EB-5 Program: Sources of Funds — Where does the money for your EB-5 investment come from?
To qualify for the EB-5 Visa, applicants must invest a minimum amount of $900,000 in a New Commercial Enterprise, which would lead to the creation of at least 10 full-time jobs for the American workers. While this seems to be simple enough, the submission of the I-526 petition, which begins the visa application process is more complex than it appears at first glance. Form I-526 must be accompanied by documentation, not about only the NCE but also the applicant’s source of the investment funds.
Mr. Khatri ran a real estate business in India and his son was in the U.S enrolled for higher education on an F-1 visa. His son eventually wanted to settle down in the States and expand their business there. While they started to look into various options to get the Permanent Residency at the earliest, they came across the EB-5 Program and decided to go ahead with it since they had the appropriate funds.
They started with their process with the appointment of an immigration attorney and while they were documenting their funds, the issue of the source of funds arose. Even though the funds were acquired over time through the sale and purchase of their ancestral property which was legally acquired, the documentation for the source of funds was not enough, which was causing a delay in the filing of Form I-526. Usually, when the major source of funds is coming from the sale of the ancestral property, the documentation includes receipts, contracts, stock ledgers, deeds, purchase agreements, bank statements showing the receipt of the proceeds. But for Mr. Khatri, it was a major hurdle as the property was purchased a long time ago. But still, he went ahead and filed Form I-526 with the available supporting documents.
When the form was reviewed by USCIS, it was rejected on the basis that it didn’t have enough supporting documents to prove the source of funds being invested in the EB-5 Program. This resulted in a disappointment for Mr. Khatri and his son, who had to return to India as his F1 student visa expired.
The scenario is not limited to Mr. Khatri. Various investors face similar issues with the source of funds that are being invested in the program, which results in the rejection of Form I-526.
According to the USCIS Policy Manual, the purpose of this exercise is to display that the investor is “ the legal owner of the capital invested and obtained the capital through lawful means”. From the Fiscal Year 2008–2019, a total of 1,014 I-526 applications for the EB-5 were denied due to incomplete documents supporting the sources of funds of the applicants. Form I-526 approval rates have ranged from as low as 79% to as high as 92% in the past ten years. The applicant must trace the path of funds from the point of acquisition to when they are deposited in NCE’s escrow account.
There could be various sources of funds for your investments some of the common sources of funds could include:
- Company Loan or Profit Distribution:
If the investment funds derive from a company, the applicant should evidence the company’s business operations and finances
- Sale of Assets:
If the investment is from the sale of an asset, the applicant should isolate the related transactions and include supporting documentation evidencing the sale
- Gifts:
The lawful source of the gift funds must be demonstrated. Gifts must then be traced from the donor to the receiver, and the gift circumstances should be explained in a supplementary statement.
- High-Earnings:
If the investment is based on accumulated wealth, the applicant should submit an accountant’s statement, bank statements, and tax returns for at least the preceding 5 years.
In addition to the source of funds, the applicant should also establish they are the legal owner of the funds, which generally means that the applicant has to document the “path of funds”, using bank statements establishing that the investment was made with the applicant’s funds.
Some of the common supporting documents for the source of funds include:
- Accountant’s statement
- Bank statements
- Tax returns
- Purchase agreements
- Receipt of the proceeds
- Business formation documents
- Company financial statements
- Business contracts and invoices
Source of funds has always been a major hurdle in the application of the EB-5 Program, even when the funds are acquired legally, the documentation supporting should be able to establish the same. It has been one of the major reasons behind the rejection of Form I-526.
Thus, if you are planning to make the first move towards achieving The American Dream for your family, you should make sure their source of funds being used for the EB-5 investment is well supported by the documents, so the chances of rejection of your petition are low.
