Lawful Source of Funds for the EB-5 Visa
Seeking classification as an immigrant investor under the employment-based fifth preference category (EB-5) carries a heavy evidentiary burden. The regulations prohibit the use of "assets acquired, directly or indirectly, by unlawful means (such as criminal activities).
It is required to distinguish between proving the "source" of funds and proving lawful investment of the funds. This distinction separately presents requirements for documenting a petitioner's investment and the legal acquisition of the investment funds.
Documenting EB-5 Funds
A petitioner cannot establish the lawful source of funds merely by submitting bank letters or statements
documenting the deposit of funds. Without documentation of the path of the funds, the petitioner cannot meet
his burden of establishing that the funds are his own funds.
Simply stating the origin of the funds without supporting documentary
evidence is not sufficient for the purpose of meeting the burden of proof.
Also the investor must show a "pattern of income" to justify the EB-5 investment. Income tax records should be submitted, preferably for a period beyond the five years required by the regulations. Also provide savings and personal investment records to prove that even if a petitioner has not earned a substantial annual income, there is a credible claim that the necessary funds were accumulated over time.
Showing the path of an investor's money and the pattern of his or her past income are both important in achieving approval of an investor petition. In this regard it is helpful to view every dollar in an applicant's portfolio as being corroborated; this should be made possible through appropriate documentation. Bank statements, account numbers and deposit/withdrawal slips, and any and all wire-transfers between accounts tied to the investment are important for this corroboratory purpose. Charts showing both the path of money invested and the pattern of an investor's past income are helpful.
There are myriad potential sources of an EB-5 petitioner's investment income. Where funds are inherited, a will or trust forms are needed. Where funds are earned from income on an investment, stock certificates, dividend letters, and account statements are vital.
Where funds were earned from income on a previous
business investment, the corporate tax returns for the business, complete with evidence of payouts to the
owners, should be included.
EB-5 Visa Funds from a Loan
Proving the Source of Funds for EB-5 purposes that are obtained by loan. Clearly, it is difficult enough to prove that one's own funds are, indeed, one's own. When the funds are obtained by loan, there may be even greater scrutiny.
The regulations expressly prohibit using loan money for EB-5 purposes if the loan is obtained by using the new commercial enterprise as security. It does not matter if the loan is from a third party lender or the enterprise itself. In either
case the petition will be denied if the loan is secured by the new commercial enterprise.
Examples of information required to evidence the source of loaned funds:
- Terms of the loan agreement
- Documentation proving funds from the lender to the investor (bank statements)
EB-5 Visa Funds from a Gift
A common situation amongst EB-5 applicants occurs when a child is above the age of 21. This applicant would have "aged-out" for inclusion on the parents petition and would need to complete their own separate EB-5 investment.
In this situation, the parent may gift the required EB-5 visa funds to their child for onwards use in an EB-5 project.
There is still the evidentiary requirement on the petitioner to provide information on the source of these funds. Merely documenting the gift transfer to the petitioner is not enough, the petitioner would need to demonstrate how the person that gifted the funds earned that money and that is was acquired legally. The funds still need to be documented from their inception to the final destination of the projects partnership accounts.
Examples of information required to evidence the source of gifted funds:
- Deed of Gift
- Documentation proving funds from the donor to the investor (bank statements)
- A statement explaining why the gift was made and for what purpose
- Evidence that gift tax has been paid, if applicable;
- Documentation such as income tax returns and/or ownership of business that prove the donor's financial background and demonstrate how he/she derived the funds that were gifted
EB-5 Visa Funds from an Inheritance
In cases where the documentation is not available, a common sense approach should be used that explains the relationship, the amount that was inherited and the circumstances. Typial information required to evidence inherited funds are shown below:
- A death certificate
- The Will of the deceased
- Statement of the relationship between the investor and the deceased
- Documentation such as bank statements showing the transfer of inherited funds to the investor
- Certification of payment of inheritance tax, if any;
