EB-5 Visas are sought after investment based pathways to a Green card. An EB-5 Visa is described in Wikipedia as follows:
“The EB-5 visa for Immigrant Investors is a United States visa created by the Immigration Act of 1990. This visa provides a method of obtaining a green card for foreign nationals who invest money in the United States. To obtain the visa, individuals must invest $1,000,000 (or at least $500,000 in a “Targeted Employment Area” – high unemployment or rural area), creating or preserving at least 10 jobs for U.S. workers excluding the investor and their immediate family. Initially, under the first EB-5 program, the foreign investor was required to create an entirely new commercial enterprise; however, under the Pilot Program investments can be made directly in a job-generating commercial enterprise (new, or existing – “Troubled Business”), or into a “Regional Center” – a 3rd party-managed investment vehicle (private or public), which assumes the responsibility of creating the requisite jobs. Regional Centers may charge an administration fee for managing the investor’s investment. The Regional Center provision of the program was scheduled to end on September 30, 2012. At the end of September 2012, President Obama signed into law S. 3245 extending the EB-5 Regional Center Pilot Program for an additional three-year period. The program was reauthorized by the House of Representatives on September 13 in a vote of 412-3 and passed by the Senate in August 2012.
If the foreign national investor’s petition is approved, the investor and their dependents will be granted conditional permanent residence valid for two years. Within the 90 day period before the conditional permanent residence expires, the investor must submit evidence documenting that the full required investment has been made and that 10 jobs have been maintained, or 10 jobs have been created or will be created within a reasonable time period.”
Unfortunately with the benefits of a U.S. Green Card come the income tax, and Bank Secrecy Act compliance requirements. A U.S. permanent resident must comply with the same reporting and disclosure obligations as U.S. citizens. These obligations include filing Reports of Foreign Financial and Bank Accounts (FBAR’s) under the Bank Secrecy Act and income tax returns with schedules including Form 8938, Statement of Specified Foreign Financial Assets, Form 3520, Report of Foreign Gift, Bequest or Inheritance, Form 5471, Controlled Foreign Corporation Return and potentially others. The non-willful failure to file these returns and reports carry significant civil penalties ranging from $10,000 per account per year for FBAR violations to 25%-35% of inheritance or gift values in the case of Form 3520. Willful failures to file can result in civil penalties of 50% or $100,000, which is greater, in the case of FBAR violations and potentially criminal prosecution. Tax evasion and willful failure to file FBAR’s are crimes which the Supreme Court has determined to be a serious felony which means conviction carries with it potential deportation.
Immigration lawyers and consultants need to be aware of the reporting and compliance obligations for all their clients, but in particular they should advise EB-5 applicants of the disclosure issues. EB-5 applicants typically have substantial assets in their country of origin and may have worldwide holdings. The EB-5 applicant must be willing to make disclosure of worldwide assets and report worldwide income or should not enter the EB-5 program.
Proper tax advice is essential to insuring that an EB-5 Visa holder stays in status and retains the opportunity to become a U.S. citizen.