By Anayat Durrani
Many EB-5 investors want to use a mixed source of funds for their investment, such as from inheritances to real estate sales, but may be unsure whether it is acceptable. Experts say using a mixed source of funds is allowed if funds come from verified legal sources.
“Yes, nothing in the law prevents an investor from combining funds from multiple and varied legal sources,” says Belma Demirovic Chinchoy, founding partner at Iyer Demirovic Chinchoy LLP. “From a practical standpoint, this boils down to preparing multiple source and path of funds reports for the I-526/E filing, as each of the sources must be traced individually.”
All funds used must be traced back to their origin with a documented source and path of funds (S/POF). Investors will need to provide documentation in their I-526 petition that shows where the capital came from. Administrative fees also typically require source of funds evidence.
“Investors whose funds come from multiple sources should expect to pay higher attorney fees, as multiple S/POF reports require more time to prepare,” says Demirovic Chinchoy.
EB-5 investors can combine sources of funds
Brennan Sim, global sales for EB5 United, says investors can draw mixed funds from property sales, property loans, home equity lines of credit, market investments, gifts, and more.
“For funds to be accepted, their origin must be legal, documented, and either already in the United States or capable of legal transfer to the U.S.,” Sim says.
Funds do not have to come from one source alone but can be derived from multiple sources like lawful employment earnings, sale of a property, inheritance, gifting of funds, and loans.
“I would add that cryptocurrency is certainly a manner in which you can easily provide proof of funds, given that there is an immutable ledger of most widely used coins,” says Robert V. Cornish, Jr., managing shareholder, Law Offices of Robert V. Cornish, Jr., PC. “However, the source of funds that bought the cryptocurrency may well be subject to USCIS scrutiny.”
Demirovic Chinchoy explains that investors often “combine funds sourced to appreciated real estate, either its sale or a mortgage loan secured by the RE, with accumulated savings from income. Or employment bonuses with appreciated stocks.”
Funds documentation and traceability are key in EB-5 application
Sources of funds can be mixed provided each source is properly traced and that they do not contradict one another.
“For example, do not claim a $250,000 sign on bonus from company A and then provide a W2 – for the exact same year/period – from company B,” says Demirovic Chinchoy. “Investor’s funds from various sources should be pooled into a single bank account owned by the investor, preferably new account or one with minimal activity, and from there transferred to the NCE/escrow in one lump sum.”
Given funds will often come from mixed sources, investors typically must submit several types of documentation.
“It’s essential to trace these funds back to their original source. For instance, if an investor sells a property, the original funds used to purchase it must be traceable,” says Sim. “Investors are advised to consult their immigration counsel to ensure the proper documentation of fund sources according to USCIS standards.”
Documents used can include business registration records, tax returns, certified copies of court documents, or any other financial records that show the legitimate origin of the funds.
“The source of funds documentation is a pivotal component of the EB-5 process. For an investor I-526E petition to be approved, both the project and the source of funds need validation,” says Sim. “Most reputable EB-5 issuers, Regional Centers, and their attorneys are well-versed in working with USCIS to ensure complete and correct documentation for project approval. This emphasizes the critical role of investors’ immigration attorneys in their journey to obtaining a green card.”
EB-5 legal counsel must look into fund sources and documents
Properly documenting mixed sources of funds can help avoid receiving a request for evidence (RFE), a notice of intent to deny (NOID), or outright denial of a petition. By working with a qualified EB-5 professional and providing a well-documented trail of the funds and source of funds, investors can navigate the process more smoothly.
Sim says it’s not uncommon for investors to use various sources of funds for a single petition.
“It’s also important to understand that the USCIS reviews not just the origin of each fund source, but the trajectory they take enroute to their EB-5 projects,” says Sim. “Therefore, before liquidating, transferring, or remitting funds, it’s crucial for investors to consult with their immigration counsel about the source and path of funds for their entire EB-5 investment.”
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