Source of funds for EB-5: lawful source and path of funds

Two related ideas sit at the centre of most EB-5 source-of-funds reviews. They are often discussed together, but they answer different questions.

Lawful source of funds

Where the money originally came from and why that origin was lawful. For example, years of salary on which taxes were reported, or the proceeds of selling a property the investor legally owned.

Path of funds

How the money moved from its origin to the EB-5 investment: from a salary account to a savings account, through a currency conversion, across an international wire, into an escrow account and finally to the new commercial enterprise. Each step is usually supported by a bank record or similar document.

A strong source explanation can still raise questions if the path is unclear, and a clean path does not by itself show that the original funds were lawfully obtained. Petitioners therefore generally aim to present both as one connected, documented story.

The investment must also be placed "at risk" in the enterprise. For petitions filed on or after March 15, 2022, the minimum investment is $1,050,000, or $800,000 in a targeted employment area or an infrastructure project. These amounts are scheduled to be adjusted for petitions filed on or after January 1, 2027; as of our last review, adjusted figures had not been officially published. The full amount invested is generally subject to source-of-funds review, and investors often need to document separately the funds used for fees and expenses. See EB-5 requirements for the broader picture.

Most investors draw on more than one source. The table below lists categories of records that are commonly relevant. It is not a checklist: what is needed, and in what form, varies with the facts, the country involved and current USCIS expectations.

For many investors the most complex part of the path of funds is moving money across borders. A few general considerations come up repeatedly:

• Home-country rules. Some countries regulate how much currency individuals may convert or send abroad, or require specific reporting. Outbound frameworks such as India's Liberalised Remittance Scheme set their own rules and limits. Following those rules is part of showing a lawful path.
• Traceable channels. Transfers through regulated banks generally produce records that are easier to follow. Informal channels, unrelated third parties or money changers that do not issue clear records can make the path difficult or impossible to document.
• Exchange records. Where funds are converted, keeping the conversion confirmations helps reconcile amounts in different currencies, including differences caused by exchange rates and bank charges.
• Intermediate accounts. Each account the money passes through generally adds a link that may need its own statements. Fewer, clearly documented steps are usually easier to explain.
• Timing. Large deposits that appear shortly before a transfer can prompt questions about where they came from. The explanation for such deposits is part of the source story.

These are general points only. Exchange-control and tax rules differ by country and change over time, so investors usually coordinate transfers with an attorney and, where needed, with a qualified adviser in the home country before moving funds.

Gifted and borrowed funds can be lawful sources of EB-5 capital when they are properly documented. Both shift part of the evidentiary burden to a third party, which is why they deserve early planning. Our article on gift and loan funds covers them in more detail.

Gifts

• A gift generally needs to be shown as genuine, with no expectation of repayment or of the donor sharing in the investment.
• USCIS commonly looks at the donor's lawful source: how the donor earned or acquired the money, supported by the donor's own records.
• The path generally runs from the donor's accounts to the investor's accounts and then onward, so both sides of the transfer need records.
• Gift tax or reporting rules may apply in the donor's country, the investor's country or the United States. A qualified tax adviser can explain what applies.

Loans

• A loan used for an EB-5 investment generally may not be secured by the assets of the enterprise being invested in.
• Where a loan is secured by the investor's own assets, the investor usually needs to show ownership of the collateral and how it was lawfully acquired.
• Information about the lender and the lawful source of the lender's funds may be requested, particularly for loans from individuals or private companies.
• The loan terms, disbursement and transfer records generally form part of the path of funds.

Investors are sometimes surprised to be asked about events long before the investment. The reason is that a lawful source is usually traced to its origin, and that origin may lie years or decades in the past.

• Savings built over a career are generally explained by the earnings history that produced them.
• Property sold today may have been bought many years ago, and the purchase money itself may need an explanation.
• Inherited or gifted funds may require records about how the original owner acquired them.
• Tax filings over a period of years can help show that income was reported and is consistent with the assets claimed.

For petitions governed by the rules that apply after May 14, 2022, the statutory documentation requirements generally include the investor's personal tax returns covering the preceding 7 years, subject to the applicable provisions and exceptions. Whether and how this applies to a particular petition, for example where returns were not required in some years, is a question for a qualified U.S. immigration attorney.

Older records can be hard to obtain: banks may have retention limits, businesses may have closed, and archives may need formal requests. Starting the document search early, and noting gaps honestly with any available alternative evidence, is generally more effective than reconstructing records under a deadline. The current Form I-526 (opens in a new tab) and Form I-526E (opens in a new tab) instructions describe the evidence USCIS asks for and should be read in their latest version.

Indian investors draw on the same general categories of sources as anyone else, but the records involved have their own names and formats. The EB5 Circle Investor Guide summarises the documents that commonly come up, depending on circumstances:

Tracing a property sale is a good illustration of the level of detail involved. An investor selling property in India would typically document how and when the property was acquired, the sale transaction, receipt of the proceeds, the taxes paid, each subsequent bank transfer and the international remittance itself. A large deposit on a bank statement does not, by itself, show how the money was earned.

• Translations. Documents in Indian languages generally need certified English translations.
• Two sets of rules. Indian tax and foreign-exchange requirements for sending money abroad are separate from eligibility under U.S. law, and both need attention. An Indian tax professional can advise on the Indian side.
• Visa availability is a separate question. Documenting funds well does not affect when a visa becomes available for applicants chargeable to India; that depends on the Visa Bulletin.

For a fuller treatment, including common mistakes and best practices, see source of funds for Indian investors.

Source-of-funds work is usually a collaboration. The steps below show one common way it is organised; the order and roles vary by case.

1. 01

   Step 1: Initial review with an immigration attorney

   A qualified U.S. immigration attorney reviews the planned sources, identifies likely evidence and flags issues such as gifts, loans or cross-border transfers.

2. 02

   Step 2: Financial reconstruction with an accountant

   An accountant, often one familiar with the home country's records, may help assemble income histories, reconcile accounts and prepare summaries or reports that tie documents together.

3. 03

   Step 3: Tax and exchange-control input

   A qualified tax adviser can explain tax consequences in each country involved, and local advisers can address currency and remittance rules.

4. 04

   Step 4: Planned transfer

   Funds are moved along the documented path agreed with the attorney, keeping every confirmation and statement.

5. 05

   Step 5: Petition assembly

   The attorney organises translations, exhibits and a narrative explaining the source and path as part of the I-526 or I-526E filing.

If you are early in planning, it can help to list your likely sources and note which records you already hold and which may be hard to obtain. That list is a useful starting point for a conversation with a professional.

• Read about EB-5 requirements and the overall EB-5 process.
• See gifts, loans and inheritance for more on third-party funding, and source of funds for Indian investors if your funds come from India.
• Review understanding EB-5 investment risk before committing capital.
• When you are ready, you can request a consultation to be connected with an appropriate qualified professional. Please do not attach or describe financial documents in the form.

Your own qualified U.S. immigration attorney, together with an accountant and a qualified tax adviser where needed, is the right source of advice on what your evidence should contain.