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I 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.
OK, now for something completely new and pretty exciting (at least in my world). U.S. Citizenship and Immigration Services (“USCIS”) recently approved an application for an EB-5 Regional Center in the Capital Region which was facilitated by the Center for Economic Growth (“CEG”) and Prime Regional Center, LLC, an affiliate of Prime Companies. The Regional Center will be in an area of Upstate New York that includes eight counties surrounding and including the Capital Region, as well as specific counties in the Southern Tier, Mohawk Valley and Central New York.
So, what’s a Regional Center? Good question! Employment-based immigration is organized in a “preference” system, and one of the preferences is commonly called “EB-5”. The EB-5 employment preference is for immigrant investors (i.e., for employment-creation). In general, this category provides, initially, conditional permanent residence for foreign nationals who invest $1,000,000.00 in a new commercial enterprise that employs at least ten (10) full-time U.S. workers. The foreign national is made a conditional permanent resident for a two (2) year period, at which time he or she may make an application to remove the conditions and grant permanent residence. In order to receive unconditional permanent residence, the foreign national must show that he or she has “substantially met the capital investment requirement.”
A foreign national may also be able to make a smaller investment of $500,000.00 if the investment is in a targeted employment area that includes rural areas with populations of less than 20,000, or locations that have experienced unemployment at 150 percent of the national average.
Certain EB-5 visas also are set aside for investors in what are called Regional Centers, which are designated by USCIS based on public or private proposals for promoting economic growth. A Regional Center is defined as any economic entity, public or private, which is involved with the promotion of economic growth, improved regional productivity, job creation and increased domestic capital investment.
The Regional Center program is for generally good for investors who have the means to invest the capital (i.e., not less than $500,000.00), but who do not wish to actively manage the business. Foreign national investors who choose to invest through a Regional Center must demonstrate that a “qualified investment” is being made in a new commercial enterprise located within an approved Regional Center, and show, using reasonable methodologies, that ten (10) or more jobs are actually created either directly or indirectly by the new commercial enterprise through revenues generated from increased exports, improved regional productivity, job creation, or increased domestic capital investment resulting from the Regional Center. The typical investment will be $500,000.00 (plus additional fees and expenses associated with getting into the program, which can range from $20,000 to $70,000, plus or minus, plus professional fees), which may or may not be returned to the investor at the end of the proverbial day.
In a statement about the approval of the Capital Region’s EB-5 Regional Center, New York Governor Andrew Cuomo said, “As the State works to attract businesses and jobs from across the nation, we must also look overseas to lure global investors and entrepreneurs to start and grow their companies in New York. … With this approval, the Capital Region will be more attractive than ever before to businesses from overseas interested in expanding their investments here in the United States.”
We can only hope.
Basically, an EB-5 Regional Center allows wealthy foreign national investors to essentially “buy” a Green Card for themselves and their families (although not without a lot of hoops to jump through and significant financial risks too). The EB-5 program has been around for quite some time now, but not until the Regional Center portion of the EB-5 program gained traction with the immigration bar and the economic development community and their lenders did it start being used as it was intended; that is, to stimulate the U.S. economy through job creation and capital investment by immigrant investors by creating a new commercial enterprise or investing in a troubled business.
This is truly an exciting opportunity for the Capital Region!