Additional Considerations When Proving EB-5 Source of Funds

The EB-5 program grants U.S. permanent residency to foreign investors in exchange for their investment in the U.S. economy. The investment must also create at least 10 jobs for qualified American workers.

To qualify for the EB-5 visa, applicants must invest $1,050,000 in a new commercial enterprise (NCE), or $800,000 if the NCE is in a targeted employment area. They must prove to the United States Citizenship and Immigration Services (USCIS) that the invested funds were legally obtained.

Source-of-funds documentation is a key requirement to demonstrate the legality of the investment capital. It is a complex process that requires extensive documentation. However, understanding specific EB-5 considerations can make it easier for investors to navigate this process.

In this article, we’ll discuss additional considerations investors should keep in mind when proving EB-5 source of funds.

What Is the Source-of-Funds Requirement?

While the EB-5 program is designed to attract foreign investments and create jobs for Americans, the U.S. government is selective about the acceptable types of investments. They prioritize ensuring that the invested funds are from lawful sources, which is why the EB-5 program has strict source-of-funds requirements.

The source-of-funds requirement mandates EB-5 investors to provide clear and accurate documentation proving they obtained their investment capital legally. The documentation must also show a clear, legal path of funds from its origin to the EB-5 investment. Your legal source-of-funds documentation is a crucial set of documents to submit along with your I-526E petition.

The specific documentation required depends on your source of funds, whether it’s earned income, capital gains, loan, or inheritance/gift, among other options. However, it’s recommended that investors provide all documents they can find going as far back as possible. Failure to submit adequate documentation can result in USCIS requesting further evidence, delaying your I-526E processing time. It can also result in a denial of your application.

Points to Remember When Proving EB-5 Source of Funds

Gifts and Loans Are Acceptable Sources of EB-5 Funds

Gifts and loans can be straightforward sources of funds to access and document for investors who cannot make the EB-5 investment upfront, or those whose source of funds is complicated to prove.

A foreign national can use gifted capital as long as the gift is legally transferred, traceable to a lawful source, and accompanied by a gift letter or deed. Both the donor and recipient may need to submit personal income tax returns to show they’ve paid taxes on the gifted amount. Additionally, the gift letter must confirm that the funds don’t need to be repaid and verify the legality of both parties’ sources of funds.

You can also use a secured or unsecured loan for your EB-5 investment. Note that the Administrative Appeals Office (AAO)’s ruling in the Matter of Zhang in 2019 made it lawful for EB-5 investors to use unsecured loans.

For investors whose sources of funds are inherited assets with more than 10 years of history, proving the legality of the funds down to their origin can be difficult. Obtaining a loan provides an easier option for proving the lawful source of investment funds in cases like these.

Prove the Legality of Invested Funds Regardless of the Source

Whether you obtained the capital for your investment from earned income, sales of assets, inheritance, gift, or loan, you must prove it was legally sourced. USCIS typically requires at least seven years of tax returns.

If you’re from a country where tax returns are not required or mandatory, you may need to provide audits from certified accountants, affidavits, and bank statements to show the path of funds. If you’re using earned income, you must provide employment verification documents and trade or professional licenses.

USCIS needs these documents to verify that your funds are not proceeds of unlawful activities and have been generated through legal means.

Use Easily Documentable Funds to Avoid Issues With USCIS

For investors who operate active checking accounts and receive funds from diverse sources, the best practice is to isolate the easiest traceable funds for EB-5 investment. If possible, the funds should be isolated in a separate bank account to prevent the commingling of funds.

This is an essential consideration because USCIS may want to investigate all large transactions on the account around the time of the EB-5 investment. Even if you’ve already transferred the EB-5 funds to the new commercial enterprise’s (NCE) escrow account before receiving a large deposit, USCIS may still require source-of-funds documentation for all monies received immediately after the EB-5 deposit.

Older Funds Are More Difficult to Document

The older the funds, the more difficult it is to find documents tracing their origin and path. This is particularly true for investors using inherited funds for their EB-5 capital.

USCIS requires that all EB-5 funds be traced to their origin to prove lawfulness. Investors using inherited funds, especially multi-generational ones, must trace the funds back to their original owner.

This poses a lot of difficulty because not all countries store records for several decades. So, documents such as bank statements, inheritance statements, and tax records required to prove the legality of the invested funds may be unobtainable. You may have to rely on indirect evidence such as affidavits, letters from former employers, government property publications, etc.

Proving legal source of funds in such a case requires the assistance of an experienced EB-5 immigration attorney.

You Can’t File Form I-526E Based on Future Funds

USCIS requires that your petition be approvable on the day of filing. And since the I-526E petition is based on a qualifying investment, you cannot file a Form I-526E based on future funds, as this will violate the investment requirement.

For example, let’s say you have $500,000 and hope to save the $300,000 balance in the next 12 months, but you want to file your EB-5 petition now to fix a priority date. This may not work because there’s no 100% guarantee that you’ll be able to invest the rest of the required funds. You may lose your job or business, or an unforeseen circumstance such as ill health can make it impossible for you to save.

The $300,000 does not belong to you yet and you can’t use money that’s not yours or future funds for an EB-5 investment.

Although partial investments are allowed, it’s different from future funds. A partial investment is allowed when an investor needs more time to liquidate their assets or receive dividends from other investments. In this case, the investor already has the funds but needs time to make it available.

USCIS Can Still Request Further Evidence After I-526E Approval

USCIS can request further evidence if they see the need to do so even after I-526E approval. This usually happens when an investor files Form I-829 to remove conditions on their EB-5 Green Card. USCIS will evaluate your Form I-829 against the EB-5 requirements and the investment information in your I-526E petition.

If they notice any previously ignored discrepancies or gaps or have any reason to suspect fraud, they will issue a request for further evidence. If you cannot provide the requested documentation, they may deny your I-829 petition.

Partner With EB5AN for a Seamless EB-5 Process

The EB-5 process can be complex, especially with the requirement for a detailed legal source-of-funds package. This is why it’s essential to work with EB-5 professionals who understand the nuances of the source-of-funds process.

EB5AN is an experienced EB-5 firm and regional center operator. In 10+ years of practice, we have successfully helped over 2,300 families relocate to the U.S. as lawful permanent residents.

For more information about the EB-5 source-of-funds requirements, schedule a free one-on-one call with our expert team today.