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Alien Entrepreneur EB-5 Investors: The Source of Funds Element

Of the many hurdles the immigration regulations have in place for EB-5 investors, one of the most difficult is proving that the intended funds have come through lawful means. The regulations specifically mention business records and tax returns as ways to establish the legitimacy of the capital. While the regulations allow for other evidence, it is generally accepted that the immigrant investor will have a much smoother process with tax returns, business records, or both. The most common and safest way to show the source of funds is evidence of liquidation of tangible assets in the home country to prove the lawful qualities of the source of funds. For instance, many of our clients had liquidated businesses, or real estate properties to track that the funds had been secured by lawful means. Contact us for an evaluation of your EB-5 investment. We are one of the few law firms in the nation who have been successful in obtaining EB-5 approvals.

For tax returns, the investor is required to submit five years worth of returns for all taxes which would include business taxes, property, and most commonly, income taxes. If the investor has not had to file a tax return, for example, if the investor is a retiree, there must be sufficient evidence including attestations by the investor for the reasons that taxes have not been filed or did not have to be filed. In fact, if the investor does not currently pay income taxes, the USCIS might still require evidence of paid taxes from the last period the investor did have to file them. Perhaps somewhat surprisingly, given the stringency of the regulations, the potential investor is not required to prove that the income showed by tax returns is sufficient to have earned the large amount of capital required by the EB-5 regulations. The examiners are also not checking to prove that taxes were paid correctly, or even at all. If these records do not support the capital, however, the actual source of funds must still be clearly established.

The same holds true for the requirement for business records. The regulations ask for foreign business registration records, assuming that the investor owns or owned a business. So, the investor should be prepared to document evidence of the business such as registration certificates or articles of incorporation. Again, while the regulations require this information, “if applicable,” the evidence does not have to show that this is the source of funds being used in the investment. If these funds are the source, then such documentation may be even more closely scrutinized but, if not, then the actual source must be carefully documented.

For example, if the funds come from a gift or an inheritance, the investor would need to document the transfer of the money. This documentation will need to include the relationship between the investor and the giver and further documentation showing the giver’s source of funds. A wealthy relative who has earned money through legitimate means is certainly entitled to give that money as a gift or leave it as an inheritance, and those funds are able to be used by the investor to meet the criteria set by the regulations.

Loans may also be used, with the important caveat that the assets of the intended enterprise cannot be used as security for the repayment of the loan. The investor is able to use personal assets as collateral. The investor must be able to identify the source of the funds and the terms of the agreement. In addition, the individual loaning the money will be required to document the source of the funds as if the loaner was to be the actual investor. In this way, a potential investor cannot pass ill-gotten gains to another to “lend” back. The regulations anticipate the showing of a clear tracing of lawful funds.

As stated in the outset of this article, the most likely scenarios for supporting the amount of capital needed to qualify as an EB-5 investor will be the sale of a large home or business or simply the accumulation of wealth over a period of time. This documentation is typically easier to obtain and offers solid evidence of a lawful source of funds. The sale of a home or business can often be documented by transaction receipts and public records as well as through tax documents. Personal wealth can be shown through taxes as well, and also through statements from bank and brokerage accounts.

Of course, every situation is different and the difficulty of the regulations keeps the number of EB-5 visas well below the maximum allowed. For this reason, it is important that potential investors speak with an immigration attorney who has an understanding of the law and experience in this field. The attorneys at The Law Firm of Shihab & Associates, Co., LPA are immigration attorneys with proven experience and would be happy to speak with you about your options as an investor or any other immigration question or concern you might have. Please contact them at the office nearest you to set up a consultation and have all your questions answered and options presented.

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