Draft Immigration Rule Would Ease Foreign Entrepreneurs’ Entry

From labor disputes cases to labor and employment publications, for your research, you’ll find solutions on Bloomberg Law®. Protect your clients by developing strategies based on Litigation...

By Laura D. Francis

Aug. 26 — Foreign entrepreneurs would have an easier time starting businesses in the U.S. under proposed regulations released Aug. 26 by the Department of Homeland Security.

The long-awaited proposed regulations (RIN:1615-AC04) would allow the DHS secretary to temporarily admit, on a case-by-case basis, entrepreneurs who meet a certain set of defined criteria related to the success of their startup companies and how many jobs they generate for U.S. workers.

The idea is that these entrepreneurs will generate a “significant public benefit” to the country by growing the economy and creating jobs, and so they should be allowed into the U.S. without having to go through the regular process for applying for a visa.

The entrepreneur proposed rule is one of the last pieces of President Barack Obama’s 2014 executive action on immigration to be implemented. In a post issued the same day, the White House also indicated that DHS guidance on entrepreneurs self-petitioning for a green card is forthcoming. The guidance likely relates to the promised national interest waiver vehicle for immigrant entrepreneurs seeking green cards.

President ‘Committed’ to Attracting Entrepreneurs

The president is “committed to attracting the world’s best and brightest entrepreneurs,” Tom Kalil, deputy director for technology and innovation with the White House Office of Science and Technology Policy, said during an Aug. 26 press call.

More than 40 percent of Fortune 500 companies were founded by immigrants or their children, and immigrants are more than twice as likely to start a company as their native-born counterparts, he said. Immigrants are behind many tech giants, including eBay, Google, Instagram, Tesla, WhatsApp, and SpaceX.

Immigrants are particularly suited to starting businesses in the U.S. because they are “long on ambition and short on things to lose,” Max Levchin, a co-founder of PayPal, said.

There are many international students studying in the U.S. who ask about how to start businesses back in their home countries because they don’t see a way to stay in the U.S., Levchin said during the press call. It “makes very little sense” that the U.S. is educating the best and brightest and then losing that talent to other countries because of our immigration system, he said.

Levchin, who came to the U.S. at age 16 from what was then the Soviet Union, also has founded Slide, Affirm and Glow.

Currently, there is no visa for immigrants to found startup companies, although legislation to that effect has been introduced in Congress several times.

Focus on Growth, Jobs

The proposed rule is aimed at those entrepreneurs who can demonstrate that their startups have the potential for rapid growth, job creation and innovation, according to U.S. Citizenship and Immigration Services Director León Rodríguez. The agency expects about 3,000 applications a year once the rule is finalized and the program gets off the ground, although there is no cap on the number that can apply.

That could mean the creation of upwards of 30,000 jobs per year under the program.

The administration is working to get that going by the end of the calendar year. There will be a 45-day comment period once the proposed rule appears in the Federal Register, currently scheduled for Aug. 31.

The proposed rule would set up two separate periods of “parole,” the discretionary authority the administration is using under the Immigration and Nationality Act. There would be an initial, two-year period that could be extended an additional three years. Both periods have similar criteria that would have to be met for the entrepreneur to be able to stay in the U.S.

After those periods of parole, the entrepreneur could choose to apply for a temporary visa or green card, such as an EB-2 or H-1B, Rodríguez said.

Two Parole Periods

Under the proposed rule, for the first two-year parole period, entrepreneurs would have to show: creation of a startup within the three years preceding the application and that the startup has the potential for rapid growth and job creation; the applicant has at least a 15 percent ownership interest in the company and has an active role in its operations and future growth; and the startup has secured at least $345,000 in funding from established U.S. investors or at least $100,000 in government grants.

For the additional three years, entrepreneurs would have to show: the company has been lawfully operating for the past two years and continues to have the potential for rapid growth and job creation; the entrepreneur has at least a 10 percent ownership interest in the company and has an active role in its operations and future growth; the company received at least $500,000 in additional funding from establishing U.S. investors or government grants; the company has at least $500,000 in annual revenue, with average annualized revenue growth of at least 20 percent; and the company created at least 10 jobs for U.S. workers.

For both periods, the entrepreneur applicant also would be able to submit alternative, “compelling” evidence that admission to the U.S. would create a significant public benefit.

Up to three co-founders of a single startup business could apply for parole.

The proposed rule also would allow entrepreneurs to bring their spouses and children, and spouses would be granted employment authorization.

Praise From Immigration Attorneys

The proposal drew immediate praise from immigration attorneys.

“This proposed rule is a welcome step for the government to use its existing statutory authority and the immigration law to encourage entrepreneurship and economic growth,” American Immigration Lawyers Association Second Vice President Marketa Lindt told Bloomberg BNA Aug. 25. “We are encouraged to see that this proposed framework appears to set reasonable benchmarks to measure the likelihood of success of the entrepreneurial enterprise.”

It’s “encouraging” that the proposed rule “recognizes that new businesses are not all funded the same way, and provides for flexibility” for entrepreneurs using “new and novel funding models,” according to Lindt, who practices with Sidley Austin in Chicago.

The proposed investment thresholds are “a little high,” but not “overly burdensome,” Susan Cohen, founder and chair of Mintz Levin’s immigration practice, told Bloomberg BNA Aug. 26. She suggested that $250,000 for the initial parole period might be “a little more manageable.”

But overall the proposed rule is a “good thing,” Cohen, who practices in Boston, said. “We really need something, anything, to help foreign entrepreneurs,” she said.

“They have done their due diligence,” Tahmina Watson of Watson Immigration Law in Seattle said Aug. 25. The length of the proposed parole period is “very feasible and reasonable,” and the investment thresholds appear to be in the mid-range for what was proposed in the various startup visa bills introduced in Congress, she told Bloomberg BNA.

There may be some concern as to next steps once entrepreneurs’ parole periods come to an end, Watson said. With the exception of those switching to green cards, “nobody is allowed to change their status from parole to something else while they’re in the U.S.,” she said. That means the entrepreneur would have to leave the country and apply for a temporary visa abroad.

“Ideally we want Congress to create a startup visa for us,” Watson said. But short of that, she said the proposed rule is “very creative” and “well worth the wait.”

To contact the reporter on this story: Laura D. Francis in Washington at lfrancis@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

For More Information

Text of the proposed rule is available at http://src.bna.com/h4Q.

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Labor & Employment on Bloomberg Law