07 Nov Can EB-5 Partial Investments Work? – Episode 90
Some partial EB-5 investments get approved, while others are denied. What’s the difference? On this episode, Mona, Mark, and Rebecca discuss the rules around partial investments and offer examples of documentation that earns USCIS approval. Listen in for insight on demonstrating a commitment to a project, changing the source of funds after documentation is submitted, and contributing the remaining funds in a timely manner.
At the most recent IIUSA EB-5 Industry Forum, Sarah Kendall, Chief of the Immigrant Investor Program Office (IPO) mentioned that it was acceptable to file an I-526 with less than $500K prior to the November deadline. While this is nothing new, it is important to fully understand the USCIS criteria for filing with partial funds and follow the regulations to increase your chances of being approved.
On this episode of EB-5 Investment Voice, Mona, Mark, and Rebecca sit down to discuss the rules around partial EB-5 investments, making the distinction between mere intent and actual commitment. They share the patterns they’ve noticed in terms of denials, offering examples of documentation that is earning approvals from USCIS.
The MSA team also covers source of funds affidavits and partial investment commitment letters, explaining why timelines are important and what happens if an investor cannot procure the remaining funds. Listen in to understand the danger in changing the source of funds once documentation is submitted and learn why it’s beneficial to contribute the balance as soon as possible.
What the Rules Say About Partial Funds
- At the IIUSA EB-5 Industry Forum in Seattle, IPO Chief Sarah Kendall stated that it was acceptable to file an I-526 with less than $500K before the November 21 deadline. Mona points out that this is nothing new, as applicants have always been allowed to invest partial funds, provided they follow USCIS criteria.
- Per the regulations, the investor must establish that they have invested or are “actively in the process of investing” the required amount of $500K. Rebecca stresses that an investor can’t show mere intent but must demonstrate an actual commitment by submitting evidence that shows they have placed the full amount at-risk.
The Pattern Around Denials
- Mona’s team has analyzed recent denials of partial funds and determined that entrepreneurial cases are approved much less often than Regional Center projects. This is likely due to the fact that USCIS makes it so difficult to prove that funds not in the business still qualify as at-risk.
- A promise to contribute future earnings or invest once an exchange rate improves fall into the category of “mere intent” and will not earn USCIS approval. If, however, an applicant can show that a bond will divest in three weeks, for example, and commits to transfer those funds to the EB-5 project, they are much more likely to be approved.
- An applicant who owns land and provides documentation that they are in the process of selling is likely to be approved by USCIS. On the other hand, a petitioner who simply indicates an intention to put their land on the market at an unspecified future date is likely to be denied.
Documentation to Demonstrate Commitment
- If an immigrant investor has already put $100K in a project, they must document their commitment to provide the remaining capital by submitting a commitment letter. The letter details the source of the remaining funds and suggests a timeline for submission.
- The source of funds declaration or affidavit itself must also explain where an investor’s EB-5 funds are coming from. Again, these documents must go beyond the intent to demonstrate that the money is truly committed to the EB-5 project in question.
- If, for whatever reason, the investor cannot come up with the rest of the funds, the project has the right to keep their partial investment. Remember, the petitioner made a contractual commitment to contribute $500K to the project.
Changing Your Source of Funds
- Mona and Rebecca caution clients against changing the source of funds once documentation is submitted, as USCIS regulates that a petitioner must be approvable upon filing. A new set of facts regarding the remaining amount further complicates an EB-5 petition and makes denial more likely.
- Let’s say the sale of an investor’s property falls through, and they decide to contribute accumulated salary to the project instead. The petitioner would then have to fully explain the unforeseeable circumstance that forced the change.
MSA’s Advice on Partial Investments
- Mona and Rebecca recommend contributing the remaining amount to the project within 180 days if at all possible. While we can get away with waiting as long as a year, putting up the money as soon as possible confirms intent.
- USCIS is likely to adhere very strictly to the regulations and deny any partial investment petitions that don’t submit enough evidence. And an ethical attorney should turn away those cases they expect to be denied, rather than wasting an investor’s time, money and emotional capital.