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An Obama-era rule that would make it easier for foreign-born entrepreneurs to launch U.S. startups may be delayed after the Trump administration ordered a fresh review weeks before the rule was slated to take effect.
The Homeland Security Department quietly sent the rule back to the Office of Management and Budget last month, possibly stalling it. Immigration lawyers, venture capitalists and startup founders are unsure about the fate of regulations that some entrepreneurs were counting on to launch their businesses in the U.S. this summer. The rule was set to take effect July 17, but questions have been raised about whether the new review may be the Trump administration’s first step toward killing it.
“We’re already in June, five weeks away, and nothing,” Greg Siskind, an immigration attorney and founding partner of Siskind Susser PC in Memphis, Tenn., told Bloomberg BNA. “They haven’t confirmed this rule is rolling out on time, they haven’t confirmed anything.”
Immigrants have long fueled new Silicon Valley companies. They founded almost 45 percent of startups in 2012, according to the Ewing Marion Kauffman Foundation. Tech giants such as Alphabet Inc.'s Google, Tesla Motors Inc. and eBay Inc. have foreign-born founders.
The rule would allow foreign-born entrepreneurs with at least a 10 percent ownership interest in a startup that has received capital investments totaling at least $250,000 or government grants of at least $100,000 to enter the U.S. for 30 months. The individuals then could apply for a second 30-month stay if they demonstrate yearly business revenues of at least $500,000 with an average annualized growth rate of 20 percent and have created at least five full-time jobs for U.S. workers.
In January, DHS estimated nearly 3,000 entrepreneurs would be eligible to enter the U.S. annually.
Groups such as the National Venture Capital Association and FWD.us, an immigration group founded by tech luminaries including Reid Hoffman and Bill Gates, see the rule as critical to allowing job-creating founders to stay in the U.S.
“Foreign-born founders have made significant contributions to our economy, and it’s sound public policy to attract more of them to the U.S. to build high-growth companies. Otherwise, those founders remain overseas and our country loses out on job creation and innovation,” Ben Veghte, spokesperson for the venture capital association, told Bloomberg BNA.
A Department of Homeland Security spokesperson said the department continues to review the rule but otherwise declined to comment. The White House, OMB and Office of Information and Regulatory Affairs (OIRA) did not respond to requests for comment.
The U.S. does not have a visa program for startup founders, unlike countries such as Ireland and Canada. Republican and Democratic lawmakers have introduced legislation on the subject in recent years, but none of the bills have been enacted.
To be sure, it is not uncommon for a new administration to review so-called midnight rules promulgated at or near the end of the prior administration. But new administrations typically do that much earlier, Susan Dudley, director of George Washington University’s Regulatory Studies Center and former administrator of OIRA said.
The review process signals that the administration may at least delay the July 17 effective date of the rule, but legally can’t delay it indefinitely, she said.
It is also unclear what the Trump administration can do at this point to kill or change the final rule without starting a lengthy new rule process, which they haven’t announced, Dudley said. The administration can’t issue a different final rule without first proposing a new rule, seeking public comment and undergoing a new legal review, Dudley said.
If the administration decides to issue a new rule, it would have to re-examine the records and public comments the Obama administration used to create the original rule.
The new rule would almost certainly face immediate litigation from businesses or organizations who supported the original, Dudley said. The Trump administration would have to prove in court that new facts had come to light since the first rule was issued, or that the Obama administration’s process and review of public comments was flawed.
The administration could have used the Congressional Review Act to repeal the rule, as it has done with more than a dozen Obama-era regulations, but the deadline to put that option in motion has passed, Dudley said.
In any case, the re-review of the rule signals the administration will continue to tighten legal, as well as illegal, immigration, Siskind said.
“We had clients who were hoping to be able to file. The category that would use it the most are the MBAs and the other foreign students in the U.S. They want to start companies,” Siskind said.
Siskind said the administration’s moves to limit other legal immigration options, such as the high-skilled H-1B visa, has left entrepreneurs with few paths to stay in the U.S.
“I wouldn’t be surprised if there’s litigation instantly because people can’t wait. For a lot of companies, they’re at the end of a line,” Siskind said. “VC funders are at risk because businesses that they’re invested in are in jeopardy if the founder is gone.”
It’s also unclear if the pressure to place the rule in review is coming from the White House or within DHS itself.
Immigration attorneys and proponents of the rule have speculated the Trump administration would attempt to delay the rule since a leaked draft executive order dated January 23 appeared to move to terminate all parole policies.
The draft version of the International Entrepreneur Rule faced opposition last October when a group of Republican senators, including Judiciary Committee Chairman Charles Grassley (R-Iowa) challenged the president’s power to grant parole to an entire category of immigrants as opposed to allowing it on a case-by-case basis. Grassley’s former aide, Kathy Nuebel Kovarik, was appointed chief of the Office of Policy and Strategy for the U.S. Citizenship and Immigration Services in the Department of Homeland Security earlier this year.
Several proponents of the rule said they thought the move to re-review it stemmed more from scrutiny of executive parole power than an opposition to startup activity, but that the time for that scrutiny had passed.
“Policy makers have had an opportunity to weigh in from across the aisle, the idea that extra time is needed here is not the case. I don’t think we should wait any longer here to create tens of thousands of American jobs,” Todd Schulte, president of FWD.us, told Bloomberg BNA.
If the rule does take effect, the Homeland Security department is unlikely to delay applications without risking judicial action, several sources familiar with the rulemaking process said.
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