Partial Capital Contributions Versus “Skeletal Filings”
With the upcoming new EB-5 regulations slated to take effect on November 21st, 2019, prospective EB-5 investors should consider the benefits of utilizing partial capital contributions as a means of completing their I-526 filing, getting a priority date, and locking in the minimum investment amount of $500,000.
What is a Partial Capital Contribution?
A Partial Capital Contribution is exactly what it sounds like: an I-526 filing with a portion of the required investment amount of $500,000 contributed at the time of initial I-526 filing. There are several reasons why investors may choose to utilize partial capital contributions. In many cases, prospective EB-5 investors do not have $500,000 liquid and available to invest on short notice; often times funds are invested in other assets such as second homes, investment accounts overseas, or they may own equity shares as part of their employee compensation package that are not available to sell for a set period of time. Using a partial capital contribution allows those prospective investors time to liquidate holdings while allowing them to get a priority date and lock in the current terms of EB-5 prior to new regulations taking effect.
At the time of this article’s posting, USCIS has two requirements for gaining permanent residence through the EB-5 program: invest $500,000 (if investing in a Target Employment Area) and create 10 jobs. What is less known is that the entire $500,000 does not need to be invested up front. USCIS permits an investor to be in the process of investing or making a partial capital commitment to submit an I-526 and establish a priority date. The partial capital contribution schedule eases the burden for the investor and provides more time to plan for the larger financial commitment. More importantly, an investor can file the I-526 immediately with a partial capital contribution and establish a priority date.
Introduction to Partial Capital Contributions
All EB-5 investors must invest into a new commercial enterprise (NCE), invest $500,000, and create full-time positions for at least 10 qualifying employees. The total investment amount and job creation requirements are straightforward concepts. What is less known is that to begin you EB-5 application, the full $500,000 investment is not required.
The USCIS Form I-526 specifically states: “You may file this petition for yourself if you have invested or are actively in the process of investing the required investment amount in a new commercial enterprise (NCE).” The language stating you are “actively in the process of investing” is very important for two reasons:
- The I-526 application process can take over 24-months to get approved by USCIS. Given this time lag, the sooner an investor can file the I-526 to start the process, the better.
- Many investors have their net worth tied up in existing investments that may take several months to liquidate. Making a partial capital contribution to start the I-526 filing while planning for the remaining amount can help alleviate the initial burden.
A partial capital contribution schedule will allow an investor to file an I-526 application today, while permitting time to plan for the remaining capital contribution.
USCIS Form I-526 Requirements
The instructions for the USCIS Form I-526 state “You may file this petition for yourself if you have invested or are actively in the process of investing the required investment amount in a new commercial enterprise (NCE).” In question 9 of Part 2, Information about your investment, it requests the “Total Amount Deposited or Committed to Deposit into the U.S. Business Account for NCE.”
In question 21 of Part 2, Information About Your Investment, it asks to “Please identify the sources of capital you have invested or are actively in the process of investing in the NCE.”
To see the full USCIS Form I-526, click this link: USCIS Form I-526
Planning Your Capital Contribution
A partial capital commitment or installment style contribution schedule is permitted by USCIS; however, investors still need to have a plan to complete the full $500,000 investment before USCIS reviews the I-526 petition. Processing times for I-526 petitions are currently reported by USCIS as taking between 27.5 to 49 months, but because investor petitions could be adjudicated in as little as 12 months and USCIS, investors should plan to complete their filings in under a one years time.
USCIS is clear in § Sec. 204.6(j)(2) that mere intent to invest is not enough. USCIS requires that I-526 “… petition must be accompanied by evidence that the petitioner has placed the required amount of capital at risk for the purpose of generating a return on the capital placed at risk.”
Having a good plan in place will not only satisfy USCIS requirements, but it will ensure that the investor successfully completes their capital contribution commitment.
Partial Capital Contribution Versus A “Skeletal Filing”?
Partial Capital Contributions should be used when the investor’s source of funds is derived from a source that takes time to liquidate, not to buy time that investor time to earn additional funds for investment. A “Skeletal Filing” is a filing that is lacking sufficient evidence of the source of funds for the investment filed simply to obtain a priority date. These “Skeletal Filings” lead to lengthy USCIS adjudication times and many Requests for Evidence (RFEs), and many are ultimately denied.
When using Partial Capital Contributions for EB-5 investment, prospective EB-5 investors will still need to provide evidence of ownership of their intended source of funds. For example, if an investor was planning to sell a home to fund a part of their EB-5 investment, they would need to provide evidence of the source of funds used to purchase the home, proof of mortgage if the property was financed, proof of their ability to pay the mortgage, and proof of property tax or deed tax paid. Once the property was sold, the investor would provide the sale contract and bank statements showing the deposit of the proceeds of the sale into their bank account and the transfer of those funds to the U.S. project they are investing into. Additionally, I-526 filings utilizing Partial Capital Contributions will need to include additional documentation that clearly identifies and documents the EB-5 investor’s firm commitment to invest as well as all capital sources, and their approximate value, that are intended to be liquidated to fund the EB-5 investment.
Partial capital contributions help investors file an I-526 with a portion of the required $500,000 to establish a priority date and lock in their investment under the current EB-5 regulatory framework. Investors will still need to identify and provide evidence of the source of funds they plan to utilize for their final capital contribution and they will need to place all capital prior to USCIS adjudicating their I-526 petitions. Partial Capital Contributions differ from “Skeletal Filings” in that they directly identify the source of funds to be utilized and provide evidence of lawful ownership of those sources. Finally, they demonstrate the investor’s firm intention to invest the full capital. Crafting successful Partial Capital Contributions requires not only a good plan that is carefully assessed by the Behring team, but also an experienced immigration lawyer with an excellent track record in assisting EB-5 investors filing an I-526 petition using a partial capital contribution. Contact Behring to learn if you are qualified.
Behring Co. Offers Personal Investment Planning For Qualified Investors.