ABCs of Immigration: Parole for Entrepreneurs Final Rule

Parole for Entrepreneurs Final Rule

By Greg Siskind

 

I.Executive Summary

A.Purpose of the Regulatory Action

 

USCIS has released the final rule implementing the parole for entrepreneurs program proposed this past August. The rule allows individuals who can demonstrate that being allowed to remain legally and work in the US in a parole status would provide a significant public because he or she is the entrepreneur of a new start up entity in the US that has the significant potential for rapid growth and job creation. This can be demonstrated by, among other things, the receipt of (1) significant capital investment from US investors with established records of successful investments or (2) significant awards or grants from certain Federal, State, or local government entities. Alternative criteria are also described in the rule. Also, an applicant must show that he or she has a substantial ownership interest in the entity, has an active and central role in the entity’s operations, and would substantially further entity’s ability to engage in research and development or otherwise conduct and grow its business in the United States.

 

DHS believes that this final rule will encourage foreign entrepreneurs to create and develop start-up entities with high growth potential in the United States, which are expected to facilitate research and development in the country, create jobs for U.S. workers, and otherwise benefit the U.S. economy through increased business activity, innovation, and dynamism.

B.Legal Authority

 

DHS cites Section 212(d)(5) of the Immigration and Nationality Act for its authority to propose this rule. That provision grants DHS the discretionary authority to parole individuals into the United States, on a case-by-basis, for urgent humanitarian reasons of significant public benefit.

 

DHS also cites the following immigration laws as giving it authority to issue this proposed regulation:

 

–        Section 402(4) of the Homeland Security Act of 2002

–        Section 103(a)(1) and (3) of the Immigration and Nationality Act

–        Section 101(b)(1)(F) of the Homeland Security Act of 2002

C.Summary of the Final Rule Provisions

 

The rule creates a new section 8 CFR 212.19 covering the new program.

 

1. Formation of a New Start-Up Entity. Entity must be formed within the five years immediately preceding the date of filing of the initial parole application. The proposed rule called for formation within three years preceding the date of filing.
2. Applicant is an Entrepreneur. The applicant is an entrepreneur of the start-up well-positioned to advance the entity’s business. An applicant must shoe he or she: (1) possesses a significant (at least 10%) ownership interest in the entity at the time of adjudication of the initial grant of parole; and (2) has an active and central role in the operations and future growth of the entity, such that his or her knowledge, skills, or experience would substantially assist the entity in conducting and growing its business in the US. The applicant can’t simply be an investor in the start-up. The proposed rule required at least a 15% ownership interest.
3. Significant US Capital Investment or Government Funding. The applicant must validate through reliable supporting evidence, the entity’s substantial potential for rapid growth and job creation. An applicant may be able to satisfy this criterion in one of several ways:
   a.Investments from established US investors. The applicant may show that the entity has received significant investment of capital from certain qualified US investors with established records of successful investments. An applicant would be able to meet this standard by showing the start-up has received investments of capital totaling $250,000 or more from established US investors (such as venture capital firms, angel investors, or start-up accelerators) with a history of substantial investment in successful start-ups. Proposed rule required showing $345,000 or more from established US investors.
   b.Government grants. The start-up has received “significant” awards or grants from Federal, State or local government entities with expertise in economic development, research and development, and/or job creation. The requirement would be met if the start-up received awards or grants totaling $100,000 or more.
   c.Alternative criteria. An applicant who partially meets one or both of the above criteria can be considered if he or she provides “additional reliable and compelling evidence” that his or her entry would provide a “significant public benefit to the United States” and which would validate the entity’s “substantial validation of the entity’s substantial potential for rapid growth and job creation.”

 

If an applicant meets these criteria, the applicant, as well as his or her spouse and minor, unmarried children may be considered under this rule for a discretionary grant of parole for up to 30 months (2.5 years). The proposed rule would have limited the grant to two years.

 

Applicants for this type of parole benefit will file a new type of application form specifically tailored for entrepreneurs along with a proposed application fee. Applicants would also provide biometrics.

 

No more than three entrepreneurs may receive parole per start-up.

 

USCIS will consider the totality of the evidence to determine if the applicant meets the criteria and whether negative factors exist that warrant denial as a matter of discretion.

 

If parole is granted, the entrepreneur would receive employment authorization which would be limited to the start-up. Spouses would be permitted to apply for employment authorization under 8 CFR 274a.12(c)(34) but would not be considered work authorized incident to status and would need to apply for employment authorization.

 

DHS may revoke the parole “at any time as a matter of discretion” or if DHS decides the parole is no longer providing a significant public benefit such as when the entity has stopped operating or the application involves fraud or misrepresentation.

 

Extensions may be granted

 

Applicants will be allowed to be considered for re-parole for an additional period of up to thirty months (2.5 years) if they can show that the start-up has shown signs of “significant growth” since the initial grant of parole and the start-up continues to have substantial potential for rapid growth and job creation. The proposed rule allowed extensions of up to three years. Applicants would need to show the following to be considered for a discretionary grant of an additional period of parole:

 

1. Continuation of Start-Up Entity – the entity must continue to be a start-up entity. This can be shown if the entity
   a.Has been lawfully operating in the US during the period of parole; and
   b.Continues to have substantial potential for rapid growth and job creation.
2. Applicant Continues to be an Entrepreneur – The applicant is still working as an entrepreneur at the start-up which can be shown with proof that he or she
   a.Continues to possess a significant (at least 5%) ownership interest in the entity (the proposed rule said 10%); and
   b.Continues to have an active and central role in the operations and future growth of the entity such that his or her knowledge, skills or experience would substantially assist the start-up in conducting and continuing to grow the business in the US. The explanation from USCIS for the reduced ownership interest is because it sometimes is necessary to sell ownership interests to raise additional venture capital financing.
3. Significant US Investment/Revenue/Job Creation – The applicant must document the start-up’s continued potential for rapid growth and job creation. This can be shown in one of several ways:
   a.Investment of at least $500,000 from established US investors with established records of successful investments; significant award or grants from government entities that regularly provide start-up funding; or a combination of both.
   b.Revenue generation – at least $500,000 of additional funding with average annualized revenue growth of at least 20% during the initial parole period.
   c.Job creation – the applicant may show the entity has shown substantial job creation during the initial parole period. Generally, this means creating at least 5 full-time jobs for US workers during the initial parole period. The proposed rule said 10 jobs.
   d.Alternative criteria – An applicant only partially meeting these requirements may be considered if he or she provides additional reliable and compelling alternative evidence.

 

Initial and extension applications are to be judged based on the totality of the circumstances.

 

The entrepreneur and any dependents granted parole under this program will be required to depart the US when their parole periods have expired or otherwise been terminated, unless they are otherwise eligible to remain in the US. Before reaching the 5-year limit for parole, such individuals may apply for any immigrant or nonimmigrant classification for which they may be eligible. Because parole is not considered an admission to the US, parolees are ineligible to adjust or change status in the US.

 

Entrepreneur parolees will be authorized to work incident to status and will be able to work with an I-94 and a passport. The I-9 regulations are being changed to recognize this.

 

Applicants will file using a new Application for Entrepreneur Parole (Form I-941).

 

Effective date – The rule will take effect in six months (July 15, 2017).

D.Summary of Changes from Proposed Rule

 

• Minimum Investment Amount. Initial investment reduced from $345,000 to $250,000; DHS has increased the timeframe during which the qualifying investments must be received from 365 days to 18 months immediately preceding the filing of an application for initial parole.
• Definition of Entrepreneur: Ownership Criteria. Changes entrepreneur criteria from requiring 15% to 10% ownership at the time of the initial application and from 10% to 5% at the time of the re-application.
• Qualified Investment Definition. DHS revised definition of “qualified investment”; proposed rule said it was an investment made in good faith, and that is not an attempt to circumvent any limitations imposed on investments, of lawfully derived capital in a start-up that is a purchase from such entity of equity or convertible debt issued by such entity. DHS modified the definition to include other securities that are convertible into equity issued by such an entity and that are commonly used in financing transactions within such entity’s industry.
• Qualified Investor Definition. DHS proposed that an individual or organization may be considered a qualified investor if, during the preceding five years, investments were made in start-ups in exchange for equity or convertible debt in at least 3 separate calendar years comprising a total within such 5-year period of no less than $1,000,000; and after the investment, at least 2 such entities created at least five job or generated at least $500,000 in revenue with average annualized revenue growth of at least 20%. In the final rule, the minimum investment is reduced to $600,000 made in at least three separate calendar years. Also, the change to the type of investment noted in the last paragraph applies here as well.
• Start-up Entity Definition. USCIS initially proposed that an entity would be considered recently formed if it was created within the three prior years. That’s lengthened in the final rule to five years immediately preceding the filing date of the initial parole request.
• Job Creation Requirement. In the proposed rule, at the time of re-parole, the entrepreneur can show creation of ten qualified jobs. That is reduced to five in the final rule.
• Revenue Generation. Final rule clarifies that for purposes of re-parole, the minimum annual revenue must be generated in the US.
• Parole Validity Periods. In the proposed rule, initial period was 2 years and 3 years for re-parole. In the final rule it is 2.5 years in the initial parole period and 2.5 years in the re-parole period.
• Material Changes. “Material change” definition expanded in the final rule to include “a significant change with respect to ownership and control of the start-up entity.” Also, the entrepreneur’s ownership can be reduced from 10% to 5% (versus 15% to 10% in the proposed rule).
• Reporting of Material Changes. Gives DHS more flexibility in the future with respect to the manner in which material changes are reported to DHS.

 

DHS estimates that 2,940 entrepreneurs will be eligible for the program (curiously, this is the same estimate as the proposed rule even though the criteria have been significantly eased). Approximately 3,234 dependent spouses and children are also expected to seek parole.

II.Background

A.Discretionary Parole Authority

 

INA Section 212(d)(5)(A) says “under conditions as he may prescribe only on a case-by-case basis for urgent humanitarian reasons or significant public benefit [to] any individual applying for admission to the United States” and the significant public benefit is the basis for the proposed rule. Parole is a discretionary grant and must be determined on a case-by-case basis.

 

Parole is not an admission to the US and if parole is revoked, the person is restored to the status held at the time parole was granted.

 

USCIS, CBP and ICE all have authority to parole applicants under this rule. Applicants in the US will need to file an I-131 advance parole application in addition to the I-941. Entrepreneurs in this category will present a Department of State (DOS) foil, Authorization for Parole of an Alien into the US (Form I-512L), or an Employment Authorization Document (Form I-766) to a CBP officer and the officer will issue an I-94 for the length of the parolee’s authorized parole period. Because parole is not an admission, one can be admitted even if he or she is inadmissible under Section 212(a) of the INA.

 

Once the applicant is paroled in to the US, the individual is authorized to work incident to status. The I-9 rules are being changed to allow a document combination of a foreign passport and Form I-94 with a parole endorsement.

III.Public Comments on the Proposed Rule

A.Summary of Public Comments. DHS received 763 comments from individuals, incubators, companies, venture capital firms, law firms and government officials 51% supported the rule, 46% opposed and 3% were indeterminable. Close to 300 were either duplicates or parts of mailing campaigns.

B.Legal Authority. Comments were received both supporting and opposing DHS’ legal authority to use parole power for the purpose stated in the regulation. DHS cited the statutes noted above to justify the regulation.

C.Significant Public Benefit. A commentator argued that the quality of the jobs created should be considered. DHS noted that the quality of jobs might be considered in the alternative criteria when the entity lacks a qualifying investment or grant.

D.Definitions.

1. Entrepreneur – Ownership Criteria. Commenters complained that 15% is only appropriate for smaller start-ups. Some wanted the shares to have a minimum value attached. Others noted that when teams of founds are involved, 15% might be unrealistic. DHS agreed to reduce the ownership percentage but declined to require a minimum valuation of the shares saying it would be too complex.
2. Other Comments on Entrepreneur Definition. A commenter wanted USCIS to demand prior experience as an entrepreneur. DHS noted that this might be considered in determining whether an entrepreneur is well-positioned to substantially assist the entity with growth and whether, in the totality of the circumstances, the entrepreneur will provide a significant public benefit. Another wanted more clarity on what well-positioned means. DHS believes the rule sufficiently explains. Another commenter asked whether contributing intellectual property would be playing a “active and central role” in the start-up. DHS agreed that this is a factor that could be considered.
3. Definition of Start-up Entity. “Recently-formed” and the 3-year Limitation Requirement. USCIS lengthened time to five years to file application because some businesses have long gestation periods and sometimes people takeover inactive businesses.
4. Other Comments on the Definition of Start-up Entity. DHS rejected a comment to limit the benefit to companies filling a need not currently being met in the US. DHS rejected saying this would make the rule overly restrictive.
5. Qualified Government Award or Grant. A commenter suggested adding grants from non-profits (such as universities) be considered. DHS said that charitable grants are less likely to be in high-growth potential enterprises. But such grants could still be evidence that they merit a favorable exercise of discretion. DHS may revisit this issue in the future.
6. Qualified Investment. A commenter asked that non-monetary contributions be considered in the “qualifying investment”. USCIS declined but said they can be included as alternate criteria. DHS also agreed with a comment to expand to include investment instruments other than equity and convertible debt. DHS agreed and includes “other security convertible into its equity.
7. Qualified Investor. A commenter suggested using the SEC’s definition of “accredited investor” which is less restrictive than the proposed rule’s definition of “qualified investor.” DHS agreed and lowered the investment amount from $1,000,000 over three calendar years to $600,000. A comment also suggested creating a white list program for previously approved investors. DHS declined but may revisit this in a future modification of the regulation.
8. Evidence Required to Establish Qualified Investor. Commenters expressed concern with how difficult it would be for an investor to prove revenue and job creation. DHS did not agree this was overly burdensome, but will monitor and consider changes in the future.
9. Foreign funding/investment. May commenters criticized limiting investment to US citizens, lawful permanent resident, or entities controlled by US citizens or LPRs. DHS says it will not because DHS cannot as easily evaluate for legitimacy and screen for indicators of fraud and abuse.
10. Self-funding/”bootstrapping”. Some commenters suggested allowing entrepreneurs to self-fund. DHS declined.
11. Other comments on qualified investors.
12. DHS declined to permit as a qualified investment but indicated it could be evidence in the alternative eligibility criteria.
13. Established US investors.
14. Approved Regional Centers. DHS indicated that they would not specifically be mentioned in the rules, but were not excluded either.
15. Qualified Jobs. DHS declined to expand beyond US citizens, lawful permanent residents or other immigrants authorized to be employed in the US. DHS also refused to expand the definition of full-time employment.
16. Material Change. DHS decided to make changes to help clarify what constitutes a material change. Commenters had requested the definition exempt transitions that are typical within start-ups. DHS largely kept the definition of material changes that must be reported. However, it added the cessation of the entrepreneur’s qualifying ownership in the start-up enterprise to the list of material changes that must be reported. But the definition has been changed to only include “a significant change with respect to ownership and control of the start-up entity.”

E.Application Requirements

 

1. Application for Entrepreneur Parole. A commenter suggested creating an express entry process resembling the Canadian express entry. DHS declined noting the Canadian system is designed for permanent residence and is based on a points system.
2. Submissions of documentary/supporting evidence. Some commenters worried that the evidentiary requirements, particularly relating to providing letters or media, might be difficult for companies operating in “stealth-mode”. DHS believes now allowing five years from creation rather than three is going to solve that problem.
3. Application Requirements for Spouses and Minor Children. DHS got comments favoring allowing spouses and children to get parole.
4. Other comments on application requirements. DHS clarified that Canadians can apply at ports of entry and don’t have to go to a consulate unless they are coming in to the US from a country other than Canada. In those cases, they will have to go to a consulate.

F.Parole Criteria and Conditions.

 

1. Minimum investment. Many commenters argued that the $345,000 threshold was too high and significantly more capital than needed by most start-ups. DHS agreed and lowered it to $250,000. Others suggested measuring revenue generated and not capital invested. DHS disagreed but noted revenue generated may be shown as additional evidence of the start-up’s potential for rapid growth and in the alternative criteria test. DHS chose not to differentiate the start-up costs based on the type of business activity because this would be too complicated. DHS did heed the comments that requiring the funding come within the preceding 365 days would unnecessarily remove otherwise worthy start-ups and the period was extended to 18 months. A commenter requested allowing commitments to fund if parole is granted to count. DHS declined, but did note that such commitments could still be considered in the alternative criteria and as compelling evidence of substantial potential for rapid growth.
2. Minimum government grants or awards. Several commenters argued that the $100,000 threshold should be lowered because government grants are rarely that large. DHS declined saying it used the Federal Small Business Innovation Research and Small Business Technology Transfer awards and dollar amounts as a guide.
3. Initial parole alternative criteria. DHS agreed with commenters wanting additional factors to be considered as alternative criteria and the following have been added:

(a.) Number of users or customers

(b.) Revenue generated by the start-up

(c.) Social impact of the start-up entity

(d.) National scope of the start-up entity

(e.) Positive effects on the start-up entity’s locality or region;

(f.) Success using alternative funding platforms, including crowdfunding platforms;

(g.) The applicant’s academic degrees;

(h.)The applicant’s prior success in operating start-up entities as demonstrated

 

Start-up accelerators will be evaluated on several factors including years in existence, graduation rates, significant exits by portfolio start-ups, significant investment or fundraising by portfolio start-ups

 

4. Re-parole criteria.a.Minimum investment or grants/awards. Commenters thought raising $500,000 was too much for re-parole given the short period for the initial parole in the proposed rule. DHS disagrees regarding lowering the amount but noted that it is lengthening the initial parole to 2.5 years from 2 years or the applicant can use the revenue generated or job creation criteria.
   b.Minimum annual revenue. DHS declined to modify this criterion after consulting with the SBA. A commenter suggested looking at user growth as an alternative to revenue growth. DHS noted that this could be considered as alternative evidence in the alternative criteria option.
   c.Minimum jobs created. DHS lowered the job creation eligibility criterion from ten to five based on several comments.
   d.Re-parole alternative criteria. DHS declined suggestions to consider teaxes paid as a criterion for re-parole.

 

5. Authorized periods of parole. Based on several comments, DHS adjusted the initial and re-parole periods to be 2.5 years each from 2 years and then three years.

 

6. Limitation on number of entrepreneurs. DHS declined suggestions to raise the number of entrepreneurs beyond three who can get parole based on one start-up.

 

7. Income-related conditions on parole. A number of commenters pointed out that founders often take very low salaries in the start-up phase and requiring a 400% of poverty minimum income for re-parole is problematic. Others asked for other types of compensation such as benefits to be considered. DHS declined to change the requirement.

 

8. Reporting of material changes. Several commenters pointed out that it can be very burdensome to report every change required in the proposed rule by filing a new parole application. DHS noted that it had eased the requirement to report changes that are “significant” in nature. It also stated that a mere notification wasn’t enough for the agency to determine if the entrepreneur still qualified and a new application was the best way to determine this. However, it indicated it may revisit this question in the future.

 

9. Other comments on parole criteria and conditions. DHS declined suggestions to require entrepreneurs be paid the prevailing wage because the purpose of the program is not to address labor shortages in the US. Several commenters complained about entrepreneurs not having an easy ability to leave an enterprise. DHS did note, however, that a new application can be made for a new start-up.

G.Employment Authorization.

 

1. Automatic employment authorization upon parole. DHS clarified that an EAD is not required for the parolee entrepreneur but is required for a spouse. Also, DHS declined to expand the rule to permit the entrepreneur to work for a subsidiary or affiliate.
2. Spousal Employment. DHS declined to follow comments asking that spouses not be authorized to work noting that this would be a disincentive for entrepreneurs to set up start-ups in the US.

H.Comments on the Parole Process.

 

1. Ability of Individuals to Qualify for Parole under this Rule. DHS clarified that the rule provides for individuals to present themselves at ports of entry to be paroled into the US and that there is no requirement that an entrepreneur be in the US or maintain any prior immigrations status. Applicants in the US in an NIV status must exit and reenter the US to become parolees.
2. Waiver for Entrepreneurs Presently Failing to Maintain Status. Commenters suggested that entrepreneurs be eligible to file even with immigration status violations. DHS noted that unauthorized employment or a prior status violation will not necessarily preclude an individual from qualifying for parole. But that factor could be considered by DHS in granting parole based on DHS’ discretionary authority.
3. Relationship between Parole and Various Nonimmigrant Visa Classifications.a.Pathway for Current Nonimmigrants to Use Entrepreneur Parole. Some commenters mentioned it would be hard for F-1 students to transition to entrepreneur parole. The STEM OPT rules might make it hard for an entrepreneur to qualify for parole. DHS noted that the first 12 months are not a problem. The STEM extension requires showing an employer-employee relationship but this is not an absolute bar against entrepreneurial activity. DHS also noted that filing and obtaining approval of a Form I-941 while in a non-immigrant is not a violation of NIV status. But an exit and reentry is needed to switch to parole status.
   b.Switching Between Nonimmigrant Status and Parole. DHS said it would not allow changes from parole to NIV and vice versa in the US as it would violate the INA.
   c.Entrepreneur Pathways and Entrepreneur Parole. DHS noted that the Entrepreneurs Pathways web site at USCIS.gov and the Entrepreneur Parole category are intended to complement each other and that other NIV and IV categories remain available to entrepreneurs.

 

4. Travel document issuance. DHS notes that entrepreneurs granted parole can be granted advance parole to facilitate travel and can grant it for multiple uses.
5. Parole in place. Several commenters suggested allowing this to avoid unnecessary and burdensome exits and reentries when switching from NIV to parole status. DHS indicated that this procedure is not permissible under the law for these types of cases.
6. Comments on options after 5-year total parole period ends. Some commenters expressed concerns that if there is not a path to a green card, some entrepreneurs will not take advantage of the program. DHS notes that parolees are not precluded from pursuing green cards and retaining priority dates is also not affected. But a path to a green card is not created and this must be done by Congress. But NIVs like an O-1, or a green card in the EB-2 national interest waiver category are possibilities.

I.Appeals and motions to reopen. DHS declined to adopt suggestions to allow for an appeal process due to the discretionary nature of the program.

J.Termination of Parole.

 

1. Discretionary authority to revoke/terminate parole. Commenters expressed concern that untrained examiners could pull parole status in cases not warranting it. DHS indicated it is committed to providing sufficient training on entrepreneurship issues to adjudicators.
2. Notice and decision. Commenters suggested DHS provide notice and opportunity to respond before terminating parole. DHS agreed that this is appropriate in certain scenarios and not in others. DHS will give notice of termination where it believes that:
   a.The facts or information contained in the request for parole were not true and accurate;
   b.The alien failed to timely file or otherwise comply with the material change reporting requirements in this section;
   c.The entrepreneur parolee is no longer employed in a central and active role by the start-up entity or ceases to possess the required ownership stake in the start-up entity;
   d.The alien otherwise violated the terms and conditions of parole; or
   e.Parole was erroneously granted.

Automatic parole will happen if DHS is informed that the parolee is no longer employed by the start-up or no longer has the required ownership stake. And the spouse and children’s status will automatically terminate as well. Appeal is not permitted, though a motion to reopen and reconsider is possible.

3. Other comments on application adjudication and parole termination. DHS declined to create a premium processing option or maximum adjudication time.

K.Opposition to the Overall Rule. DHS discussed broad opposition to the concept of Entrepreneur Parole reflected in some comments.

L.Miscellaneous comments on the rule

 

1. Additional Suggested Changes to the Rule. A number of comments beyond the scope of the rulemaking were made and were not adopted.
2. Information/Guidance. DHS may consider making parole data public.
3. Comments Regarding the E-2 Nonimmigrant Classification. Some commenters suggested the E-2 program is less complicated and should be the model DHS declined noting that the purpose of this program is different than the E-2 category.
4. Usefulness of the Rule. DHS acknowledges that many entrepreneurs will be ineligible. It will monitor and may modify rules in the future if it looks like the bar was set too high.
5. Include On-Campus Business Incubators in the Rule. DHS declined to make participants in these programs automatically eligible, but noted that being in one of these programs can be a factor to show substantial potential for growth.
6. Objection to Use of the word “Parole”. DHS ignored this comment saying the term s appropriate.
7. Concern over Possible Exploitation of Entrepreneurs. Commenters expressed concern that investors could exercise undue control by threatening to pull money out of venture and causing parole status to be revoked. DHS noted it’s not so easy to pull out money once invested. DHS also disagreed that the rule will created a brain drain in developing countries.

M.Public Comments on Statutory and Regulatory Requirements.

1. Regulatory Impact Analysis. DHS is not certain how many will apply but said its estimate is reasonable.
   a.Job Creation. DHS agreed with those saying rule will create jobs.
   b.Impact on Native US Entrepreneurs and Native US Workers. DHS disagreed with commenters claiming rule would hurt US entrepreneurs or US workers. DHS disagreed noting that applicants must provide evidence of providing significant potential for rapid growth and job creation.
   c.Impact on Innovation. DHS agreed that the rule will be positive.
2. Review under the National Environmental Policy Act (NEPA). DHS indicated it complied with NEPA and says rule has no environmental impact.
3. Proposed Information Collections under the Paperwork Reduction Act.
   a.Employment Eligibility Verification, Form I-9. Comment is outside the scope of the rulemaking.
   b.Application for Entrepreneur Parole, Form I-941. DHS changed estimate of I-941 time burden from 1.33 hours to 4.7 hours.
4. Comments and Responses to Impact on Small Business. The SBA expressed concern regarding flexibility for entrepreneurs to move between start-ups and it might violate the Regulatory Flexibility Act. DHS indicated that this is a voluntary one so no imposed costs.

IV.Statutory and Regulatory Requirements

A.Unfunded Mandates Reform Act of 1995. DHS says unaffected by rule.
B.Small Business Regulatory Enforcement Fairness Act of 1996. DHS says unaffected by rule.
C.Executive Orders 12866 and 13563. OMB has reviewed and signed off. DHS provides a detailed cost analysis of the various provisions in the rule.
D.Government Costs. DHS has determined that the I-941 filing fee of $1200 is enough to cover the costs and services.
E.DHS outlined broad benefits to be provided by the program.
F.Regulatory Flexibility Act. [DHS mis-numbered this section in the final rule]. DHS says rule will not have a significant impact on a substantial number of small entities.
G.National Environmental Policy Act. DHS certified compliance.
H.Executive Order 13132. DHS says not substantial direct effect on the States.
I.Executive Order 12988. DHS certified compliance.
J.Paperwork Reduction Act. DHS estimates 4.7 hours for form and 1.17 hours for biometrics.

 

Regulatory Changes.

 

8 CFR Part 274a. Amends Part 103, section 103.7 to note new Application for Entrepreneur Parole (Form I-941) and a filing fee of $1200.

 

Part 212 – DOCUMENTARY REQUIREMENTS: NONIMMIGRANTS; WAIVERS ADMISSION OF CERTAIN INADMISSIBLE ALIENS; PAROLE

 

Section 212.19 Parole for Entrepreneurs.

 

(a.) Definitions

(1.) Entrepreneur

• Substantial ownership interest (10% at start and 5% at re-parole)
  • Can’t go below 5% in the initial period
  • Can go below 5% in the re-parole but some ownership must continue.
• Central and active role in the entity

(2.) Start-up entity

• US business that was formed in 5 years immediately preceding parole filing date or within the 5 years before receiving a grant, award, or investment in paragraph (3) or (5) of this section
• Entity has lawfully done business during any period of operation since formation date
• Has substantial potential for rapid growth and job creation

(3.) Qualified government award or grant

• An award or grant for economic development or job creation made by a federal, state, or local government entity (not including foreign entities)
• Agency must regularly provide such awards or grants to start-ups
• Contractual commitments for goods or services are excluded

(4.) Qualified investment

• Made in good faith and not an attempt to circumvent limits on investments under this section
• Lawfully derived capital
• Purchase from a start-up of equity, convertible debt, or other security convertible into the equity commonly used in financing transaction within such entity’s industry
• Cannot include an investment from the entrepreneur or his or her parents, spouse, sibling, or child or any entity where the entrepreneur or relative has an ownership interest

(5.) Qualified investor

• An individual who is a US citizen or lawful permanent resident or an organization located in the US and operating through a legal entity organized on the laws of the US or a state, that is owned and controlled, directly or indirectly by US citizens or LPRs
• Individual or organization must regularly make substantial investments in start-ups that then exhibit substantial growth in terms of revenue or jobs
• Shall not include an individual or organization that has bene enjoined from buying or selling securities or acting as an investment advisor, broker, or dealer
• Investor, during the prior five years has met the following requirements:
  • Made investments in start-ups in exchange for equity, convertible debt or other security convertible into equity a total of no less than $600,000; and
  • At least 2 such entities created at least 5 qualified jobs or generated at least $500,000 in revenue with average annualized revenue growth of 20% or more

(6.) Qualified job

• Full-time employment located in the US that has been filled for at least one year by one or more qualified employees

(7.)Qualifying employee

• A US citizen, lawful permanent resident, or other immigrant lawfully authorized to be employed in the US, who is not an entrepreneur of the relevant start-up entity or the parent, spouse, sibling of the entrepreneur
• Does not include independent contractors

(8.) Full-time employment

• Paid employment
• 35 hours per week
• Doesn’t include combinations of part-time employment

(9.) US business entity

• Any corporation, limited liability company, partnership, or other entity organized under federal or state law
• Conducts business in the US
• Not an investment vehicle primarily engaged in dealing securities

(10.) Material change

• Any change in facts that could reasonably affect whether the company provides a significant public benefit to the US. May include (but is not limited to)
  • Criminal charge, conviction, plea of no contest, or other judicial determination in a criminal case concerning the start-up
  • Any complaint, settlement, judgment, or other determination concerning the entrepreneur or the start-up in a proceeding brought by a government entity
  • Any complaint, settlement, judgment, or other determination concerning the entrepreneur or the start-up in a proceeding brought by a private organization involving more than 10% of the assets of the entrepreneur or start-up
  • A sale or other disposition of all or substantially all the start-up’s assets
  • The liquidation, dissolution, or cessation of operations of the start-up
  • The voluntary or involuntary filing of a bankruptcy petition by or against the start-up
  • A significant change with respect to ownership and control of the start-up
  • A cessation of the entrepreneur’s (1) qualifying ownership interest in the start-up or (2) playing a central and active role in the start-up

(b.) Initial parole
(1.) Filing of initial parole request form

• Applicant must file an Application for Entrepreneur Parole (Form I-941) with USCIS with the required filing fee and biometric fee and supporting documentation

(2.) Criteria for consideration –

(i) In general. Applicant will provide a significant public benefit to the US based on his or her role as an entrepreneur of a start-up

(ii) General criteria. Must provide a detailed description and the following evidence:
(A.)applicant is an entrepreneur based on definition above and entity is a start-up based on definition above
(B.)Applicant has

1. Received in last 18 months a qualified investment of at least $250,000 from one or more qualified investors
2. Received, in last 18 months at least $100,000 through one or more qualified government awards or grants.

(iii) Alternative criteria

• An applicant partially meeting one or both of the above, can provide alternative “reliable and compelling evidence of the start-up’s substantial potential for rapid growth and job creation

(c) Additional periods of parole
(1.) Filing of re-parole request form

• Prior to parole expiring, parolees can request additional parole time by filing a new I-941 with the required fees and supporting documents

(2.) Criteria for consideration
(i.) In general. Applicant will provide a significant public benefit to the US based on his or her role as an entrepreneur of a start-up
(ii.) General criteria. Must provide a detailed description and evidence of the following:

• The applicant continues to be an entrepreneur under the definition above and the entity continues to be a start-up
• The start-up has
  • Received at least $500,000 in qualifying investments, qualified government grants or awards, or a combination of such funding during the initial parole period
  • Created at least 5 qualified jobs with the start-up during the initial period; or
  • Reached at least $500,000 in annual revenue in the US and averaged 20% annual revenue growth during the initial period

(iii.) Alternative criteria

• An applicant partially meeting one of the above criteria can provide alternative “reliable and compelling evidence of the start-up’s substantial potential for rapid growth and job creation

(d.) Discretionary authority; decision; appeals and motions to reopen
(1.) Discretionary authority

• Parole is granted in DHS’ sole discretion on a case-by-case basis if DHS determines, based on a totality of the evidence, that an applicant’s presence in the US will provide a significant public benefit and that he or she otherwise merits a favorable exercise of discretion
• DHS will weigh all evidence, positive or derogatory, including evidence of criminal activity or national security concerns

(2.) Initial parole

• Initial period of parole may be granted for up to 30 months; I-941 must be approved before an applicant can appear at a port of entry

(3.) Re-parole

• DHS may re-parole an applicant for one additional period of up to 30 months
• If the applicant is in the US, approval of a new I-941 will be considered a grant of re-parole
• If the applicant is outside the US, the applicant must appear at a port of entry to be granted parole

(4.) Appeals and motions to reopen

• No appeals of denials
• No consideration of a motion to reopen or reconsider a denial of Form I-941, but USCIS may reopen or reconsider on its own motion

(e.) Payment of biometric services fee and collection of biometric information

• Parole and re-parole applicants must pay a biometric fee and then will be required to get biometrics

(f.) Limitations

• No more than three entrepreneurs per start-up
• An alien shall not receive more than one initial grant of entrepreneur parole or more than one additional grant of entrepreneur re-parole based on the same start-up, for a maximum of five years

(g.) Employment authorization

• Entrepreneurs are authorized to work for the start-up incident to status

(h.) Spouse and children

(1.) Spouse and kids file for parole using Form I-131 with evidence of qualifying relationship and meriting a grant of parole; biometric fee required
(2.) Spouse and children may be granted parole for no longer than the entrepreneur
(3.) Spouse can apply for an EAD after being paroled in using Form I-765
(4.) Children may not seek employment authorization
(i.) Conditions on parole

• Parolee must maintain household income of 400% of the federal poverty line for his or her household size
• USCIS may request verification of parolee compliance at any time

(j.) Reporting of material changes

• Parolees must report any material changes to USCIS. A new I-941 must be submitted each time a material change is reported along with a filing fee and biometric fee
• Parolee must immediately notify USCIS in writing if she or she will no longer be employed by the start-up or ceases to possess a qualifying ownership stake

(k.) Termination of parole
(1.) In general

• DHS, in its discretion, may terminate parole at any time without prior written notice or opportunity to respond if it learns the parolee no longer provides a significant public benefit.
• DHS may also choose to provide an opportunity to respond to a notice to terminate

(2.) Automatic termination

• Parole will be automatically terminated without notice when the parole expires unless a non-frivolous application for re-parole is filed.
• Automatic termination when parolee no longer employed by the start-up or ceases to have a qualifying ownership interest
• If parolee’s status terminated, spouse and children are automatically as well
• Employment authorization automatically ceases when parole is terminated

(3.) Termination on Notice

• USCIS may give notice to terminate in the following circumstances:
  • The facts or information in the I-941 were not true and accurate;
  • The parolee failed to timely file or comply with material change reporting requirements;
  • The entrepreneur is no longer playing a central and active role;
  • The parolee violated the terms and conditions of parole; or
  • Parole was erroneously granted

(4.) Notice and decision

• If a notice of intent to terminate is issued, 30 days to respond should be provided

 

(l.) Increase of investment and revenue amount requirements

• The investment and revenue amounts will increase every three years based on changes in the Consumer Price Index

 

Part 274a – Control of Employment of Aliens

 

New Section 274a.2(b)(1)(v)(A)(5) – permits individual who is employment-authorized incident to status or parole with a specific employer to show a foreign passport with an I-94 indicating employment-authorized status as long as the period of endorsement has not yet expired and the employment is not in conflict with the individual’s employment-authorized status or parole.

 

New section 2741.12 Classes of aliens authorized to accept employment

 

(b) Aliens authorized for employment with a specific employer incident to status or parole

– Adds new paragraph (37) describing entrepreneur parole recipients

– Adds new language also adding parolees for any other urgent humanitarian or significant public benefit reason

 

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