DHS releases final International Entrepreneur Rule

13 Jan 17

UNITED STATES

The Department of Homeland Security has released the final version of the International Entrepreneur Rule, which would grant qualifying foreign entrepreneurs permission to remain temporarily in the U.S. to grow their startups. Applicants must meet minimum capital investment or government grant requirements and demonstrate that their startup will provide a significant public benefit through rapid growth and job creation.

The final rule is scheduled to be published in the Federal Register Jan. 17 and take effect 180 days thereafter.

Key criteria:

  • The startup must have been created within five years of the application for temporary permission to stay (parole) and the applicant must have at least a 10-percent interest in the startup and play an active role in operations.
  • The startup must have significant capital investments from well-established U.S. investors of at least $250,000 or government grants or awards of at least $100,000. If these thresholds are only partially met, the applicant may present “reliable and credible evidence of significant potential for rapid growth and job creation.”
  • Successful applicants would be granted parole of 2 1/2 years initially. After the initial period, entrepreneurs may qualify for an additional 2 1/2 years of re-parole upon demonstrating that they continue to hold a 5-percent interest in the startup and play an active role in operations, and that the startup meets growth criteria of $500,000 in annual revenues, an average annualized revenue growth of 20 percent, and has created five full-time jobs in the U.S. during the initial parole period. Alternatively, if these criteria are only partially met, applicants may show “reliable and credible evidence” that their parole will continue to provide a significant public benefit.
  • Family members (spouses and unmarried children under 21) may follow to join. Spouses are not automatically authorized to work, but may apply for an Employment Authorization Document.
  • Entrepreneur-based parole is limited to three individuals (and their spouses and children) per startup.
  • Parole decisions are made on a discretionary, case-by-case basis. As parole does not constitute admission or a nonimmigrant category, parolees are ineligible to convert to another nonimmigrant category or to apply for a green card unless they meet separate eligibility criteria for another category.

Final rule v. Proposed rule

In response to more than 750 public comments, DHS revised and relaxed several provisions from the proposed version to the final rule. Some of the key differences are summarized here:

  • In the final rule, a startup may be eligible if created within five years prior to the parole application (instead of three years under the proposed rule).
  • The minimum capital investment has been reduced to $250,000 (from $345,000 in the proposed rule). The final rule also provides a longer time frame to receive investments of 18 months immediately preceding the parole application (instead of one year under the proposed rule).
  • The final rule relaxes the entrepreneur’s minimum ownership requirement to 10 percent (instead of 15 percent under the proposed rule) for the initial parole application and 5 percent (instead of 10 percent under the proposed rule) for re-parole applications. The reduction recognizes that entrepreneurs may need to sell their interest to raise capital during early years of a startup.
  • Entrepreneurs applying for re-parole must show job creation of five full-time jobs (instead of 10 under the proposed rule).
  • The definitions of “qualified investment” and “qualified investor” have been broadened. Qualified investments are those made in good faith and may include “other securities convertible into equity commonly used in financing transactions within their respective industries.” The final rule removes the requirement that qualified investors have invested within three calendar years of the previous five years and reduces their qualifying minimum to $600,000 (from $1 million under the proposed rule).
  • The final rule makes a slight change to the initial parole and re-parole periods to 2 1/2 years each (instead of two years initially and three additional years under the proposed rule).

BAL Analysis: Though the final rule is generally a broader rule than the version proposed in August, the qualifying criteria remain high. Commenters to the rule expressed concerns that it does not provide a clear path for nonimmigrants currently in the U.S. to benefit from the rule. The final rule does not explicitly state that foreign nationals currently in the U.S. in nonimmigrant status, such as F-1 students, may apply for entrepreneur-based parole without violating their status. However, the comments section states that DHS believes it is “certainly realistic” that an F-1 student in the U.S. can start a business during the Optional Practical Training period and meet requirements to apply for parole under the regulation. BAL will be reviewing the final regulation and releasing additional analysis in the coming days.

This alert has been provided by the BAL U.S. Practice group. For additional information, please contact BerryApplemanLeiden@balglobal.com.

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