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EB-5 Source of Funds: Loans and Gifts + Recent USCIS RFE Issues

Sam (00:00:06):
Hi everyone. This is Sam Silverman, managing partner of EB5 Affiliate Network. Thank you for taking some time to join us for today’s webinar. Today, we’re going to be discussing EB-5 source of funds with a particular emphasis on recent USCIS RFE issues that have come up in the context of EB-5 investors using loans and using gifts as part of their source of funds for their EB-5 applications. Today, we’re joined by a Christian Triantaphyllis, a well-known EB-5 immigration attorney in the space, and we’re going to be covering some very specific RFE language that USCIS has brought up in recent cases. Today’s webinar is going to be recorded. So if you want to watch it or share it with someone after the fact, it’ll be on our YouTube channel. If you’re interested in getting a copy of the slides, please email us at info@eb5an.com, in the center of the screen there, after the presentation.

Sam (00:01:11):
And we’ll be happy to send you a PDF file of all of the slides that we’re going to cover today as well. If there are questions during the webinar, please use the chat box on your screen, and we’ll try and cover as many questions as possible at the end of the webinar. So if you do have a burning question, we’re going to go in order. So, please be sure to submit it earlier, and we’ll try and cover as many as we can. Okay. Quick overview of what we’re going to cover today. First, a little bit about our speaker, Christian, and about EB5 Affiliate Network. We’ll talk about source of funds in general and do a quick overview. Then, we’ll dive into loans and gifts specifically, and then we’ll talk about some specific USCIS language for RFEs that Christian has encountered in the last year. Then we’ll finally open it up for questions at the end.

Sam (00:02:16):
Okay. So, first, before we jump in, for those looking to set up an EB-5 project, most projects are located in targeted employment areas. We recently launched a new TEA, or targeted employment area, map—it’s available for free on our website. You just type in the address, and it’ll immediately tell you if the site qualifies—very quick, simple. And we also give you a free qualification report if the site does qualify. So, check that out. If you’re looking at doing your own EB-5 project… if you’re looking at doing your own project or you’re an investor, and you want to really understand how the EB-5 program works, you can get a copy of our EB-5 guidebook. It’s been just updated. It’s available for free at eb5guidebook.com, or if you want a hard copy, you can also get one on Amazon as well. Okay. So getting into background, as I mentioned at the beginning, I’m Sam Silverman, one of the managing partners at EB5 Affiliate Network. I’m on the left side of the screen here and joined today by my partner, Mike Schoenfeld. And I’ll let Mike jump in and introduce himself and give us some context about the company.

Mike (00:03:34):
Hi everyone. Thank you very much for joining our webinar today. As Sam mentioned, I’m Mike Schoenfeld, managing partner of EB5 Affiliate Network. Prior to launching this company eight years ago, I was working at a large private equity firm in leveraged buyouts at the Boston Consulting Group. Before that, as you can see on the screen, all three of our managing partners come from more of an institutional background—big law, finance, and real estate as well. And we’ve had a goal of bringing more of that institutional lens to the EB-5 industry. And over the past eight years, we built an industry-leading company doing just that. So, thanks again for taking the time to join us today.

Sam (00:04:18):
Thanks, Mike. For additional context, EB5 Affiliate Network is a national regional center operator and fund manager. So, we own and operate many regional centers that cover most of the United States. And we have almost 2,085 investors from more than 60 countries that have invested in projects under our regional center network. This is a quick map showing an overview of where our regional centers are located and another global map showing where a lot of our investors come from. Most important here is that investors from a wide variety of backgrounds consistently find value in our investment approach to EB-5 investments. And now, as I mentioned earlier, we have the pleasure of having Christian Triantaphyllis joining us today. We’ve worked closely with Christian in the EB-5 space over the last six, seven years, and he’s represented many, many investors from around the world. And so, I’ll turn it over to him to provide a quick introduction about himself and his experience in the EB-5 space.

Christian (00:05:44):
Thank you, Sam. As mentioned, my name is Christian Triantaphyllis. I’m a partner at Jackson Walker, LLP, where I am the chair of the investment immigration practice. I work with a team of attorneys and paralegals on all kinds of immigration matters, and we particularly specialize in EB-5 investment immigration matters. I’ve been working a lot on EB-5 matters for the last 10 years or so. As Sam mentioned, I’ve worked with investors from all around the world, seeing all kinds of different scenarios and needs from different clients. I have clients who’ve gone through the entire EB-5 immigration process, received their money back, and gone on to apply for citizenship. And I have other clients just starting out in the immigration process like you might be thinking of doing so today. I’ve been named a top 25 immigration attorney by EB-5 Investors Magazine for the last three years. Before that, I was named a top EB-5 rising star. Again, I’m glad to be speaking with you today, and I look forward to discussing loans and gifts in the source-of-funds context and RFEs—requests for evidence—that we will are receiving from USCIS.

Sam (00:07:11):
Perfect. Thank you. Thank you, Christian. Okay. So before we dive into some of the very specific USCIS language that Christian’s been seeing, we’ll provide a quick overview of source of funds for those of you who are beginners in the EB-5 context. So first, so when doing an EB-5 application, there’s two main sets of documentation that are required. The first is the project documentation, and this is the second blue box on the screen on the left. First is the project documentation explaining how your project that you’ve decided to invest in meets the EB-5 program criteria. So where’s the money going? How’s it being spent? How are the jobs being created? All of that has to be clear and meet the EB-5 rules. So that’s kind of the first half of the application. The second half is the part that’s customized and varies by each investor.

Sam (00:08:15):
And that’s number two, that’s the source-of-funds documentation showing how each investor individually also meets the EB-5 program criteria. And so, what that really means is the first five bullets on the right-hand side there. So first, you know, where did this money come from? Has it been lawfully obtained? And then, on the project side, it’s really three, four, and five. So, capital was invested. It did go into the project. The project will create the number of jobs needed, and the investor is involved to the extent necessary in the project. So, skipping back to the, to the first part of this slide there, the investor has to be able to show that not only do they own the capital legally, they’ve gotten the money that they’re putting in legally, but they also have to show how they got those funds and how they’ve arrived into the project. And so, we’re going to get into that in a lot more detail, but just high level, as part of the investment process, each investor has to show that they earned the money or obtained it legally and the money has ended up in the project from their own account.

Sam (00:09:33):
And when you’re thinking about a project… so, every project, there’s only one set of documents related to that project that USCIS is going to review, but then each investor has their own custom set for the source of funds. So, almost always, the I-526 denials that we have seen across the industry have come from the source-of-funds perspective. If you have any well-structured project, there’s no reason that it should be denied by USCIS. The key reason we see in a vast majority of cases is actually due to the source of funds, which is why it’s such a critical component of the application.

Sam (00:10:10):
And that’s why it’s really important to work with someone who’s seen hundreds and hundreds of EB-5 applications and has a feeling for how USCIS going to respond when certain types of documents are missing or aren’t included that should be to best navigate that process. Okay. So now we’re going to talk a little bit about loans and gifts in general. Mike, do you want to start?

Mike (00:10:42):
Sure. So when you look at the most common sources of funds for EB-5 investments, a lot of it depends on what country you are investing from. In some countries, there’s been a lot of appreciation in the land and real estate prices, and the most common method of showing the source of funds is that appreciation in the real estate. And then, other categories, such as an investor that’s been on an H-1B in the United States and can show their income from an easy-to-source U.S. source… they may use that for their proof. So the core categories, it really depends on where you’re coming from, but they include ordinary income… just the salary that you’re getting paid and having all of the backup evidence and tax documents proving that you legally earn that money or capital gains, whether that’s from real estate investments or from stock investments or the a sale of a private company. The next most common is gifts or inheritance.

Mike (00:11:45):
And this is where we’re going to spend a good amount of time today speaking about gifts because it’s not enough to show that somebody gave you the $900,000. You actually have to go a level deeper than that and show where that money originally came from. And that’s something that Christian is going to dive into a little bit more later. And then the last category, and this is one that has been constantly evolving in terms of what is and is not allowed, is loans either from friends or family and what’s important to have structured in those documents to prove that that loan does meet the requirements. And as Sam mentioned earlier, because there are so many different methods you can use, it’s critical to engage a competent immigration attorney early on who will look at your personal situation and figure out what the easiest, cleanest, and most approvable source of funds is for your individual situation.

Sam (00:12:44):
Thank you, Mike. And one thing I want to add on that as well is that there’s no restriction or limit on how many different sources can be used to show where the $900,000 is from. So, you know, if you had several gifts from family members and then you had stocks that went up in value and you took out a loan and you had salary income, all of those different pieces can all be used. They just have to be documented, you know, appropriately to the USCIS standard. Now, you know, obviously simpler is better. So, you know, if you can show that you got to the $900,000 from just two sources instead of five, then that’s going to be preferred.

Sam (00:13:30):
So when we talk about gifts specifically, and by gifts, we’re talking about, you know, a gift during someone’s life or inheritance, and then also the source of the gift from a family member or from friends, right? So how does the U.S. government find a gift that’s money that’s given outright, no expectation of repayment, and it’s just been given away, right? And so the major questions to consider here are going to be, why did that person give you that money, right? What’s your relationship to them? And, you know, was that gift properly reported? And if there was any tax, was that tax paid and [you have to] prove that that happened, right? So in the United States, and obviously this is going to vary dramatically from different countries around the world, but in the United States, if you give someone money, whether it’s a friend or family member, whoever, you generally have to file a gift tax return, and that money comes out of the amount that you can give away during your lifetime.

Sam (00:14:39):
And so, if you gave a large amount of money and you didn’t do that, you didn’t file that gift tax return and pay the tax on it, if applicable, then that’s not a legal gift. And so, that would not be able to be used. And so, the same thing applies, whether the gift was made in the US or in another country, you know… whatever the rules are, you have to make sure that they were followed and that you can document how that money came, you know, came over to you. And then, you’re going to want to show, additionally, how the person who’s giving you the money, where did they get that money? That’s now being given over to you. It’s not enough to just say, “Hey, I got a gift from my mother,” and, you know, that’s the end of the chain. No, you’re going to have to show, how did your mother get those funds that were then given to you, and was the gift appropriate, and were any taxes or documents that needed to be filed correctly filed? And those would need to be included.

Sam (00:15:41):
Okay. So, now shifting over to loans. So the key with the loans is going to be related to the asset for which the loan is being made against, right? So, let’s say that you own a piece of real estate, and you bought it for a small amount of money a long time ago. Now it’s gone up a lot, and you’re taking a loan today. Well, let’s say the loan is from a bank—that’s fairly simple. You just show the loan agreement and, you know, the transfers from the bank showing that the money came from the bank, but then you’re going to need to show, how did you originally get the funds needed to purchase that piece of real estate? Obviously, it’s gone up in value and USCIS understands that assets, you know, over time, valuations can change, but again, how did you get the initial seed capital that was used to fund that particular purchase?

Sam (00:16:35):
And so, in a lot of times, you know, that purchase was made a long time ago and, you know, the documentation showing how the funds were obtained to buy that asset originally may be difficult to obtain, or may not be obtainable, or, you know, there could be bad record-keeping in that country. There’s a lot of potential issues that come up when you’re dealing with that situation. And so, Christian’s very familiar with how to navigate that, particularly in countries like India, Vietnam, China, et cetera. So those are some factors to keep in mind. And, you know, in addition, you’ll have to show how those funds have moved over time, right? So all the bank statements and records showing, you know, how the money moved from A to B to C and then eventually, now, presently, is moving from the investor’s personal account into the EB-5 project bank account.

Sam (00:17:40):
Okay. So, we’ve got just a couple things to quickly cover, and then we’ll turn it over to Christian. So, to kind of illustrate how a sample source-of-funds response is typically put together in the initial EB-5 application, we put together a short cover letter outline. This is a completely fictional investor. So it’s not a real person, but we’ve tried to include a number of the more common issues that come up and types of documents that an investor would need to provide. And so, this is a template document that’s available on our website. The link is there at the bottom, and this is a list of some of the exhibits that would be required to be included for this particular hypothetical investor’s application. So, as you can see, there’s 25 different documents related just to the source of funds for that particular investor’s application. And so, it’s very important to make sure that the list of documents that you’re going to include is comprehensive and you haven’t missed any or haven’t not included any type of document that should be included.

Sam (00:19:01):
Okay. All right. So now we’re going to dive into some kind of more specific questions and issues that have come up with USCIS recently in terms of loans and gifts. And so, I’ll turn it over to Christian, and I think, Christian, to start, it would be helpful to explain what is an RFE, how does it happen? What’s the timing on it? What happens if you can’t produce the documents, et cetera, et cetera. And then, we can jump into, you know, some of the specific things USCIS is asking for.

Christian (00:19:32):
Sure, happy to do that. So, when we file a petition with USCIS and the EB-5 world, specifically an I-526 to start off the EB-5 process, we are demonstrating where you got your investment funds from to invest with the EB-5 project. As was described earlier, we go through an extensive process of documenting your source of funds. So, when we file the I-526 petition with USCIS, their job is to open up that application and review it for either approval or to ask questions that they might have about the petition. And when they ask questions, they send a notification back to us in the form of a letter called a request for evidence, and a request for evidence is fairly routine in terms of… they’re not saying we’re about to deny your petition. It is more of an opportunity to clear up some questions that the government has about your petition upon their initial review.

Christian (00:20:57):
Now, typically you’re going to have around three months to respond to that request for evidence, meaning providing information back with an explanation to USCIS based off the questions that they’ve asked in that letter. People outside of the United States typically have, I think, about two more weeks of time to respond than people inside the US, and right now, due to COVID-19, everyone’s gotten an automatic 60-day extension beyond the deadline given on the request for evidence, or the RFE, as we call it, because the government is understanding that things are delayed and documents are harder to get ahold of during times of COVID-19. So that’s been beneficial as well. Sometimes clients or potential clients ask, “What is your RFE rate?” meaning, how often do you get an RFE when you file an I-526 petition? So, I don’t know that I could pinpoint that rate.

Christian (00:22:05):
I certainly know how to prepare an I-526 petition and an EB-5 case that I feel should avoid an RFE, but sometimes you have officers on the other end who either want to bring up new issues or are still undergoing training and don’t fully understand all of the issues dealing with source of funds, and they might ask questions regardless. So it’s not always under our control, but I’ll put it this way: working with an experienced attorney can help you manage the extent to which you get an RFE and what kind of questions are they asking, meaning are they manageable to respond to? And furthermore, if that RFE is issued to you and you’ve got an attorney, it can help you respond to the RFE successfully rather than unsuccessfully, meaning the government could get your response to the RFE, not be satisfied, and issue next a notice of intent to deny, which you have 30 days to respond to all questions.

Christian (00:23:15):
At that point, it is more like, if we don’t respond, they’re going to deny the petition. So, the RFE process is really an opportunity to clear up questions. Sometimes, the officer may be a bit confused about the information they’re looking at, and it’s an opportunity for us to go ahead and get the petition approved, if we respond with sufficient information. I mean, we see approvals within the next three weeks oftentimes. So, again, it’s fairly routine in terms of we’ve seen how the process goes. So, what I thought we could do with the EB5 Affiliate [Network] team is to look at some actual RFEs as examples that I’ve seen over the last year or so for both loans and gift scenarios so you can actually get a good feel for what you might expect when try to make an investment using a gift or a loan.

Christian (00:24:20):
So the first, let’s call it the first problem or issue that we’re going to look at, is USCIS wants to know the source of the gift. So, it’s not enough to just say “I was gifted money to make my EB-5 investment.” You need to demonstrate how that individual gifted you the money to make the EB-5 investment. Here’s the example. So, here is the RFE that said petitioner asserts that she obtained EB-5 funds through the sale of her business that she established in 2013 in Venezuela. Petitioner established a business in the pharmaceutical industry in 2013 and sold it and used that money to make an EB-5 investment. However, petitioner failed to provide any documents to demonstrate how she obtained the initial investment of approximately $104,000 in 2013 to establish the company. Further, due to multiple deficiencies and inconsistencies in the record, petitioner has not proved the lawful source of the gift of $525,000.

Christian (00:25:40):
So, what’s going on here is… this is a long-winded way of saying, we need to understand how you had the startup capital to commence your business. In 2013, we understand that there was a gift involved that allowed you to have the startup capital, but please provide us more information about the gift. So what kind of information would we provide in response to that? Well, first of all, you want to have a proper gift agreement, a donation agreement between the individual making the gift and the individual receiving the gift. We help clients draft these donation agreements. And we make sure that everyone is signing a statement that says this gift is being granted, irrevocably and unconditionally for the person to use for their EB-5 investment. And we get into their relationship in that agreement so USCIS understands sort of the practical stories behind the relationship behind a gift …

Christian (00:26:59):
… meaning we want to document if they have a familial relationship, we want to document if they’re long-time friends, we want to document how these two individuals know one another. Also, we need to focus on the individual making the gift. We need to document how the gifted funds were earned. Now, in this particular example, I recall that the funds were earned by somebody who sold real estate years ago. So, we documented how it was that that individual was qualified to sell real estate and was licensed to do so. There were some old pictures of their professional career. We provided a personal statement signed by that individual’s personal lawyer stating, yes, this individual was involved with real estate for years, and we were able to document the deposit of the gift when that occurred leading up to 2013. So all that together wound up resulting in an approved I-526 petition. But as you can see, USCIS is certainly interested in knowing more about the source of the gift. And that’s why you want to document that sufficiently.

Christian (00:28:22):
Why don’t we go on to the next issue that we’ve decided to look at for gifts? The next gift-related issue does involve the gift tax. Earlier, gift tax was mentioned at a very general level. I thought it would be helpful to look at what an RFE looks like when requesting more information about whether taxes were paid on a gift. So here’s the example. USCIS states in its RFE that it is unclear whether gift taxes were paid by brother. This was a gift between a brother and a sister. “Please provide a statement by brother supported by applicable sections of Nigerian tax laws clarifying whether a gift tax was due, and if so, whether brother paid the tax.” USCIS went on to [request] income certificates or tax records to show sufficient income savings by brother prior to the gift to petitioner and personal income taxes issued in petitioner’s and brother’s names from any applicable taxing authority in Nigeria.

Christian (00:29:41):
So what are we supposed to do here? Well, in response, let me back up. So we have to think about, you know, in different countries, different legal jurisdictions have different tax laws, particularly different tax laws on gifts. In this circumstance, a gift tax was not due. So, we needed here to explain further that we did not include the documentation of a gift of taxes paid on a gift in this petition because no gift taxes were due. So in this circumstance, we can provide a letter from a tax consultant or a tax expert in Nigeria explaining under local authority as to why no gift tax is due for this gift. Or we may also pull a report from one of our large tax companies that are out there in the world that produce global reports on taxes.

Christian (00:31:07):
And they’ll have country-specific sections where you can look through and pull out “no gift tax due in Nigeria between family members” like this. And generally, USCIS does accept that kind of documentation or that kind of authority because USCIS is not the Internal Revenue Service. They are not the tax authorities of the United States government. They’re, at a very high level, trying to understand whether the money is lawful in the sense that were taxes paid where they should have been. So, in a circumstance where a tax is due on a gift made here, we would explain that either there was an exemption applicable to the tax, meaning, perhaps, you know, for anyone in the US, if it’s a U.S. person, a U.S. person can claim an exemption on their gift taxes. And it’s taken out of their sort of lifetime taxes paid, if they choose to do that.

Christian (00:32:19):
Otherwise, if there was a tax due, we would later document that that gift tax was paid when that individual making the gift was reporting their taxes at the end of the year. So here, you know, in that circumstance where a gift tax is due but not yet paid, but to be paid in the future, we need to be ready for USCIS to ask such a question about the gift tax and help them understand when it’s going to be due. And if it’s already due, then it’s been paid when the taxes were filed. Again, here was a successful example of thoroughly reviewing the questions and replying with sufficient information. This case was approved in a matter of days after responding.

Mike (00:33:11):
Christian, how do you think about whether to do something like this ahead of time? So to repair that type of information with the initial package, with the I-526, or in something like this, whether you’d rather submit all the real evidence and then wait for them to ask nuanced questions like this?

Christian (00:33:28):
Right? So we typically would respond. We would include a lot of this information upfront. There are, you know, there are various reasons in the past that have sometimes put limited timeframes for a client file, a petition. There were extreme deadlines that we’ve dealt with, and you’d be fine. There are age-out issues where a child might be about to turn 21, and you need to get the I-526 petition on file to lock in that child’s age to be able to immigrate with the family. And under some of those more extreme circumstances, you can’t, you know, the client isn’t able to get everything together for you that means that you have an airtight petition. However, again, working with an experienced immigration attorney specializing in EB-5, you can still file a petition where you can sort of expect what you’re going to hear back in an RFE and then respond sufficiently.

Christian (00:34:26):
But to answer your question, yes, I mean, I typically would include local tax authority when I’m working with someone who’s receiving a gift to demonstrate whether a gift tax is due or not. All I typically ask is, “Do you have a local charter accountant or tax consultant that you can have sign a letter that says no gift tax due?” If there is one due, I always have them work with their tax consultant to get a timeframe as to when it is they will pay that gift tax. So we either tell USCIS what’s going to happen, or we’re ready to answer with that information in the event USCIS asks the question.

Mike (00:35:13):
Okay, great. Yeah. And it’s becoming more and more clear that it’s very much a team effort. It’s not just the immigration attorney, but there’s many other advisors that are involved in the process where you’ll have to pull evidence from as well.

Christian (00:35:24):
That’s right. That’s exactly right. So why don’t we go onto our third issue? We’re going to transition over to looking at use of loan proceeds when making an EB-5 investment. Individuals can receive loans from banks or from friends and family, or shareholder loans, for instance, from a company that they may be a shareholder of. The issue that I thought we could look at here is, USCIS will ask about the ability to use those loan proceeds for EB-5 investment purposes. So, let’s look at what USCIS asked in this RFE. USCIS states that—here’s another scenario where a brother was involved—states that brother was entitled to the amount of the loan distribution. Further, the record failed to document bank records showing X had accumulated the USD, the funds, prior to making the loan. All right. So I’m going to speak to what it means—this first snippet, this first example—to be entitled to the amount of the loan.

Christian (00:36:56):
There’s two ways I would think about where USCIS tries to really look at the use of the loan proceeds as being lawful. One is in the event of a shareholder loan, meaning an individual is receiving a loan from his or her company. Did that individual go through the right process, the corporate process that was needed, that they needed to go through in their home country or in the US to get that shareholder loan or to receive that shareholder loan in their bank account? So what I mean by that is, was there an approval process? Did they apply to the board or the other shareholders for the loan contract? What does it state, and once the loan application has submitted to the other shareholders, did they hold a meeting to approve it?

Christian (00:37:58):
We do work with clients throughout documenting that process and have done so many times successfully. So each USCIS officer may be looking at this case in a different way in terms of experience level. So sometimes, we do get repeat questions, even though I feel a lot of the information is already in the documentation. And other times, you get no questions at all—they fully understand the shareholder loan, that the individual did have approval, because we’ve provided the application for the share—I mean, for the loan, and the approval and the actual bank statements demonstrating that the loan was made from the company to the individual. So that’s one example. Another example is, sometimes within the loan application, or, I’m sorry, within the loan contract, there can be restrictions on the actual use of that loan, meaning it might say the purpose of this loan is for specifically rehabilitating single-family housing in your home country, or I’ve seen it as specific as “This loan is for purchasing handbags.” “This loan is for paying student loans.” And what USCIS has decided is they feel that if an individual goes on and uses those proceeds for purposes of EB-5 investment, then there they are in default of that loan. Therefore, there could be a problem with the lawful source of funds. So, we always review that contract and try to make the purpose or use of those loan proceeds as general as possible. And as long as that’s taken care of, USCIS is not going to bring that up as an issue.

Christian (00:39:53):
All right. So one other piece of information that we would include here is, we need to document how it is the company had the money to provide that loan to the individual. So, here we try to get third parties involved—again, maybe an accounting firm, looking at the books under normal accounting practices to say, yes, there were sufficient retained earnings in the company bank account prior to the loan. We want to provide bank statements. And if there are recent deposits prior to making the loan, we want to talk about where those deposits might’ve come from, what kind of business dealings that company was involved in prior to making such a substantial loan to the individual shareholder. Again, here we have an example of some questions that USCIS has come to us with. We responded, and the case was approved. So I hope this is also insightful in terms of how to document a shareholder loan or being careful about the use of the proceeds of that loan for EB-5 purposes.

Christian (00:41:03):
We’ve got one more example. So let’s go on to issue number four. Here we have the concept of receiving a mortgage loan that investor can receive from a bank, for instance, based on home equity, a home equity loan that they can receive from a bank to now use for EB-5 investment purposes, I should say. So here is what USCIS stated in this RFE: “The loan proceeds of approximately $100,000 dollars have not been shown to derive from lawful means because the funds used to purchase the property, which was used as collateral for the loan, have not been shown to derive from lawful means.” USCIS also proceeded to say the following: “Please provide an update on the current status of the loan. Please submit sufficient evidence that the loan was repaid with funds from lawful means. Please provide account statements from X Home Mortgage reflecting the current loan status.”

Christian (00:42:22):
All right, so we’ve got a few things to look at here. In this example, I decided to pull an exact snippet from that RFE in terms of what USCIS was suggesting to provide in response to answer their questions. What they said here was the following: “Please submit sufficient evidence to show that the source of funds used by the petitioner to purchase the property derived from lawful means. This should include complete bank statements, tax records, foreign business registrations, or other sufficient evidence. Please also submit sufficient evidence to demonstrate accumulation and maintenance of these funds.” So what they mean by that is here’s the type of evidence you could provide to us that you had accumulated enough funds to purchase this property in the first place, and you accumulated those funds in a lawful way. We want to know that because you received a loan based off of your ownership of that property. They don’t need to know how the bank was able to make the loan.

Christian (00:43:27):
They’re comfortable, USCIS is comfortable with that, but they know that there is an asset involved with securing this loan. And that’s why USCIS is asking this question, but perhaps the more interesting part of this RFE is here. USCIS has interest in the current status of the loan. How is the individual taking care of that loan that hasn’t been repaid? And that is a sort of newer, in my mind, a newer question. I have seen this question long ago. For years, I did not see this type of questioning, but this is an RFE within the last year or so. So I would say it’s pretty, fairly recent. And so, I always tell clients, when you’re servicing that loan, you know, keep your bank records. If it’s your, you know, if you have the same job as before, that’s an easy explanation—we’re telling the government, look, you’ve held onto your job since filing, and you’re using salary from that job to pay for this law. Sometimes clients ask, “Can I just pay back the entire loan? That way, before the I-526 petition’s approved, I don’t have to have this loan on my books.” Well, you can, but be sure to keep all the documentation readily available in the event USCIS comes back with questions about it. You’ve got an example right here that they might, and so we want to be prepared for that.

Christian (00:45:04):
So that’s some recent RFEs that I’ve seen. You know, Mike, Sam, if you have any questions about that example or any other, I’m happy to weigh in on it, but I hope everyone found those to be helpful in terms of understanding how to use loans and gifts for EB-5 investment purposes.

Mike (00:45:26):
Yeah. I’d say, just generally, what are you seeing as the trend in terms of frequency of RFEs on these issues versus what you were seeing historically? So, three years ago versus more recently in the last year, and then, in terms of that, what are you also seeing in the response time—if you provide the information on this, is it a fast response, or is it taking longer for them to actually get through the process of reviewing the RFE response?

Christian (00:45:51):
Sure. So the shareholder loan example, that is one that I’ve seen an uptick in terms of RFEs issued, making sure, you know, where the officer’s making sure he or she is comfortable with that entire structure and source of the loan. Fairly extensive RFEs really trying to understand how the company had the loan and had the funds to loan to the individual. The terms of the loan [USCIS is] not so interested in. In the past, USCIS was more concerned about the terms of the loan—“tell us more about the equity that’s being used to secure the loan to make sure, you know, that equity is worth the value of the loan.” Really, there’s not a lot that USCIS has been questioning about lately. They’ve more been looking at, how does that company have enough money to make the loan and did it accumulate those funds lawfully to do so.

Christian (00:47:06):
Let me think of another example, and then I’ll tell you more about response times once we respond to the RFE. In terms of gifts, you know, I would say the gift tax issue is a newer… I think relatively newer as compared to the other types of RFEs that we’ve seen, but I do feel that so long as you can pull enough documentation from local authority demonstrating why a gift tax was not paid, I would say nine times out of 10, the government is not going to issue an RFE about it. Sometimes you have maybe a new officer or something that piques their curiosity about the gift tax, even though you’ve already provided, again, you know, a snippet from accountant firms, a global report on taxes, where you now have the need to dig deeper with either maybe a support letter from a local attorney who’s an expert in taxes or something along those lines demonstrating why no taxes were due on that gift, but it really can be mitigated, like I said, nine times out of 10.

Speaker 3 (00:48:51):
In terms of providing the right information upfront and response times, here’s one positive. I have seen USCIS approve RFEs like these, where it’s just asking questions about the source of funds, nothing about the project. Okay. Strictly source of funds, where we responded and they have approved those I-526 petitions in as quickly as two weeks. Other times, maybe a month to a month and a half, but relatively speaking, that’s pretty, pretty good in terms of timing. It doesn’t always work out that way. Sometimes, someone may be waiting another three to four months, unfortunately, but we have seen some good response times once we send in the information in response to the RFE.

Mike (00:49:37):
Okay. Great. Very helpful.

Sam (00:49:43):
Thank you. Thank you, Christian. All right. We’ll open it up for questions. So again, if you have a question on anything that Christian’s just covered, please use the chat box to submit it, and we’ll try and cover those as many as we can.

Mike (00:54:35):
We’ll actually open it up to questions. And I know Sam has been going through the questions and can start asking Christian several of the ones that we got.

Sam (00:54:44):
Yeah. Yeah. So, we’ve got a number of questions. I don’t know if we’re going to be able to cover all of them, but for questions that we don’t cover, I’ve put up the contact information on this screen for both EB5 Affiliate Network and for Christian. So if we don’t get a chance to cover your question, or if you have source-of-funds–specific questions, Christian would be happy to work with you and try to address those. So, one of the first questions that we got is about investors from India. Currently, there’s a $250,000 limit per year that can be sent out from India. So, if the investment is $900,000… you know, Christian, have you seen Indian investors, you know, pooling that $900,000 together, given the current $250,00 per-person, per-year transfer restriction that’s in place?

Christian (00:55:43):
Sure. That’s a great question. So, there are a few ways I’ve seen that handled, and one is to work around the fiscal year in India, in April, basically trying to meet everyone’s maximum out before the fiscal year ends and then completing the investment post-fiscal year, if that individual has that kind of time or patience to get it done. Otherwise, using an investor’s quota plus the investor’s spouse’s quota plus the investor’s, either children or even parents, depending on what the bank is willing to accommodate you with, has enabled investors to get enough of the money out from India over to the US to complete the EB-5 investment in a pretty sufficient amount of time and a pretty short amount of time. So, it usually will involve getting multiple immediate family members involved with meeting their quotas to meet the $900,000 investment level.

Sam (00:57:06):
Got it. Thanks. Thanks, Christian. Let’s say that we have an investor who moved from Latin America to the US, and they started a business and it was going well, and then several years ago, they sold it, and now they want to use those funds as a source of funds for EB-5. Would they have to document how they got the money to initially purchase the business that they recently sold in the US and show the source for those funds?

Christian (00:57:35):
Yes, yes. Typically, we’re going to show how it is that that individual had the money to start the business. And that can really… what kind of documentation you’re going to include is really dictated, you know, in terms of where that business was started and how long ago it was started. I’ve had clients who started something as large as a bank years and years ago. And, you know, I’m talking a hundred years ago, and, in those circumstances, you know, there’s only so much information you can provide, yet USCIS still wants to understand, how did you get that business up and running? So, we go to old family and friends—maybe they had consultants around them back then who are still alive. Maybe there are newspaper clippings. That’s sort of the old… you know, how to document something from long ago. If it’s a business just started within the last, let’s say, you know, five, six, seven years, we can really drill down in terms of, all right, I had a $100,000, and I turned this into a multi-million-dollar company. And here’s how I did it. We’ll talk about that. And the government understands it.

Sam (00:58:55):
What about if someone is an owner of an LLC and they want to make a loan to themselves to use for their EB-5 investment? What do they need to be aware of in that situation?

Christian (00:59:09):
All right. In that situation, the most cautious approach is to share that loan with the individual shareholder or owner equity in the business. What I mean by that is, otherwise, if you don’t secure it with the equity interest, you now have an unsecured loan, which, again, I’m not saying cannot be used, actually, due to recent developments in federal court. We are more and more confident about using unsecured loans, meaning just a straight shareholder loan, not secured by equity interest, but if the individual has that equity interest in that company that is worth at least the amount of the loan or more, we encourage securing the loan with that ownership and demonstrating that that equity is worth more than the loan. And that is going to be a strong case. I’ve got that kind of case approved again and again. Of course, we have to, like I was saying, we have to say how the company has money to loan the investor. But generally speaking, that’s how we would go about it.

Sam (01:00:29):
And that’s going to be independent of whether or not that company has retained earnings, right? The retained earning part is probably not as crucial—it’s more important to either have there be collateral or no collateral, is that right?

Christian (01:00:42):
Right. Because there are various ways a company can get cash to make the loan, I have documented cases where that company decided to go and transact with another company, you know, complete a business deal. And now it had money to make the loan to the investor, to the shareholder, and we documented the rest of it as we’ve described.

Sam (01:01:08):
And so, just generally zooming back out now, you know, if an investor is in a position where, you know, there could be a loan made or a gift, what do you recommend is kind of the cleaner route to go, if there is that flexibility?

Christian (01:01:25):
All right. Excellent question. Usually, a gift is going to be the more straightforward approach, but there are some caveats. There are some strings attached to that statement. One is you want to look at whether a gift tax is clearly due or not due on that gift. If it’s very clear that no gift tax is due, that’s one, you know, that’s a feather in the cap of saying that a gift is sort of the easier approach. Also, a gift is supposed to be unconditional, irrevocable. You know, “Here is your money now, a gift.” And so, sometimes I have clients who are saying, well, you know, it’s a gift, but you know, I’m going to pay him back. And I’m saying, that’s not a gift. So, a gift is a great scenario if you’re truly ready make a gift and receive a gift for EB-5 purposes.

Sam (01:02:41):
Got it. Thank you. Thank you, Christian. There’s one or two questions here that I can just quickly answer. So one of them is, are we able to file an adjustment for status if we have a pending I-526 petition? And the answer to that is no, that should have been answered by the immigration attorney who filed the I-526. Another question, quickly, we have here is, if the person’s in India and they’re getting a gift from a person in the US, how did the transfers have to be done? The money does not have to leave the US and then come back in. The money can come from anywhere, either overseas or in the US, and go directly into the project. There’s no requirement that the money has to start from out of the United States before it enters the project. That’s a really common misconception that we see. Another quick question: is it better to take a loan from a business that’s an LLC or a C corp? I don’t think there’s a difference. Christian, what do you think for that?

Christian (01:03:45):
I agree with you. I don’t think there’s a difference.

Sam (01:03:48):
Okay, great. Okay. Yeah, we’ve got one other question. For funds being transferred from third parties versus funds coming directly from the investor’s own personal account, how do you navigate that situation, Christian? Is it better for the investor to just kind of accumulate all of the capital in their own named account and then transfer to the project, or, you know, are transfers from different places that all go into the project acceptable? How do you deal with that?

Christian (01:04:25):
Sure. I’m comfortable with either one of those scenarios, Sam. I mean, you know, people may say, “Well, don’t, you just need to, it doesn’t need to come from the same account at the same time.” Well, sir, if you can make that happen, let’s make that happen. It’s a very straightforward presentation to USCIS, but I would say, you know, a large percentage of the time, it’s not that straightforward, and money is coming from, perhaps, different accounts and at different times over to complete the EB-5 investment. And I am just fine with filing a petition under that scenario and have gotten many petitions approved that have that kind of funding. So I’m comfortable with either one.

Sam (01:05:11):
Got it. Okay. And the last question we’ll cover is, are there any particular countries that you’ve seen, just in general, where applicants, you know, from those countries get more RFEs than others? Or would you say it’s pretty much going to be based, really, on the complication of the individual situation versus, you know, anything tied to geography?

Christian (01:05:34):
Right. I don’t know. I don’t tie RFEs to geography. I really tie it to the complication of that individual’s source of funds. I’m sure there can be some money exchange issues with certain countries that you need to really navigate. Yes, some countries have more documentation than others, but I’ve worked with a lot of different countries around the world, and I’m typically able to get some kind of information that I feel is enough to get that case approved. And I’ll just, you know, again, a long way of saying it, I think it’s a case-by-case basis rather than a geography-based problem in terms of RFEs.

Sam (01:06:30):
Got it. And just, hypothetical, let’s say you were working on a hundred EB-5 petitions this week, you finished them all up. You’re Superman, you work 24 hours a day. You submit all of them. What percentage of that hundred would you predict, just given how aggressive USCIS is today, that would come back, you know, with some kind of RFE or question?

Christian (01:06:56):
Maybe 20%.

Sam (01:07:02):
All right. And with that, I think we’ll wrap it up. If we weren’t able to get to your question, or you still need more information, please reach out to us—emails for our team at EB5 Affiliate Network and Christian are on the screen, or give us a call. And again, if you want to see a recording of this webinar, it’ll be on our YouTube channel in a few days. Or if you’re interested in getting a hard copy of the slides, just email us at info@EB5AN.com, and we’ll be happy to send that over. Um, so thank you again, Christian, for taking the time today. We really appreciate it, and yeah, we hope it was valuable for everyone. And, future questions—please, please, don’t hesitate to reach out.