Source of Funds for Indian EB-5 Investors: Webinar with Immigration Attorney Anahita George

English Webinar with Anahita George, Esq.
EB-5 Source of Funds: Best Practices for Indian Nationals

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EB-5 Source of Funds: Best Practices for Indian Nationals

हिंदी Webinar with Anahita George, Esq.
EB-5 Source of Funds: Best Practices for Indian Nationals

ગુજરાતી Webinar with Anahita George, Esq.
EB-5 Source of Funds: Best Practices for Indian Nationals

Sam
Hi, everyone. This is Sam Silverman, managing partner of EB5AN. Thank you for taking time to join us on today’s webinar. Today we’re going to be discussing EB-5 source of funds best practices for Indian nationals. And we’re going to be covering this from the perspective of Indian investors who are located in India—as well as Indian investors who are already in the United States on H-1B or other non-immigrant visa categories. During the webinar, if you have questions, please use the chat box, send us a message, and we’ll cover as many questions as we can at the end. If you’d like a copy of the slides, you can email us at the email address on the screen, info@eb5an.com, and we’ll get back to you and share a copy of the slides.

Today we’re going to chat about EB5AN. We’ll introduce our guest panelist, Anahita Shah, one of the top EB-5 immigration attorneys, whose practice largely focuses on Indian nationals. We’ll talk about different source of funds considerations for Indian nationals. We’ll run through a real source of funds case study. And then we’ll chat a little bit about one of our current EB-5 rural projects, the Twin Lakes Georgia rural loan Project.

About EB5AN: we’re a national leading EB-5 investment fund manager. We own and operate many regional centers that cover most of the United States. We’ve worked with thousands of investors from around the world. This is a map showing where some of our investors come from. This is another map showing the areas in the United States where we have active and approved USCIS regional centers. As I mentioned earlier, I’m Sam Silverman, one of the two managing partners of EB5AN. A little bit more about my background, education, and experience is there on the left side. We’ve been in the EB-5 investment space for more than 10 years at this point and have worked on many projects all around the United States.

Now, I’ll turn it over to Anahita. I’ll let her share a little bit about her background and experience. She’s kindly agreed to do today’s presentation in three languages: English, Hindi, and Gujarati. For those who don’t speak all of those languages, or only speak one or two, please bear with us. She’s going to quickly switch from language to language—one, two, and three—to make sure that we cover everything in a way that’s easily understood by all of our audience members. With that, Anahita, I’ll let you jump in.

Anahita

Thanks, Sam. My name’s Anahita George. I am the partner of a boutique immigration firm named George & Marzialo in Seattle. Our practice is 90% EB-5. We’ve done over 500 EB-5 applications and I’ve been processing EB-5 for over a decade now. I’m a licensed attorney in the state of Washington, as well as Pennsylvania.

Source of Funds Documentation for EB-5 Investors

Sam

Let’s dive into some of the details. Anahita, why don’t you give us a quick overview of what is source of funds? How does it fit in with an EB-5 application? And why is the government focused on requiring this as part of the application to obtain green cards?

Anahita

That’s a great question, Sam. Source of funds is the meat of EB-5, along with the project documentation, of course. The government wants to see two things: one is that the funds you’ve accumulated have been legally sourced through either legal employment, legal business, or inheritance (which has also been legally acquired), and that you’ve maintained those funds and paid taxes on them.

It is very, very important to prove to the US government that those taxes were paid, whether in India or in the United States. If you don’t have your source of funds documentation laid out properly, it results in denial, extensive RFEs (requests for evidence), or a notice of intent to deny—this usually causes significant delays in EB-5 applications. So, my advice to my clients and investors is put in all the hard work at the beginning of your petition, spend some time—weeks—designing the transaction, and then execute on the investment in the project.

Sam

Let’s chat very quickly about the overall application. Source of funds is one piece. What is the other critical piece that needs to go in with an EB-5 application?

Anahita

There are two critical pieces. One is the source of funds and the other is the project documentation packet. The project document packet is not only important for USCIS; it is also extremely important for the investor to educate themselves about what the project is, what the loan term is (or what the equity term is), and what the offerings are. My recommendation to my clients is to make sure that whatever project you’re investing in is freely sharing these documents with you and is allowing you the time to review them. The project should be answering any questions that you have pertaining to these documents.

Just to recap, Sam, I think all investors need to understand that if a regional center is not sharing the template of the project documents and is unwilling to answer questions over email, that should be a red flag for any investor.

Sam

And as part of those documents, how often do you see the financial statements as part of that set of documents being made available, being shared? And why is that an important aspect of picking a project?

Anahita

That’s a great question. I would say that maybe two projects on the market are willing to share their financial statements. As we all know, these companies are privately operated and they want to guard their financial statements. Giving the investors access to those financials shows transparency. It establishes which parent company is funding the project, whether they have the ability to complete the project, and whether they have the ability to repay the investor—not only after they’re through with their process, but in case there’s some denial in the middle of the process and there’s an I-526 repayment guarantee. Often, I’ve seen the I-526 repayment guarantees worded as, “Well, you’ll get repaid if the developer has money,” or, “You’ll get repaid if the fund has money,” or, “You’ll get repaid if we can sell this option.”

What do financial statements have to do with it? Financial statements help the investor to determine whether the developer has the money to cash them out—say, within 90 days of a denial if they’re eligible. So, I think that transparency really helps the investors decide whether the entity backing the project is a shell or if it’s actually a well-funded entity with assets.

To summarize, Sam, I think this is extremely important for investors to understand, especially in India. I’ve heard that there are Indian developers involved in smaller circles or that there are smaller projects involved that’ll give repayment guarantees to the investor directly. None of that is legally enforceable in a court. If the project refuses to pay you back, you can’t go to a court and say, “Hey, this guy promised to pay me,” because all EB-5 investment is at risk. The way to avoid that issue is to make sure that if a project is sharing the financials, you study the financials in depth and you understand the relationship between that entity, the regional center, and yourself as the investor.

Sam

That’s a very good summary. Let’s shift gears and talk a little bit about how the money gets sourced. Obviously, any source is permitted as long as you can legally demonstrate where the funds are from and how they’ve been earned. Why don’t you walk us through the different major buckets? Obviously these buckets are going to vary for Indian investors coming directly from India versus in the US. To start, let’s talk about these first for investors already in the US and then talk about these for (as many of your clients are doing, I’m sure) applying directly from India. They don’t have US tax returns.

Anahita

That’s a great question. I would say, Sam, 98% of the time, whether it’s funds from India or funds from the US or clients in the US or in India, it’s usually a combination of these 90% of the time. Ordinary income usually comes from clients of mine who are working for Google, Microsoft, Amazon, Oracle, Snowflake, VMWare. They have salaries that have accumulated over a period of time and are building up in their bank account. In that case, our goal is to show that this client’s been paying taxes—here are five years of tax returns, here are the W2s, here’s the employment confirmation letter, and here are bank statements for five to seven years showing the accumulation of wealth over a period of time.

But you can’t have three years of bank statements where your balance is zero and suddenly have $500,000 show up in your account and say, “Well, this is salary.” The government’s not going to believe that. What they want to see is the buildup of wealth. They want to see bi-weekly paychecks or monthly paychecks, eventually that bucket growing larger and larger, and then you investing that money in EB-5. Most of the time we see that clients don’t keep cash in their account; they’re either investing it in a brokerage account or in crypto, or they’re buying real assets with it. When the funds are invested in a brokerage account, the government wants to see a clear line, “Here’s my bank statement. Here’s money coming in through salary. Here are my brokerage account statements. Here’s money going from my bank account into my brokerage account. Here are three years of brokerage statements that show that I’ve maintained the funds in the brokerage account. I’m trading with those funds and I’m liquidating at the end of the three-year mark.”

In that case, USCIS will usually RFE us. For example, if you’re liquidating assets in 2023 and you then use that money to fund your EB-5 investment, we tend to get an RFE two to three years down the line asking for tax payment proof and tax return filings. You need to demonstrate that you’ve paid the taxes on the capital gains that you’ve accrued. Same with stock options. A lot of my clients in tech field have stock options. They’ll liquidate that. At the time of filing, we do not have the tax return to show the tax obligation was paid. It is extremely important to either supplement that eventually or have it ready for USCIS when they raise a question.

The most common source of funds from India is a gift or inheritance from family members. And what is interesting to me (I didn’t hit this roadblock until 2016) is that my understanding previously was, “Hey, this inheritance was from 1947 or 1921. There’s no way to say that these funds were legally sourced by my great-grandfather.” All the government’s looking for is an affidavit. The affidavit should attest that these funds used to acquire the land were legally sourced. Even if you have secondhand knowledge, you want to say in depth, “I have heard through my father that my grandfather was a farmer. He used to farm here and he then purchased this land for x Rupees.” It’s also important to have documentation, such as the purchase docs, which in India weren’t standardized before 2012. So, a lot of the time there are no purchase documents. It is very important that the attorney you’re working with lets the government know, shows the government that these standardized records did not exist in India pre-2012.

If you do not explain that, you end up with a request for evidence that then asks “ Give me the purchase contract, give me the copy of the title, give me X, Y, Z, give me bank statements.” It’s extremely important to lay out to the government that the document retention period in India for bank records and tax records is seven to 10 years. “Anything outside of that is going to be unavailable, and in lieu of those unavailable documents, I’m supplementing the record with a sworn affidavit.”

This is an education process. Keep in mind that the officer who is looking at your documents is not Indian but an American person who’s going to look at the documents and your job. Your attorney must educate them about the system in India, educate them about the tax consequences. We recently had a question raised by USCIS about liquidation of property in the United States. The government wanted to know if the client had over $10,000 in foreign accounts, and if they did, whether they’d filed the F bar. This is very new. It seems like the government’s getting on top of things. They want to make sure not only that are you complying with taxes in the United States, but also in India, in your home country.

Any time an H-1B investor receives a gift, it is their obligation to file Form 3520 with the IRS, not only for tax purposes—eventually, USCIS comes back and asks this question. If the gift is coming from a relative in the United States, the donor is taxed in the US on the gifts given. It’s extremely important for the donor to file a gift tax return and demonstrate that there was no tax obligation, or demonstrate that the taxes have been paid and the return has been filed.

Finally, moving on to loans for family or friends. This is acceptable after Zhang vs USCIS. You can now borrow money from private lenders, friends, or companies. What is important is that you show the source of funds of that family member, just as if you were sourcing your own income, just as if you were sourcing your ordinary income, just as if you were sourcing your capital gain. It is extremely important to have this conversation with your friends and family prior to taking on any funds from them—your attorney is going to ask for in-depth documentation of how they acquired the funds.

It’s also important to have an arms-length transaction between both parties, which means that the loan needs to be at market terms; the rate needs to be at market terms. For example, you can’t have a personal loan that spreads out for 30 years. There’s no such product on the market. You must do some research and see how far a personal loan can extend.

If it’s seven years, make sure that you have a seven-year loan. We tend to follow the AFR, which is the federal rate, and then we determine the rate based on the AFR rate. I think, historically, clients used to repay loan funds using any funds that were available to them. Now that the processing times are kind of ticking up, we have started to see RFE about source of funds used to repay those funds. One piece of advice I give my clients is to plan in advance, make sure that you’re using clean money that can be documented for repaying these loans.

All in all, Sam, whatever the corpus is, whatever the base is, whether it’s a company or your own business, USCIS wants to go back in time to understand that the source of funds used for the startup capital was legally sourced. So, the story needs to start at the beginning. If it’s your ordinary income, you need to go back in time, pull out your W2s, tax returns, or bank statements, and show that you were employed and you were indeed getting paid this much money.

If it’s capital gains, same thing. If you have equities that you’ve held on for 10 years, you need to show that they were acquired 10 years ago and you’ve maintained those. For gifts and inheritances, whoever you’re inheriting from needs to establish that they legally acquired that asset that they’re gifting to you.

Sam

Before we jump into the more specifics of each of these four categories, tell us a little bit about your practice, how you work with clients, what the process looks like, and how long it typically takes. What are some of the bottlenecks? Walk us through what that looks like, specifically with investors from India who have Indian sources of funds.

Anahita

A lot of my H-1B clients have a mixture of sources of funds, where part of the money comes from the US and part of the money comes from India. The US part is pretty easy. Usually, if it’s 100% US sourced, we tend to gather the files in three to five days. The average file size is 3,000 to 5,000 pages, so it is quite in depth.

For money that’s coming from India, a lot of times there are several bottlenecks. One of the bottlenecks is a remittance limit of $250,000 from India. It is very important that you plan accordingly if you’re going to spread it out over two fiscal years and you want to make the most of your transfers over March and April. The fiscal year in India ends in March. I’ve noticed that a lot of attorneys in the game don’t know that the limit of $250,000 goes away if you’re an H-1B client in the United States who has an NRE, NRO account.

If you have an NRE, NRO account in India, the limit is $1 million, which solves a lot of your problems. So, your relatives can pump in $250,000 in your NRE, NRO account and you can remit up to $1 million into the United States. That is one bottleneck that we’ve learned to clear; if they are non-resident Indians, we tend to open NRE, NRO accounts in India.

The second thing I’ve noticed is, in property asset sales in India there’s usually a mix, there’s a cash component and there is a taxable component. I get a lot of questions like, “Hey, can I use that cash component somehow?” You cannot. You have to use the price that is listed on the contract. So if the contract says, “Well, I’ve paid you $200,000,”and you’ve received that $200,000 in your bank account, that is the only money you can use for EB-5 purposes. Any cash transactions that you’ve done under the table are ineligible for EB-5.

The third is, for remittance purposes, if you’re making remittances from India to the US, the banks in India usually want to know why you’re remitting that money abroad. One way to overcome that is remitting to yourself, a self-remittance. You’re remitting from your Indian account to yourself, self-remittance. Your parents are sending it to you; you can say it’s family maintenance under the RBI code. No questions are asked there. However, if the client is in India and they directly want to send the money to the project in the United States, what works is an executed offering document.

So, if you provide an executed subscription agreement to the bank, most banks in India access ICICI City to understand what the document is, and they understand what you’re trying to do. The problem comes when clients try and borrow money against assets in India and then remit it to the US. That is not legal. That is a violation of FEMA rules in India. Although USCIS will not care, the Indian government will care. And if the Indian government alleges wire fraud, that is going to show up on a record in the US. That is going to bar you from immigration. So, you need to be very careful that you’re not borrowing from banks in India and then remitting that money abroad for EB-5 purposes.

Finally, the consequences of taxes. There are a lot of transactions that are hybrid. There are H-1B clients who are in the US getting gifts from their family members in India. There is no tax in India if you’re gifting to blood relatives. However in the US, you’re required to file a 3520 declaration that says, “Hey, I’m a US person.” Keep in mind, all H-1B employees, for tax purposes, are US persons. They should be taxed just as a US resident or a US citizen is. So, if they do not comply with Form 3520’s requirements, it is likely that three years down the line, the government comes back and asks, “Where’s the form?” Other thing I’ve seen: if you do maintain Indian bank records and accounts and the aggregate value of those accounts is over $10,000, there’s a good chance that USCIS will come and ask for FBAR compliance documents. The penalty for not complying with FBAR is $10,000 per year plus interest for every year that you’ve not complied. It is a pretty steep penalty.

So, for all my clients in India that are currently here on H-1B, my recommendation is to go through all your financial records to make sure that you do not have bank accounts or brokerage accounts in India that exceed $10,000. If you do, you need to file an FBAR because the USCIS is getting extremely smart about it. They want to know about the FinCEN documentation requirements, Form 114. Recently, we had an RFE asking all these questions. Although it wasn’t applicable in that transaction, your attorney needs to be tax-law savvy in order to answer those questions.

Sam

On that last point, before you switch to the other languages, why don’t you tell us a little bit about your experience in tax and what you were doing previously to practicing EB-5 immigration full time? And how that gives you some different perspectives that other attorneys without that background might not be aware of.

Anahita

Prior to immigration law, I was practicing tax law. I’m an undergrad accounting major who has worked at KPMG in their audit department, so I’ve done a lot of forensic accounting. And for three years I was a tax attorney with Deloitte, and for another two years I was a tax attorney at PWC. So, I’ve hit three out of the four big four accounting firms. I worked a total of five years, which is why tax and forensic accounting is my specialty. This helps me understand and educate the clients ahead of time before we see any roadblocks in the future.

Sam, to recap, I insist that you pay an interest on any loans that you borrow from friends or family. You need to make sure that that friends or family disclose that the interest is taxable income, because I’ve seen instances in which the government has asked for the tax records of the person that’s lending to you. They want to see that they’re paying taxes. Secondly, even if it’s tax-free in India, Indian tax returns have two components. One is the acknowledgement, which has all the finalized numbers, and the second is the worksheet.

The worksheet is where you have the itemized layout of what income you’ve earned and what percentage it’s taxed at. Even if the gift you’ve received is a 0% tax, you want to make sure that your accountant in India shows that income on computation and shows a 0% tax. So, when you go to the embassy in Mumbai for an interview, you can show the government, “Here’s the registered gift, and here is my tax return, which is registered with the Internal Revenue Service, which shows that there’s a 0% tax on the gifts that I received from my family members.”

Sam

There’s a lot of nuances and things to be aware of, especially when there are loans involved and gifts that carry on, not just from the initial submission of the petition, but also at the interview stage and at the final removal of conditions.

Anahita

What we’ve noticed is that, even if your I-526 is approved, the questions are rehashed in Mumbai. Those questions are asked again in Mumbai. So, I’ve seen a lot of times that attorneys who don’t specialize in Indian source of funds will just give the first page of the tax return. That page does nothing. You need to have the worksheets along with it so that USCIS understands where you’re generating money from.

Ordinary Income SOF for Indian Investors

Sam

Let’s shift gears and talk a little bit about some of the real specific aspects. I know we already covered some of this previously. Tell us, what are some of the main things to really be aware of, specifically for Indian investors doing source of funds related to ordinary income? What are the top three or four things that you really make sure clients have covered in their petition, so there aren’t any questions later?

Anahita

Again, a lot of nuance comes from experience. These are things I’ve learned over a decade. Just like the US has a W-2 Form, India has what you call Form 16, which is a certificate of tax deduction. It has the name of the employer, the name of the employee, and your gross wages and taxes withheld on each of your pay period. It’s an extremely important document to attach to your Indian source of funds, especially if you’re employed in India. If you attach that along with your tax returns, along with your bank statements, you’re in good shape. Again, Form 16 is the equivalent of the US W-2. Just like that Form 1040, the Indian acknowledgement of tax record along with the computation of income is the equivalent of a US tax return. So, you need to make sure that those documents are in order and you have to provide the last five to seven years of those documents.

The second thing is banking records. In the US the retention period for any bank records is seven years. If you were to go to Bank of America and Chase and ask for documents pre-2016, you’re not going to get them. In India, that document retention period is 10 years. So you can get documents, bank records as of 2013. You cannot make the argument to the government, “Hey, I don’t have my 2013 bank statement because it’s outside the document retention period.”

Again, under the Indian anti-money laundering rules, those records should be available, and from what I’ve seen from USCIS, they have also educated themselves on these retention policies. So, if we quote or misquote something, we tend to get a pushback and say, “Hey, you’re not right about this.” The third thing is that translations are extremely, extremely important. Again, most of India has bank statements in English, all the tax returns are in English, all the Form 16s are in English.

So, that is not usually a problem with ordinary income. We find problems when you’re liquidating an asset and the purchase and sale agreement are in different languages. One question I keep getting asked is, “I had the salary, but I spent it. I had the salary for four years, but I invested in real estate. Can I just get money from somewhere else and say, this is my salary?”

You can’t, because that money coming from somewhere else is what the US government’s going to see and say, “Hey, where’s that coming from?” If you’ve invested that money in real estate or in shares, what you want to do is to liquidate those pieces so you can claim that the money came from your salary earnings.

So, it’s very important not just to trace the money, but to show that the wealth has been maintained until you’ve made the investment in EB-5. And again, paying taxes is extremely important if you’re employed. That’s very easy. India now has an electronic system. Employers just punch in the data and it shows how much tax you’ve paid and how much gross income you’ve made.

Sam

There’s a lot of things to really, really be aware of. Over the years have you ever had any clients not eventually get approved with your guidance? Tell us a little bit about your track record. Then, how many clients have you stepped in and helped who were originally working with another attorney who didn’t give the client the right advice or didn’t include the right documents? How many of those types of cases have you stepped in on?

Anahita

I’ve done about 550 EB-5s from beginning to end. I have had zero denials. All my cases have been approved. We put a lot of time into our files. The big players usually do a great job. But I have seen that the smaller players in the field (because EB-5 is a big ticket item) tend to take on the cases and have no idea what they’re doing.

India is not like the United States. The systems are really, really different, and if an attorney does not understand that, it really makes the [USCIS] officer angry. I’ve had cases where I’ve stepped in where the government has questioned the entire resume of the applicant, and then we have to go back in time and provide, say, Form 16s for each employer, the website of each employer, address where they worked, and get a confirmation letter. Some of these requirements are really burdensome.

I had a recent case where the government wanted me to get business registration documents because they did not believe that all these companies that this client was working for were real, because these were small businesses. So it’s very, very important to do things right the first time, and it’s extremely important for the client to be able to review what was filed before it was filed.

Sam, a lot of the times when I get clients from other attorneys, they do not have a copy of what was filed. I have no idea what was said, and that just makes my life harder. If I don’t know what was said and I contradict what was said, that can result in an outright denial and that can result in severe immigration consequences.

So, my advice to all the clients is to make sure that before anything is filed, you get to read the source of funds memo and you have a complete electronic copy of what is being filed and you sign off on that before it’s filed.

Sam, the last thing I want to mention with ordinary income: a lot of investors in India have their own businesses that they draw ordinary income from. They’ll draw salary from their own business. The government still wants to know how you got the money to start the business. They want to see the business’s financials.

At that point, that business is no longer a third party, it is a related entity. Once it becomes a related entity, you need to explain the source of funds for that entity.

Ordinary income from your own business: you need to source the business as well as your income.

Capital Gains SOF for Indian Investors

Sam

Let’s shift gears and talk about capital gains. I know you’ve got a lot of clients who took funds that they earned and put it into a brokerage account, and they were trading options and crypto and all of that. What are some of the problems that you see with those clients? How do you make sure that they don’t get tripped up when an adjudicator’s reviewing their files and a document is missing or they don’t have everything really air tight and linked together?

Anahita

Starting on the US side, I have seen that most of my clients have an average of five bank accounts. It is my job as an attorney to go back; let’s use the example of a Fidelity brokerage account. If they have a Fidelity brokerage account, we tend to go through all the incoming transactions in the Fidelity brokerage account. If we cannot tie those transactions to one of the five bank statements, the accounts that are owned by the investor or the investor’s spouse, we then have to go back and ask the investor, “Hey, where are you getting this money from? You need to explain, because every penny that’s going into your brokerage account will be scrutinized.”

You also need to show that you’ve maintained these equities. You cannot have sold the equities, zeroed out your account, and then there’s a transfer of equity suddenly in 2020 and you’re saying, “Hey, here are the equities that I sourced from my salary.”

That is not true. Those equities were transferred from somewhere and they came from somewhere. Same thing applies for stock options. Clients have RSUs that have skyrocketed. Again, it is extremely important when you are investing in EB-5 that you account for taxes. If you’re not paying now, you will pay some time in the future, and you must make sure you have documentation to substantiate that you’ve paid those taxes on capital gains. 1099 is the tax schedule that you get in the United States.

Outside of the United States, most equity transactions have an NSDL statement, which is a national depository in India, which maintains all the equity records where you’re purchasing or selling; it’s a national brokerage. So, that brokerage should ultimately be able to give you accounting of all the profits, the taxes, and the long-term and short-term capital gains. In India, prior to 2017, long-term capital gains were not taxed. So, a lot of the times when I’m submitting Indian files where equities were liquidated prior to 2017, the government comes back and asks, “Hey, your tax return doesn’t show any long-term capital gain.” The reason for that is that before 2017, India did not have long-term capital gains on some of the equity transactions.

Again, this is the attorney’s job. The attorney’s job is to educate. For any asset, whether it is equities or land, it’s extremely important that you document how you purchased that and how you sold that. There’s a concept of indexation in India that does not exist in the United States. In the US, if you bought a property for 200K and you sold it for 400K, you’re paying taxes on 200K. In India, if you bought a property for 200K and are selling it for 400K, the value of that 200K is adjusted for inflation, so it’s going to be either worth less or more. It’s called indexation, and based on the indexation, your capital gains will vary.

Again, that is a concept that needs to be explained to USCIS. At times when a currency has devalued significantly, like the Indian currency has, your capital gains amount is tiny or it’s a loss, and the government doesn’t understand that. They see your basis and they see your end sale price and they say, “Hey, you should have paid taxes on 200K. Why haven’t you?”

It is important for your attorney to explain what indexation is, and it is important for you to show that if there are any gains, you’ve paid taxes on them, and those gains are usually reflected in the worksheet. So, submitting just the first page is not going to educate USCIS on the matter.

The last point I’ll make is that I have a lot of clients from farming communities in India. Farming land, rural land that is sold is usually tax-free in India. Again, this is not something many attorneys know. It is your responsibility (the client and the attorneys) to let the government know in advance: “Don’t RFE me because here’s evidence on why this land gain wasn’t taxed; because it’s rural, because India is an agrarian economy, here’s the Indian tax code, which says that these profits are not taxable.” Versus a non-agricultural land where you have to pay income, but the cost is indexed, so your taxes will be lower.

Gifts and Inheritance SOF for Indian Investors

Sam

Let’s talk a little bit about gifts and inheritance. I know this is really important for Indian investors, particularly given that a lot of ancestral land can often be involved in transactions or properties, also businesses that are inherited from a long time ago. For clients where that’s an issue, particularly in India, how do you approach that? What are the first questions you’re asking? If the documents are going to include significant gifts or inheritance, how do you make sure that you avoid questions at the beginning?

Anahita

When I make a phone call with a client, the first thing they’ll say is, “Oh, yeah, this property’s inherited 60 years ago.” They think that that takes away the need to document source of funds. It is not true. It causes other issues. What I tend to ask the client is, “When was the property acquired? How is this person related to you? Do you have the title of the property? Was the land register reflecting a passage of title from your great-grandfather to your grandfather to you? And where’s the sale date and where’s the transfer of title?”

It’s extremely important to run through the entire process. The government is always going to want to know (even if it’s a hundred-year-old transaction) how your forefathers or your grandma or your great grandma acquired that property. It can be just in the form of an affidavit, giving a brief background on your family members in India.

Secondly, if the inheritance has been passed on for three or four generations, there’s a document called 7A. It’s the land ledger in India, which will show the passage of these assets from one person to the other.

The third thing we tend to get an RFE on is a will. If the property was inherited after the person passed away, you need to produce a will, and if there is no will, your attorney needs to, in advance, let the government know, “There was no will in place for this, but my client is a class one heir”. In India, if you’re a class one heir, you automatically get the wealth if a person dies without a will. How do you prove that you’re a class one heir? You need to establish the relationship between yourself and your great-grandfather, and the way to do that is to produce your birth certificate.

If you’re the petitioner, the petitioner produces their birth certificate, which has the names of both parents. If it was your father’s father, your father then produces his birth certificate to show that he was related to his father. Then, that land ledger will have the great-grandfather’s name, which shows, “Hey, yes, these guys were related, and it passed on.”

What I want to say in short is that you cannot make any statements without producing evidence. Your attorney cannot say, “My client inherited this land.” Okay, where is the exhibit pertaining to that? All of this must be documented. “His grandfather passed away, his father passed away, and then he and inherited the land.” Well, you need to produce the death certificate. You need to produce the will. If there is no will, you need to provide a letter from the attorney in India saying that it was an interstate succession, and here are the Indian laws—or if there was a will, that it’s been entered into probate. Here is the probate documentation.

For gifts and inheritances in the United States and India, clients will say, “Well, can my friend give me a gift of $200,000?” USCIS or the IRS is not going to believe that your friend is gifting you $200,000. So, the rule we follow is to take gifts from immediate relatives, blood relatives; these could be your parents, your in-laws, your wife, or your siblings. Anything outside of that becomes suspect.

Limit that pool of gifting to immediate family members. Anything outside of that you want to document as a loan where you’re repaying. Again, tax obligations are extremely, extremely important. In India, there’s no tax. That being said, you still need to explain that to USCIS. In the US, however, if you’re in the US and you’re getting all this money from abroad, you need to show that these monies were received as gifts, even though there’s no gift tax. And again, the donor on their end needs to disclose to your attorney that there’s no tax in India as well. So, cross-border tax consequences need to be accounted for. Local tax consequences need to be accounted for, and you need to educate the government as to whether the asset sold is rural or not rural, whether it’s an equity or inherited equity, and what taxes you need to pay.

To conclude, Sam, inheritances have two major issues, especially old inheritances. Clients need to make sure that their attorneys document how that asset was acquired by their great-great-grandparents or parents, even if they’re not alive anymore.

And the second is the tax consequences of that. A lot of the times we get RFEs saying, “Have you paid taxes in India?” My advice to attorneys as well as clients is to attach a circular that shows that there are no gift taxes from immediate relatives in India, and if there are any tax consequences, they need to be demonstrated in the computation of income.

It’s important to work with someone who’s done Indian source of funds before. Otherwise, you’re not going to get this nuance or that advice, or you’re not going to know what the parallel local documentation is.

Loans SOF for Indian Investors

Sam

Let’s move on to loans from family and friends and companies. How often do you see this, and is it something that’s happening more often lately? And what are some of the major issues that clients don’t think about that you’ve had to come in and address?

Anahita

Loans are definitely more and more common since the amount’s gone up to 800K. People use that to patch it. Now loans from, for example, banks like a home equity line of credit, or asset collateralized loans, are easy because then you just have to show the source of funds for the underlying asset. How did you acquire that house and how are you borrowing against it?

However, a loan from a personal entity, person, company becomes a little bit more complicated. First thing is, I had a question of, “Can it be a 0% loan at 30 years?” No, it can’t. It needs to be at market terms, right? Follow the AFR, make it a seven-year loan. You can make it an interest-only loan. You can have the whole amortization schedule laid out in your loan agreement, which is prepared by your attorney, and at the end of the seven years, you can have a bubble payment, but it needs to be at market terms.

The second question I get asked is, “Well, can I just make it a gift from a friend or a company?” You can’t. The government’s not going to believe that a friend or a company’s gifting you money. If you are borrowing money from a company or a friend, you always need to show that other person’s source of funds. A lot of times when I step in another attorney’s file, I notice that the attorney has not educated the investor nor the lender about which documents can be asked for. So, a lot of the times I’ll go back to the lender and say, “Hey, can you provide these documents?” And there is hesitation or skepticism. The client will come back and say, “Hey, no one told me I was supposed to provide this and I don’t feel comfortable providing that.” If that person, the lender, does not provide that document, the case is closed; there’s nothing you can do. You have to respond with their documentation, which is why it’s very important to have this conversation in advance with the lender to make sure that they’re comfortable providing those documents.

The second thing is that your attorney can always create a Chinese wall whereby you don’t get to see the lender’s documents; the attorney is just doing the source of funds on the other side and submitting that to USCIS. So, they can create a Chinese wall to make the lender more comfortable.

And the third point is, if you’re paying interest, which you will be to the lender, the lender absolutely needs to disclose that as income. The government can come back and ask for tax returns that indicate that this tax or interest income has been accounted for.

Regarding collateral, I get the question of whether there can be an unsecured loan. Yes, at present, there can be an unsecured loan. However, again, the loan needs to be at market terms. If there’s collateral in place, you need to make sure that you account for how that collateral was acquired.

Another question I get asked is, “Can I deduct the interest rate that I pay on my loan?” The answer is no. You cannot deduct that because it’s a personal loan; any interest that you pay on it is not deductible. And any foreign documents—again, USCIS is very, very strict, that any foreign documents need to be submitted with the English document on top and the foreign document at the bottom.

A lot of the time loan documents, promissory notes, and collateral documents will be in foreign languages. It is extremely important to submit translated documents along with the local-language documents for the government to look at. I’ve had cases where there’s a lot of overlap between English and Gujarati or English and Hindi and the client’s like, “Well, there’s only these six words that are not translated.” You’d be surprised at the RFE you’d get just for those six words. So, you want to make sure every document is translated.

Sam

Tell us what an RFE is, why does that matter, and why do you want to avoid that if possible?

Anahita

An RFE is a request for evidence, which means that the government is not convinced that the story you’re telling is true, or they think there are gaps in your story. They’re not happy with your explanation. I absolutely loathe RFEs, which is why I put a lot of work up front. And the reason to loathe them is, one, you have very limited time. You have 88 days to respond quite often. A lot of the times it’s not even possible for the clients to get the documents within that time period. Second, once you get an RFE and you respond to that RFE, there’s no time limit within which the government needs to get back to you. I have files from seven other attorneys that are in the RFE stage that have been pending for 18 months. So, you really, really want to avoid that RFE.

And the reason that’s important for Indian nationals is that an RFE can cause retrogression. India is now retrogressed, which means that, even if you’re getting an approval, you’re not going to see that green card until your date becomes current. This causes a lot of stress for the attorney, causes a lot of stress for the client. I’d much rather do all the heavy lifting upfront than receive an RFE. Sometimes the RFE is 15, 20 pages long, sometimes it’s one page. I’ve seen RFEs where I’ve submitted gift affidavits and the government has come back and said, “Hey, where’s the gift affidavit?” Then, it’s just a matter of resubmitting if your attorney has retained a copy of the file. You really want to try your hardest to avoid an RFE.

Of late, we’ve seen the government jumping straight to a notice of intent to deny. For example, if you get an RFE, you respond and the government’s not happy, they can come back and send a notice of intent to deny and say, “Hey, we’re not really happy with your answer. You need to provide A, B and C.” They only give you 33 days to respond to that. If the government skips the RFE stage and sends you a notice of intent to deny and gives you 20 pages to address in 33 days, you better hope your attorney has time to respond to that and you have the time to run around and get the documents for that as well.

So, you want to try your hardest to avoid an RFE or a notice of intent to deny, which also ties into the reputation of a regional center or the reputation of a project. A lot of the times, even if they have questions about just the project, they’ll lump in the source of funds questions and they’ll give you only 33 days to respond. That is why it’s extremely important to go with a reputable regional center and a reputable project that has a full set of documents and has filed an I-956F. And eventually, maybe over two to three years, we’ll know which projects have been approved—but until all the projects’ exemplars are approved, what you can do is look at the track records. So, if it’s EB5AN, you go back and say, “Hey, have you had any project-related denials?” That saves you from the grief of having to deal with RFEs or a notice of intent to deny.

Sam

Tell us a little bit about cases where other attorneys messed something up and you got the call to step in. How many of those cases have you taken on over the last 10 years? Were you able to save most or all of them? And what are some of the main kinds of problems that you uncovered?

Anahita

I’d say I do an average of three to four cleanup cases per month. I’d say I have been able to rescue about 98% of them. I usually know in advance who I can’t rescue; it’s obvious because, when I start taking on the client, I first interview the client. There are two situations in which I can’t rescue a file. If you’ve borrowed funds from someone and that person refuses to give their source of funds document, there’s nothing I can do to save the file. Second is if you owe taxes, and you never filed that tax return, you can’t rescue the file. I could make an argument that, “Hey, I forgot, I’m now up-to-date on my taxes and filed the taxes,” but then it’s at the discretion of the government to approve you or not.

Sam

What about issues where it’s not related to the investor and it’s really related to the project? What are some of those problems that you see?

Anahita

Especially of late, we’ve seen a lot of COVID projects (projects that were launched during COVID) that collapsed. And we have seen intense RFEs on the project side. The RFEs want to know a couple of things. One, they want to know, “Have you been in compliance with the business plan? Have you materially deterred from the business plan? Have you explained to us the facts and circumstances surrounding it?” A lot of the times the client will say, “Well, COVID hit,” but we’re way past COVID now. If you haven’t made substantial progress towards actually making that entity ongoing and operating, you’re going to have trouble.

The second thing I’ve seen is failed financing. When the petition was first filed in, say, 2019 or 2020, the project said, “Hey, we will acquire the financing eventually.” Most of those financing deals failed or the project never got financing. Or, the project said, “We’re going to do 185 investors,” and they got 10 and they didn’t have the full capital stack: fail. You don’t have the full capital stack to complete the project. You can’t overcome that unless you show the government that you’ve found the money magically and are going to finish the project.

And the third thing I’ve seen is going concern issues. The government has the EIN number of the entity you’ve formed. They tend to run that EIN to check if you’ve filed payroll records, if you’ve started employment creation. If they see that nothing’s going on with that entity, they’re going to send you questions about the going concern nature of the project. I worked on a project that was going to manufacture biofuels, and they promised a very, very high return to the investors. They said, “Hey, we’re going to pay out 7 to 8%, you’re going to all do well.” People from India tend to trust other Indians, so people invested. That project never took off because they were going to use grease from restaurants to make biofuel, and in the year and a half, there was no restaurant waste because of the lockdown.

That project completely collapsed, and in that collapse, not only did people lose money; it never started, and the government wanted to know if it was a going concern. As soon as we said, “Well, it’s not a going concern, but they did spend some money,” they said, “Well, there’s a material change in this entity and we’re going to deny the EB-5.” There are times where just nothing’s been built and the government says, “Hey, I looked on Google Earth and I found nothing.” So, there have been a lot of those cases where the project promised something and didn’t deliver or didn’t acquire the right permits or changed the location of the project or couldn’t get financing. We’ve seen a host of denials from 2019, 2020 projects because of COVID-related disruptions.

Sam

We’ll chat about this a bit later when we talk about projects, about things to look for and keep in mind from an immigration perspective. Let’s pause here and I’ll let you translate, and then we’ll have a high level summary and then move on to the project stuff.

Anahita

To recap, if you’re borrowing from friends or companies, make sure your attorney has a conversation with the friend or the company explaining what it entails to lend this money to a friend or to a petitioner. They’re going to have to go through the intrusive process of source of funds. And if that party’s unwilling, you should not be using money from that party at all.

Review of Common SOFs for Indian Investors

Sam

Let’s hit these kind of couple major things specifically for Indian nationals. In your own words, what are some of the kind of main things to be aware of? I know we touched on some of these earlier, but just for each category, what’s kind of the one thing, summary piece of advice you’d give?

Anahita

For ordinary income, especially coming from India: always produce tax records, bank records, and Form 16 (which is like the W2), and explain to the government that Form 16 is exactly what the US W2 is. As long as you provide those documents, we have not seen any issues with ordinary income. If you’re going to invest in fixed deposits or equities and generate capital gains, it’s very, very important to show that the asset was purchased using that ordinary income or legal income. And for any capital gains that have been completely taxed, it’s very important for attorneys to explain the indexation method of taxation in India, which means that the money is valued for inflation. So, if you invested 200k in something, your basis in that asset isn’t 200k, it’s whatever the value of that money is today. So, it’s not as simple as, “My gain is $200,000, I’m going to pay taxes on that.” No, the attorney’s going to have to explain what indexation is.

In terms of gifts or inheritances, for any inheritance, the corpus (the source) will have to be accounted for. If it’s 50, 60 years old, an affidavit suffices, but you need to recall details that the officer believes are believable. And when it comes to loans from friends and family, the first thing you need to do is introduce them to your attorney. Make sure that the attorney explains to them what it entails and that they cannot back out of providing these documents. Do not execute a loan, do not take money from friends and family unless you’ve already completed the source of funds on their side of the investment.

To recap, it is very important to design the transaction with the attorney. Once the transaction is designed, we tend to create a checklist. Based on that checklist, then we collect documents. If you’re working with an attorney who does not understand Indian documents, you will not know what other documents to provide in lieu of, say, Form 16. If this client does not have a Form 16, what else can he provide? If he does not have Form 16A, what else can be provided? If you don’t have a birth certificate, you can provide a PAN card or another card that has the name of the parents or the spouse. If you don’t have a marriage certificate, you can provide an election commission card. All of that comes through practice and comes through dealing with these clients over and over again. You need to account for deficiencies in documents and pivot by providing other documents that provide the same data.

Sam

I’ll ask a couple of specific questions about a couple of these categories. Regarding ordinary income, we talked a lot about traditional employees. What about the self-employed? What are some of the more important things to be aware of for investors who are going to source either from the US or from India if they’re self-employed?

Anahita

That’s a great question. For the self-employed, you want to start at the beginning where the government starts. Three questions: one is, “Hey, what was your startup capital and where did you get that money from?” If you’re in the US, it’s unlikely that you’re going to have bank records, it’s unlikely you’re going to have tax returns. What you could probably have is an employment confirmation letter from your old employer that would say, “Hey, A, B, C person was making $100,000.” That will say, “Hey, this business’s startup capital was$ 25,000,” giving them some reason to believe that you had that money at the time to start this business.

After that point, they want to substantiate the legitimacy of the business. How do you do that? You provide tax records, audited financials, and bank statements. At our firm, we tend to use an audit methodology when we are substantiating the income in a business. There’s no way for the government to know if every penny deposited in your business is legal or not. So, how do you do that? Well, the way I do that with my clients is I’ll say, “Hey, the US has the last 7 years of records and India has 10,” pull out those records, produce five invoices that you have invoiced to your client, and tie that to a bank account, a bank statement.

For example,, “Purchase order 3560, I received $80,000. Here is the bank statement that shows the receipt of $80,000 on March 15th, 2021.” You do that five times every fiscal year and you tell the government, “Hey, the document’s voluminous, I’m establishing this. I’m using the audit methodology to show that all the funds in my bank account are legal. If you want more invoices, I’m happy to provide upon request.” Very important.

The last step is, if you’re drawing dividends from a company, you want to make sure that it’s on your schedule K-1 and that it’s been taxed. Or if you’re borrowing from the company, make sure that you have the loan agreement in place and that you’re paying interest to that company and you’re making monthly payments to that company.

It’s extremely important for the client to understand whether they’re withdrawing dividends from the company or if they’re withdrawing retained earnings, retained capital. Based on that, the documentation requirement changes, which is why an accounting background with an attorney is extremely helpful.

I like the question of, “Wouldn’t a tax return be enough?” IRC61 in the United States says income is income regardless of the source. So, even if you have drug money or money from trafficking, all of that income in the United States is taxable, which is why just producing your tax return and saying, “Hey, look, I have made this money,” does not give the government a picture of whether that money was legally sourced.

To summarize, every Indian client will say, “I have tax returns.” Tax returns do not tell the government where you got the money from; all they say is that you’ve paid taxes on that income. The government wants an in-depth story of forensic accounting of where your money came from, and if you do not provide that, you will get an RFE or a denial.

Sam

Capital gains, we talked a little bit about equities and deposits. Let’s talk a little bit about real property. Real property transactions in India and in the US: investors bought a home years ago, now the home’s gone up in value, and they want to use part of that appreciation to fund their EB-5. What are things that they need to be aware of and make sure they work with an immigration attorney before they start executing documents, HELOC, all of that? How does EB5 fit into those decisions?

Anahita

I have a lot of clients who are either tapping into the home equity line of credit because of the appreciation or are selling the property because of the appreciation. The first question I ask them is, “How did you buy the property?” And you’d be surprised, a lot of the times people brought money from India. And if they did bring money from India, and if there is no accounting for that, you really cannot be selling your property or borrowing against that property. You need to absolutely be able to account for how you paid for that property.

If all the money is coming from US income, it’s very simple because most clients have used their salary to pay the down payment, and then over the next seven years, we highlight mortgage payments made every month, month after month, to the bank. It’s a very intense process. However, if you bought the entire property in cash, the government’s going to want to know where that entire money came from.

When you’re selling the property, there’s capital gains involved. Now, if you’re married and filing your tax returns jointly, selling your primary residence up to $500,000 is exempt from taxation. President Obama passed a law which exempts $500,000 in capital gains—great. A lot of the clients are looking into selling their primary residence and moving into a new place to capture that gain untaxed. The other option I’ve seen clients choose is a home equity line of credit. Because they want to raise the funds immediately and then put the property for sale, they pay down the loan using the proceeds from the sale.

Again, first things first: you need to understand how the property was sourced. If the property is from India, like I said, the RFE I’ve seen from the government is, “Well, you bought it for A, you sold it for B. The capital gains is X dollars. Why is the capital gain showing less?” Again, like I said, money is adjusted for inflation in India, which means money is worth a lot less. That means you’ll either pay more or less taxes, and that needs to be explained to the US government as to why the number’s not neatly tying together.

In all, Sam, I want to close by saying that it’s extremely, extremely important to keep the tax consequences in mind. If you have retained an attorney that does not understand tax, my advice is to go hire a tax lawyer. And if you’re selling a property overseas and you’re in the US on an H-1B visa, India and the US have a double taxation treaty. This means that, for any property of yours that you sold in India, you’re going to have to disclose the capital gains in India as well as in the US. The method for calculation is going to differ in both countries. India may say you owe taxes on 100k, US may say you owe taxes on 200k. You’re going to have to pay taxes in both countries because, eventually, the IRS is going to come and ask you questions, and so is USCIS. They’re going to come and ask whether you’ve complied with tax obligations in both countries.

Sam

Being familiar with those rules and how that’s going to be reported and looked at by USCIS is critical.

Anahita

Yes.

Sam

Gifts and inheritance. We talked a bit about evidence of the inheritance—about whether there’s a will or not a will. What’s the number one problem that you see with Indian inheritances, Indian funds or property? What’s the number one thing that you’re like, “Oh, this attorney messed this up and now I got to come in here and try to untangle this”?

Anahita

I think the biggest problem I see is when the property’s inherited into state, when someone dies without a will. Then the question becomes, “Is this person a class one heir? Is this property still in litigation? Has it been probated?” All those questions come in, at which point, there’s no way to prove if this person is the legal owner of the asset that was sold. So, it is extremely important that, before the government raises that question, you provide a copy of the Indian law to explain what class one heirs are. There is clear documentation of the assets flowing to those class one heirs.

Most Indian clients don’t have a will in place. It is very, very important to provide proof of local interstate succession rules. Explain to the government why (along with your mother, possibly) you are the only surviving member. And if your mother has relinquished rights, for example, to that asset, you need to have that document in place, notarized, executed, and filed with the Indian government. It’s extremely important to show that no other parties in the family have rights over those assets; they’ve relinquished their rights and you are a class one heir. And if you are not, there was a will through which you’ve inherited the property. If you do not show that line, you’re in trouble.

The second thing I’ve seen is that attorneys don’t provide proof of relationship. What do I mean by that? It’s something as basic as, “I inherited a property from my father.” Okay,, how do you prove this is your father? You provide a birth certificate. Okay. My father inherited this property from his father. Well, how do I show who my father’s father is? Well, his birth certificate. But he didn’t have a birth certificate. What else can I provide? I can provide his school-leaving certificate. I can provide Aadhaar card. Both of those documents will have his father’s name on it. All right. Do you have proof of your grandfather’s ID to show that he was a real person?

The government can ask for that. If you do not have those documents, it is extremely important to explain why. If your grandfather passed away 50 years ago, you can say, “Hey, here’s proof of the document retention period in India for people that have passed away 17 years ago and do not have an ID. I apologize for the inconvenience. However, I’m showing you that I had a relationship with this person this way.” So, you really have to dumb it down, and every sentence you say needs to have a corresponding exhibit to it.

Sam

Having gone through those types of questions, I’m sure you have some templates about A-1 class and how that interaction works. You’ve got a lot of that off the shelf that’s been approved by USCIS multiple times.

Anahita

Correct.

Sam

How does that factor into how quickly you can get a file completed? Because you don’t have to start from scratch. And at this point, you’ve likely seen most situations at least one time previously, so you’ve got something to work from.

Anahita

Correct. So, I have support for basic things, like class one errors. What are class two errors? What do you do when someone dies in the state? I have laws in India that show that rural or agricultural property is not taxed. I have laws that show how indexation taxation in India works. I have laws that show that. if you were married before 2006, you will not have a marriage certificate. I have laws that shows that if you were born before April 1st 1970, birth certificate will not be available. I have laws that show that, prior to 1947 when the British were in India, there was no land recording system. Everything was systemized in 2012.

Usually, my job is to add those documents to the file. I will never go ask the clients to prove that to me, because I have support for that. I have support for the Reserve Bank of India regulations, which show that banks only need to retain records for 10 years. I have support that you can only remit 250k and support that you can remit over a million dollars from an NENR account. That really cuts down the time the client has to go on a wild goose chase to provide these documents to prove the local country rules.

To summarize, Sam, it’s very important to understand who acquired the property; your relationship with the acquirer of the property; whether there was a will in place; what the local country rules are; and whether other heirs have waived their rights to these assets if it was interstate succession.

Sam

Let’s move on to the last category here: loans. We talked a little bit about this previously, but what are the number one, number two problems that you see clients getting with loans? They come to you and say, “Hey, I’ve got X, Y, Z company, friend, relative, whoever is going to loan me the money.” And you’re like, “Great.” Where does that conversation run into “Uh-oh, I guess maybe I can’t actually do that”?

Anahita

Most of the times what clients are trying to do is infuse a company with the money and say, “Okay, this friend’s going to lend me out money.” The problem is, you have to go into great detail about the company or the friend’s finances. So, the government’s immediately going to see a big ticket item coming into your account, and that ticket item is them lending money to you. That does not work. It needs to be very systematic. The company’s earnings are growing, the company has accumulated this much money, and from that money, you’re borrowing funds. The second thing I see is clients always ask me if it can be a 0% loan. It can’t. It needs to be at market terms. Just because the IRS will say nothing is free, so they’ll put an implied tax on it. So, if the tax rate right now, AFR, is 4% and your relative’s charging you 0%, the IRS is going to imply a 4% gain on your tax return.

So, either you show a 4% gain on your tax return as income, or you just pay out the 4%. Let that person that you’re paying to disclose that income and make it a real loan agreement. That is one problem. The second problem is for cases that I took over, in the middle of the transaction, the attorneys hadn’t explained the documentation. The source of funds is an intense process. A lot of the times there’ll be H-1B holders that’ll borrow from H-1B holders, and those H-1B holders are scared to disclose their documents or they’re worried that it’s going to impact their immigration. None of that happens. It does not impact an H-1B holder’s immigration if you’re lending to another H1-B friend as long as the money is legal. But again, it’s such a scary issue that clients are not always willing to share their personal documents, especially when they’re immigrants. So, it’s extremely crucial and important to talk to all these lenders in advance to make sure they understand what it takes.

My best practice is to talk to the lender personally. I will schedule calls with the lender, explain to them, and if they agree to then cooperate, I will first source their money and then let the investor take funds from that lender. There needs to be a loan agreement in place—this is where we differ from other firms, as we handhold them for a year. We make sure that every month, payments are being made according to the amortization schedule on the loan document, and we make sure that those funds are legally sourced. My firm tends to file addendums every year for loan-based transactions. In those addendums, every year we provide a yearly compliance report where we’ll say, “Okay, an IDA borrowed $500 from this person. Every month she’s paying $10 back. Here’s evidence of her paying $10 from her salary. Here are bank statements.” This avoids an RFE in the future. The best practice, until the loan is paid up, is to keep filing an addendum until your EB-5 is approved.

Sam

Tell us, what is an addendum inner filing? How does that work and who’s doing it? Where’s it going? All of that?

Anahita

An addendum inner filing: we tend to use that in two instances. One instance is if you’re borrowing money from either a bank or a friend or a company. We tend to show the source of funds of repayment on a yearly basis. Once you file your EB-5, you get a receipt notice. At the bottom of the receipt notice will be the office address of the office that has jurisdiction over the case where your case is sitting. For EB-5, it’s all sitting in D.C. at the IPO. So, once that packet is ready, on an annual basis I will print the packet out, put a cover letter on the top saying, “This is my annual compliance report showing that the loan has been repaid using legal funds,” and I will put the receipt notice and send it to USCIS. Usually within four weeks, we will get a status update on the USCIS’S website that’ll say, “We’ve received correspondence and we’re reviewing it.” We don’t have to do this.

I have not seen any firms that do it. The reason we do it is because India keeps going in and out of retrogression. To avoid any RFEs and future questions, we tend to file these in advance. And the second thing we file is tax compliance. If you’ve executed the transaction this year, the following year, we file proof that all tax obligations have been met. The good news is we used to do this all on paper. Now, USCIS is handing out online access codes, which allows us to upload unsolicited evidence to the USCIS account directly. This is great, because it makes our life easier. However, we have not seen it played out yet. We don’t know if the government’s going to go back to the database and access it or not. So, we’re doing a twofold approach. We’re uploading these documents to uscis.gov, and we’re sending physical copies to DC as well. Again, all of this is just to avoid an RFE, to prevent the case from being prolonged more than it needs to.

To summarize, Sam, I want to highlight that loans from Indian banks that are then remitted to the US for EB-5 investment purposes are illegal in India. You’re not allowed to do that. I have seen cases where USCIS has approved the transaction. They end up going to the Mumbai Embassy. Keep in mind, the Mumbai Embassy is the only embassy in India that does that interviews EB-5 applicants. So, they are experts in Indian law as well as EB-5 regulations. They will tend to catch this issue. They will flag the issue and say, “Hey, you violated local country rules, thereby making your funds illegal and revoking your visa application.” So, it’s very important to work with an attorney that understands the local rules as well as the US rules.

Real-Life SOF Example

Sam

Now, we’re going to shift gears and chat about a real-life situation. I know we’ve talked a lot about a lot of hypotheticals, so we’ll talk about a real-life source of funds case study. As you walk us through this, tell us the importance of making something very complex as simple and easy to follow as possible for the adjudicator.

Anahita

Yeah.

Sam

You’ve always got to be thinking, “Who’s the audience for this application, and how do you put it together in a way that’s both compelling from a storytelling perspective, but also logical and easy to understand?” Because if the person gets confused, then they’re just going to send back a bunch of questions and you’re going to face an undue delay and may have to find documents that may not be easily accepted.

Anahita

This is if a US business owner makes a loan to an EB-5 investor against a real asset. An EB-5 investor, for example, has a multifamily apartment in Mumbai. First thing’s first, you need to identify who the EB-5 investor is, so you’re providing a passport and birth certificate. Then, I move on to the second step, saying, “Okay, how did this investor acquire this asset? Let’s talk about that.” If they had their own income, then we go dig into that income, salary income, business income. What was the income? If it was inheritance, we then use personal documents to establish the relationship between the person who inherited this multifamily and the person who actually built out the multifamily or first purchased it. So, in storytelling, you introduce the character, you then talk about how the asset was acquired, and you show the source of funds of the asset acquisition. Then, you show the appraisal of that asset, show the loan document, and show that money being invested in the EB-5.

When it comes to the asset itself, if you’re collateralizing the asset, you need to have two things. You need to have the loan agreement in place, and you need to have a recorded mortgage. Just think about a storytelling perspective. You have an asset, you’ve identified the investor, you’ve identified where the investor got the money from to buy this asset. Then, you’ve showed the market value of that property. You’ve said, “Okay, this asset is worth $1.6 million. I’m only borrowing $800,000.” So, you make a loan agreement with the lender and you say, “All right, here’s the loan agreement. Here’s the recorded mortgage. I’m pledging this asset.” It’s a 10-year mortgage loan at market interest rate. Every month you’re making payments. The way I tend to handle the payments is to talk to the client in advance and say, “If you’re getting income from the multi-family, I prefer that you use that income from the multi-family to make repayment of that loan.”

The reason for doing that is, if they were to involve another asset in repayment (say they had another multifamily in Chennai and they bring that asset in to repay this loan), at some point USCIS is going to come ask that question, “Give me the source of funds for that asset in Chennai.” That is going to open up a whole can of worms. So stick to the asset. If this is the asset that’s generating the wealth, use this asset to repay the loan. Use the asset to repay the loan, as well as the interest. Now, once the funds from the loans have been received, the friend is then getting the money for EB-5. So, the collateral is done. So, Sam, the loan is going to the friend of the investor, and then …

Sam

Yes. The investor is the Indian national.

Anahita Yes.

Sam

They’re borrowing money.

Anahita

Yes.

Sam

And they’re getting a mortgage. The friend, who’s a US national, made money from a digital consulting business over a few years and is then using that money to issue the loan.

Anahita

The friend is using the money to issue the loan. So, the friend is then, say, giving 300K for the loan?

Sam

The friend earned 300K each year for five years before the loan was made from his digital consulting business.

Anahita

Okay, so he made 300K. All right, and then that money was lent to the EB-5 investor.

Sam

Exactly. There was a loan made against the apartment building, and then the investor took that money from the loan and used it for EB-5.

Anahita

So only 300K in this example.

Sam

It’s an 800K loan.

Anahita

Okay.

Sam

The US national who made the loan, that person earned 300K a year for five years. So they earned $1,500,000 in income, and then out of that $1,500,000 they loaned $800,000.

Anahita

I see. So that multifamily is just a collateral. You’re using the friend’s income to take out the loan?

Sam Exactly.

Anahita

Okay.

Sam

The friend is the bank and he got his income from a digital consulting business.

Anahita

Okay. Let me start over on this because then I will make some nuanced points on this. So, let’s start over on the source.

Sam

Okay.

Anahita

We have an EB-5 investor who’s an Indian national. Keep in mind, the EB-5 investor cannot borrow funds from a bank in India. So, they would be borrowing funds from a friend in the US. What do you do in that case? The first step is to provide the identity of the EB-5 investor. The second is to show what asset they own, prove that they actually own that asset, and then go into the source of funds for the acquisition of that asset. So, if the asset cost was one crore rupees, you need to show how the investor made that one crore rupees to buy this multifamily apartment. If the investor inherited the multifamily apartment from, say, his father who, for example, was a lawyer; then, show proof that his father really was a lawyer and had income to buy this multifamily.

After that part of the story is over, you’ve already sourced the asset. Then, you move on to the next step and you up raise the multifamily apartment. That multifamily apartment today, for example, up raises for 12 crores, which is more than $800,000. Now, that asset can be held as a collateral by your friend who’s lending you money. So, that friend will then have a loan agreement in place between himself and you and will record the deed. He will record the mortgage on that multifamily apartment. Then, you go into the friend’s finances to document how the friend made the money. The friend made the money through his digital consulting business. What does that entail? That entails you explaining, showing the business and corporation documents, the EIN, the operating agreement, and proving that this person is the 100% owner.

“Give us the business’s tax return. Give us the personal tax returns, give us their bank records, personal as well as business.” What the government’s going to try and see is that over a period of five years, that this person has actually made enough money from the business to lend out the money to his friend. So, they will look for a connection between business funds being transferred to personal account, and from personal account, that money accumulating over a period of time to lend to that EB-5 investor in India. I get asked a question, “Hey, does my friend need to move all that money to India and then the Indian invests that money into the EB-5 project?” You do not need to do that. We have answers for that. We are able to open US bank accounts for Indians that are residing in India.

What that does is it takes away the need of circulating the money around the globe, moving it from US to India, India to US. So, the way this transaction would work is the friend would then lend out $800,000 to the EB-5 investor. That money would go in the EB-5 investor’s US bank account, and from the US bank account it would then go to the EB-5 project that they’re investing in. Again, in both cases, it’s extremely important to show that the multifamily was legally sourced and that the friend legally sourced the digital consulting business. Always have to provide the ideas of the lender, the borrower, the creditor, whoever is in play. The way I like to write my story is a step-by-step process. When I am working on my source of funds, there are two elements. One is the index of exhibits, and the other is the actual cover letter telling the story.

The USCIS officer only has six to eight hours to read through a file. If they can’t make sense of that file in six to eight hours, they’re going to send out an RFE. My goal as an attorney is to make sure that the officer just reads the index of exhibit in chronological order and doesn’t even need to read a cover letter to make sense of the story. So, I will start the story as investor was born in India. See exhibit one, birth certificate. Investor owns this multifamily asset located in Chembur in Mumbai. See this exhibit. Once that exhibit has been shown, then it’s just going from one step to another. Again, the job is to simplify it for the USCIS officer and educate them. If there is no support; if you’re saying something and there’s no support for that, you need to explain why there is no support for that sentence. And in lieu of that support, you are providing a sworn affidavit.

For example, if this multifamily property was in your family for three generations, you’re not going to have banking records, you’re not going to have tax returns, you’re not going to have details about your great-grandfather. You will then provide your sworn affidavit to cover all the gaps within that source of funds. If you do not do that, I promise you the government will come back and send an RFE asking for 1920s bank records. You will laugh at that moment saying, “How is that even possible?” But it is your job and your attorney’s job to then explain why those documents have not been provided and explain the local country’s rules.

Again, very, very important: on a monthly basis, please make those loan repayments. Again, as a best practice for attorneys, on an annual basis, I do recommend filing the source of funds of the repayment and showing that your friend who has lend you the money, is paying taxes on that interest. Also show that you are making regular payments on that loan and that you’re current on that loan.

Sam, to recap, it’s extremely important that the repayment is discussed with your attorney in advance. The reason is that you do not want to introduce new assets. The minute you introduce new assets for repayments (say you’re using a property located in other area to repay this loan), your attorney’s then going to have to go back and source how that asset was acquired. So, the best practice is to discuss in advance with your attorney what asset wealth you will use to repay the mortgage. And ideally, you want to keep using the multifamily apartment in Mumbai so the attorney doesn’t have to keep sourcing the asset that’s paying for that loan.

Sam

That makes a lot of sense. Keep everything self-contained and just easy to follow.

Anahita

Yes.

Choosing an EB-5 Project

Sam

Now, we’re going to shift gears and chat about EB-5 projects. So, we’ve spent a lot of time going through all the different elements of a successful source of funds package, things to avoid. Particularly with respect to Indian clients sourcing funds from India, and Indians who are already in the US who may be getting part of their source of funds from friends or family overseas. Before we jump in and talk about one of our current EB-5 projects, can you tell us a little bit about what is important from an immigration perspective when you have clients considering different projects? What’s the talk you have with clients before they even start looking at different projects? What are you really hoping the clients identify in a project that will really increase the likelihood of their success in the process?

Anahita

I have clients that I classify in two buckets. I have one group of clients that’ll come to me and say, “Hey, I want to maximize my return on investment, which means I want my green card and I want interest, or I want upside.” And the second bucket will say, “I want my green card and I want my capital back.” And ideally, it’s very easy to work with that second bucket because they’re on the right track. If there’s a project that is promising extraordinary returns and the market rate is say, quarter of a percent, there comes the need to dig into the project. And as an immigration attorney, I cannot advise my clients as to where to invest, but things that I can do to maximize their success is ask them questions about job creation and the capital stack. So, I usually tend to have a 45-minute conversation with my clients about a list of questions that they should be asking of the projects.

One of those questions is, has the project started, and are there any jobs in place? The reason to do that is if the jobs are already created in advance, there is no risk of them losing their green card. For example, if the project is building homes and three years down the line, the economy collapses… But today, that project has enough jobs for every investor in the project, there is no risk at the I-829 stage. Where I’ve seen a lot of clients lose their green card, lose their money is when get to the I-829 stage and the project hasn’t started or the project sunk; it never created the jobs that are needed. So, jobs, jobs, jobs. The first thing I ask my client to focus on is to solve for immigration risk. Look if the project has already created the jobs. The second thing I ask the clients to focus on if they want to go into an early stage project: I tell them that it’s extremely important for them to make sure that the entire capital stack is up in place. What do I mean by that? I mean the first question to ask the project is, “How many EB-5 investors do you need to complete the project?” If the answer is not zero, you have a problem. The second question to ask is, “Hey, do you have a loan in place? And by loan I don’t just mean a term sheet. Are you making draws on that loan? Have you used the money from that loan?” Extremely important. And the third point, which I think that, just as a matter of finance, it’s important for clients to understand: if a project is paying out a high interest rate, you need to understand that the way EB-5 works is you have the investor, you have the regional center, and you have the developer.

The regional center is borrowing money from you, the investor, the EB-5 investor, and it is lending to the developer. If the regional center is paying out 4% to the EB-5 investor, at what rate is the regional center then lending out the funds to the developer? 4 plus 7? 4 plus 8? 4 plus 10? If you look at bonds, that is junk bond territory ,and that is one way for clients to assess risk. If the capital stack is not in place, you have a risk of the project not being completed. If the jobs are not in place, you have the risk of losing your green card at the I-829 stage. This is extremely important for my H-1B clients, because these clients are jumping off their H-1B, going onto their work permits. They do not want to risk losing a green card because the project didn’t take off or the jobs weren’t created. So I go through 45 minutes of educating the client, and then based on that, the client comes up with a list of questions to ask the projects and makes the decision as to where they want to invest.

Sam, to recap, I think that my only recommendation to my clients is to focus on the track record, focus on the job creation requirement—and, in this uncertain interest rate environment, to make sure that the entire capital stack is in place, the loan is in place, and that all the funds from the developer are in place before investing in any project.

EB5AN’s Twin Lakes and Concurrent Filing

Sam

Now, we’ll shift gears and chat about one of the current EB5AN rural projects that we have available. It’s called Twin Lakes Georgia. Twin Lakes Georgia is a single-family home project located just outside of Atlanta, Georgia. It’s a project with a developer called the Kolter Group. Kolter’s been around since 1997. Over 25 years, they’ve developed more than $24 billion of projects, primarily in the Southeast, including 20,000 single-family homes in process and realized over that time period. It follows 14 prior EB5AN Kolter projects. So, since 2013, EB5AN and Kolter have successfully completed 14 other EB-5 projects. This one, the Twin Lakes Georgia loan project, is the 15th project with a 100% project approval rate from USCIS to date. So, investors know that there’s a very long track record of USCIS approving the Same structure that we’re using for this current project over many, many projects over an extended period.

Let’s chat about concurrent filing. I know you referenced it a little bit earlier about H-1B clients. Tell us a little bit about concurrent filing, who does it benefit, who does it not benefit, and how does it fit in with the Visa Bulletin and India being current now for rural investors?

Anahita

The great thing about the Reform and Integrity Act was that it allows concurrent filing prior to the EB-5 being adjudicated. Under the old law, clients could only apply for adjustment of status after their I-526 was approved. After the Reform and Integrity Act, clients are concurrently able to file for adjustment of status if their date is current or the country of origin is current. So, what does that mean? If you look at the US Visa Bulletin today, India is current in the rural, high unemployment, and in the infrastructure categories. That means that if clients are in the US on an H-1B visa, E-2 visa, F-1, visa, L-1 visa, TN visa, or any of those visas, these clients then have the ability to apply for adjustment of status with their EB-5. So, we tend to file their I-526E application with the source of funds and the project documents along with their I-131 application (which is the application for a travel permit), I-485 application (which is the application for a Green Card) and I-765 (which is the application for a work permit).

All of these are filed concurrently, and this is only possible because India is current today. This is why we encourage our clients to file as soon as possible to take advantage of this situation where they can get a work and travel permit. Timelines have been really, really amazing for USCIS standards. We have seen work permits get approved in as little as 60 days up to a maximum of 5 months. Work permits tend to kick in from 60 days to the 5-month mark. This (especially for my tech clients in Amazon, Google, Oracle, etc., who are burnt out of working these high stress job) gives them the ability to immediately quit their job and either take a break or work on an EAD— or to start their own business. The second thing that happens is, usually within eight to nine months, these clients get travel permits. This gives them the ability to travel outside the country and come back without having to worry about stamping or without having to wait at the embassy or to be processed anywhere.

I’ve had a bunch of investors on H-1B visas who have continued on the H-1B visa after getting their EAD and have gone to India. The dates for embassy stamping are not available. They have reentered the country using that travel permit and remained on an H-1B visa. So it’s a great, great benefit that my clients see. However, it comes with a flip side. This is why it’s extremely important for clients to pick the right project because like I said, if ultimately your EB-5 gets denied because the project didn’t do what it was supposed to do, there’s a risk to you in that case. It is likely that USCIS comes back and says, “All right, you can jump back on H-1B,” but it is also highly likely they say, “Hey, you already lost the H-1B. You are without status. You are basically waiting for adjudication of I-485 and I-526. In the meantime, you’re utilizing this work permit and the project failed, so now you have accrued all this illegal time.”

That is another interpretation, so it is extremely important to protect yourself against that. I tell my H-1B clients to only go for projects that have jobs in place today or that are mid-stage, that have all the funding in place. It is a double-edged sword where the clients have to be more careful about the projects that they invest in. But they also have an immediate benefit of using that work and travel permit to accelerate their earnings, to quit their jobs, to work wherever they want.

Sam

What does that timeline look like? If a client finishes their source of funds package, and they’re ready to go, then what do they do next. How do you help them make this happen?

Anahita

Everything is filed simultaneously. Our track record for H-1B clients is that we finish files within 14 days. Our guarantee is that we will turn in the file in around two weeks. Usually, source of funds, adjustment of status— everything is done within two weeks. All of it’s filed together. Again, work permits are approved in 3 to 6 months. Six is a high end. Usually we’ve seen clients get approved in under 4 months. The travel permits are approved in eight to nine months, which is extremely quick. If you look at H-4 EADs right now, in order to get H-4 EAD, the minimum wait time is six to eight months. So, EB-5 is prioritized and is getting EADs a lot faster than any other category.

To recap, Sam, we don’t know how long India and China will remain current. We encourage our clients to file for adjustment of status while India is current. The benefit of that is that the work permit is valid for two years. After that two-year mark, even if India retrogresses, you can keep renewing that work permit until you get that conditional green card. This is a huge added benefit. The downside to it is the clients need to be extremely, extremely cautious in the project that they pick. They want to make sure that they’re not picking a project that hasn’t started construction yet. I’m not saying that the project’s going to fail. It’s just to protect them from the failure of a project launching or not getting the requisite permits or not getting the requisite financing. It is always better for H-1B clients to go into a mid-stage project that has already put in the jobs in place, and that they know that there’s no risk of default or the project not continuing.

Sam

That makes a lot of sense. Circling back to the project, the Twin Lakes Georgia project. Again, it’s a large single-family home community with amenities. It’s located just outside of Atlanta, Georgia. It qualifies as rural, which means that investors in the project are given priority processing of their I-526E green card application. It also means they have access to a 20% visa set-aside. Anahita, what is priority processing? How does that likely differ from some of the other categories ,and why is the set-aside really important for Indian-born investors?

Anahita

Let’s talk about priority processing first. Under the Reform and Integrity Act, rural projects have priority processing. There’s three kinds of processing. There’s expedited processing, which is given to clients in humanitarian need or emergencies or because of USCIS error. That is extremely fast processing. Even that takes a year, though, at least. The second is priority processing, which is what the rural projects have. And third is regular processing, which is all the other unreserved categories, the high-unemployment TEA, and the infrastructure category.

The industry estimates that investors in rural projects are going to get processed faster than other EB-5 lines because of the way the regulations were written. The issue is that we have no data yet to see how long that is. Again, the industry expects that approval to be around 24 months, but it’s in a wait-and-watch mode. To me, the bigger benefit of rural is that 20% set-aside, and that is extremely important to H-1B holders with kids.

Why is that important? For example, say you get your EB-5 adjudicated in three and a half years in rural and once it’s adjudicated, India’s not current. Well, India’s not current, but 20% of the visas, because you invested in rural, have been set aside for the rural category. Since this line is very new, there are not a lot of people ahead of you in this line. So, the sooner you file, the better it is. The more people will line up behind you, the better your odds of capitalizing on that 20% set aside. That really helps in protecting your kids from aging out. That really helps in delay in fighting retrogression. If there is retrogression, you still have that 20% set-aside for rural in spite of India being retrogressed.

Sam

What is retrogression, and why does that matter?

Anahita

All American immigrant visas have a quota. EB-5 has a quota. Once that quota per fiscal year gets used up, the government moves the dates back. What that means currently: if you look at the unreserved category, India is in April 2017. That means that most EB-5 visas for this fiscal year have been used up. The government’s not going to print any more green cards unless the fiscal year changes, which is on October 1st. On October 1st, the government will resume printing green cards again until they use up the quota for the next fiscal year. If you’re in a rural category and if the quota for that fiscal year is over, but that 20% has not been used up, you will get allocated that 20%.

What that does is: once your EB-5 is approved, if a green card is not available, the government won’t be able to print a green card for you. However, once the EB-5 is approved and a green card is available under the 20% quota, you can still get your green card printed. This approves your conditional green card faster rather than waiting for India to become current in the regular line.

To summarize, Sam, for Indian investors, we’ve seen a lot of rush in the rural TEA projects because of the priority processing and because of the 20% set-aside. And because this line is very new (it has just opened), most projects on the market are in high-unemployment TEAs. People are assuming that that’s why most investors have ended up in high-unemployment TEA projects. Rural is a better place to go by extrapolating that logic. SO, people are going into rural for that 20% set-aside to protect their kids from aging out and to benefit from priority processing.

Sam

One of the things that we really like about the Twin Lakes Georgia project is that it’s a proven business model. The entire community is going to have about 1,300 single-family homes, and as of July 1st, we know that over 520 homes have already been sold. And over 370 homes have actually been constructed. Residents have actually moved in and are living in the community. The clubhouse is done, the pickleball facility—all the amenities are pretty much completed and open and in place. So, the project is a going concern. It’s already profitable. It’s created almost 2,000 EB-5 eligible jobs already. So, a lot of that risk, “Are they going to get the financing?

Are people actually going to buy the product that this project is going to sell? Is it going to happen? Is it going to be profitable?” A lot of those questions have already been addressed, and clients coming into a project like this that started construction four years ago are getting the benefit of having a lot of that execution and feasibility risk eliminated. As I’m sure every immigration attorney will tell you, an EB-5 investment has to be at-risk. There must be the potential for gain or loss in order for an EB-5 investment to qualify for the green card. However, the amount of risk that you need to take on when you select a project can be very low. There just has to be some element of risk there. In this case, this project, 520 homes have already been sold, but there’s still more than 700 homes that have not yet been sold. So, how quickly and when those homes are going to be sold and built—that’s a projection.

There is that element of risk and lack of clarity, which allows us to satisfy that at-risk requirement, compared with a project where all the financing is not in place—the project is dependent on future rents, no one’s rented yet, they have to build the hotel, build the apartment building. Then they’re hoping there’s going to be a refinancing event at some point in the future. Those types of projects tend to be a lot more speculative, where there’s a lot more execution and financing risk that the client is taking on. Now, those projects will also qualify and satisfy that risk requirement for EB-5, but the risk level is a lot, lot higher. It’s certainly far more than the level that’s required for the investment to qualify as being at-risk.

One of the other things that we really like about this Twin Lakes project is that it’s an age-restricted 55-and-up retirement community. The retirement community brand is called Cresswind, and it’s a proven brand. This location, Cresswind Twin Lakes, is one of 13 Cresswind communities across the Southeast. So, not only is this particular location proven and successful, but it’s also effectively a franchise of a successful retirement community platform with amenities and single-family home models that’s proven in multiple locations around the Southeast. So, there’s a very strong track record that this type of business works not only in this location, but also across many other similar locations in the same area of the United States.

Now, one of the other things that we talked about earlier was the I-526E approval guarantees, safety of funds. How do we make sure that, not only is the EB-5 integration process successful for investors (being that there’s enough job creation for them to receive the permanent green card and get I-829 approval) but we’re also very concerned with capital safety. Making sure the investors’ funds (that $800,000 that’s being invested) is safe and that it’s going to be repaid in a timely manner. And so, one of the ways that we accomplish that with this Twin Lakes project a loan repayment guarantee from one of Kolter’s parent holding companies. So, one of Kolter’s entities with significant assets, almost $400 million in assets, provides a repayment guarantee that secures the loan.

And that entity, not only does it have significant assets, but it also has significant net equity. It’s basically a diversified entity that really materially increases the likelihood that the investors are going to get timely repayment of their funds. In many EB-5 projects where the investment is structured as a loan, the security of that loan will just be limited to the project itself. So, if something happens with a project—let’s say it’s a hotel project or an apartment project—if for whatever reason that apartment building at that location or that hotel at that one address is not as successful as people thought, oftentimes the investors could lose money, all or part of the funds that they’ve invested in. The repayment is only tied to that one building producing enough cash flow and a refinancing event in the future.

We want diversification. Just like when you invest in the stock market, it’s usually not a good idea to bet your entire net worth on a single stock. The same strategy applies here. We want diversification for that investment. And so—even though the funds are going into the Twin Lakes project to satisfy the at-risk requirement for USCIS, for the EB-5 program—the security of the investment, the obligation to repay those funds on time, is tied to a much larger entity that’s completely separate from the project, and it has a large balance sheet. It owns more than 35 different projects that are all spread out, and so that repayment is diversified. That means it’s a lot safer than having the repayment tied to just a single asset.

That kind of diversification is combined with the fact that the Kolter Group is one of the largest developers in the Southeastern United States. They’ve successfully borrowed and repaid billions of dollars of loans over the last almost 30 years. They’ve never not repaid a single loan. So, you tie that track record and fiscal responsibility combined with the fact that this project’s repayment guarantee is with a diversified parent holding company with significant assets. We think that those two factors combined make us one of the safest rural EB-5 loan projects available on the market today.

Anahita

Sam, I get a question from my clients about EB-5 loan repayment guarantees. I believe they talk to projects all over the United States, and they will often come to me and say, “Hey, how can EB5AN give us a loan repayment guarantee if our funds need to be at risk?” Can you address that, please?

Sam

We actually have a blog post in process on that exact question, because it’s one that is quite common, and a lot of our competitors will use that safety feature as a way to confuse clients, unfortunately. So, let me give you a little bit of clarity on how that’s structured. We’ve been using the concept of an EB-5 loan repayment guarantee since 2014. We’ve used it on more than 10 prior EB-5 projects with Kolter, and we’ve received 100% USCIS approval on those projects. So, there’s no question whatsoever that a repayment guarantee is allowed, and it is obviously allowed with Kolter because we’ve gotten many of those approvals to date. Now, why is that the case? Why is it allowed when the regulations, the EB-5 program rules, state that funds must be at-risk?

It goes back to that same idea that there’s many, many different levels of what the government considers at-risk. The way the government defines at-risk is the potential for gain and the potential for loss. No matter how large or how small, it just has to be there. Potential for gain, potential for loss. Now, Kolter is a very large company. They’ve been doing business almost 30 years. The same situation applies for any large, successful going concern business. So, if I’m an investor and I decided I would want to make a loan to Microsoft, Microsoft’s a huge company. They’ve got a big track record, they have a large balance sheet. They’ve been in business a long time. But Microsoft is a for-profit business. It’s a going concern entity, and like any business, it’s possible that that business could fail. Maybe two or three years from now, they overinvest in AI and all of a sudden they run out of cash and they have to declare bankruptcy. Very unlikely, but it’s theoretically possible. Fortune 500 companies have failed over the last 30 years. It’s not impossible.

So, that possibility… You’ve made a loan or that a loan has been made to you from that type of entity that has a big track record—even though it’s very, very unlikely, the fact that it’s still possible: that still satisfies the at-risk requirement for USCIS. So, there’s no way to reduce the investment risk down to zero because then it would be considered not at risk. But what you can do is you can lower that risk to a very, very low level. And having this type of repayment guarantee from a separate diversified company with a track record of repayment over a very long period of time and significant assets and net equity—we think that’s the best way to lower that risk as low as we can—without touching the zero risk level and still qualify for the green card.

The other two things that we have on this slide that I’ll quickly mention: this same entity that’s providing the loan repayment guarantee is also providing an I-526E approval refund guarantee. That basically means that if an investor’s application is denied for any reason, they’re going to be promptly refunded. That’s beneficial, especially if you hire an immigration attorney who doesn’t do a good job because then you’d be able to get your money back early and you wouldn’t be waiting until the end of the investment.

So, these are safety features that we’ve built in to give clients peace of mind, but the reality is, as long as you hire a really experienced immigration attorney like Anahita and follow their advice, you won’t have any issues getting approved. The last item is the job creation guarantee. So, as Anahita mentioned, in order to successfully complete the entire EB-5 process, you need to create 10 jobs and you have to be able to show how those jobs were created. This project has a job creation guarantee and more importantly, it’s already created almost 2,000 EB-5-eligible jobs. So, for our clients coming in today, when they join, they know that we’ve already created those jobs that are sitting there in a job bank and available to be assigned to them. Those different safety features really set the Twin Lakes rural EB-5 project apart from many of the other, both rural and non-rural projects that are out there.

Unfortunately, many of the rural projects that investors will see in the market are projects that are dependent on EB-5, and they really wouldn’t be happening if EB-5 weren’t available. This project is pretty much the opposite. It was started late in 2019, years and years before there was any preference for rural projects, which only came about in 2022. It’s successful, it’s proven, it doesn’t need EB-5 capital; EB-5 investment is just nice to have for the project.

And so, it basically is just a really solid development project that happens to qualify for the rural designation. And that’s really what you want to be looking for; you want a project that doesn’t need EB-5 and is not dependent on it. It has other sources of capital. It’s a proven economic model. You can see revenue being generated, you can see profit being realized. That really helps you eliminate a lot of the risk that you’d otherwise be facing if you were building a project like a hotel or apartment building; where maybe the project was planned out three or four years ago, prices have gone up, rents have changed, and people no longer want to live in that area. Eventually, when the project gets built, all of a sudden interest rates are much higher, debt service is greater, and now the project can only generate half of the rent that it was targeting.

And because the rent or because the debt service and interest rates are higher, now all of a sudden the project is facing bankruptcy. Why take that kind of chance years in the future on an unknown refinancing event when you can go into a project that’s already proven? It has proven that it is able to generate a profit in the current economic climate, obviously not just at this one location, but across many locations around the Southeastern United States.

One of the other things I’ll just touch on quickly here is Kolter. They’re the number one developer in the active adult single-family home market. So they’ve got more market share in this market than some of the largest publicly traded home builders in the United States. So, they’ve found a very specific niche: active adult communities under the Cresswind brand. They’re just executing and doing extremely well, even compared to some of the largest and oldest home building companies like Lennar and the Pulte Group: they’re doing even better than those companies. And lastly, don’t just take my word for it. As of July 4th, we’ve conducted eight different EB-5 investor interviews from investors, many of whom are Indian, H-1-B and India-based EB-5 investors. So, it’s really important when you’re making an investment to get other perspectives. Some investors have experience with real estate. Some of them are attorneys, some of them are not. Some of them are software engineers, some of them are data scientists, and they may not be experts in understanding how a real estate development works, how it gets financed, what are the risks involved. So, it can be really beneficial to hear perspectives from other investors who may have more relevant experience as to why they decided to select one project over another.

One of our investors, actually Ken here, who worked with Anahita, did EB-5 investments for six of his family members in the Twin Lakes project. He wrote a check for $4.8 million and gave $800,000 to six relatives, each of whom invested in our Twin Lakes project. There’s no exact right project for every investor, but you got to do the research and think, “What’s most important to me? Do I really want to focus on capital preservation, making sure I get the $800,000 back in a timely manner and make sure the green card process goes smoothly? Or do I really want to just try to chase a higher return and getting the green card successfully and potentially losing some of the principal capital?” You’ve really got to decide, “Why am I making this investment, and what do I really want to prioritize?”

There’s no free lunch, just like any other investment. If you’re going to be targeting a higher return, you’re going to be absorbing and accepting higher risk. So, that’s really a key aspect when it comes to project selection. Anahita, I know you’ve represented a number of these clients. What are some of the most important things that your clients have conveyed to you on why they decided to go with the Twin Lakes project?

Anahita

I think the number one reason, because most of these clients are H-1-B holders, has been the job creation aspect. The fact that this is not an early-stage project, this is a mid-stage project. All of these guys already are going to get the jobs that are in place. They’re going to be allocated the jobs. The second thing I’ve heard is that they’re very comfortable with the Atlanta metropolitan area. Unlike some of the areas like where I live in, Seattle, or San Francisco, which have experienced exponential growth and are kind of coming down now.

Atlanta is experiencing quite a bit of a boom. The third thing is definitely Kolter. All these people recognize the Kolter brand. II have a client who went in and looked at bankruptcy records to see if Kolter had filed any bankruptcies in the last 20 years, how they did in the ’08 financial crisis, and the home sale velocity. I think, even in a high interest rate environment, clients have said that they feel comfortable with an aging US population investing in homes that are age-restricted.

Concluding Remarks

Sam

Before we conclude, all of these testimonials (they’re each about an hour long)—they’re all available on our website. If you go to EB5visainvestments.com/testimonial, you can see the full videos and transcripts for each of these interviews.

Can you walk us through the process for engaging you to help with source of funds? Also, just tell us why an Indian-born investor, whether they’re in India or whether they’re in the US, go with you? There’s thousands of attorneys, maybe not all of them have a lot of EB-5 experience. But for that profile of client, why are you best situated with the right experience to help them get through the process and not have any issues?

Anahita

In terms of getting in touch with me, the best way to reach me is through WhatsApp or email. Those details are on this slide. I would say that, to start the process, I tend to provide a free 45-minute consultation to potential clients before charging any money, to understand what their source is, to tell them what roadblocks they’re going to see, and to understand where they are in the project selection process—whether they’ve made a decision or are in the process of making decisions. Once that initial conversation is done, the client understands what roadblocks they need to overcome. If they think they can overcome those roadblocks, then they choose to retain me. Once they retain me, we start working in coordination with each other to resolve issues or to start documenting the source of funds.

Like I said, I have about a decade of experience doing EB-5. I spent the first 18 years of my life in India. I can read documents in Hindi, I can read documents in Punjabi and Guajarati; all three languages as well as English. What helps me a lot is that, thanks to the 18 years I spent in India, educated in India, up until college, I understand the Indian system, the tax laws. I was an accounting major back in India as well. And having the forensic accounting background overlaid on it. There is not a single source of funds from India or from the US or a combination of both that I have not seen. We are a boutique firm. We tend to provide one-on-one attention to the clients. So, clients have reached out to me at 2:00 AM, 3:00 AM and have been able to answer their questions.

What is extremely important for us as attorneys is to provide that level of customer satisfaction, especially when clients are located in Asia. What we tend to do is have a bunch of attorneys, including me, that are working night hours in order to coordinate. Otherwise, you lose a lot of time in just emailing back and forth. If I send an email this morning and at night I go to bed, the client sees it at night, and if they have any questions, they have to wait until I wake up. Based on the client’s profile, we decide what times we’re going to work . We customize that entire experience. On top of that, there is not an RFE I haven’t seen, there is not a case I’ve not resolved. I have done about 220 India EB-5 applications with a 100% approval rating.

So, if there’s any roadblock you’re going to hit, I’m going to see it before we even file the application. Or if there’s any roadblock that I see, I probably have an answer for I, or I just need to sit down and brainstorm with the client. We’re not going to go back and reinvent the wheel. None of this is new to us. Everything is just second nature in habit. I think we have one of the fastest processing times in the industry when it comes to processing EB-5 files. Like I said, for my H-1-B clients, we process files in under two weeks, and for my Indian clients it is about four weeks.

I get a lot of clients from big law firms with big reputation coming to me that have been sitting on source of funds for six to eight months. I’ve also seen a lot of practices where these attorneys in the US will outsource their work to accountants in India and the accountants in India only understand the Indian side of things. They do not understand the American side of things. Here you work directly with an attorney that understands the Indian laws, the Indian regulations—and understands what questions are going to be asked at the embassy in India and how to answer those questions. We are boutique. We are a mid-size firm. We specialize in EB-5 and there is not an Indian scenario we haven’t seen after doing 220 files from India with a 100% approval rating.

Sam

Tell us a little bit about your presence in India. I know you travel there regularly and you still have family there. If clients are in India, they want to meet you, how do you provide that personal level of service with a client base that’s halfway around the world?

Anahita

I travel to India three times a year. Again, I have family in India, but not just that—I try and meet clients in person. But on top of that, like I said, I have clients that have approved EB-5s, or US passports based on EB-5s, who are all spread out throughout the country. They tend to then guide my future clients. So, I’m one of the few attorneys that is able to provide 5 to 10 references in the city that the client is located in. That gives the client a lot of comfort that they’re not the only one; there are these 10 other people in their vicinity that have dealt with this attorney, who has taken them from start to finish.

So, not only do we travel to India and meet the clients, but there are also enough people spread out across India, clients of mine that already have their conditional green card, permanent green card, or US passports. They are willing to guide the new set of clients through how they overcame certain issues or how their experience was with me and how they went through their project selection experience.

Sam

Talk to us about independence and why it’s critical to have an attorney who really has your best interests at heart—and how that varies across some of the other attorneys and some of the other projects that you’ve seen.

Anahita

That’s a great question. The first tip that I give my clients when they call me if they don’t ask me if I work for EB5AN or have any affiliation with EB5AN or any other regional center, is, “Hey, your first question should be, ‘Have you ever represented a regional center, or have you done the project docs for the regional center, or are you in any way in bed with the regional center where any conflict of interest would result in you withdrawing your representation in this case?’” And that is a question I believe every EB-5 investor should be asking of the attorney as well as the project. I think a lot of regional centers that I work with will say, “Here’s an introduction to a specialist. That being said, we don’t care who you work with.” But there are a certain few that I know that have attorneys that have done their project docs. These regional centers are also recommending the same attorney to the EB-5 investor, and if you try and bring an outside attorney in to do the source of funds, there’s going to be pushback.

It’s extremely important for the client to quiz the attorney to make sure that the attorney is only on the investor side of EB-5, not on the regional center side of EB-5. Clients do not realize that retainers have legal language that will absolve these attorneys from conflict of interest. It is extremely important for clients to read the retainers to make sure that they’re not working with a conflicted attorney. If you’re working with an attorney who has represented the regional center as well as the investor, the next question is: “Whose interest is the attorney looking out for? Is it your interest as the investor, or is it the regional center’s interest?” Because at this point the regional center has paid this attorney to do the docs and the investor is paying this attorney to do source of funds. So, whom does the attorney’s loyalty lie with?

It is extremely important to ask that question. I always say, even if Sam’s recommending me as an India expert, I know that EB5AN tends to recommend multiple attorneys. You’re free to work with whoever you want to or anyone outside of that as well. You need to have that with any regional center you’re approaching. You need to make sure that the attorney isn’t paid on both sides and isn’t in bed with a certain regional center and is going to give you the honest opinion on your source of funds, as well as on the immigration side risk on the project itself.

Sam

As a different angle on that same topic, for those who aren’t regularly hiring attorneys in the US: tell us a little bit about fiduciary duty, client confidentiality, and attorney-client privilege. Describe that trust relationship and why it’s almost like a mini marriage for an extended period of time with the attorney that you’re going to pick and how that kind of factors into who you should be picking.

Anahita

As Sam said, EB-5 is a long process. It is not short. It starts when you make that first phone call to your attorney, to the day you apply for removal of conditions, to the day you get the removal of conditions lifted, to the day you become a US citizen. You’re talking about a 7-to-10-year marriage with the attorney. You’d better like the attorney you’re working with, you’d better feel heard, and you’d better feel respected. What I’ve heard in the industry (and I think attorneys have a bad reputation about this overall) is once the retainer is signed and the funds are paid, attorneys are slow to respond. They will not respond quickly enough. The way we design our retainer is to divide our payments in half. That is particularly done to give the attorneys and the clients the peace of mind that the attorney’s going to continue working because they have that other half to collect.

We also design our transaction in phases so that we’re not charging all the money upfront for your removal of condition service that is going to be rendered seven years down the line, and you’re now married to us. At every stage, it is your choice whether to continue with us or to go to another attorney. I think fiduciary duty is a concept that a lot of clients abroad do not understand because lawyers are not a common feature for these kind of transactions. In the United States, under the bar rules, attorneys are allowed to represent one side of the transaction.

So if I’m representing an EB-5 investor, I’m only representing that EB-5 investor. If I’m representing EB5AN, I’m only representing EB5AN, doing their securities documentation, litigating for them X, Y, Z. Now, if I want to represent both sides, say I want to do the project docs for EB5AN, or I want to be their marketing person, or I want to be their consultant and I’m getting paid by them. If I’m also doing the investor’s EB5 files and I’m getting paid by the investor, my loyalty because of the amount of money that will be paid out by the regional center is going to be a lot higher. My loyalty is going to lie with the regional center.

That will make sure I make the source of funds work even if I don’t think it crosses the threshold, even if I don’t think USCS is going to approve it. My duty and my responsibility is going to be towards EB5AN because they’re paying me all this money to make sure that I filed this application for the EB-5 investor. So, it’s extremely important that you make sure that the attorney is not in that boat.

The bar rules have clearly stated if you’re going to represent both sides of the transaction, you need to get the client to sign a conflict of interest waiver. The problem is the conflict of interest waiver doesn’t really say conflict of interest waiver in bold and doesn’t really explain what exactly is going on. There’s a lot of legalese and a lot of the real issues are hidden behind that legalese. Clients are always flustered or don’t understand what that means.

So, clients end up signing that document and not knowing until the fund goes down that this attorney or this firm was representing both sides of the transaction. It is extremely important that the attorney you pick protects your fiduciary, is the one who is looking out for your interests. It is my job to tell you as the investor, “Hey, this source is not going to be approved by EB5, by the USCIS IPO office. Please do not file this application.” However, if I’m in bed with a regional center, I’m going to say, “This is going to work just fine. Go ahead and file it.” And then of course you’re going to find out two to three years down the line, this didn’t work. And in that case you’ll get an RFE, you’ll get annoyed and then I can just throw my hands up and say, “Well, we tried, it didn’t work.” But you’ve now lost time, you’ve lost money and you’ve lost immigration benefits.

It’s extremely important for you to understand that the attorney should only be representing you in this transaction and not both sides of the transaction. Even if you’re referred to this attorney, say by EB5AN or another regional center, this is a question you should be asking in writing over email. My recommendation to clients is, when you’re communicating with regional centers or attorneys, questions like these need to be asked over email. There is record of what was said. If a regional center or project or an attorney’s unwilling to answer these questions in writing or kind of courses here to jump on a phone call so that they can answer these questions, that is not enough. That is not good enough. If I am unwilling to say, “I’m not in bed with EB5AN” or “I’m not in bed with another regional center,” that is not good enough, that should prevent you from hiring me. But if I can with confidence state on an email, “Yes, I’m independent and I only represent investors,” you can be confident that if I have lied, you can come sue me. So, it’s very, very important for clients to ask these questions whether they’re abroad or in the United States.

Sam

Yes, investment transparency and avoiding conflicts of interest are absolutely critical and the company, the law firm that we use to prepare all of our project documents—they do not represent individual investors. We really, really like to have that independence and transparency so that the attorneys that our investors select—it’s completely their choice. Obviously, we recommend attorneys from whom we get good feedback from clients. And we often will introduce multiple attorneys because it’s really important for clients to interview a few different personalities.

Sometimes with one attorney, you’re not just getting the experience and the paperwork, you’re also getting the communication style, the languages, the time zone, the bedside manner. There’s a lot of different factors that go into selecting an attorney. Anahita is one of the top attorneys, who many of our clients do choose to work with, and her work is impeccable and we hear nothing but good things from all the clients that have chosen her, but she’s not the only attorney that we work with.

And every one of our investors is free to choose any attorney they like. We can provide a short list of 5 to 10 attorneys that we’ve worked with over the last 10 years. If for whatever reason the clients don’t like any of those attorneys, they’re absolutely free to go to Google, type in “EB-5 attorney”, talk to 20 people and pick whichever attorney they like. We can provide the project documents for the Twin Lakes project or any other project that we’ll work on. And we’re happy, more than happy to cooperate with any other attorney, share all the materials, and make sure that attorney’s up to speed.

I think the last question I would have: generally, if you’re an investor considering doing the EB-5 process, what’s the timeline look like? Is this something that can be done in a couple of weeks, couple of months? Obviously, you want to avoid the situation where you get fired from Amazon and you’ve got to scramble. So talk to us a little bit about timing and what’s the right time to start the process and how does that overlap with your current status and with availability of funds? One thing we didn’t spend any time on at all is partial filing and things like that, but talk to us about timing.

Anahita

I think that with the uncertainty in economy, what I’m telling my clients is that it’s best to file EB-5 ASAP because that way you have access to, say, line of credits, unsecured loans, home equity line of credits. Once you’re laid off or unemployed, none of these lenders are going to lend you money. On an average, a client of mine borrows $400,000 to $450,000 from a US bank in order to fund their EB-5. And that is only possible if you are employed. If you’re unemployed, that those options go away and then you have to use the fallback of a partial filing. I personally am okay with partial filing only if the investor can show and can determine that they’re in the process of investing.

What does that mean? That means if you’re liquidating a real estate and you’re under contract, but it’s going to take 60 to 90 days to get that payment, I can for sure tell USCIS, “Here’s the real estate, this is how it was acquired. Here’s the property under contract. The money’s going to take 90 days to come, but hey, the investor has $100,000, he’s already paid that in and the rest is going to come in 90 days. And once the rest comes in, we will interfile.”

But at that point, I feel comfortable filing with that a $100,000. As an attorney who’s very risk-averse when it comes to other people’s immigration, I want to make sure that I can document in the process of investing, whether it is sale of real estate or it’s a loan taking some time to come through; it’s been pre-approved or it’s RBI remittances in India that are capped at $250,000. Things like those you can easily do partial filing with. The government understands why you’ve done partial filing. Where I’m uncomfortable with partial filing is when the client has no asset to tap into and is going to say, “Hey, I’m going to make this salary over a period of three years or over the next 12 months and I’m going to put that money in.”

The other problem you hit in an uncertain economy is, what happens if you get laid off and now you haven’t stuck to the plan? I get a lot of clients that have the money but don’t want to borrow because of the high interest rates. And what I tell them is it’s better to always fund it 100% if you can, and then you can always put up that asset for sale and pay it off using the sale funds. What you don’t want to do is wait for the sale to be completed, liquidate, and then file the EB-5 five. The more time you spend doing all this, the more people are going to be ahead of you in line. As for the turnaround times, like I said, for EB-5 investors who are in the US, 7 to 14 days, I tend to work with my Amazon clients or my Google clients after work hours after 5:00 PM so they can provide all the documents. Everything’s done electronically, everything’s assembled electronically.

And for Indian clients, the average time is four weeks. I have had clients come to me from other firms that have been waiting for six to eight months and have just been sitting because the attorney asks for document A, they provide document A, then the attorney asks for document B, and day over day over day, you start to lose time. So, you really need someone who’s flexible and willing to work with you in local time zones. I have occasionally also traveled to India to finish source of funds. That is also an option that we provide as a firm. Again, in this uncertain environment and with a brand new rural line, what I’m telling my clients is, “Let’s file ASAP, let’s be first in line so that there are many more people behind us and not ahead of us.”

Sam

Thank you very much, Anahita. That was a long, long webinar in multiple languages, but I think we covered many important topics. For investors who watch this in the future and are exploring EB-5, definitely reach out, talk to Anahita, and she’ll be able to quickly tell you whether EB-5 is a possibility. What documents would be needed, what the timeline would look like. And she’ll help give you that confidence and perspective on how similar your situation is to others and what can be done and how much time it’s going to take to make the green card a possibility. So, thank you very much, and Anahita has our strongest recommendation as well.