Obama's Parting Gift to Business Immigration: The International Entrepreneur Parole Rule and the Long-Awaited AC21 Regulations

March 20, 2017

Prior to leaving office, the outgoing Obama administration published two important Final Rules in the Federal Registers relating to business immigration:

  • The “International Entrepreneur Parole Final Rule” (“IEP Rule”) which was published in the Federal Register on January 17, 2017, and is slated to go into effect on July 17, 2017, provides temporary ‘parole’ status and work authorization to certain entrepreneurs who have secured funding from recognized US investors.

  • The “Retention of EB-1, EB-2, and EB-3 Immigrant Workers and Program Improvements Affecting High-Skilled Nonimmigrant Workers Final Rule” (AC21 Regulations”) which was published on November 17, 2016 and went into effect on January 17th provides long-awaited and for the most part favorable interpretation of the far-reaching American Competitiveness in the 21st Century Act of 2000 (AC21) and other important laws relating to employment-based immigration.  

While both Final Rules are welcome changes to business immigration policy, it is still uncertain whether they will survive the early days of the Trump Administration. The President has made clear his intention to make unprecedented changes to immigration policy and roll-back the Obama administration’s rulemaking. Because the Rules were introduced in the final days of the Obama administration, they are subject to invalidation by the Republican-controlled Congress and President under the Congressional Review Act (“CRA”). The President and Congress has already used the CRA to nullify three Obama regulations. Prior to Trump taking office, the CRA had only been successfully used once.
 
The IEP Rule may also be subject to the President’s “Regulatory Freeze” memo published on February 20, 2017. Because the Rule has not yet taken effect, the Freeze memo would allow the DHS to postpone the effective date in order to “review questions of fact law and policy” raised by the Rule, and  implement new replacement rulemaking effectively canceling the Obama  Rule. A draft Executive Order leaked in February, contains language further suggesting that the Administration intends to do apply the Freeze Memo to end Obama parole programs such as the one implemented by the IEP Rule. To date, this draft Executive Order has not been signed by the President.  

 

INTERNATIONAL ENTREPRENEUR PAROLE 

 

The International Entrepreneur Parole would provide the Department of Homeland Security (DHS) with discretionary authority to grant “parole” to qualifying foreign entrepreneurs so that they may establish and grow their startup entities in the United States. Parole is a form of discretionary relief granted to individuals so that they may be admitted into the United States for a temporary period for humanitarian reasons or “significant public benefit.” If parole is granted, the entrepreneur will be authorized for employment with respect to the entrepreneur's start-up entity. The entrepreneur's spouse will also be permitted to apply for employment authorization. The stated purpose of the new rule is to encourage foreign entrepreneurs to create jobs and benefit the U.S. economy. The Final Rule does not go into effect until July 17, 2017, and, as explained above, may be invalidated by Congress before it goes into effect.  
 
Criteria for a Grant of Initial Parole. DHS may grant parole to entrepreneurs of startup enterprises on a case-by-case basis for an initial stay of up to 2.5 years if the following conditions are met:

  • Formation. The startup was (a) formed in the United States within 5 years immediately preceding the application filing date, (b) has lawfully done business since incorporation, and (c) has substantial potential for rapid growth and job creation  
     

  • Control. The applicant has (a) a substantial ownership interest (minimum 10%) in the startup and (b) has an active and central role in its operations and future growth; and    
     

  • Capital. The startup has received at least $250,000 of capital from (a) U.S. investors with established records of successful investments or (b) at least $100,000 in awards or grants from certain Federal, State, or local government entities with expertise in economic development, research and development, or job creation.
     

  • Alternative Criteria. Alternatively, an applicant who only partially meets one or both of the investment/funding criteria may be considered for parole if he/she provides additional reliable and compelling evidence that the startup would provide a significant public benefit to the United States.  The Final Rule does not define or provide examples of “reliable and compelling” evidence.
     

  • Limitations. No more than three applicants may receive parole with respect to any one qualifying entity.

Criteria for a Grant of Re-Parole. DHS may grant re-parole for an additional 2.5 years if the following conditions are met:

  • Continuation of Start-up Entity. The start-up entity must have been lawfully operating during the initial period of parole and continue to show substantial potential for rapid growth and job creation;
     

  • Continuation of Applicant as an Entrepreneur. The applicant must continue to (a) possess at least a 5% ownership interest in the operation at the time of filing and (b) continue to have an active and central role in the entity’s operations and future growth; and
     

  • Significant U.S. Investment, Revenue, or Job Creation. The applicant must demonstrate that the start-up possesses continued potential for rapid growth and job creation. This may include  evidence showing that, during the initial parole period, the startup either: (a) received at least $500,000 from qualifying investors, in qualified government grants or awards, or a combination of the two; (b) created at least 5 qualified jobs; (c) reached at least $500,000 in annual revenue in the United States and averaged 20% annual revenue growth or more; or (d) submits other reliable and compelling evidence establishing the start-up’s continued potential for rapid growth and job creation.

Qualifying Investor. Self-funding is excluded. Only capital received from qualifying investors will be considered:

  • U.S. Investor. An individual U.S. citizen or a lawful permanent resident, or a legal entity organized under the laws of the United States or any state, that is majority owned and controlled, directly or indirectly, by U.S. citizens or U.S. permanent residents;
     

  • Investor Activities. Investor must regularly make substantial investments in start-up entities that subsequently exhibit substantial growth as measured by revenue or job creation during the 5-year period immediately preceding the filing, defined as follows:

    • Investor must have invested at least $600,000 in equity, convertible debt, or other security convertible into equity commonly used in financing transactions; and
       

    • Subsequent to such investment, at least 2 such entities must have each created at least 5 qualified jobs.  These must be full-time positions located in the US that have been filled for at least 1 year by one or more by a qualifying employee.  The employee must be a U.S. citizen, a lawful permanent resident, or other U.S. worker who is not the applicant or a relative.  Independent contractors are excluded; or
       

    • Alternatively, subsequent to such investment, at least 2 such entities must have generated at least $500,000 in revenue with average annualized revenue growth of at least 20%.

Filing Fee and Processing Times. Applicants seeking an initial grant of parole must file an Application for Entrepreneur Parole on Form I-941 and include the required filing fee of $1,200. Note that premium processing is not available with Form I-941, government processing times cannot be estimated until adjudication for this benefit begins.   

Discretionary Grant is Revocable. Decisions to grant parole are discretionary, and will be made on a case-by-case basis. USCIS adjudicators would be required to consider the totality of the evidence, including evidence obtained through background checks and other means, to determine whether an applicant has met the above criteria, whether the applicant’s parole would provide a significant public benefit, and whether negative factors exist that warrant denial. DHS may also revoke any grant of parole at any time if the agency determines that parole no longer provides a significant public benefit, such as when the entity has ceased operations in the United States.
 

AC21 REGULATIONS

 

The new AC21 Regulations provide a broad range of new benefits, and favorable interpretations of existing immigration laws, including a new 60-day grace period for foreign workers in H-1B and other nonimmigrant status who are laid off from their sponsoring employer, clearer rules for granting extensions beyond the H-1B maximum time limit based on a pending green card processes, new forms of work authorization based on pending applications for employment authorization and “compelling circumstance,” where the foreign worker has an approved immigrant petition. Please refer to our earlier alert which provides a comprehensive overview of the new AC21 regulations.
 
Potential Invalidation under the Congressional Review Act
 
Both the International Entrepreneur Parole Final Rule and AC21 Regulations could be invalidated by Congress and the President. Under the Congressional Review Act (“CRA”), major regulatory proposals are subject to review and possible invalidation for at least 180 session days after final rule publication. The CRA was designed to provide a means for a new president, in concert with a Congress controlled by the same party, to roll back so-called “midnight rule-making” published during the waning days of the previous administration.  The CRA would thus allow the Republican-controlled Congress and President to invalidate the international Entrepreneur Rule before it goes into effect, and invalidate the AC21 Regulations shortly after its effective date. The CRA would also prevent similar rules from being implemented by future presidential administrations, unless approved by Congress.

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