29 Jun The International Entrepreneur Rule
The International Entrepreneur Rule (the “IER”) was created by an executive order by the Obama administration just three days before the former president left office and is set to go into effect on July 17, 2017. If IER become effective, it would allow eligible foreign entrepreneurs to stay legally in the U.S. and work on their companies for a maximum five years. The Department of Homeland Security would administer the applications and it estimates that 2,940 entrepreneurs will be granted parole to the U.S. each year. However, according to reports from SF Chronicle and the Wall Street Journal, the Trump administration intend to delay IER’s effective date until March 2018 and pursue steps to rescind the rule altogether in the meantime. President Trump has met with tech executives in a White House meeting on Thursday (June 22, 2017). During the meeting, tech executives signaled their needs for the IER.
Key Points about the International Entrepreneur Rule:
- What is a Parole: DHS can parole non-citizens into the country on a case-by-case basis for “humanitarian reasons” or “significant public benefit.” The Parolee can physically enter and stay in the U.S. and does not need a visa. However, the Parolee is not legally “admitted” and needs to find ways to remain once his or her parole expires.
- Initial Parole Requirements:
- Formation of New Startup-Entity. The individual applicant has recently formed a new entity in the U.S. (within 5 years preceding the date of filing) that has lawfully done business since its creation and has substantial potential for rapid growth and job creation.
- Applicant is an Entrepreneur: (1) possess a significant (at least 10%) ownership interest in the entity at the time of adjudication of the initial grant of parole; (2) has an active and central role in the operations and future growth of the entity; and (3) cannot be a mere investor.
- Significant U.S. Capital Investment or Government Funding. This requirement can be satisfied in several ways:
- An applicant would generally be expected to demonstrate that the entity received at least $250,000 investments from well-established U.S investors.
- An applicant would generally be expected to demonstrate that the entity received at least $100,000 awards or grants from U.S. federal, state or local government entities with expertise in economic development, research and development, or job creation.
- For applicants who partially meet the criteria above, they can alternatively satisfy the “significant U.S. capital investment or government funding” requirement by providing additional reliable and compelling evidence that they would provide a significant public benefit to the U.S.
- The Parole: The individual applicant who meet the above requirements (and his or her spouse and minor, and unmarried children) would be granted a discretionary parole (based on the totality of the evidence) lasting up to 30 months (which may be extended by up to an additional 30 months, see below discussion) for stay in the U.S.. The entrepreneur will be authorized for employment with respect to the entrepreneur’s startup entity, but entrepreneur’s spouse and children will not be authorized for employment, unless they meet other requirements permitting an employment authorization. DHS retains the authority to revoke any such grant of parole at any time as a matter of discretion.
- Re-parole Requirements: the individuals granted parole under the above requirements may be allowed a re-parole for an additional period up to 30 months, if:
- Continuation of Startup Entity. The startup entity (1) has been lawfully operating in the U.S. during the period of parole; and (2) continues to have substantial potential for rapid growth and job creation.
- Applicant Continues to be an Entrepreneur. The individual applicant (1) continues to possess a significant (at least 5%) ownership interest in the entity at the time of adjudication of the initial grant of re-parole; and (2) continues to have an active and central role in the operations and future growth of the entity.
- Significant U.S. Investment /Revenue/Job Creation.
- Additional Investments or Grants. An applicant would generally be expected to demonstrate that the entity received at least $500,000 additional qualifying funding during the initial parole period.
- Revenue Generation. An applicant need to demonstrate that the entity reached at least $500,000 in annual revenue, with average annualized revenue growth of at least 20%, during the initial parole period.
- Job Creation. An applicant need to demonstrate that the entity created at least 5 full time jobs for U.S. workers during the initial parole period.
- Alternative Criteria. For applicants who partially meet one or more of the above criteria, he or she may be allowed a re-parole if he or she provides additional reliable and compelling evidence that his or her parole will continue to provide a significant public benefit to the U.S..
- No more than three entrepreneurs (and their spouses and children) may receive such additional periods of parole with respect to any one qualifying entity.
Criticism to the International Entrepreneur Rule:
- The requirements for high growth and revenue generations negatively impact business operations and potentially put these startups at a disadvantage.
- The startups may obtain funding from angels or banks, which do not satisfy the requirements.
- 5 years is not a very long period of time for startups, and entrepreneurs need to find ways on their own to remain in the U.S. once their parole expire.