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U.S.C.I.S. Proposes the International Entrepreneur Rule

imm_2I originally wrote about this last Fall, but given the current events in Washington, the general chaotic environment that my colleagues and I are practicing in, and the great concern that clients are showing about their future prospects of remaining in the United States (whether they are here lawfully or not), I thought it appropriate to provide a positive update for the alien entrepreneurs out there.

On January 17, 2017, the Department of Homeland Security (“DHS”) published a final rule to improve the ability of certain alien start-up founders to begin growing their companies within the United States and help improve our nation’s economy through increased capital spending, innovation and job creation.

Under the new rule, effective July 17, 2017, DHS may use its “parole” authority to grant a foreign national a period of authorized stay (that is, temporary permission to be in the United States), on a case-by-case basis, to those alien entrepreneurs who demonstrate that their stay in the United States would provide a significant public benefit through the potential for rapid business growth and job creation. Those who are eligible may be granted a stay in the United States for up to 30 months, with the possibility to extend the period for an additional 30 months if they meet certain criteria, and in the discretion of DHS.

Here are the specifics. An applicant for parole would need to demonstrate that he or she meets the following criteria.

1. First, that the applicant possesses a substantial ownership interest in a start-up entity created within the past five years in the United States that has substantial potential for rapid growth and job creation.

2. Second, that the applicant has a central and active role in the start-up entity such that the applicant is well-positioned to substantially assist with the growth and success of the business.

3. Third, that the applicant can prove that his or her stay will provide a significant public benefit to the United States based on the applicant’s role as an entrepreneur of the start-up entity by:

A. showing that the start-up entity has received a significant investment of capital from certain qualified U.S. investors with established records of successful investments;

B. showing that the start-up entity has received significant awards or grants for economic development, research and development, or job creation (or other types of grants or awards typically given to start-up entities) from federal, state or local government entities that regularly provide such awards or grants to start-up entities; or

C. showing that they partially meet either or both of the previous two requirements and providing additional reliable and compelling evidence of the start-up entity’s substantial potential for rapid growth and job creation.

Under the rule, parole eligibility may be extended to up to three entrepreneurs per start-up entity, as well as their spouses and children. It is important to note that alien entrepreneurs will be only be eligible to work for their start-up business.

This recently published final rule is a legacy of former President Obama. Some of you will recall that back in 2014, because of Congressional inaction, former President Obama vowed to take whatever steps he could, short of legislation, to advance his immigration agenda, and in this case, to make it easier for alien entrepreneurs to start up or scale up their businesses. Well, he made good on his promise. (Let’s hope our current president keeps this in place, or even improves upon it. There has been a smattering of news that suggests that he may try to kill it.)

A few other important points related to all of this. First, and significantly, there is no required wage obligation for the alien entrepreneur parole beneficiary. However, to maintain parolee status, the alien entrepreneur must maintain a household income that is greater than 400 percent of the federal poverty line for his or her household size as defined by the U.S. Department of Health and Human Services (“HHS”). HHS revises these guidelines annually.

The new rule also requires the alien entrepreneurs to immediately notify U.S. Citizenship and Immigration Services (“USCIS”) of any material changes that could reasonably affect USCIS’s determination that the alien entrepreneur provides, or continues to provide, a significant public benefit to the U.S.
Finally, USCIS has indicated that the required investment and revenue amounts will be automatically adjusted every three (3) years by the Consumer Price Index and USCIS will post the required amounts on its website.

As I have previously mentioned, the investment thresholds appear not to be overly-burdensome. The rule also seems to recognize that new businesses are not all funded the same way, and provides flexibility for entrepreneurs using new or novel funding models.

So that’s the good news. The bad news continues to be that there’s no “next step” for when the entrepreneur’s parole period comes to an end. That is, unless a foreign national has a vehicle in place to become a lawful permanent resident (i.e., a Green Card holder), under the rule, they will not be allowed to change their status from their parole status to some other type of lawful nonimmigrant status while they’re in the United States. That means the entrepreneur would have to leave the United States, try to apply for a temporary visa abroad, and then re-enter the United States (assuming that’s even a viable option).

So, progress? Yes. Panacea for foreign national entrepreneurs? Not totally, but it is for sure a step in the right direction. Let’s hope it stays in place and Congress and our President improve upon it.

U.S.C.I.S. Proposes the International Entrepreneur Rule

imm_3I think my colleagues in the immigration bar will agree that in order to achieve your client’s immigration goal, whatever it may be (e.g., a “Green Card,” citizenship, or whatever), sometimes you need to take baby-steps (e.g., enter the U.S. on a temporary visa before you try to obtain a Green Card). I’ve over-simplified the example, but the point remains the same. And sometimes, unfortunately, there are a lot of baby-steps that need to be taken during the process.

Here’s another issue. I recently had a conversation with a client about how to get a prospective hire into the United States to he could work for the client (in the absence of any immediately available H-1B nonimmigrant worker visa numbers). I told my client he had two (2) options. First, he could wait until Spring, 2017, file a petition with to U.S. Citizenship and Immigration Services (“USCIS”) to qualify his prospective hire as an H-1B nonimmigrant worker, hope that petition would be one of the lucky 65,000 petitions selected by USCIS, and then wait for an October 1, 2017 start date. His second option would be to engage in what I described as some “creative lawyering” and hope for the best. His immediate response to the latter was, “that sounds expensive.” And it would be, with no assurances that it would work.

Alas this is often what my colleagues and I would have to explain to foreign national entrepreneurs when they want to be part of a “start-up” company, either as an investor-owner and/or as an employee. The path to permanent residence (i.e., a Green Card) is not easy, usually time-consuming (i.e., years and years and years), often expensive, and unfortunately, never a sure thing.

Well that may soon be changing, at least in terms of getting away from “creative lawyering.” On August 26, 2016, USCIS announced the proposal of a new rule, which would
allow certain international entrepreneurs to be considered for “parole” (that is, temporary permission to be in the United States) so that they may start-up or scale their businesses in the United States.

The new rule would allow DHS to use its existing discretionary statutory parole authority for entrepreneurs of startup entities whose stay in the United States would provide a significant public benefit through the substantial and demonstrated potential for rapid business growth and job creation. Under the rule, DHS may parole, on a case-by-case basis, eligible entrepreneurs of startup enterprises: (a) who have a significant ownership interest in the startup (at least 15 percent) and have an active and central role to its operations; (b) whose startup was formed in the United States within the past three (3) years; and (c) whose startup has substantial and demonstrated potential for rapid business growth and job creation, as evidenced by: (1) receiving significant investment of capital (i.e., at least $345,000.00) from certain qualified U.S. investors with established records of successful investments; (2) receiving significant awards or grants (i.e., at least $100,000.00) from certain federal, state or local government entities; or (3) partially satisfying one or both of the prior two criteria in addition to other reliable and compelling evidence of the startup entity’s substantial potential for rapid growth and job creation.

Under the rule, foreign national entrepreneurs may be granted an initial stay of up to two (2) years to oversee and grow their startup entity in the United States. In addition, USCIS would entertain a later request for re-parole (for up to three [3] additional years) if the foreign national entrepreneur and the startup entity continue to provide a significant public benefit as evidenced by substantial increases in capital investment, revenue or job creation.

In general, most commentators agree that the proposed parole period is very reasonable, and the investment thresholds appear not to be overly burdensome. Indeed, the proposed rule seems to recognize that new businesses are not all funded the same way, and provides flexibility for entrepreneurs using new or novel funding models.

While the rule is not yet final, my primary concern is next steps once an entrepreneur’s parole period comes to an end. That is, unless a foreign national has a vehicle in place to become a permanent resident, under the proposed rule, they will not be allowed to change their status from their parole status to some other type of lawful nonimmigrant status while they’re in the United States. That means the entrepreneur would have to leave the United States, try to apply for a temporary visa abroad, and then re-enter the United States (assuming this is even a viable option).

While this is not the panacea perhaps foreign national entrepreneurs would hope for, it’s definitely a step in the right direction. Stay tuned for the final rule.

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