To qualify for an employment-based fifth preference (EB-5) visa, applicants must invest a minimum of $900,000 in a new commercial enterprise (NCE) that would lead to the creation of at least 10 full-time jobs for American workers. While this 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 about the source of the investment funds.
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,” according to the USCIS Policy Manual. In support of their applications, investors can use a variety of documents that fall into four broad categories:
- 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; and
- 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 are the same for regional center project 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.
Because funds often derive from multiple sources, investors may need to submit several types of documentation. To keep matters as simple as possible, an investor should work with EB-5 professionals or an immigration attorney to identify the simplest and clearest source of investment funds.
For example, assets acquired through loans and used as collateral to raise the investment amount and funds obtained from third parties as gifts and loans make for complex source of fund documentation. In contrast, funds derived from savings and investment typically require simpler supporting documentation. 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 invest in a project in a targeted employment area (TEA), which requires an investment of $900,000. 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 advices or pay stubs from the hospital where they worked—and their tax returns for the five-year period.
2.1. The proceeds of 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 $900,000 in an EB-5 project in a TEA.
Providing evidence of the proceeds of 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 showing 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 they inherited the initial $250,000, that the person who left it to them 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 death certificate would be required. It is also good practice to include a copy of the will and bank statements showing 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. This, of course, becomes increasingly complicated the more time has passed since the decedent passed away. For example, if the person died 50 years ago, it would be impossible to provide documentary 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 complexity of this aspect of the source of funds, it would be best for the couple to consult an immigration attorney or EB-5 program specialist.
2.2. The proceeds of a property sale as a source of funds (U.S. citizens)
If the same scenario applied to a couple who are U.S. citizens and who want to invest the proceeds of the 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.
However, they have to adhere to all relevant state and federal securities laws.
3. The proceeds of 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. Thus, 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, source of funds can be a complex matter, and each case is unique. This makes it impossible to provide a list of the required documentation to prove source 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 to help document their sources of funds section of an I-526 application.