The International Entrepreneur Rule

January 25, 2017

Immigration Law Alert

Author(s): Jason Gerrol

By notice dated January 17, 2017, the Department of Homeland Security (DHS) issued its final rule pertaining to international entrepreneurs. Under the rule, a foreign entrepreneur may be granted parole to enter the United States for the purpose of operating and growing his or her start-up entity in the United States. The rule will become effective on July 17, 2017.

Under the Immigration and Nationality Act (INA), DHS has long held the authority to grant parole for urgent humanitarian reasons or when a significant public benefit would result. Under the rule, DHS is using its “parole” authority to grant a period of authorized stay to foreign entrepreneurs of a new start-up entity in the United States in order to enhance entrepreneurship, innovation and job creation in the United States (a significant public benefit).

How do I qualify for parole as an international entrepreneur?

An entrepreneur applicant must meet the following criteria: (1) possess a significant ownership interest (at least 10% ownership) in a start-up entity created in the United States within the past five years and which has substantial potential for rapid growth and job creation; (2) have a central and active role in the start-up entity to substantially assist with the growth and success of the business; and (3) demonstrate significant U.S. capital investment or government funding by showing that: (a) the start-up entity has received significant capital investment from qualified U.S. investors with established records of successful investments; (b) the start-up entity has received significant awards or grants from federal, state or local government entities with expertise in economic development, research and development or job creation; or (c) they partially meet either or both of the two requirements and provide additional compelling evidence of the start-up entity’s potential for growth.

To demonstrate significant public benefit as a result of capital investment from qualified U.S. investors with established records of successful investments, the entrepreneur rule requires that the minimum investment amount in the start-up entity be $250,000. A qualified U.S. investor means a U.S. Citizen or Legal Permanent Resident, or an organization located in the United States and majority owned, either directly or indirectly, by U.S. Citizens or Legal Permanent Residents. Qualified U.S. investors may include venture capital firms, angel investors or start-up accelerators. While the rule does not prohibit investment from non-U.S. investors, or U.S. investors lacking the requisite record of successful investment, such investments will not be included in the rule’s minimum investment amount.

Alternatively, an entrepreneur applicant may demonstrate the requisite investment/funding as a result of significant awards or grants from certain local, state or federal government entities totaling $100,000 or more. If the start-up company only partially meets either or both requirements, additional “compelling evidence” can be provided in the form of: the revenue generated by the start-up company, social impact of the start-up company, national scope of the start-up company, applicant’s prior success in operating start-up companies, applicant’s academic degrees and the number of users or customers.

If granted parole as an international entrepreneur, how long can I remain in the United States?

Parole may be granted for an initial period of 30 months (2.5 years). An additional period of 30 months may be granted at the discretion of DHS. While the initial grant of parole requires the entrepreneur to possess at least a 10% ownership interest, the rule allows for a reduction of ownership to 5% at the time of filing a renewal application. In addition, to be eligible for renewal, the start-up entity must have received at least $500,000 in qualifying investments, qualified government grants or awards, or a combination of both, during the initial parole period; created at least five qualifying jobs with the start-up entity during the initial parole period; or reached at least $500,000 in annual revenue. Entrepreneurs seeking renewal may also provide additional “compelling evidence” to justify a renewal of the period of parole.

Can my spouse and children be granted parole as well?

Yes. Spouse and children under the age of 21 may also qualify for parole. Importantly, the rule allows spouses to apply for employment authorization once in the U.S., which once granted, will allow them to work for any U.S. employer.

What does parole mean? Is it the same thing as entering on a visa?

Under relevant provisions of the Immigration and Nationality Act, Congress granted DHS discretionary authority to parole into the U.S. on a case-by-case and discretionary basis any individual for urgent humanitarian reason or significant public benefit. INA §212(d)(5)(A), 8 U.S.C. 1182. Parole is not the same as entering the U.S. on a visa (e.g., H-1B, E-2, O-1, etc.). When entering the U.S. on a visa, a foreign national is granted “admission” to the United States in that particular visa status and, as a general rule, an “admission” provides the ability to change status to another non-immigrant visa classification, or file for an adjustment of status to obtain legal permanent residency (i.e., a green card). Unlike a visa, parole is not an admission to the United States. It is a legal concept allowing an individual to be physically present in the United States without a visa, at the discretion of DHS. Foreign entrepreneurs granted parole under the new rule would not be prohibited from later obtaining a nonimmigrant or immigrant visa and being admitted to the U.S. in that visa status.

Are the requirements for parole under the entrepreneur rule different from the requirements for U.S. investor visas (e.g., E-2 visas)?

The entrepreneur rule is different from existing avenues for foreign investors and entrepreneurs in that it requires a showing of “significant” capital investment from U.S. investors. In contrast, the E-2 investor visa requires the funds to be invested by the foreign applicant and ownership to be predominantly by the foreign applicant or individuals from the applicant’s country.

Most significant about the entrepreneur rule is that the existing E-2 investor visa is reserved for nationals of countries with which the United States maintains a treaty. Foreign entrepreneurs from non-treaty countries such as Brazil, China, India, Israel or Russia are not eligible for E-2 status. The new entrepreneur rule is available to all foreign entrepreneurs, regardless of their nationality.

July 11, 2017 update: By notice dated July 11, 2017, the Department of Homeland Security (DHS) has delayed the effective date of the International Entrepreneur Rule to March 14, 2018, and will seek comments on whether or not to rescind the rule altogether.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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