EB5 Investors Magazine Volume 7, Issue 1 - Page 72

EB5 INVESTORS M AGAZINE 70 I ssues S urrounding S ourcing of EB-5 A dministrative F ees Even though the law is vague on source of funds for administrative fees, it can turn out to be an important credibility issue for some marginal investors. By Stephen P. Pazan T he consultant performing a source of funds analysis is often asked by the EB-5 investor exactly what specific documents and proof are required. Admittedly, some documents are so commonly provided that they can be considered as required. But law and policy, even where it does discuss the documents that the Investor Program Office wants to see appended to an I-526, is permissive. It talks about the documents that an investor may or should supply. The expert’s reply, then, to a foreign investor who asks the question is often a dissatisfying and ambiguous. “It depends.” In a recent scenario, a foreig n investor paid his administrative fee from an LLC account in the United States after the source of funds report had been completed. The investor’s lawyer and SOF consultant had never been told about the LLC. Understandably, the regional center, which wanted to receive the investment quickly, was frustrated by this the last minute switch. A reasonable person would have assumed investor would have drawn the funds from previously disclosed accounts. The question posed was, if the I-526 was submitted without sourcing the administrative fee, what would the result be? ADMINISTRATIVE FEES NEED NOT BE SOURCED A d m i n i s t r a t i v e fe e s i n c lu d e d i f fe r e nt t h i n g s depending on the project. Some include attorney fees, fees for source of funds reports, commissions to agents and other expenses for which the typical investor might ot her w ise be responsible. In al l cases, adm i n ist rat ive fees e x ist ma i n ly for t he pleasure and profit of the regional center running the project. In fact, in today’s competitive EB-5 market, some projects “waive” them altogether as an incentive to investors. Then, they likely recoup some of what wou ld ot her w i se be col le cted by charging for services separately.