The EB-5 investment program provides foreign nationals with an enticing opportunity—in exchange for investing in a qualifying U.S. business, they can become eligible for permanent resident status. Thousands of foreign nationals have successfully relocated to the United States through the EB-5 investment program since its inception in 1990. Despite the program’s popularity, interested foreign nationals should note that making an EB-5 investment requires careful planning. Without professional assistance, it can be difficult to ensure compliance with the EB-5 investment program’s many regulations.
For example, United States Citizenship and Immigration Services (USCIS), which regulates the EB5 investment industry, examines investors’ I-526 petitions meticulously. Form I-526 must show USCIS that the EB-5 funds have been irrevocably committed, are at risk, and originate from legal sources. For many EB-5 investors, the legal source-of-funds requirement is one of the most challenging aspects of completing Form I-526. In this article, we examine how EB-5 investors can prove to USCIS that their capital has indeed been sourced legally.
USCIS’s High Evidentiary Standard
An EB-5 investor’s Form I-526 must trace the invested funds back to their source in great detail—the adjudicators will need to see where the capital originated. Tracing the capital back to its source will likely require carrying out extensive research. Moreover, all EB-5 investors should retain an experienced immigration attorney, who can help them gather the necessary evidence for their I-526 petition.
In its Policy Manual, USCIS states that EB-5 investors must “demonstrate by a preponderance of the evidence that the capital invested, or actively in the process of being invested, in the new commercial enterprise was obtained through lawful means.” This evidentiary standard—“a preponderance of the evidence”—means that it must be more likely than not that the EB-5 capital was sourced lawfully. However, it is safer for EB-5 investors and their immigration attorneys to err on the side of caution and provide as much evidence as possible.
Providing the Needed Documentation
To comply with the above requirements, EB-5 investors must procure copious evidence that shows the path of their funds. USCIS allows EB-5 investors to use any legal source of funds, so the evidence needed in each I-526 petition will depend on the investor’s situation. However, regardless of the source of funds, all EB-5 investors should submit their tax returns for the previous five years. In addition, investors may use funds derived from multiple sources; if so, they must provide the needed evidence for each source of funds.
EB-5 investors from non-English-speaking countries must provide a certified translation of each document. In the rare case that a certain document is unavailable, the EB-5 investor must provide valid, specific reasons why the evidence cannot be obtained.
Some of the most common sources of funds include real estate assets, loaned capital, and gifted funds. We now provide a list of documents that can be used to prove the legality of each of these sources. Investors should keep in mind that they will almost always need to provide a capital source statement, regardless of where they obtained their EB-5 capital.
Real Estate Assets
Real estate sales require investors to provide a bank statement proving that the sale proceeds were deposited. The property ownership certificate, tax documentation, and purchase and sales contracts must also be included in Form I-526.
If loaned funds are obtained from a private lender and not from a financial institution such as a bank, the private lender must be identified. Moreover, the lender must provide a statement showing how they obtained the loaned funds. The I-526 petition must also include a copy of the loan agreement and records proving that the loan was deposited to the investor. Even though the Zhang v. USCIS court ruling sets a precedent for using unsecured loans, it is safer for investors to use secured loaned funds.
Gifted EB-5 investment capital requires proof that the funds were indeed gifted and are not expected to be repaid. The gift-giver must submit a capital source statement explaining how they acquired the funds originally, and this information must agree with the investor’s own capital source statement.
Compiling Form I-526, including the source-of-funds documentation, can be challenging for EB-5 investors who are unfamiliar with the program’s regulations. To increase their chances of successfully relocating to the United States, EB-5 investors would do well to work with an EB-5 consulting firm as well as immigration counsel.