EB5 Source of Funds Requirement Explained – Top Questions Answered

In this article, we are going to provide a detailed explanation of the EB5 “source of funds” requirement and answer some of the most important questions regarding this requirement.  If you are considering an EB5 investor visa, make sure to read on. 

We are Ashoori Law, led by Michael Ashoori, a U.S. immigration lawyer based in Los Angeles, California.  At our law firm we work with clients from all over the world, and we regularly post articles and videos to make sure that you are up to date with the latest immigration news.  If, after reading this article, you have more questions, then we invite you to contact us at Ashoori Law.  Feel free to call us at +1-818-741-1117 or you may schedule a free consultation by clicking this link.

The EB5 Investor Visa and the Lawful Source of Funds Requirement

The EB5 visa is an investor visa in which a person can qualify for a green card by making an investment in a U.S. business and creating jobs for U.S. workers.  You can also get a green card for your spouse and your unmarried children under 21 years old with an EB5.

Notably, one of the requirements of the EB5 investor visa is that the funds that you use to invest must come from a lawful source.  The reason for that requirement is that USCIS, properly enforcing immigration law, wants to make sure that you are not investing funds that have been obtained through illegal and/or criminal activity, such as deriving funds through money laundering or another type of impermissible activity. 

What Are Some Examples of Lawful Sources of Funds?

There are many sources of funds that could potentially qualify for an EB5 visa.  Let us go over a few:

• Lawful employment earnings.  Assume that you work for a number of years, and you save up the funds that you use to make your EB5 investment.  That saved income from lawful employment or from operating your own lawful business can be the basis of your source of funds that is used for your EB5 investment.

• Proceeds from the sale of a property.  Perhaps you own a piece of real estate, and you sell that piece of real estate.  The funds that you receive from the sale can be used as the basis of your EB5 investment.  

• Gifts or inheritance.  Assume that your parents or your rich uncle gifts you the investment funds that you use for your EB5 investment. This can also be the basis of a valid source of funds used for your investment.  

• Loan.  If you are able to get a loan, that could potentially qualify as a valid source of funds for EB5 purposes.

What Is the Difference Between the Source of Funds and the Path of Funds?

There are, in fact, two separate requirements within the EB5 source of funds requirement. USCIS wants to see the source of the funds, which is where the funds came from; and USCIS wants to see the path of the funds.

The path of the funds is essentially, for lack of a better term, the path that the funds take from the source all the way until they are invested into the EB5 business.  Keep in mind that to qualify for any EB5 visa, you have to adequately show the source of the funds and the path of the funds.

How Do I Prove Lawful Source of Funds and Path of Funds?

Demonstrating a lawful source of funds and path of funds depends on your specific circumstances.  Important considerations include:  Where did your funds come from? What path did your funds take from the time that they were derived until the time that they made their way into the EB5 new commercial enterprise operating account?

Your specific circumstances and your specific situation will dictate the appropriate documentation, and the appropriate way that your source of funds and path of funds are diagrammed.

Be Sure to Enlist the Help of an Experienced Attorney

Your attorney will play a very critical role in demonstrating source of funds and path of funds. For source of funds, your attorney will oftentimes prepare a detailed memorandum explaining specifically from where each source of funds originated.  It could be that you have $100,000 that came from one source, and $250,000 that came from another source, and another $50,000 that came from yet another source.  Each of these different sources has to be clearly explained so that the USCIS officer reviewing your case can easily identify and follow along with what is going on with your source of funds.

With regard to the path of funds, your immigration attorney will likely also prepare a diagram illustrating the path that the funds took from the time that they were derived until the time that they made their way to the new commercial enterprise’s operating account or escrow account. The purpose of this diagram is to clearly illustrate and make it easy for the USCIS officer to understand the path of the funds.

What Documents Do I Have To Provide To Prove Lawful Source of Funds?

The documents needed will depend on what you are claiming as your source of funds. For example, if you’re claiming that the funds came from the sale of a property, then you will likely need to show the purchase and sale agreement of the property, along with your bank statement which shows the transfer of the funds from the buyer to the seller.  

If you’re proving that your lawful source of funds came from a gift, from a friend or a family member, then you will likely have to provide a signed gift declaration signed by the gifter, which explains that they’re giving you a gift in that amount, along with an explanation on how they obtained the funds that they are using to gift to you.   Remember, just because you’re getting a gift from another person, doesn’t mean that that person doesn’t have to explain and prove how they obtained their funds.

Maybe you are claiming your lawful source of funds came from employment earnings.  Then, you would likely use tax returns along with the signed declaration to demonstrate that you earned the funds through lawful employment. Your particular situation will determine how many years of tax returns you’ll have to provide to USCIS.

For example, somebody who makes a million dollars a year in annual salary doesn’t necessarily have to provide as many years of tax returns to demonstrate how they compiled the $500,000 needed for their EB5 investment.  By contrast, somebody who makes $100,000 a year, or $150,000 a year, may have to provide more years of tax returns to demonstrate how they were able to compile the $500,000, or the million dollars that’s needed for their EB5 investment.

If you’re working with a qualified immigration lawyer, he or she will outline specifically what documents you need, and that should hopefully make the process much easier for you. To reiterate, the documents specified here do not comprise an exhaustive list.  They are just some of the documents that are required.  In reality, depending on your particular situation, there will likely be many more documents required to sufficiently prove a lawful source of funds and path of funds.

My name is Michael Ashoori and I’m a U.S. immigration lawyer and the founder of Ashoori Law. As an immigration lawyer, I help families, professionals, investors, and entrepreneurs get visas, green cards, and citizenship to the United States.  If you have any questions, feel free to schedule a free consultation by clicking this link.