3 Important Changes in the EB-5 Source-of-Funds Policy

The EB5 Immigrant Investor Program offers a pathway to US permanent residency for foreign nationals who invest in USCIS-approved businesses that create jobs. Although the program is considered one of the most direct paths to a US green card, the application process involves a comprehensive review, particularly of the source of funds used for the investment. 

In recent years, USCIS has implemented significant policy changes regarding the investor’s source of funds, and immigration attorneys and EB5 investors must be aware of these updates to avoid delays or denials. These updates, which took effect on May 14, 2022, aim to strengthen the transparency and legitimacy of the capital invested by EB5 applicants. Here’s a breakdown of the top three changes to watch out for: 

1. Stronger Documentation Requirements for Source of Funds 

Under the new policy, EB5 investors must provide comprehensive documentation proving the lawful source of their invested funds and any associated fees. This includes business records, personal tax returns, and more. The required documents are as follows: 

• Business and tax records. Investors must submit records such as foreign business registration certificates and corporate tax returns, as well as personal tax returns for the past seven years (or a specified period determined by the US Secretary of Homeland Security). 

• Evidence of monetary judgments. Investors must provide certified copies of any monetary judgments against them, including pending legal actions. This requirement ensures that any funds being transferred are not tied to criminal or civil liabilities. 

• Transfer information. Detailed information must be provided regarding the individuals or entities transferring funds into the US on the investor’s behalf. 

This policy emphasizes the importance of transparency, meaning that investors must meticulously document the origin of their funds, including any funds used for administrative fees and capital contributions. 

2. Gifts and Borrowed Funds Are Now Permissible, with Clear Conditions 

Previously, the EB5 process sometimes viewed gifts and borrowed funds with skepticism. However, the new rules clarify that gifts and loans are now explicitly permissible sources of funds, provided they meet two conditions: 

• Good faith transactions. The funds must be gifted or lent in good faith and not as a means to circumvent the EB5 program’s limitations on permissible sources of capital. 

• No proceeds from illegal activities. Gifts or loans cannot be derived from illegal activities, ensuring that the money used for investment is clean and lawfully obtained. 

For those relying on gifted or borrowed funds, additional documentation is required. Investors must submit proof that the donor or lender has a lawful source of the funds, similar to the documentation required for their own investment. This includes evidence such as tax returns, business registration records, or bank statements from the donor or lender. 

3. Clarification of the Period for Tax Returns and Other Evidence 

To further tighten compliance, the new rules specify that investors must provide personal tax returns from the past seven years (or another period determined by the US Secretary of Homeland Security). This requirement ensures a comprehensive view of an investor’s financial history and identifies any potential irregularities in the source of their wealth. The extended requirement for tax records helps USCIS ensure that all funds invested in the EB5 program have lawful, traceable origins, whether domestic or international. 

Conclusion 

The changes to the EB5 source-of-funds policy, effective May 14, 2022, underscore the program’s commitment to transparency and the prevention of illicit financial activities. For prospective investors, it’s crucial to understand these new requirements and ensure they can provide thorough documentation of the lawful origin of their investment funds. By staying informed and compliant, EB5 applicants can navigate these changes and increase their chances of a successful petition.