On December 14, 2017, U.S. Citizenship and Immigration Services (USCIS) announced that it is implementing the International Entrepreneur Rule (IER), in compliance with a federal court order. The IER regulations, 8 CFR § 212.19, allow qualifying foreign national entrepreneurs to enter the U.S. temporarily to develop and grow new businesses. At the same time it is accepting applications under the IER, however, the agency is preparing to publish a Notice of Proposed Rule-Making (NPRM) to rescind the IER. Thus, it is unclear whether individuals who apply to enter the U.S. pursuant to the IER will ultimately receive the benefits of the rule, or for how long.
“Parole” versus a “Visa”
Aside from the E-2 visa (which is limited to individuals and enterprises of specific nationalities), U.S. immigration law does not provide a visa specifically for company founders to work in the U.S. in the startup they founded. A visa specifically for startup founders would have required an Act of Congress. Parole, on the other hand, is a form of entry into the U.S. based on agency discretion rather than on a statutory visa category. Once granted, parole can be revoked at any time and without notice, if USCIS determines that parole no longer is warranted or the parolee fails to comply with any conditions of parole. The IER permits qualifying applicants to come to the U.S. on a grant of parole. The grant of parole for this purpose is referred to as Entrepreneur Parole.
History and Current Status of the IER Rule
The IER regulations began as a proposed rule, published in August 2016 during the Obama administration. After a public notice and comment period and revisions to the proposed rule, the IER was published in final form on January 17, 2017, in the final week of the Obama Administration, and was set to take effect six months later, on July 17, 2017. However, a few days before the rule’s effective date, when applicants would have been able to submit their applications, the Trump administration published a rule delaying the IER’s effective date to March 14, 2018 to afford the government more time to consider eliminating Entrepreneur Parole. The last-minute delay of the rule was challenged in federal court by members of the startup community, who claimed that the rule delaying the IER violated the Administrative Procedure Act (APA) because there was no public notice and comment period, which the APA ordinarily requires. On December 1, 2017, the federal court agreed, and the delay was vacated. Nat’l Venture Capital Ass’n v. Duke, No. 1:17-cv-01912-JEB, 2017 U.S. Dist. LEXIS 197738 (D.D.C. Dec. 1, 2017). The decision led USCIS to announce on December 14, 2017 that it would begin accepting Entrepreneur Parole applications immediately.
Although USCIS must accept applications for Entrepreneur Parole for the time being, the federal government is pursuing plans to abolish the program, claiming it is not the appropriate vehicle for attracting and retaining international entrepreneurs and does not adequately protect U.S. investors and workers. The steps to rescind the IER could be completed within several months, at which point grants of parole, if any, could be revoked. It is critically important that applicants and prospective applicants for Entrepreneur Parole get individualized legal advice on the risks associated with the process, and on other possible options for living and working in the U.S.
Application Process for Entrepreneur Parole
The application form for Entrepreneur Parole is Form I-941, “Application for Entrepreneur Parole,” posted with the associated instructions on the USCIS website. (Note that when USCIS announced on 12/14/2017 that it would begin accepting applications, the Form I-941 and the associated set of instructions on USCIS’s website were mismatched – the I-941 reflecting the requirements in the final IER rule, and the instructions reflecting the requirements of the earlier, proposed rule. USCIS corrected the error and posted new instructions dated 12/22/2017.)
The application filing fee is $1,200, plus an $85 biometrics fee. After submitting an I-941 with the required fees and supporting documents, the applicant will be summoned to provide biometrics at a designated location, either in the U.S. or at a U.S. Embassy/Consulate abroad (depending on the applicant’s location). USCIS has not stated their estimated processing time for an application for Entrepreneur Parole. Their 15-day Premium Processing Service is not available for Entrepreneur Parole applications.
A single start-up may have no more than three applicants for Entrepreneur Parole.
Entrepreneur Parole may be granted for an initial period of up to 30 months, and re-parole may be granted for one additional period of up to 30 months based on the same business entity.
Required Qualifications for the Entrepreneur, the Startup, the Funders, and the Funding
The entrepreneur seeking parole must:
- Have ≥ 10% ownership in the startup.
- Hold a central and active role in the startup.
- Have knowledge, skills, or experience that will substantially assist with the
- growth and success of the startup.
The startup must have been:
- Formed within five years prior to the application.
- The recipient of substantial investment or awards within 18 months prior to application, in the form of either $250,000 from “qualified investors” with a track record of success, or $100,000 in government grants.
For startups qualifying based on $250,000 from qualified investors, the investor(s) must:
- Be a U.S. citizen or lawful permanent resident, or an entity that is majority owned and controlled by U.S. citizens and/or lawful permanent residents.
- Have invested ≥$600,000 in startups within the last five years, of which two startups either: (a) created five full-time (35+ hours per week) jobs held for at least one year by employees (not independent contractors) who were U.S. citizens or work-authorized immigrants (nonimmigrants, on temporary visas, will not count); or (b) generated at least $500,000 in revenue with average annualized revenue growth of at least 20 percent.
For startups qualifying based on $100,000 in government grants, the grants must:
- Be from a U.S. federal, state, or local entity with a track record of granting funds to start-ups.
- Be for economic development, research and development, job creation, or another similar monetary award directed at start-ups.
- Not be part of a contract for goods or services.
If an applicant for Entrepreneur Parole only partially meets the above funding criteria, the IER provides the option of providing other compelling evidence that the startup has substantial potential for rapid growth and job creation.
Conditions and Features of Entrepreneur Parole
USCIS may grant an initial period of Entrepreneur Parole for up to 30 months, and may re-parole an entrepreneur for one additional period of up to 30 months based on the same business entity, if the re-parole request was filed prior to the expiration of the initial period of parole. An applicant for parole has no rights to challenge the denial of an application and no rights to appeal a decision to deny.
Approval of an application for Entrepreneur Parole provides authorization for work at the identified startup only, and any material changes related to the parolee’s work must be reported to USCIS on an amended application. Also, the entrepreneur parolee is required to notify USCIS in writing immediately if the parolee will no longer be employed by the startup entity or no longer possesses a qualifying ownership stake in the business entity. USCIS may terminate parole at any time, either automatically without notice, or with written notice.
An entrepreneur parolee must maintain a household income greater than 400% of the federal poverty guideline for his or her household size, as a condition of parole. The annual federal poverty guidelines may be found on the U.S. Department of Health & Human Services website at https://aspe.hhs.gov/poverty-guidelines.
Spouses and minor children of entrepreneur parolees may also be paroled by filing Form I-131, “Application for Travel Document,” along with evidence of familial relationship with the entrepreneur, as well as evidence meriting a grant of parole (e.g., maintaining family unity and thereby furthering the entrepreneur’s effort to operate and grow a business in the U.S.). The application of a spouse or minor child may be filed at the same time as the entrepreneur’s application, or later. The family applicants are also required to appear for biometrics. The spouse may apply for an EAD (Employment Authorization Document) upon arrival to the U.S. as a parolee. EAD applications are typically processed in three months.
Re-Parole / Extension
Re-parole for one additional period of up to 30 months is available if it can be demonstrated that the entrepreneur’s stay in the U.S. continues to provide a significant public benefit. The business entity must continue to be a startup, as defined in the initial application, and the applicant must continue to be an entrepreneur serving a central, active role in the company, and own at least five percent of the company (a reduction from the 10 percent requirement in the initial application). Also, the applicant must have maintained a household income greater than 400% of the federal poverty line.
Also, for the entrepreneur to qualify for a parole extension, the start-up entity must have:
- received at least $500,000 in qualifying investments, government grants or awards, or a combination of such funding, during the initial grant of parole; or
- created at least five qualified jobs with the start-up during the initial parole period; or
- reached at least $500,000 in annual revenue in the U.S. and averaged 20% annual revenue growth during the initial period.
While Entrepreneur Parole appears to have opened the door for certain foreign national entrepreneurs to spend a total period of up to five years in the U.S. to develop a startup, it is unclear whether the door will remain open long enough for Entrepreneur Parole applications to be processed, or for approved Entrepreneur Parole applications to remain valid long enough to be useful to the entrepreneur and the startup. With U.S. government efforts underway to repeal the program, those who pursue Entrepreneur Parole into the U.S. under IER should do so with careful planning and caution.
© Jewell Stewart & Pratt PC 2018