EB-5 investments typically utilize an escrow arrangement to safeguard EB-5 investors prior to I-526 petition approval. The following is a high-level overview of the EB-5 escrow process:
- EB-5 Investor Chooses a Project. The EB-5 investor will then sign subscription agreements, operating agreements, escrow agreements and other project documents (collectively “project documents”).
- Deposits in Escrow. The EB-5 Investor will then deposit the required investment amount in an escrow account relating to the project.
- File I-526 Petition. After the EB-5 Investor has signed on to a project and deposited the required investment amount in escrow, he or she will file their I-526 petition with USCIS.
- Conditions of Escrow Release. The conditions of when money is released from escrow depend on each individual project. Here are three scenarios for illustration:
- Scenario 1: If the escrow agreement conditions the release of funds upon filing of an I-526 Petition, once an EB-5 investor has received confirmation of their I-526 petition filing, they will provide that confirmation to the escrow agent who will then release the funds in escrow to the designated project company account pursuant to the project documents.
- Scenario 2: If the escrow agreement conditions the release of money in stages, for example, half when the I-526 petition is filed and half when the I-526 petition is approved, the same procedure for release of the funds following I-526 petition filing noted in Scenario 1 above will generally be observed.
- Scenario 3: If no funds will be released until I-526 petition approval, the funds will remain in escrow until the EB-5 investor provides proof of I-526 Petition approval to the escrow agent who will then release the funds in escrow to the designated project company account pursuant to the project documents.
- Release of Escrow. Once the conditions for escrow release for that specific project are met, the funds will be released to the designated project company account pursuant to the project documents.
Once an I-526 petition has been adjudicated, either approved or denied, what occurs to funds in an escrow account will depend upon the EB-5 investor’s project documents. One hard and fast rule is that once an I-526 petition is approved, all of the EB-5 investor’s money remaining in escrow must be released to the project company. If the I-526 petition is denied, the relevant provisions of the project documents will control whether or not funds are returned to the EB-5 investor and how this occurs.
Generally, in an escrow arrangement described in Scenario 2 and 3 above, upon evidence of I-526 petition denial, the escrow agent will refund the amount that denied EB-5 investor has remaining in escrow. If the amount in escrow is not enough to fully refund the EB-5 investor’s funds, the project documents will most likely guide the process of obtaining the remaining amount. Each EB-5 investor should be familiar with their project documents, which will guide their specific escrow process.