The following information has been further updated due to subsequent legal developments. Please also review the updated article Investor Entrepreneur Rule Gets a Second Chance.
The Entrepreneur Rule that was set to go into effect on July 17, 2017, has been delayed until March 18, 2018, to allow the Department of Homeland Security (DHS) an opportunity to review the rule in light of President Trump’s Executive Order 13767, “Border Security and Immigration Enforcement Improvements.”
President Trump’s Executive Order 13767 requires federal agencies to review any procedures for granting parole and change any procedure that proposes a threat to the United States’ security. In consideration, the DHS is taking comments from the public in consideration of whether the rule should be finalized.
Unfortunately, there is a possibility that the Entrepreneur Rule never goes into effect and because the DHS decides the rule proposes an unlawful security risk in light of Trump’s executive order.
On July 17, 2017, the international entrepreneur rule will take effect, which permits the Secretary of Homeland Security to grant parole admission on a case-by-case basis to immigrant entrepreneurs who will increase job growth and provide a significant public benefit to the United States. The goal of the international entrepreneur rule is to allow The Department of Homeland Security (DHS) to improve start-up success by increasing and enhancing entrepreneurship, innovation, and job creation.
For a start-up to qualify it must have been founded in the last five years, must have been founded in the United States, and must demonstrate a substantial potential for growth. In addition, only three immigrant entrepreneurs may receive parole admission per company. Applicants are only eligible if their company meets the above criteria. While each applicant is reviewed on a case-by-case basis, the international entrepreneur rule established general criteria for the DHS to consider.
The applicant entrepreneur must demonstrate that he/she has significant ownership of the company, at least 10%, possesses critical operational knowledge that would assist growth in the United States, and the company has received a large financial investment. To demonstrate financial liquidity the applicant’s start-up have received investments of $250,000 or more from U.S. investors or have received $100,000 or more in government grants.
If an applicant does not meet one of the above requirements, he/she may still be considered for parole admission if the entrepreneur can demonstrate his/her company will offer a significant public benefit. For example, the start-up will create jobs in the United States.
The DHS reviews all parole admission in the totality of the circumstances – in light of all the applicant’s information is there reasonable certainty the applicant will provide the United States with a significant public benefit. Included in the totality of circumstances are general immigration requirements, i.e. background check, possessing good moral character, passing medical examination.
Generally speaking, an applicant who meets the above criteria will be considered for discretionary admission for up to 30 months, 2.5 years, with the possibility of extending the applicants stay for an additional 30 months, 2.5 years. A qualified applicant may bring his/her spouse and minor children, if applicable. Additionally, applicants will be required to submit biometric information regarding the company’s development. No more than three foreign entrepreneurs may receive parole admission for one start-up.
Once parole admission is granted the entrepreneur may only be employed by the start-up for which parole admission was granted. An accompanying spouse may not seek employment unless he/she receives special visa status pursuant to 8 CFR 212.19 or is otherwise separately eligible for parole status as an entrepreneur. After parole admission is granted the DHS may revoke parole admission at any point if the DHS determines there is no longer a significant public benefit, the start-up ceases to conduct business in the United States, or the DHS has reason to believe that the applicant engaged in fraud or misrepresentation.
Additional Parole Period
To be considered for an additional parole period, the DHS considers several factors. First, an applicant must be able to demonstrate the continuation of the start-up and that the start-up continues to demonstrate substantial potential for growth.
Second, the applicant must demonstrate he/she continues to be an entrepreneur. To be considered an entrepreneur an applicant must retain a significant ownership interest, at least 5%, and maintain an active in central role in the daily operations and future growth of the company. Parole renewal requires a lower ownership interest than the original application to account for the need of additional financial investments from venture capitalists during the initial start-up period.
Third, an applicant must demonstrate significant investment, revenue, or job creation. A significant investment is demonstrated if the start-up receives an additional $500,000 investment during the parole period. The start-up can demonstrate significant revenue by generating $500,000 in annual revenue with annualized revenue growth of at least 20% during the parole period. Job creations can be satisfied by the creation of 5 full time jobs for U.S. workers during the parole period.
If an immigrant entrepreneur meets part of one or more of the above criteria the entrepreneur may still apply and their application will be reviewed in the totality of the circumstances. The focus of the review will be on the start-ups likelihood to continue to provide significant public benefit.
All parole renewal, regardless of whether the above requirements are satisfied, is reviewed on a case-by-case basis. During the parole renewal period, the DHS retains the right to revoke parole at any time.
Ability to Change Immigration Status after Parole
At the end of the parole period, a parolee may be able to apply to change status to an immigrant or a nonimmigrant visa status for which they are eligible. However, parole is not considered admission into the United States, therefore many entrepreneurs will likely have to leave the United States and apply for a visa in their native country. Contact our office to help decide which immigrant or nonimmigrant visas may be available to each individual.
Changes from the Proposed to Final Rule
Several changes were made to the proposed international entrepreneur rule after the notice and comment period. Some of the most notable changes to the final rule included: 1) investment amount lowered from $345,000 to $250,000 in the final rule; 2) start-up ownership requirements were lowered from 15% to 10% the first parole period and 5% at the time of re-parole; 3) a start-up was originally considered “recently formed” if founded in the last 3 years, but under the final rule the company is considered recently formed if created in the last 5 years; and 4) the job creation requirement was lowered from 10 to 5 new full time jobs.
As the Rule Develops
The international entrepreneur rule adds an exciting alternative way for start-ups to grow in the United States. The general criteria above will serve as a baseline for the rule to develop, but as immigrant entrepreneurs begin to apply more information will be available.