Overcome the Biggest EB-5 Issue: How to Document Lawful Source of Funds for EB-5 Investment

One of the keys to receiving I-526 petition approval and becoming eligible for a U.S. visa is proving your EB-5 investment capital came from a lawful source of funds.

Documenting your lawful source of funds for the EB-5 investment is one of the biggest hurdles for EB-5 applicants and it can also be one of the most time-consuming parts of preparing an I-526 Petition for filing. In order to streamline the process, here are several key pieces of information an interested investor should know about documenting their lawful source of funds.

What does “lawful source of funds” mean?

All EB-5 investors must prove that the funds they’re using for their investment were procured from lawful or legitimate sources (no activities that would be considered criminal or illegal in the U.S.). In order to do so, they must provide written evidence showing the path the funds took to the U.S. The evidence may also need to be translated into English. Each investor’s application is considered on a case by case basis.

What does a “preponderance of evidence” mean?

A preponderance of evidence is the standard of proof an EB-5 applicant must satisfy. Basically, an EB-5 applicant must prove that their claims are more likely than not to be true. By submitting relevant and credible evidence, an EB-5 applicant can satisfy the standard of proof.

Common sources of funds:

Here’s a list of some of the most common sources of funds that may be used for an EB-5 investment. Evidence must be translated into English. Oftentimes, investors must provide provide copies of evidence going back several years to prove it’s a lawful source.

Salary earnings

Employee contract
Tax returns
W-2s
Bank account statements showing deposit of salary

Investments

Documentation of investment accounts for the last three years or more
Stock certificates
Bank account statements and information

Sale of real estate

Contract of original purchase
Ownership certificate
Contract of sale
Deed tax certificate
Bank account statements to show proceeds deposited into investor’s personal account
Evidence of how the real estate was originally purchased (gift, earnings, loan, etc.)
Loan contract

Sale of a business

Business registration
Documentation of sale of business
Proof of ownership, directorship, or officership along with stock records
Accountant’s appraisal of the business

Inheritance

Any relevant documents related to the estate settlement of the deceased

Gift

Gift letter
Source of the gifter’s funds
Gifter’s bank account statement showing withdrawal of gift funds
Investor bank account statement showing deposit of gift funds into investor’s account
Tax returns

Loan

Loan documents
Bank statements showing deposit of funds into investor’s personal account
Proof that the loan company had sufficient funds at the time the loan was made by showing company financial statements, loan agreement to investor, bank account statements, or other proof
Asset appraisals (collateral)
Lender’s sources of capital

Divorce

Documents that show income received from a divorce (alimony, property settlements, etc)

Lawsuit

Any official judgments related to funds recovered in a civil lawsuit

The investor’s burden:

Whatever the source may be, it is the burden of the investor to prove with a preponderance of evidence that the capital came from lawful sources. Consult with an EB-5 immigration attorney to ensure that you have provided sufficient evidence for your case.

Proving path of funds to the U.S.

An EB-5 investor will need to show the path of funds as it travels from overseas to the U.S.

Wire transfer evidence
Deposit confirmation and bank letter
Evidence of the funds going from one account to another

Basic identification information that may be required of the EB-5 applicant (and, if applicable, their spouse and unmarried children under the age of 21 years) include:

Copy of I.D.
Copy of passport
Birth certificate
Marriage License (or Divorce Certificate if applicable)
Death certificate if applicable

What are the new EB-5 minimum investment amounts for targeted employment areas?

On November 21, 2019, the EB-5 minimum investment amount for targeted employment area projects was raised to $900,000. Principal EB-5 investors can still include their spouses and unmarried children under the age of 21 years on their application. In other words, although the EB-5 rate has increased, it includes a family-sized package of green cards.

Save time and focus on documenting the capital going into EB-5

An investor only needs show evidence for the capital going into the selected EB-5 regional center project. An investor may have a multi-million dollar net-worth, but they most likely only need to document the $900,000 (plus administrative fees) to gain I-526 Petition approval.

Save time and select funds that are easier to document

If an investor has several sources of funds they can use for the EB-5 investment, selecting funds that are simpler to document can save time. It is likely that an investor has multiple sources of funds that require proof going back years. Consult with an experienced EB-5 immigration attorney to determine which sources of funds are the smartest to use for your I-526 Immigrant Petition by Alien Entrepreneur.

Any sources that are co-mingled with other sources may be more difficult to provide evidence for. An attorney may strategically advise an EB-5 applicant on what sources to use and not use.

Save time and use a gift or loan if your funds are not easy to liquidate

If liquidating the funds you wish to use for the EB-5 investment would take a long time, it may be a good idea to instead use a gift or loan. The EB-5 investor must still provide sufficient evidence that the funds used for the gift came from lawful sources. If a third-party loan from a bank or other financial institution is used, the principal EB-5 investor must be personally liable for the loan. In order to avoid petition denials or delays, consult with an EB-5 immigration attorney to learn about the best practices for using a loan. For example, the market value of the collateral used for the loan may need to exceed the amount of the loan by a certain percentage in order to avoid the delays caused by an investor receiving further requests for evidence from USCIS.

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Clare Lithgow