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Simplified distribution of K-1 forms to EB-5 investors is a lesser-known benefit of JTC Americas’ EB-5 Fund Administration Solutions. To learn more about the pain points issuers have in dealing with the required tax form — and how our Investor Portal turns a common operational annoyance into a non-issue, we spoke with Dawn Shuster, Head of Client Services USA.

Q: Thanks for speaking with us, Dawn. First, could you give us a quick overview of what the Schedule K-1 is, and why it’s required for EB-5 investors?

A: The United States tax code allows certain types of entities to utilize pass-through taxation. This effectively shifts the income tax liability from the entity earning the income to those who have a beneficial interest in it. The Schedule K-1 is the form that reports the amounts that are passed through to each party that has an interest in the entity.

For businesses that operate as partnerships, it’s the partners who are responsible for paying taxes on the business’ income, not the business. Each partner is responsible for filing an individual tax return reporting his share of income, losses, deductions and credits that the business reported on the informational 1065 tax form.

As a result, the partnership must prepare a Schedule K-1 to report each partner’s share of these tax items. K-1s are provided to the IRS with the partnership’s tax return and also to each partner so that they can add the information to their own tax returns.

Because the majority of EB-5 projects are structured as limited partnerships, K-1s are required of immigrant investors in most cases; however, due to the particularities of the EB-5 arrangement, distribution of K-1s is often far from straightforward.

Q: What problems do issuers run into when dealing with K-1 distributions?

A: A single EB-5 project is often funded by investors from all over the globe — whose addresses on file may or may not be up to date, or easily delivered to. As a result, distributing physical K-1s through the mail (and then confirming receipt) can be a real headache.

Q: What does JTC Americas do to help?

A: Well, after listening to our clients’ complaints about their difficulties dealing with K-1s, we saw an opportunity to build a streamlined K-1 distribution process into our investor-facing EB-5 Portal, and we now offer this K-1 Distribution Solution as added benefit to all issuers.

Q: How does that work exactly?

A: First, it is the issuer’s responsibility to generate a K-1 for each investor. We work with issuers to establish a document naming convention for each individual project, to ease organization.

Then, rather than physically mail (or attempt to mail) the K-1 forms to investors, we instead upload them electronically to our Secure Portal. Each investor already has access to the Portal, with a personal login, for the purposes of monitoring their funds’ and EB-5 petition’s statuses.

Q: And then the investors are notified directly?

A: Correct. From there, we send an email from our system to the investors, alerting them that their tax documents have been uploaded and that they may access them through our Secure Portal site.

Q: Can an EB-5 Project use this K-1 distribution method for distributing other important information to investors?

A: Absolutely. As with K-1’s, any sensitive document that needs to be securely syndicated to investors can be distributed in the same manner. We use templates in our email communications that can be worded appropriately to identify the type of document being distributed.

This process is easier and much more secure than traditional methods.

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JTC Americas is offering K1 distribution services to all EB-5 Issuers, please fill out the form below to take advantage!

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