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Understanding EB-5 Source of Funds Requirements

The employment-based fifth preference (EB-5) program has since 1990 remained one of the fastest ways for foreign nationals to obtain permanent residency in the United States.

To qualify for an EB-5 Visa under this program, as an applicant, you would need to invest a minimum of $800,000 in a new commercial enterprise (NCE) located in an area that has been designated as a targeted employment area (TEA). Alternatively, for any other area, the investment amount would be $1,050,000. This investment should lead to the creation of at least 10 full-time jobs for American workers.

Key Point: What Is a Targeted Employment Area (TEA)

TEAs are a specific type of geographic designation to encourage investment in areas with high unemployment rates or rural areas. The main purpose of designating areas as TEAs is to promote economic development and job creation in areas that may have a higher need for such an investment.

There are two types of TEAs:

High Unemployment TEA: These are areas where the unemployment rate is at least 150% of the national average unemployment rate. In other words, they are areas with significantly higher unemployment rates than the national average.

Rural TEA: These are areas located outside of a metropolitan statistical area (MSA) or outside of a city or town with a population of 20,000 or more. Rural TEAs are eligible for TEA designation regardless of their unemployment rate.

While this information seems to be simple enough, the submission of the I-526 petition that begins the visa application process is more complex than it appears at first glance. Form I-526 must be accompanied by documentation about not only the NCE, but also the source of the investment funds.
According to the United States Citizenship and Immigration Services (USCIS) Policy Manual, the goal of this exercise is to prove that the investor is “the legal owner of the capital invested and has obtained the capital through lawful means.” In support of their applications, investors can submit a variety of documents including the following:

  • Business registration records.
  • Tax returns or similar documents filed within the preceding five-year period (personal, partnership, and corporate).
  • Proof of other sources of capital.
  • Certified copies of court judgments, pending civil or criminal court cases, and government administrative proceedings in or outside the United States within the past 15 years.

The requirements for proving where investment funds originated from are the same for regional center projects and direct investments. USCIS adjudicators often also require source of funds evidence for administrative fees, so the evidence should cover the investment amount and any fees paid.

Because funds often come from multiple sources, investors may need to submit several types of documentation. To keep matters as simple as possible, an investor should ideally work with an EB-5 professional or an immigration attorney to identify the simplest and clearest source of investment funds.

In this article, we will cover the most common EB-5 sources of funds for you as an EB-5 investor, provide you with a few practical examples to put this all into perspective, and discuss the ways in which you can prove where your investment capital comes from.

Proving Your Lawful Source of Funds

Proving your lawful source of funds is a very important requirement in the EB-5 Immigrant Investor Program. It ensures that the investment capital being used for the program was obtained through legal and legitimate means.

The EB-5 program is designed to attract foreign investors who want to invest in the U.S. economy and create jobs. By making sure the funds originate from a lawful source, the U.S. government aims to prevent the program from being misused for money laundering, criminal activities, or fraud.

The U.S. has strict regulations in place to prevent illegal financial activities. By verifying the lawful source of funds, the government ensures that the investment is made in compliance with U.S. laws and regulations.

Ensuring that the investment funds are obtained legally contributes to national security by preventing potentially unlawful funds from entering the U.S. It also protects the economic and national interests of the country.

The EB-5 Program’s integrity is important to maintain investor confidence and uphold the credibility of the program.

To prove your lawful source of funds, you will typically need to provide detailed documentation that traces the origin of the investment capital. This documentation should establish a clear paper trail that demonstrates that the funds were legally acquired and accumulated over time.

For example, complex source of fund documentation could include assets that have been acquired through loans and used as collateral to raise the investment amount. In contrast, funds that come from savings and investments typically require simpler supporting documentation.

It’s important to note that the specific documentation required may vary based on your individual circumstances and the source of your investment funds.

A List of Acceptable Sources of Funds for EB-5

Funds from a variety of sources are acceptable when it comes to EB-5 investments, as long as they are from a legal source and you can provide evidence that proves this to USCIS. Here is a list of documents that are often used to prove a legal and legitimate source of funds:

  • Salary and wages from labor, services, etc.
  • Income from a business.
  • Income from a patent.
  • Funds earned from royalties on a publication.
  • Interest accrued on an investment or savings account may be put toward an EB-5 investment.
  • Loans to make EB-5 investments, as long as investors can prove that the loan provider sourced the loan funds legally.
  • Gifted funds from friends and family for EB-5 investments, as long as investors can prove that the gifted funds were acquired legally. Individuals with children older than 21 years of age, or those who do not want to immigrate to the United States themselves, may gift their children the funds to make an EB-5 investment.
  • Funds from criminal or civil legal settlements.
  • Inheritances.
  • Income gained from the selling of property.

This is not a complete list of all the sources of funds for EB-5 investments. There are other fund sources that we have not listed here that can also be used in your application for an EB-5 Visa. The key point to remember is that the funds must be legally sourced.

Common Documents for Proving Lawful Source of Funds

Before beginning the EB-5 investment process, you will need to make sure that you have all the documentation available to you that can be used as evidence that your investment funds have been lawfully sourced. This documentation must be valid and up to date. The following documents may be used to prove that EB-5 funds have been lawfully obtained:

Documents that show salary and income sources

Documentation that can be used to prove that funds were attained through salary earnings, include:

  • W-2s.
  • Personal income tax returns from the past five years.
  • Bank statements.
  • Employment contracts.
  • Any paperwork provided by an employer that explains how long an investor worked for them and how much compensation the investor received for their work.

Earnings from a business

    Funds earned from a business can be proven by providing documents such as:

    • Business tax returns.
    • Financial statements.
    • Employment contracts.
    • Business registration records.

    Documents that show stock earnings

    Documentation that can be used as evidence of investment earnings include:

    • Stock certificates from the past three years.
    • Securities accounts.
    • Investment account paperwork.
      • Documents that show earnings from the sale of a property

        To prove that you acquired your investment capital from the sale of a property or similar
        income-generating assets, you can provide a deed certificate and/or a bill of sale.

        Documents that show that an investor received a loan

        If you use a loan for an EB-5 investment, you must provide bank statements that prove that you have received the loan, as well as documentation that shows that the loan funds themselves were sourced lawfully.

        Documents that show that an investor received a gift or donation

        You will need to provide documentation that shows that you have received a gift or donation, in addition to documents that prove that the gift and/or donation funds were lawfully sourced.

        Documents that show an investor received an inheritance

        When an inheritance is used for an EB-5 investment, paperwork that shows that you received an inheritance, such as wills and/or documents from an estate administrator, should be included with Form I-526E.

        Documents that prove a legal judgment in any country

        Funds received as the result of a legal settlement, such as a lawsuit or divorce case, may be used toward EB-5 investments. In this case, a certified copy of the judgment must be provided to United States Citizenship and Immigration Services.

        This list is not an exhaustive document list. There are other types of paperwork that can also be used as evidence that EB-5 investment funds were obtained legally.

        An immigration attorney can help you understand what types of documents can be used to prove that your EB-5 investment funds were sourced through lawful means.

        Advice for Proving Lawful Source of Funds

        Before making an EB-5 investment, you should place your EB-5 investment funds in a separate bank account designated for that purpose. This will make it easier to track funds and prove that an investment has been made.

        Translate all your documents

        Any documents not originally written in English will need to be officially translated, as English copies will need to be provided to USCIS. You should allow ample time to obtain translated documents for your EB-5 application.

        Hire an immigration attorney

        It is always best to consult an immigration attorney even before you begin the EB-5 investment process. Immigration attorneys have the knowledge and experience to assist you in navigating the intricacies of the EB-5 Visa application process. Since each EB-5 investor’s situation is unique, an immigration attorney can help you take the best approach to proving that your funds have been legally obtained.

        Case Studies

        The case studies below show how source of funds requirements can be applied in practice.

        1. Savings as a source of funds

        A couple from India, both of whom are medical doctors, want to apply for immigrant investor visas under the EB-5 program. They decide to pledge investment capital in a targeted employment area (TEA) project, which requires an investment of $800,000. Over the preceding five years, they diligently saved a portion of their net (after-tax) earnings, and they intend to use these savings from salary payments to cover their investment.

        To show the source of the funds, they would need to submit their employment records. For example, documents such as their official salary advice or pay stubs from the hospital where they worked—and their tax returns for the five-year period in question.

        2.1. The proceeds from a sale of property as a source of funds (non–U.S. citizens)

        A couple in Russia inherited $250,000 from a parent, who saved the money while working for a company. The couple then invested this amount in real estate, which increased in value. When they sold the property, they received $1,000,000 for it. They now want to invest $800,000 in an EB-5 TEA project.

        Providing evidence of the proceeds from the sale of property is the simplest part of this source of funds submission. The couple should provide the purchase agreement, property ownership certificate, bank statements that show payment for the property, proof of property or deed tax payments, and personal income tax returns for the preceding five years.

        Yet, to adequately show the source of the funds, they would have to prove that the person they inherited the initial $250,000 from, earned it legally, and then that they increased their investment through the sale of property. Thus, they would have to submit the original purchase agreement for the property and all related documentation, as well as proof of the source of the inheritance.

        With inherited funds, an applicant must prove his or her relationship to the deceased, so in this case, the parent’s original death certificate would be required. It is also good practice to include a copy of the will, bank account statements, and financial statements that show the transfer of the funds from the originating account to the heir’s account.

        In some cases, USCIS wants proof that the decedent lawfully obtained the funds bequeathed to the applicant. The longer the time since the deceased passed away, the more complicated it becomes. For example, if the person died 50 years ago, it would be practically impossible to provide documented evidence of income. However, it might be possible to gather affidavits, recommendation letters, or other forms of proof that show that it is reasonable to assume that the decedent had the capacity to earn the inherited amount through lawful activities.

        If the decedent died fairly recently and the heir has retained documents related to the person’s employment history, he or she can submit documents such as pay stubs and tax returns to prove that the inheritance consisted of lawfully obtained funds. However, because of the legal complexity in proving source of funds, it would be best for the couple to consult an immigration attorney or EB-5 Program specialist.

        2.2. The proceeds from a property sale as a source of funds (U.S. citizens)

        If the same scenario applies to a couple who are U.S. citizens and who want to invest the proceeds from a sale of property in a business alongside EB-5 investors, the requirements for providing proof of the source of funds fall away. In other words, they do not have to prove how they obtained the funds. (They wouldn’t be applying for the EB-5 program).

        However, they would have to adhere to all relevant state and federal securities laws.

        3. The proceeds from the sale of stock as a source of funds

        A third couple, from Brazil, owns a business and wants to invest in an EB-5 project. To raise the investment capital, they sell part of the company, in the form of stock, to a third-party investor. While the actual sale of stock is an important aspect of proof of source of funds, the couple would have to trace the money trail back to the beginning: the founding of the company.

        In this case, the couple would first need to prove that they own the business and that they founded it with their own money. Therefore, they would then have to show the source of the initial seed capital. Additionally, they would have to provide evidence that the valuation of the company on which the stock price was based during the sale to the third party, was reasonable or at market value. Finally, they would have to include their income tax returns for the preceding five-year period.

        As these examples show, to provide sources of funds can be complex and each case is unique. This makes it impossible to provide a list of all the required documentation to prove sources of funds that would cover all eventualities.

        To avoid a request for evidence (RFE), notice of intent to deny (NOID), or the outright denial of a petition, EB-5 investors should work with a qualified professional—such as the team at EB5AN—to help document the sources of funds section of their I-526 application.\

        Key Point: What Is a Request for Evidence and Notice of Intent to Deny?

        Request for evidence (RFE)

        This is a formal inquiry or notice issued by USCIS to request additional documentation or information from an applicant when reviewing an immigration application or petition.

        Notice of intent to deny (NOID)

        This is an official communication issued by USCIS when the adjudicating officer who is reviewing an immigration application or petition, wants to deny the application based on the available evidence and information.

        Why Not Consult with Our Team at EB5AN to Help You Track and Prove Your Legal Source of Funds?

        When you are ready to begin the process of investing in an EB-5 Program, remember that you will need to provide a clear trail of documentation that proves your lawful source of funds. Having all of this paperwork in order and easily accessible will make the EB-5 investment process much easier.

        The faster you are able to gather the appropriate paperwork to be submitted with Form I-526E, the sooner you will be able to be approved for a U.S. green card and become a permanent U.S. resident.

        To find out more about how to prove that an EB-5 investment meets the lawful source of funds requirement, or to get started on the EB-5 investment process, contact EB5AN. We recommend that you take advantage of our free consultation call during which we will answer your questions in more detail.

        Reach out to us today!