-time jobs for U.S. workers, and the invested funds must be sourced legally.

United States Citizenship and Immigration Services (USCIS) will closely examine every EB5 investment to make sure that it fulfills these basic criteria. EB-5 investors must provide copious evidence that they have complied with all USCIS guidelines when filing Form I-526, Immigrant Petition by Alien Investor. This lengthy and complex petition may take several years to be processed. In light of the many regulations governing the EB-5 program, potential investors would do well to hire an immigration attorney and experienced EB-5 consultants. These knowledgeable professionals can make sure that the EB5 investment is in line with all USCIS guidelines and help investors correct any issues.

One of the most potentially confusing aspects of the EB-5 program is its requirements regarding the source of funds. In their I-526 petitions, investors must show that their funds were sourced legally and trace the funds back to their original source. USCIS allows a wide variety of sources to be used, so the required evidence will vary for each EB5 investment. Individuals planning an EB-5 investment should consider the following common sources of EB-5 investment funds and the documentation needed to prove their legality. Note that all of these sources will require a capital source statement.

Stock Proceeds

In the case of funds gained from the sale of stock, investors must demonstrate the source of the funds used to purchase the stock. For instance, they may need to provide bank statements or payment records to show how they acquired those funds. Further, investors must provide with Form I-526 the written purchase and sales contract for the stock, as well as their individual income tax returns for the previous five years. A capital source statement that shows how the investor purchased the stock and invested it in the EB-5 project will be indispensable.

Inherited Funds

To prove that inherited funds were sourced lawfully, investors must trace the funds back to their origin. Therefore, the I-526 petition must include documentation that proves the investor’s relationship to the deceased and shows that the deceased obtained the assets legally. Additionally, the investor must include a copy of the will and submit a capital source statement identifying the deceased and proving that the investor received the inherited funds.

Salary Payments

Demonstrating that salary payments were sourced legally is comparatively straightforward. Investors must submit documents such as employment contracts, income certificates, and bank statements that show the payments. The capital source statement must identify the employer and show that the salary was used as an EB-5 investment.

Property Sales

To prove the legal source of real estate sales, EB-5 investors must provide the property ownership certificate, any relevant tax certificates, the purchase agreement, and bank statements that show the payment made for the property. In this case, the capital source statement must show how the investor obtained the funds needed to purchase the property originally. Consequently, the investor may need to procure the initial purchase agreement.

Gifted Funds

Investors must show that the funds were indeed a gift and that they are not to be repaid. Therefore, the gift giver should write a gift agreement stating that the investor is not under obligation to pay back the funds. The investor’s Form I-526 must also include bank statements showing that the funds were transferred. (The gift may either be deposited into the investor’s account or transferred directly to the EB-5 project’s escrow account, but it will be easier to trace the funds if they are first placed in the investor’s account). The capital source statement for gifted funds must show that the investor received the gift and explain how the gift giver acquired the funds originally.

Loaned Funds

For loaned EB-5 investment funds, investors must prove that they secured the loan using their personal assets. The I-526 petition must contain a loan contract that identifies the assets used to secure the loan and also sets out the terms of the loan. Investors do not only need to prove that the loan itself was legal—they must also demonstrate to USCIS that the personal assets used as collateral were sourced lawfully. Of course, the documentation needed will vary depending on the nature of the investor’s personal assets.

Admittedly, the many regulations governing the source of funds for EB-5 investments may seem daunting. Still, investors who enlist the services of an immigration attorney and EB-5 consultants will receive invaluable guidance and enjoy a smoother application process. No matter what an EB-5 investor’s situation is, such professional guidance will help them comply with all the applicable regulations.