USCIS Releases Final Rule for International Entrepreneurs

USCIS has just released the final text of the “International Entrepreneur Rule” which would allow international entrepreneurs parole to be able to remain and work in the U.S. while developing and growing their startup companies.    The rule aims to stimulate foreign entrepreneurs to attract capital and create U.S. jobs by allowing up to five years of staying and working in the U.S.   This kind of rule is long overdue and has been anticipated and in the works for many years.   The new rule will become effective on July 17, 2017.

Why Is This Rule so Important?

Unfortunately, until now, the U.S. immigration system has not been very friendly to international entrepreneurs.   There are many U.S. visa types but none of them fit neatly the realities and the needs of modern entrepreneurs and founders.  For example, the E-2 investor visa has been an option but its availability is restricted only to citizens of certain designated treaty countries.  The H-1B work visa allows many talented professionals to work in the U.S. for an employer but there are significant challenges in the regulatory framework for H-1B for self-sponsorship.

Our office has worked with many entrepreneurs to find solutions and visa options; and we think that the new final entrepreneur parole rule is one more tool and option for a foreign entrepreneur seeking U.S. startup growth.   From U.S. economy standpoint – the rule aims to encourage founders to attract capital, grow revenues and create jobs.

The Final Rule

Under this final rule, USCIS may use its “parole” authority to grant a period of authorized stay, on a case-by-case basis, to foreign entrepreneurs who can show that their stay in the United States would provide a significant public benefit through the potential for rapid business growth and job creation. The entrepreneur can work only for the eligible startup and not for other companies or employers.  The new rule is effective July 17, 2017, which is 180 days after its publication in the Federal Register.

Initial Parole Eligibility Requirements

To qualify for the initial 30-month parole term approval, an entrepreneur would have to show that:

• The applicant has established a new entity in the U.S. within the last five years;
• The applicant has at least 10% ownership interest and has an active and central role in the operation and growth of the company (no passive investors);
• The company can show potential for rapid growth and job creation by:
  • Receiving $250,000 or more investment from qualified US investors (venture capital, accelerators, etc.);
  • Receiving $100,000 or more from government business development or similar grants; or
  • Providing other reliable evidence that the entity would provide significant benefit to the U.S.

Renewal Requirements

The grant of parole can be renewed for another 30-month term for a maximum permitted total time of five years.  To qualify for the renewal, an entrepreneur would have to show that:

• The initial entity continues to exist and operate in the U.S. and continues to have substantial potential for growth and job creation;
• The applicant continues to have at least 5% ownership interest and contuse to play an active and central role in the operations and growth of the company;
• The company has to show that the potential for job creation and growth remains by showing:
  • During the 2-year initial parole term the company received at least $500,000 in additional funding or investment;
  • At least $500,000 in annual U.S. revenue with average annualized revenue growth of at least 20% during the 2-year parole period;
  • The company has created at least 5 full-time jobs for U.S. workers during the initial parole period; or
  • There are other reliable factors and evidence which supports expectation of significant public benefit.

Dependents and Spouse Work Authorization

The rule contemplates that dependents (spouses and children under 21) would be eligible for parole to stay in the U.S. together with the principal entrepreneur.   Spouses will also be eligible to apply for an unrestricted work permit.

Who is a Qualified Investor?

Since the rule requires significant investments in the startup, it is important to understand that not any investor may meet the requirement of the rule.   According to the final rule, the investment must be from “qualified investors.”   The definition in the new regulations, 8 CFR 212.19(a)(5), clarifies that a qualified investor for the purpose of this final rule is an U.S. citizen or permanent resident individual or U.S. organization who, (1) during the preceding five years, has made investments in startups in an amount of at least $600,000 (which can include cash or securities convertible into equity issued by the startup) and (2) has had investments in at least two entities result in creation of 5 jobs or $500,000 in revenue with at least 20% annualized revenue growth.

Application Process

The proposed rule contemplates a new application form to be prepared and filed with U.S. Citizenship and Immigration Service – Form I-941, Application for Entrepreneur Parole, with filing fee anticipated of $1,200 plus the biometrics fee (of $85).   The process will require the submission of biometrics (digital photo and digital fingerprinting).   Upon approval of the application, the foreign entrepreneur will need to enter the US (or leave and reenter if already in the United States) and be admitted into the United States as parolee.    The final rule does not include ways to change status or otherwise be able to take advantage of this option without leaving the United States and reentering.

Dependents would file for their parole using Form I-131, Application for Travel Document.  And spouses will file for their EAD work permits using Form I-765, Application for Employment Authorization.

Changes from the Proposed Rule

DHS is making a number of changes from the proposed rule from August 2016.   The most notable changes from the proposed to the final rule are:

• lowered the investment requirement from $345,000 to $250,000;
• lowered the required entrepreneur ownership from 15% to 10% for the initial term and from 10% to 5% for the renewal term;
• increased the period of time when an eligible startup must have been formed from 3 years to 5 years;
• the parole term was changes to 30-month initial term, followed by a 30-month renewal term (the proposed rule had it as 2-year initial and 3-year renewal terms);
• amended the definition of a qualified investor by lowering the amount which must have been invested by the investor in the past;
• lowered the requirement for job creation from 10 to 5 qualified jobs;
• clarified that the revenue must have been generated in the United States.

What is Parole?

There is a distinction between being admitted as a nonimmigrant into the U.S. on a visa and being paroled into the U.S.    The government is given a lot of discretion as to how and whether to “parole” a person into the U.S.   Technically, a parole is not an “admission” into the U.S.; rather, it is a way for the government to let people into the U.S. without having to obtain a U.S. visa stamp (or using the Visa Waiver Program).    There are a number of technical distinctions between visa admission and being paroled into the U.S. – but when an entrepreneur get approved parole, they are not expected to have to need to obtain a U.S. visa stamp in order to be able to travel to the U.S.    Similarly, this is not a new visa category.

As noted above, when an I-941 entrepreneur application is approved, they will be able to travel to the United States and seek to be admitted at the port of entry as parolees.   An entrepreneur who is in the United States (on some other status, presumably) will need to leave and then reenter the United States to “activate” this parole.    At the same time, parolees who are in the United States are not eligible to change their status to another visa type without having to depart and reenter the United States.

Webinar Discussion

Our office has been very active in the immigrant entrepreneur community and we have seen great reaction to this rule since the time it was announced in the summer of 2016.   Over the next weeks and months we will be providing additional details and comments, as they become available.  On February 7, 2017, we are going to hold a live webinar session to discuss and analyse the final rule and we invite you to join us.  The webinar is FREE but space is limited so please register now.