Source of Investment Funds for EB5 Cases

A key requirement of the employment-based, fifth preference (EB5) immigrant visa category is that the foreign national investor be able to clearly and thoroughly document the lawful source of the investment funds. The sourcing of the investment funds can be quite tedious, and is oftentimes the most challenging aspect of an immigrant petition by an alien entrepreneur (form I-526). Yet, this effort is vital to help ensure the case is approved.

Importance of Source of Funds

As outlined in the MurthyDotCom InfoArticle, Overview of the EB5 Immigrant Investor Category (31.May.2017), to qualify for a green card under the EB5 category, the foreign national must invest at least $1,000,000 in a U.S. commercial enterprise, or $500,000, if the business is located in a targeted employment area (TEA). Moreover, the EB5 investor must be the legal owner of the invested capital and the investor must be able to prove to the U.S. Citizenship and Immigration Services (USCIS) that all of the capital was lawfully acquired.

Types of Investment Funds Allowed

Perhaps the most traditional source of funding is income obtained through an employer as part of one’s salary. Assuming this income is well documented and did not involve any unauthorized employment in the United States, it is possible that the ‘source of funds’ component of the EB5 petition will be relatively straightforward. In practice, however, a great many EB5 investors acquire some or all of the investment funds from sources that can be more challenging to document.

Sale of Property or Assets

A foreign national is, of course, permitted to sell property or other assets to raise the funds necessary for the EB5 investment. But, in sourcing the funds, the USCIS is likely to look beyond the sale of said property or asset in verifying the lawful source of these funds. The EB5 investor should be able to document how the funds were originally acquired to purchase the property or asset in the first place. There is no official government guidance regarding how far back the investor must document the lawful source of funds used for the investment.

Gifts

Money obtained as a gift, such as from a close family member, can be used for EB5 investment purposes. There are a few points that must be kept in mind, however. First, the EB5 investor must be able to document that this is truly a gift, rather than a loan; the person providing the gift cannot expect to be repaid. Secondly, the investor will have to document that the gifting party obtained the funds lawfully. Finally, if a gift tax is owed, the USCIS may request evidence that it was paid.

Loans

Investment funds obtained through a loan can only be used if the loan is secured by assets of equal or greater value that are owned by the investor. For instance, if the foreign national owns a home valued at $200,000 and obtains a loan for $200,000 that is secured by the home, these funds could be used as part of an EB5 investment. On the other hand, an unsecured loan, or a loan that is secured by assets of the EB5 commercial enterprise, cannot be used for EB5 investment purposes.

Documenting the Lawful Source of Funds

The type of evidence needed to document the lawful source of funds can vary tremendously from one EB5 case to the next, depending upon the form or forms of capital utilized to establish the new commercial enterprise. For example, if the EB5 investor is using income derived from a U.S. job, one would expect to evidence this with documents such as tax returns and pay stubs. These documents may need to further be supplemented with evidence that the investor had proper work authorization at the time the salary was earned. Salary earned while working abroad, especially in countries with less formalized tax records and payment histories, may have to be documented in other ways, such as through affidavits and employment verification letters.

Conclusion

The USCIS tends to closely examine all evidence related to source of funding in EB5 cases. The ability to meticulously document one’s source of funding in the I-526 petition is paramount. Those interested in pursuing a green card through the EB5 immigrant investor program are welcome to contact the Murthy Law Firm by eMailing EB5@murthy.com.

While some aspects of immigration have changed in significant ways in the years since MurthyDotCom began publishing articles in 1994, there is much that is still the same. From time to time, we at the Murthy Law Firm refer clients to articles, like this one, which remains relevant and has been updated for our readers.

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