Thursday, December 10, 2015

Tax requirements in newly published EB-5 legislation would kill the program

Congress recently published an amended EB-5 Regional Center Program bill with new requirements for investors’ source of funds. The language in the amended EB-5 bill would require 7 years of tax returns for EB-5 investors. More than 80% of EB-5 investors come from mainland China where recent tax records requirements are constantly updated to keep up with China’s rapid growing economy. “Tax vouchers” are the official unified document in China connected to an applicant’s tax record (certification) and has only been effective January 1, 2014, known as The Administration Measures for Tax Vouchers. The implementation of the tax voucher requirement is less than 7 years old resulting in a practicality issues. It is extremely difficult for any American to supply tax records for 7 years, much less a developing country where law has only recently been implemented. The US IRS requirements are less stringent requiring only 3 years of tax records for Americans in most situations.

International EB-5 investors’ Source of Funds are extremely important to document income has been earned legally and taxes have been paid on the income. The taxation in the United States is a single tax system and is not applicable to Chinese taxpayers or other applicants. The requirement of tax payment certification does not reflect the source of the investor’s amount. The amended legislation is not practical to the majority of EB-5 investors and harmful to the success of the EB-5 Program. We believe strict background checks and legally sourced capital are necessary to keep the EB-5 Program successful for the American economy. We request the 7 year requirement language in amended legislation be removed to ensure success of the program.

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