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How can I show USCIS the source of the EB-5 investment funds?

By May 5, 2023EB-5 Visa
A man pulling money out of his money jar

When preparing an EB-5 immigrant investor visa application, it is necessary to not only invest a substantial amount into the EB-5 business (the “new commercial enterprise” or NCE), but also to show the government exactly where the investment funds originated and how they flowed from the source into the EB-5 business. This is oftentimes one of the most challenging aspects of the EB-5 application. For an overview of the EB-5 immigrant visa requirements and application process, see here.

What funds are covered by the source of funds requirement?

Before USCIS will accept the EB-5 investment, they must be convinced that the money came from a lawful and legitimate source. This is called the source of funds requirement. The source of funds requirement applies both to the required investment amount ($1,050,000 or $800k for a business in a targeted employment area) and to any money that was used to pay administrative costs and fees related to the investment.

For example, if the applicant invested $1,050,000 into an EB-5 regional center project, paid an administrative fee of $50,000, and paid legal fees of $10,000, they must show the source and trail of funds for the total $1,110,000, which includes both the investment and related administrative and legal fees.

What sources of funds are permitted?

As long as the source of the invested funds is legal, applicants have many options in terms of where they can get the funds from. For example, gifts and loans are acceptable, as are funds the applicant earned by working abroad or that was generated by a business that the applicant owns abroad. The sale of real property, such as an apartment, is also a common source of funds.

Several sources of funds are not permitted. Among other things, the applicant must be the legal owner of the invested funds. Also, any loans that are secured by the EB-5 business or its assets, or that result from a debt agreement between the EB-5 business and the applicant will not be considered.

What documents are required to satisfy the source of funds requirement?

In general, USCIS will require documentation demonstrating that any funds used to satisfy the EB-5 investment requirement or to pay any related administrative costs and fees were “obtained from a lawful source and through lawful means.” The EB-5 Reform and Integrity Act, which was passed in 2022, added language to the Immigration and Nationality Act that defines what documents the government expects to see. Among other things, that law says that the government can require “any evidence identifying any source of capital or administrative fees.”

In practice, the documents USCIS will require are case-specific, meaning that they will be different depending on the source of the funds. In other words, documents showing that the applicant received the funds from the sale of an apartment will look different from documents showing that the applicant got the funds through a loan from a bank.

When determining what documents to submit with the EB-5 application, the applicant would first identify where the funds are from. Then, they will list all of the documents that prove that the funds came from the source, or sources if there was more than one source. Remember that the government will not take the applicant at their word – instead, they will require documents that support the applicant’s claims about where the funds came from, and how they were transferred to the EB-5 business.

If the source is an asset such as a business or a piece of real property, consider documents that prove who owns it. If the source is earned income from a job, consider documents that prove employment and the amount paid, such as payroll records.

The movement of funds must also be documented, through documents such as bank statements and wire or transfer receipts. Tax returns can also be valuable documents to prove that funds were actually distributed to and received by the applicant.

Two Examples of the Source of Funds Requirement

Example 1: Funds generated by a foreign business owned by the applicant. The applicant can include documents that prove that the applicant does, in fact, own the foreign business that generated the funds (such as foreign business registration records). To prove that the business actually distributed funds to the applicant, the applicant can provide foreign business tax records and audited financial statements showing income and distributions made by the business, and transfer receipts showing that funds moved from the business to the applicant. The applicant’s personal tax returns can be included to show that they paid taxes on the funds that they received from the business, thus further substantiating the source of funds as legitimate.

Example 2: Funds from the sale of an apartment. Helpful documentation would include the sales contract, a copy of the deed, transfer receipts and bank statements showing that funds were paid to the applicant in exchange for the apartment, and personal tax records showing that the applicant paid taxes on the proceeds from the sale.

What if the funds are from a gift?

If the invested funds were received by the applicant as a gift, the applicant must provide documents proving that the person who made the gift got the funds legally. The provided documents would need to demonstrate where the person who gave the funds got them.

For example, if the person who made the gift got the funds from selling their apartment, the applicant would need to provide the documents listed before proving that the source of the funds was, in fact, from the sale of the apartment, and that the person making the gift then transferred the funds to the applicant.

Remember to document both the source of the funds and the transfer of them

After establishing the source of the funds, the applicant must show the transfer of the funds from the source to the EB-5 business. This will typically include transfer receipts and bank statements showing that the funds moved first from the source to the applicant, then from the applicant into the EB-5 business.

Can USCIS require any additional documents to satisfy the source of funds requirement?

According to the 2022 EB-5 Reform and Integrity Act, USCIS will also require documents related to any court proceedings or judgments against the applicant that involve possible monetary judgments against them, whether the proceeding is administrative, civil, or criminal, and regardless of where the proceeding happened, whether inside or outside the United States. USCIS can also require documents demonstrating the identity of anyone who transfers funds into the U.S. on behalf of the investor.

How far back in time can the government look pursuant to the source of funds requirement?

One question that frequently comes up is how far back in time the government can look to determine the source of funds. For example, what if the investment funds were acquired from the sale of an apartment 40 years ago?

Unfortunately, the government’s position is that there is no limit on how far in the past USCIS can require documentation. USCIS has been known to ask for documents about the source of funds that go back decades.

However USCIS’s authority to require supporting documentation is not without limit. First, the regulations place a five-year limit on tax returns, and a 15-year limit on administrative, civil, or criminal actions.

Also, while the applicant bears the burden of proving that the application should be approved, the standard the applicant must meet is that it must be “more likely than not” that the claims are true. In other words, as explained in the USCIS Policy Manual, “even if there is some doubt, if the [applicant] submits relevant, probative, and credible evidence that leads an officer to believe that the claim is ‘probably true’ or ‘more likely than not,’ then the [applicant] has satisfied the standard of proof.” In other words, the applicant is not required to prove with 100% certainty the source of the funds. Instead, they are only required to convince the government that it is more likely than not that the source of funds is what the applicant claims it is.

What if documents showing the source of funds do not exist?

If documents showing the source and transfer of funds do not exist, there are a number of strategies the applicant might try, including using secondary evidence and affidavits. We have detailed these alternatives in a separate post here.

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