On Sep 13 2016 by H. Ronald Klasko
Proposed Rule to Benefit International Entrepreneurs
The EB-5 Reform and Integrity Act of 2022 brought many changes to the EB-5 program. For the latest information, please click here.
On August 26, USCIS issued a proposed rule to enable some international entrepreneurs to be paroled into the U.S. Our law firm’s corporate and university team circulated a Client Alert on this proposed rule. Because of its possible interest to our EB-5 readers, I have posted it below.
It is my opinion that this proposed rule will have very limited applicability to EB-5 stakeholders – regional centers, developers or investors. Contrary to some people’s belief, this is not an EB-6 program. It provides no path to permanent residence or even visa status. Rather, it enables qualifying immigrants to be paroled into the U.S. for up to 2 years and possibly to get an extension for up to 3 years.
The rule is likely to have no impact on regional center EB-5 investors. It could probably affect a very small percentage of direct EB-5 investors whose investments will attract significant capital from U.S. private or governmental investors.
Finally, it is important to note that this proposed rule is not the law. After a public comment period, it is possible that USCIS will publish the rule, possibly with changes, before the expiration of the Obama Administration. If that does not happen, the rule is at the mercy of the new Administration.
Our Client Alert follows:
On Friday, August 26, the Department of Homeland Security issued a proposed rule that would permit international entrepreneurs to apply for parole in the United States. This grant of parole will allow entrepreneurs to manage and develop startup companies in the United States. This proposed rule stems from one of the directives from President Obama’s Executive Action on Immigration, which was issued in November 2014.
The goal of the proposed rule is to facilitate business development in the United States, while creating jobs for U.S. workers and promoting innovation. Currently, entrepreneurs face great difficulty when starting a business in the United States due to the limited options for status and the hurdles that apply specifically to entrepreneurs and startups. For instance, the H-1B is an option, but it goes into a lottery each year. Even if the entrepreneur’s petition is selected in the lottery, the entrepreneur then needs to demonstrate an employer/employee relationship exists between the company and its founder and that there is enough “professional” level work for the entrepreneur. While this can be done, it is certainly a difficult process that deters entrepreneurs from starting their businesses in the United States. Parole will provide entrepreneurs with an option that makes sense for their unique situation, while also promoting the U.S. as a place where entrepreneurs can start and grow their businesses. While the entrepreneur can work in the United States, the employment is limited to the startup company for which the parole was granted, thereby limiting the entrepreneur from working on other projects.
The proposed rule outlines the following criteria in order to take advantage of this benefit:
- The entrepreneur will have at least 15% ownership interest in the company;
- The entrepreneur must have an active and central role within the company that will utilize his/her knowledge, skills or experience to substantially assist the company in managing and developing the business. The entrepreneur cannot merely be an investor in the business;
- The company must have been recently formed (generally within the three years preceding the parole application); and
- The company will provide significant public benefit through a substantial and demonstrated potential for rapid business growth and U.S. job creation, which can be demonstrated by the following:
- Receipt of significant investment of capital (generally at least $345,000) from certain qualified U.S. investors with established records of successful investments; or
- Receipt of significant awards or grants (generally at least $100,000) from certain federal, state, or local government agencies; or
- Partially satisfying one or both of the above criteria, in addition to providing reliable and compelling evidence of the company’s substantial potential for rapid growth and U.S. job creation.
The initial grant of parole will be for up to two years. The entrepreneur can subsequently apply for an extension for up to three years, upon demonstrating that the company has continued to provide a significant public benefit by showing increases to the capital investment, job creation, and/or revenue. The parole can be revoked if it is found that the entrepreneur and the startup are no longer providing a significant public benefit. There will be also be a limit to the number of entrepreneurs who can benefit from one startup – parole can only be issued to three entrepreneurs in each qualifying entity.
While this proposed rule will be very useful for entrepreneurs to obtain a temporary status in the U.S., it does not provide any path to permanent residence. Entrepreneurs who want to live and work in the U.S. permanently will have to await guidance on a permanent residence option – National Interest Waivers for Entrepreneurs. Guidance on National Interest Waivers for Entrepreneurs is expected shortly.
The proposed rule is scheduled to be published in the Federal Register on August 31. The public will then have the ability to comment on the rule for 45 days. After that, USCIS will address the comments. It is possible that the final rule is not issued until early 2017.