Proposed Rule to Expand Entrepreneur Parole

On August 31, 2016, a proposed Department of Homeland Security (DHS) international entrepreneur rule was published in the Federal Register. The proposed rule is aimed at expanding the limited immigration options for foreign entrepreneurs who, in turn, help the U.S. economy by creating jobs, generating revenue, and attracting further U.S. investment. If enacted, this proposed rule would establish general criteria permitting qualified international entrepreneurs to receive a grant of “parole” to enter the United States. Eligible paroled entrepreneurs would, under the proposal, possess temporary permission to live in the United States and start or expand the U.S. business specified in the parole application.

Criteria to Qualify Entrepreneurs

Although the DHS already has discretionary parole authority, the proposed rule would expand the authority to parole, on a case-by-case basis, eligible entrepreneurs with startup enterprises. Eligibility is limited to entrepreneurs who:

1. Entrepreneurs who have a significant ownership interest in the startup (at least 15 percent), and have an active and central role to its operations.

2. Entrepreneurs whose startups were formed in the United States within the past three years.

3. Entrepreneurs whose startups have substantial and demonstrated potential for rapid business growth and job creation, as evidenced by any of the following:

– Receiving significant investment of capital (at least $345,000) from certain qualified U.S. investors with established records of successful investments (for example, so-called “angel” investors)

– Receiving significant awards or grants (at least $100,000) from certain federal, state or local government entities

– Partially satisfying one or both of the above criteria in addition to other reliable and compelling evidence of the startup entity’s substantial potential for rapid growth and job creation

Criteria to Qualify Investors

The term “certain qualified U.S. investors” is limited to only those investors who have a history of making similar or greater investments on a regular basis over the previous five years and who can demonstrate that at least two of the entities receiving investments have experienced significant growth in revenue or job creation.

Entrepreneurs’ Ownership Interest and Household Income

The proposal contains a number of protections against abuse and related concerns. As proposed, even though the investor is only required to have a 15 percent stake in the company, only three individuals may receive parole grants through any particular entity. Additionally, the proposal contains a provision requiring that paroled entrepreneurs must maintain a household income that is at least 400 percent of the poverty level for the household size.

Preliminary Two-Year Stay and Three-Year Extension

Under the proposed rule, entrepreneurs may be granted an initial stay of up to two years to oversee and grow the startup entity in the United States. A subsequent request for re-parole for up to an additional three years is possible if it can be demonstrated that the individual’s stay in the United States continues to provide a significant public benefit.

Criteria for Re-Parole / Extension

To qualify for re-parole, the business entity must continue to be a startup, as defined in the proposal. The applicant must continue to be an entrepreneur serving a central, active role in the company. The company must also continue to have the potential for rapid growth and job creation.

Conclusion

If this proposal becomes a reality, interested investors will need to consider the availability of long-term options after the parole period has elapsed. The criteria is stringent and there is some concern that the DHS may not be able to entice enough investors, as it is not common for entrepreneurs to take large salaries during the start-up phase of establishing a new venture. The 45-day public comment period for the proposed rule ends on October 17, 2016. The rule cannot go into effect until the DHS has reviewed and considered the public comments. There is no set period for completing this task. The DHS can make changes to the proposal in response to comments, or decide to abandon the idea altogether.

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