International Entrepreneur Rule:
Parole of Foreign Start-up Entrepreneurs into the United States
Yongbing Zhang Esq.
On August 31, 2016, USCIS announced the Notice of Proposed Rulemaking (NPRM) in the Federal Register: International Entrepreneur Rule, seeking opinions and comments from the public to finalize the regulation. This is an effort by the United States executive branch in its rulemaking process to attract international entrepreneurs.
The current U.S. immigration and Nationality Act was enacted more than twenty years ago in 1996. The technology industries in the U.S. have experienced explosive advancement since then. A large number of IT based start-ups came into being and have grown into multibillion dollar giants, such as Google, Facebook, and Amazon. The increasing demand of foreign high tech talents from the technology industries has posed a challenge to the 1996 version of U.S. immigration law. Although Congress has passed some amendments to the Act, such amendments could not keep up with the growing demand from the U.S. tech industry for international talent. The law is way behind the need of the industries.
The following are some examples of the effect this gap between the law and the demand for foreign workers has had: 1) High tech companies cannot hire as many foreign skilled workers as they want because of the annual cap to H1b working visas. Some of the graduate students with science or technology degrees from U.S. universities have no choices but to leave the U.S. for their home countries or elsewhere after failing to secure work visas. 2) The employment-based immigrant visa annual quota has not increased, which has caused long waiting times for certain foreign skilled workers to obtain green cards. For instance, according to the U.S. State Department’s September 2016 visa bulletin, for Employment based 2nd preference, the cut off day for China-born applicants is January 1, 2010. For India-born applicants under the same preference, the cut-off date is in the February 2005. Every month, there is an update to the bulletin. Sometimes the cut-off date can move forward significantly, and sometimes, they can retrogress substantially. The overall trend is that applicants are experiencing a longer waiting time. 3) More and more foreign nationals that have intention to start up high tech businesses have to abandon their plans due to the current U.S. visa system.
In an attempt to solve the third problem, former U.S. Democratic Senator John Kerry proposed a bill in the U.S. Senate in 2011, the 2011 Entrepreneur Start Up Act. The bill suggested to add an Employment based 6th preference for start-up entrepreneurs after Employment Based 5th preference. It failed to obtain the sufficient support in the Senate and eventually fell into silence.
In November 2014, President Obama announced that the administration would initiate certain reforms to the U.S. immigration system within the authority granted by the Constitution to the executive branch. One of such reforms was to seek more effective solutions to attract and make it easy for foreign entrepreneurs to start up businesses in the U.S. The NPRM released on August 31, 2016, is the measure to solve this problem.
This article will first examine the proposed rulemaking to determine the exact requirements for parole of entrepreneurs. It will then follow with a discussion on the proposed rule.
Initial Parole Requirements
According to NPRM, at the time of applying for initial parole, the entrepreneur must establish that parole will provide a significant public benefit to the U.S. based on his or her role as an entrepreneur of a start-up entity. To meet the criteria, the application must satisfy three requirements. First, the applicant must meet the definition of an entrepreneur by possessing ownership interest of at least 15 percent in a start-up entity, and by having a central and active role in the operations. Secondly, the start-up entity must be a U.S. business entity recently formed and have substantial potential for rapid growth and job creation. The entity will meet the recently formed criteria if, at the time of filing application, the entity is within three years of its formation. The entity that has received qualified government grants or award or investment within three years after the formation may also be considered recently formed for this purpose. Thirdly, within one year prior to the filing, the start-up entity must receive qualified government grants and award or investment from qualified investors. For qualified government awards or grants, the amount cannot be less than $100,000; for investment funds from a qualified investor, the amount must be no less than $345,000.
The proposed rule provides very restricted definitions to qualified government award or grant and qualified investors. A qualified government award or grant is an award or grant for economic development, research and development, or job creation made by a federal, state, or local government entity that regularly provides such awards or grants to start-up entities. The definition of a qualified investor is even stricter. First, the investor must be a U.S. citizen (USC) or lawful permanent resident (LPR) or an organization located in the U.S. that is majority owned and controlled by USCs and LPRs. Secondly, such individual or organization regularly makes substantial investments in start-up entities that subsequently exhibit substantial growth in revenue and job creation. Such individual or organization must have a good record as an investor. Lastly, the proposed rule provides a quantitate criteria to qualified investors. As to the investment amount, the investor must show that in the five years preceding the application, the investor has made investment in start-up entities in exchange for either equity or convertible debt in 3 separate years of no less than $1,000,000. As to the entities receiving the investment, at least 2 such entities each created at least 5 qualified jobs or generated at least $500,000 in revenue with average annualized revenue growth of at least 20 percent.
If the application can meet the first two requirements, and meet a portion of the third requirement but not all of it, the applicant must provide other reliable and compelling evidence of the entity’s substantial potential for rapid growth and job creation.
After the approval of initial parole, the entrepreneur can stay in the U.S. for two years. The spouse and unmarried children may join the entrepreneur. The spouse may apply for employment authorization and seek unrestricted employment in the U.S. upon the approval of the employment authorization application. During the parole, USCIS will issue multiple entries advance parole documents to the spouse and children so that they can make international travels.
Before the expiration of the two-year initial parole, the entrepreneur may apply for re-parole. If granted, the entrepreneur may extend the parole for another three years. The criterion for re-parole is the same as initial parole. In order meet this criteria, the entrepreneur has to satisfy three requirements. The first two requirements are similar to the first two requirements for initial parole application. The only difference is that in the re-parole application, 10 percent ownership interest will be sufficient to meet the ownership requirement.
The third requirement is the key for USCIS to consider, and is also quite challenge for most applications. The rule provides three objective tests for start-up entities to show its substantial potential in revenue growth and job creation. Satisfying either one of the three objective tests will meet the third requirement. They are: 1) the entity has received at least $500,000 in qualifying investments, qualified government grants or awards, or a combination of such funding; 2) the entity has created at least 10 qualified jobs; or 3) the entity reached at least $500,000 in annual revenue and averaged 20 percent in annual revenue growth. All of these must occur during the two-year parole period.
If the entity cannot meet either one of the three objective tests, the applicant will have to present other reliable and compelling evidence of the start-up entity’s substantial potential for rapid growth and job creation.
Once the re-parole application is approved, the entrepreneur and the qualified family members can continue to live in the U.S. for an additional three years.
Followings are some general comments about the proposed rules.
First, the NPRM is just a proposed rule for the purpose of seeking comments and opinions. It has not become effective yet. The period for seeking comments from the public will run 45 days up till October 17, 2016. Normally, there will be additional time needed before the proposed rules can become final rules. Then it will be announced to the public and will become effective thirty days from the announcement. To estimate, the earliest possible time for the NPRM to become effective will be around the end of 2016.
Secondly, USCIS authority in parole comes from the section 212(d)(5) of the Immigration and Nationality Act. 212(d)(5)(A) provides that the Attorney General in his discretion may parole into the U.S. certain aliens on case-by-case basis for urgent humanitarian reasons or significant public benefit. The statute explicitly states that such parole “shall not be regarded as an admission.” Thus, the paroled entrepreneur will not be able to change or adjust status within the U.S. when applying for a nonimmigrant visa or green card, and will have to travel outside to the U.S. embassy or consulate overseas for a visa interview and come back to the U.S. with the approved visa.
Thirdly, the NPRM has put forward a financial obligation to the paroled entrepreneur under the regulation. As a condition to maintain the parole status, the household income of the entrepreneur’s family must be at such a high level that the annual income is not less than 400% of federal poverty line. Under the 2016 federal poverty line, the income for a family of two is $19,360, and four times the poverty guideline is $63,720. For a family of four, four times the poverty line is $97,000. According to NPRM, if the family cannot maintain such level of income, USCIS may terminate the parole at any time. Other than the requirement, the proposed rule is silent on how this requirement will be enforced. It can only be determined after the rule becomes effective.
The International Entrepreneur Rule is an administrative measure created by the executive branch within its authority under the Constitution to supplement the existing parole rules. According to this rule, international entrepreneurs may enter into the U.S. after satisfying certain requirements. It will help ease international entrepreneurs’ coming to the U.S. to start up business. This is just a reform from the executive branch. For the long term, other immigration plans should still be contemplated by entrepreneurs if they and their families intend to permanently stay in the U.S. Such plans may include H, O or L nonimmigrant visas or Employment Based 2nd or 3rd preferences. Furthermore, the NPRM is only in the stage of seeking public opinions and has not become effective yet. After it becomes effective, there are still uncertainties about how USCIS would adjudicate the application under the regulations.
September 15, 2016
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