By Marta Lillo
When making the EB-5 investment required to apply for this U.S. investor visa, many applicants assess whether to make a full or partial payment, together with other decisions, during their application process.
The EB-5 process requires investors to choose a project first and then make the required capital investment, whether the minimum EB-5 investment amount of $800,000 if the project is in a Targeted Employment Area (TEA), rural or urban, or $1.05 million if it’s anywhere else in the United States. These payments are often made into an escrow account.
After that, the investor files an I-526 petition with the U.S. Citizenship and Immigration Services (USCIS).
What are total payments and partial investments?
Total payments require EB-5 applicants to disburse the entire amount, while partial investments involve a specific amount, usually half, and provide the rest at a later agreed date. “Partial investment means that the investment is in the process of being made,” says Ying Lu, EB-5 attorney and the managing attorney of Law Office of Lu & Associates.
Both payment methods have been present since the beginning of the EB-5 program and result in sales agreements and signing a project contract.
However, up to the EB-5 Reform and Integrity Act of 2022 (RIA), total payment was a preferred option over partial, given developers and regional centers were unwilling to accept anything less over concerns that the investor could repent at the last minute or didn’t have the necessary funds.
Yet, partial payment has gained momentum due to improvements made to the EB-5 visa process since RIA, says Phuong Le, partner of KLD LLP and an EB-5 immigration attorney.
“The concept isn’t new — just that the rest of the industry seems to finally be catching up with this option,” Le adds.
Partial payment in EB-5 before and after RIA
According to Le, partial payment was helpful for investors who filed before the end of the EB-5 program on Jun. 30, 2021 (renewed in March 2022 with RIA) “to ensure they’d be able to file at a lower investment amount or to protect kids from aging out. Post-RIA, this trend only continues and is a necessary option given the $800,000 investment amount and lack of liquidity people face.”
Investment immigration attorney and founder of Carolyn Lee PLLC, Carolyn Lee, adds that “with the EB-5 investment threshold at the substantially higher minimum of US$800,000, many investors are attracted to the possibility and option of partial investment to file the EB-5 petition. They can capture an early priority date while having more time to complete the EB-5 investment later.”
Besides the priority date, another benefit of this payment option is the flexibility it grants investors, Le says, “to liquidate stocks or other investments instead of forcing them to sell at a loss. Without it, forcing investors to wait until they had the full amount ready would only cost valuable time and resources, so we’re glad to see this becoming more commonplace.”
Rakesh Patel, U.S. immigration attorney and founding and managing partner of Patel Law Group, explains that it is an option “particularly ideal for individuals anticipating funds from a sale of assets, for example, that is scheduled to occur on a specific date.”
The pandemic, higher interest rates, and the increased minimum amount of EB-5 investments have also helped the case of partial payment, with some private investment firms, developers, and regional centers opening to the alternative.
In May 2023, for example, LCR Capital Investments issued a statement saying that partial investment is a safe option, even though this regional center in the past “had been hesitant to accept investors interested in partial payment.”
Attorney Lu also indicates she’s observing a rising trend in the use of the partial payment option by Chinese EB-5 investors for other two reasons: changing market conditions after RIA and investors being more cautious. “With the establishment of the visa backlog and the adoption of stricter foreign currency control by the Chinese government, it has been much harder than before to market the EB-5 projects to Chinese investors. In addition, the minimum investment amount for EB-5 is increased. EB-5 becomes a less attractive immigration option. The market became more competitive with various immigration options offered by countries like Singapore, Australia, and Canada. To win the investors, many projects have been creative, including offering the installment or partial payment plan.”
Regarding investor caution, Lu adds that due to fraud cases involving EB-5 projects in the past, “EB-5 investors are more prudent. Rather than fully invest the EB-5 money, they would like to invest partially to reduce the risk of financial loss.”
As for Indian EB-5 investors, the option would allow them to pay part of their investment without being limited by India’s $250,000 transfer limit per financial year, which begins in April and ends in March of next year. “They may not need to wait for two fiscal years, i.e., by Mar. 31st and then after Apr. 1,” says Rohit Turkhud, counsel at CSG Law. “But, beware of the Indian laws which may not allow Indian Residents who are outside India from taking loans abroad. This may be an issue,” he adds.
What makes a successful EB-5 application using partial investment?
RIA requires applicants to provide the USCIS with documentation verifying the source of funds (SOF), showing that the investment has been made or is actively underway. “Partial payments fall within the latter category,” says Patel.
This legal acceptance increases its appeal today, adds Lee. “It’s expressly permitted by law, which allows investors to be ‘in the process’ of investing the required capital, and USCIS has indicated that this is acceptable, case by case. The remaining question is by when must the investment be completed?” she adds.
However, “actively in the process of investing” implies more than just receiving a down payment, Greg Sheehan, director of EB-5 Investor Relations and USCIS Compliance at Behring Co. Rather, it is a “forward-facing commitment that should be supported with proper documentation at the time of filing.”
The partial investment option is also part of the I-526 form, Sheehan adds. “As we can see on form I-526E, there is a table provided for the investor to input the timing and the amounts of their partial capital contributions,” says the former EB-5 Adjudicator at the Immigrant Investor Program Office.
Today’s key issue when using this payment is that EB-5 investors must prove to their project partners and the USCIS that they intend to invest fully and can fund the investment balance on an agreed date.
Lee states that an important question about this pledge “relates to what evidence is enough to show ‘commitment’ of the entire required investment, even if only a partial actual investment is made at filing.”
In that regard, Lu affirms that this evidence must “show that the petitioner has invested or is actively in the process of investing the required amount of capital, the petition must be accompanied by evidence that the petitioner has placed the required amount of capital at risk for the purpose of generating a return on the capital placed at risk. Evidence of mere intent to invest, or of prospective investment arrangements entailing no present commitment, will not suffice to show that the petitioner is actively in the process of investing.”
This evidence can range from bank statements, purchase documents, property transfer documents, and stock transfer documents to loan agreements, and more, Lu says. However, the lawyer cautions that if the EB-5 investor making a partial investment does not provide enough proof, it risks receiving a Request for Evidence (RFE) from the USCIS when reviewing the application.
Patel affirms that alongside this comprehensive documentation, “a supplemental filing with USCIS confirming the pending funds were deployed to the project often occurs within 6 to 12 months of the initial filing.”
Regarding how the agency handles applications with partial investment, Turkhud adds that “the USCIS may well question whether it is really the ‘investor’s money.’ I suspect that attorneys who are crafting the necessary agreements for these ‘loans’ are aware of the risks and pitfalls and are addressing them as best possible.”
Reasons why EB-5 investors still avoid partial investment
Attorney Phuong Le affirms there is still some convincing to do for this payment option to gain more popularity. “We know there’s been pushback from some corners of the industry because the reality is some regional centers or projects want investors to fully fund because they need the full investment amount. Some firms aren’t fans because it requires them to file an additional supplemental filing. For us, though, it’s been a necessity given increased investment amounts, volatile economies, and high-interest rates. It’s clear to us that our industry is headed towards mass acceptance of this concept to meet investors halfway and help them make a smart investment decision.”
Uncertainty and risks still associated with this method range from unfamiliarity with its practice to the absence of specific wording in EB-5 regulation about its use.
Immigration attorney and partner at WR Immigration, Joseph Barnett explains that although the law allows “investors to demonstrate compliance by being ‘actively in the process of investing,’ USCIS adjudication policy on payment in installments is not clear.”
Also, investors need support from developers and regional centers to opt for this payment type through a direct investment application or a regional center.
“If they aren’t open to partial investments, then they won’t offer them to investors,” says Charles Raether, EB-5 immigration lawyer and the founder and managing partner of AmLaw Group. “And most investors really wouldn’t think of asking about this option unless they found out about it from the regional center.”
Barnett adds that complications arising in the EB-5 application because of the partial payment also deter investors from using this practice, even if doing so would allow them to lock in a priority date if they invest in a TEA project. “Many investors are hoping to take advantage of this provision as funds become available to obtain an earlier priority date, but there is a risk that providing evidence of later accumulated funds after the initial time of filing may be considered a material change by USCIS. Further, each investor’s required two-year sustainment period won’t start running until the final payment is made and then spent by the EB-5 project, possibly increasing the risk that there may be a repayment by NCE [new commercial enterprise] before the sustainment period is met and therefore redeployment is required,” the attorney says.
Also, Raether affirms that “investors are so conservative as it is. Many would shy away from partial investments if it even slightly raises the chances of problems with USCIS and could lead to a denial. It all depends on the specific circumstances of the investor, but in some cases where SOF [source of funds] issues are complicated (which is often the case for investors considering partial investments), this structure can weaken the case a bit and lead to greater risks with the adjudication.”
To this, Le asserts that “we’ve never had a single case denied due to partial investments, but it’s critical to understand that the actual legal requirement is to demonstrate that the investor is irrevocably committed or actively in the process of investing, including laying out evidence of funding to date, any necessary side letters or amendments, and funding deadlines/timelines so USCIS can assess whether it qualifies.”
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