Klasko Immigration Law Partners attorneys, Ron Klasko, Anu Nair, and Alison Li, joined this EB-5 Affiliate Network webinar event hosted by their executive team, Samuel Silverman and Michael Schoenfeld. Anu Nair and Alison Li explained the importance of an EB-5 investor thoroughly documenting their source of funds and what the four main sources of funds are. Ron discussed the new EB-5 investment opportunities and explained the benefits and advantages of investing in rural EB-5 projects.
What is Source of Funds and Why is It Important?
One of the first and most critical steps to start your EB-5 process is establishing the source of funds process. Source of funds is the process of documenting an EB-5 investor’s lawfully obtained investment funds. This is an important first step before investing funds into a project or submitting an I-526E petition. Per USCIS, an EB-5 investor must meet the following investment requirements:
- Invest their own capital.
- Proof of legal ownership of the capital through lawful means.
- Provide documentation of the path of funds to establish an active or soon-to-be-made investment.
Common Sources of Funds
The four major sources of funds are:
- Ordinary Income – Income earned and maintained through a third-party employer or self-employment.
- Capital Gains – Documentation of initial purchase of capital or asset which has increased in value (I.e., real property, equities/commercial (fixed) deposits).
- Gifts or Inheritance – Provide evidence of inheritance and documentation of donor’s initial purchase.
- Loans from Family, Friends, or Companies – Source of funds for collateral assets must be provided. For non-financial borrowings, document how funds were acquired.
Why Should Chinese Investors Invest in Rural EB-5 Projects?
A long quota backlog and waitlist has accumulated for Chinese EB-5 investors. To provide some relief, USCIS passed the Reform and Integrity Act (RIA), which now allows those already in legal status to apply for a green card in the U.S. while waiting for their EB-5 petitions to be approved. This unfortunately is not available for investors currently waiting in the backlog. However, this is accessible for those not on any waiting list or for those who are investing in one of the newly created set-aside categories for EB-5 investors, which are Rural, High Unemployment, and Infrastructure.
Rural EB-5 Projects
For new Chinese investors, investing in rural EB-5 projects might be more appealing and offer unique advantages than the other set-aside categories. With 10,000 EB-5 visas available, 20% ( 2,000 of the 10,000) is set aside for rural investments. Other advantages for rural EB-5 projects include:
- Priority processing
- No waiting list
- Potentially quicker route to conditional permanent residence for individuals and family members (upon EB-5 approval)
High Unemployment
If an investor decides to invest in this category, 10% of the 10,000 is set aside. Historically more than 95% of EB-5 projects have been in high-unemployment areas, which will likely result in backlogs before rural area projects.
Infrastructure
With the smallest percentage of the three new categories, the infrastructure set aside currently sits at 2%.
With all this considered, the key takeaways of this webinar were, first, the importance of the investor’s source of funds. If an individual wants to pursue a green card through EB-5 investment, it’s crucial they begin to prepare documentation of their lawfully sourced investment funds before submitting an I-526E petition or sending funds to a project. The second takeaway is for Chinese investors to be aware of the new set aside EB-5 categories and to consider investing in rural EB-5 projects. Although there are three new EB-5 categories with no backlog, rural EB-5 projects offer some unique advantages for Chinese investors.
If you have any questions regarding this blog, schedule a consultation with a Klasko EB-5 attorney.
