One of the most important requirements for individuals seeking a U.S. Green Card through the EB-5 Immigrant Investor Program is the ability to prove the lawful source of funds used for their new commercial enterprise (NCE). United States Citizenship and Immigration Services (USCIS) requires EB-5 investors to provide a range of supporting documents to trace the path of funds from their home country and demonstrate that the funds have been obtained legally.

This process can be complex and challenging, so it is highly recommended that prospective EB-5 program applicants work with an immigration attorney and seek guidance from experienced EB-5 professionals when documenting their EB5 source of funds.

This article will give a brief overview of the EB-5 program’s investment requirements, explain the types of funds that can be used for EB-5 investments, lay out the ways to demonstrate that those funds were obtained through lawful means, and present a detailed example of demonstrating lawful EB-5 source of funds through stock proceeds.

What Are the EB-5 Program’s Investment Requirements?

EB-5 program applicants must invest at least $800,000 in a new commercial enterprise (NCE) that was established after November 29, 1990, or in a troubled business that they will restructure or expand. The business must be for-profit, and can have any management structure, although limited liability companies (LLCs) or partnerships often suit the EB-5 program requirements best.

Since the enactment of the EB-5 Reform and Integrity Act (RIA) in 2022, the minimum investment threshold for projects in targeted employment areas (TEAs) has been $800,000, while the threshold for other projects is $1,050,000. A TEA is an area with:

• A population of fewer than 20,000 people. It should also not border a city or town with a population of 20,000 or more, and not be located within a metropolitan statistical area according to the most recent 10-year census of the United States.
• An unemployment rate that is at least 150% of the national average.

EB-5 program applicants can make an investment either directly or via a regional center. A direct investment is when the individual invests capital directly into the NCE. On the other hand, a regional center is an organization set up to pool EB-5 funds from several investors, managing the allocation of these funds to the project.

Once an individual finds a project to invest in, they can apply to the EB-5 program by submitting Form I-526/I-526E to USCIS. Form I-526/I-526E is used by immigrant investors to demonstrate their eligibility for the EB-5 program, and must include key information about their investment project. The vast majority of EB-5 program applicants make their investment via a regional center, in which case they would submit Form I-526E.

An EB-5 investor’s I-526/I-526E petition should include:

• The applicant’s personal details, including their name, date and country of birth, and current address.
• An explanation of how the applicant’s investment in a new commercial enterprise (NCE) will meet EB-5 program requirements. In particular, the applicant should detail how it will create at least 10 full-time jobs for U.S. workers.
• A comprehensive business plan for their NCE investment.
• Financial and bank statements, property records, tax returns, and more supporting documentation.
• Proof of the lawful source of their investment funds, as well as the legal source of funds used for administrative fees and any other costs associated with the investment.

What Types of Funds Can Be Used as EB-5 Investment Capital?

All EB-5 source of funds should be properly documented to demonstrate to USCIS that they were lawfully obtained. EB-5 investors must be able to provide the appropriate supporting evidence of the lawful source of their investment funds, which may be complicated in some cases. It is important to seek guidance from an immigration attorney and experienced EB-5 professionals to demonstrate the lawful source of funds, especially if obtained through multiple sources.

Funds used for EB-5 investments can come from a variety of sources, including:

Wages and Personal Savings

EB-5 investors may use funds from their own personal savings or any other funds earned through wages from a job.

Stock or Real Estate Sales

Any funds obtained through the lawful sale of assets, including stocks, bonds, or real estate may be used for EB-5 investments, as long as the sale of the assets is thoroughly documented.

Earnings from a Business

Funds earned through the operation of a lawful business enterprise owned by the individual may be used for EB-5 investments as long as all of the appropriate documentation is provided.

Gifts

Funds given to the EB-5 investor as gifts from family, friends, or others may be used for EB-5 investments as long as those funds were lawfully obtained.

Inheritances

EB-5 investors may use funds obtained through inheritance from a deceased relative or other individual as long as the appropriate documentation is provided.

Loans

Funds obtained via loan may be used for an EB-5 investment, but it is important that the loan be secured by the investor and not by another individual. The EB-5 investor must be the one who is personally liable for repayment of the loan.

What Documentation Is Needed to Prove EB-5 Source of Funds?

Successfully navigating the EB-5 program requires comprehensive documentation to be gathered to present to USCIS in order to prove the lawful source of EB-5 investment funds. Some of the most common types of documentation to prove the lawful source of funds are:

1. Bank Statements and Employment Records

If EB-5 investment funds were earned from an individual’s own wages, employment records such as pay stubs or other documentation from employers will be needed to prove lawful EB5 source of funds.

2. Proof of the Sale of Assets

If EB-5 funds were obtained through the sale of real estate, stocks, bonds, or other assets, immigrant investors must be prepared to provide documentation such as sales and purchase contracts and property appraisals.

3. Business Documents

If funds were obtained as earnings from a business, EB-5 investors must provide financial statements, tax returns, business licenses, and other documentation to prove that the business and the funds from it were lawfully obtained.

4. Letters from Gift Givers

EB-5 investment funds can be obtained as personal gifts from family or friends, but investors need to provide letters signed by those individuals to prove that the gifts were lawfully obtained.

5. Inheritance Documents

In situations where EB-5 funds were obtained through an inheritance, immigrant investors should provide wills and tax documents related to the inheritance.

6. Tax Returns

Regardless of their specific EB-5 source of funds, investors should provide copies of their tax returns for the past several years to provide an overview of their financial history.

What if Investors Do Not Provide Adequate Proof of Their EB-5 Source of Funds?

If an EB-5 investor fails to adequately prove that their EB-5 source of funds is lawful, it can have serious repercussions on their application. USCIS may issue requests for evidence (RFEs) relating to the lawful sources of funds. The applicant then has an opportunity to provide additional documentation, but this can significantly lengthen the time it takes for the EB-5 investor to ultimately have their application approved.

In some cases, USCIS may reject the application altogether. Even if an investor’s EB-5 visa is initially approved, USCIS may revoke it if it is later discovered that there is evidence of unlawful source of funds.

Because of the high level of risk, it is crucial that applicants work with legal and financial professionals during this stage of the process.

Lawful EB-5 Source of Funds Example: Using Stock Proceeds as Investment Capital

While there are many potential lawful sources of EB-5 funds, it is common to use the proceeds from the sale of stock. When using stock proceeds, the investor would need to provide USCIS with supporting documents in their I-526/I-526E petition proving the legal source of the proceeds from the sale of that stock, which includes:

• A capital source statement detailing how the investor came to acquire the stock and showing that the proceeds from the sale of the stock are being used to fund the EB-5 investment. The investor must also provide USCIS with bank statements proving receipt of the proceeds from the sale of the stock.
• The legal source of the purchasing funds if the investor purchased the stock. This may require the investor to submit employment and payment records, property sale records, bank statements, or other supporting documents on the source of the purchasing funds.
• The written purchase contract and sale contract for the stock in question, along with any share transfer agreements tracing the path of the stock from the initial owner to the investor and then to the subsequent purchaser.
• Individual income tax returns or other similar documents filed in the previous five years. An investor unable to provide income tax returns for legitimate reasons (as in the case of investors from countries where income tax is not collected) may instead be able to submit a declaration from a tax professional in his or her home country.

Get Guidance From EB-5 Program Experts

When preparing any application materials for the EB-5 program, investors are encouraged to work with experienced financial advisors and immigration attorneys. These experts play a crucial role in the process, including helping EB-5 investors demonstrate the legal source of funds for their EB-5 investment. Professional guidance ensures that investors follow all EB-5 program requirements and laws of the United States and their home country.

As an experienced EB-5 industry leader, EB5AN has helped thousands of foreign investors obtain U.S. permanent residency. For help guiding you through the EB-5 source of funds process, schedule a free consultation with EB5AN today and our expert team will be happy to answer all your questions.