Written by attorney Brian David Lerner

EB-5 Visa Petition and using an Escrow Account

ased to the new commercial enterprise when the petition is approved and the visa has been issued or, if the alieIn alien investor cases, an escrow account enables the required initial capital investment to be held by a third party escrow holder and relen is located in the United States, adjustment has occurred. If the petition, or the visa, or adjustment of status application is denied, the escrow holder will return the money to the alien. In this way the alien's investment is made contingent upon the alien's ability to assume the status of alien entrepreneur and enter or remain in the United States to oversee his or her investment. The AAO has rejected several types of arrangements in which investment funds were released into an escrow account, limited partnership, trust fund, trust agreement or other vehicle. Petitioners in sev eral of the cases had recited the requirements of the nonimmigrant E classification to justify escrows that failed to comport with EB- 5 standards. The AAO held that in most of these cases such funds were not truly at risk, were not committed, and could be diverted from the job creation purposes which are essential to the EB- 5 classification. The government has taken the position that the use of escrow arrangements in the EB. The key differences, in the government's view, are with regard to the statutory levels of qualifying investments and the job creation requirement in the EB- 5 context. Because a minimum qualifying investment must be realized within the two-year period of conditional residence and a specified number of workers must be hired within the same period, the government takes the position that more safeguards are required when escrows are used in the immigrant investor context. For purposes of the EB- 5 category, use of an escrow account is permissible provided the following standards are met: (1) the escrow agreement must state that the required initial capital contribution is actually committed to the new commercial enterprise, where it will be available and put to use for job creation purposes immediately and irrevocably upon approval of the petition and visa issuance, or adjustment of status; (2) to ensure that the escrow agreement is a genuine arms-length transaction, the escrow holder must be a bank or similar entity that has no relationship other than that of escrow holder to the alien or the new commercial enterprise or their legal representatives; and (3) the escrow agreement should permit the alien the return of his or her money upon either the denial of the petition or its withdrawal by the alien. If necessary, USCIS officers may require an additional statement that the petitioner will not enter into any agreements that would prevent the escrow funds from being irrevocably committed to the investment enterprise for job creation purposes. If officers have any doubts as to the amount, terms, or existence of an escrow, they may contact the escrow holder directly for written confirmation of the escrow account and agreement. Once the alien investor obtains an immigrant visa or adjust his or her status, the escrow must unequivocally release the funds into the operations of the job creation enterprise (i.e., into the enterprise's United States business accounts) for job creation purposes. Capital in escrow will not be counted as investment capital unless such funds are immediately and irrevocably committed to the investment enterprise for job creation purposes upon petition approval and visa issuance or upon granting of the adjustment application. A mere statement that the funds are available from the escrow agent is not acceptable evidence of commitment. It is also insufficient to release the funds into a limited partnership, trust fund, trust agreement or other vehicle other than the enterprise's U.S. business accounts. Also remember that depositing funds into a corporate account is insufficient when the petitioner is the sole shareholder of the corporation and thus exercises sole control over the corporation's activities. In this situation, some meaningful action beyond depositing funds in the corporate account must occur during the pre-operational stage before a finding can be made that capital made available to a commercial enterprise has been placed at risk. Compliance with these requirements will be determined upon review of the petition to remove conditional residence.

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